<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934
For the fiscal year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-5951
CMI CORPORATION
(Exact name of registrant as specified in its charter)
Oklahoma 73-0519810
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
I-40 & Morgan Road
P.O. Box 1985
Oklahoma City, OK 73101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 787-6020
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Voting Class A Common Stock Par Value $.10 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Voting Class A Common Stock (Class A
Common Stock) and the Voting Common Stock (Common Stock) held by non-affiliates
of the registrant on March 19, 1999 was $79,990,417.
The number of shares of the registrant outstanding on March 19, 1999 was
21,548,883 shares of Class A Common Stock and 602 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
--------- -------------------
Proxy Statement for the Annual Meeting of Shareholders Part III
to be held on May 14, 1999
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1. Business................................................ 3
Item 2. Properties.............................................. 10
Item 3. Legal Proceedings....................................... 10
Item 4. Submission of Matters to a Vote of Security Holders..... 11
Executive Officers of the Registrant.................... 11
PART II
Item 5. Market for the Registrant's Common Stock and
Related Shareholder Matters............................. 13
Item 6. Selected Financial Data................................. 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 15
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk............................................. 22
Item 8. Financial Statements and Supplementary Data............. 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 49
PART III
Items 10.-13. All Items are Incorporated by Reference to the Company's
Proxy Statement for the Annual Meeting of Shareholders
to be held on May 14, 1999.............................. 49
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules,
and Reports on Form 8-K................................. 49
SIGNATURES.............................................. 52
</TABLE>
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
PART I
Item 1. Business
--------
(a) General Development of Business
-------------------------------
Unless the context requires otherwise, as used herein, the term "Company" means
CMI Corporation and its consolidated subsidiaries. Information regarding 1998
business developments is located in Item 1(c).
(b) Financial Information About Operating Segments
----------------------------------------------
The Company primarily operates in the road and heavy construction industry and
information regarding this and other products is located in Item 1(c). The
Company's operating segments are defined by operating locations. See note 13 of
the Notes to Consolidated Financial Statements (Item 8).
(c) Narrative Description of Business
---------------------------------
The Company manufactures a wide variety of equipment for the road and heavy
construction industry. These products are divided into two primary categories:
mobile equipment and materials processing equipment. Regarding mobile
equipment, the Company is an industry leader in the design and manufacture of
automated machines for the construction and maintenance of highways, city
streets, airport runways, county roads, bridges, and parking lots. The Company's
mobile equipment includes concrete pavers; machines for concrete placing and
spreading, finishing, texturing, and curing; pavement profiling machines;
pavement reclaimers; automated fine grading, materials spreading and placing
equipment; soil stabilizers and soil compacting machines; trailers used by the
construction and mining industries; industrial scales; bridge and canal paving
equipment. The Company's materials processing equipment includes a wide variety
of paving materials production plants for the manufacture of both hot mix
asphalt and concrete pavements. The Company also makes plants that recycle old
pavements and thermal systems for remediating contaminated soils and sanitizing
medical waste. Waste industry products included in material processing equipment
include municipal landfill compactors and industrial and green waste grinding
machines. The Company has won market recognition by producing products
emphasizing recycling and energy conservation.
During the fourth quarter 1997, the Company expanded its product offerings by
acquiring the operations of two manufacturers of concrete production plants and
two product lines from a third manufacturer. The Company first acquired the
Ross Company of Brownwood, Texas, a nearly 50-year-old manufacturer of
concrete central and ready mix plants. Ross had built a
3
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
strong reputation for innovative ready mix plants, both portable and stationery.
The Company also acquired substantially all of the assets of the successor to
the 75-year-old C.S. Johnson Company of Champaign, Illinois. C.S. Johnson was
the pioneer in the design and manufacture of large mass pour concrete central
mix plants used on some of the world's giant construction projects. Notable
past projects include the Hoover and Grand Coulee Dams. Johnson plants are
currently providing the concrete for the world's largest construction project of
modern times, the Three Gorges Dam in China. Finally, the Company acquired the
TRASHMASTER Landfill compaction line and three hard materials grinding machines
for the demolition and wood wastes industry from Rexworks, Inc. of Milwaukee,
Wisconsin.
Additional information regarding the Company's operating segments including the
products produced by its segments is contained in note 13 of the Notes to
Consolidated Financial Statements (Item 8).
The largest single impactor of Company business is the United States national
highway construction program, which is funded in multiyear blocks. The current
program, TEA-21 (Transportation Efficiency Act for the 21st Century) began
October 1, 1998 and extends through September 30, 2003. TEA-21 provides $175
billion for highway construction and rehabilitation for the six-year period, an
increase of 43 percent over the previous six-year program. A significant
addition to the current program sets mandatory funding levels and guarantees all
additional revenues of the Federal Highway Trust Fund. Regardless of this
possible additional funding, the mandatory funding levels are having a strong,
favorable impact upon customers who now can plan and prepare for an extended
period of market expansion. Provisions of TEA-21 favor the recycling of worn
pavement materials. The Company has been a leader in providing equipment for
pavement recycling.
Principal product information is as follows:
Hot Mix Asphalt Production Systems
----------------------------------
The Company manufactures and markets, primarily in North America, a wide
variety of portable and stationary hot mix asphalt production and recycling
plants including batch plants and parallel and counter-flow continuous mix
drum plants.
The Company's most popular plants are marketed under the trade name
"TRIPLE-DRUM." Production tests show this plant has superior heat transfer
performance compared to other counter-flow plant designs, especially for
recycle operations. The ease with which TRIPLE-DRUMs are passing tough
exhaust emissions standards with high production rates, even under adverse
production conditions, has been noticed by the industry and is resulting in
stronger sales.
4
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
The Company manufactures the entire plant system including components for
aggregate feeding, liquid asphalt cement and additive metering, material
mixing and heating, finished material storage and truck loading, exhaust
cleaning and computerized control packages for operating the complete
system.
Concrete Plants
---------------
The Company's concrete batching plants are manufactured and marketed by CMI
Johnson/Ross, with plants in Champaign, Illinois and Brownwood, Texas. The
Company offers the industry's largest range of ready-mix and central-mix
plants offered by a single manufacturer. The Company is the world leader in
providing large mass pour plants for dams, power plants, and other giant
concrete facilities.
Concrete Paving Systems
-----------------------
The Company introduced the industry's first automated grading and concrete
paving machines in the 1960's. Today, the Company manufactures and markets
worldwide a complete line of automated street and highway class concrete
slipform paving and paving train support machines. The popularity of these
machines relates directly to job site performance, which often has resulted
in contractors earning performance bonuses for pavement smoothness as
recorded by profileograph measuring.
The Company's highway class pavers incorporate machine improvements into
the basic machine design, making features like computerized crowning and
automatic placement of dowel bars less costly to add. The Company also
manufactures and markets a line of curb and gutter pavers and smaller
slipform pavers for residential, parking lot and building site paving
requirements.
Pavement Profiling Equipment
----------------------------
The Company introduced the industry's first dedicated pavement milling
machine in 1976. Since that time, the Company's line of "ROTO-MILL"
Pavement Profilers has set the standards for the fast developing pavement
restoration and recycling market. The Company offers a wide range of models
from small utility machines to the PR-1200, the world's largest pavement
profiling machine. Current models include the PR-500C, PR-650, and PR-800-
7, all half-lane width machines; the PR-1050, and PR-1200, full lane width
machines; and two
5
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
utility rubber tire models, the PRT-225 and PRT-525. Several mid-size and
larger ROTO-MILL models have been configured for surface mining. The
Company is gauging customer acceptance of these units and plans to further
refine models for mining use and take appropriate marketing steps to build
product awareness and sales.
Reclaiming/Stabilizing Equipment
--------------------------------
The Company's popular road reclamation and soil stabilization machines,
beginning with the RS-500 introduced in 1991, have had excellent market
acceptance. Now marketed under the trade name, ROTO-MIXER, the productivity
and versatility of these machines have created new work classifications and
markets for recycling and pavements; and have dramatically increased the
productivity of older methods. Current models include the RS-425, RS-450,
RS-500B and RS-650.
Weighing Equipment
------------------
The Company manufactures and distributes a broad line of electronic scales
for construction, transportation, material processing, mining, energy,
agricultural, and industrial applications. These systems permit direct
linkage to data processing equipment to speed material processing, record
keeping, and billing. The Company also markets high technology automatic
computer controls for continuous material blending, weighing, record
keeping, inventory tracking, invoicing, and report writing. These control
systems are marketed with the Company's hot mix asphalt production plants
and soil remediation systems.
Waste, Construction and Demolition Equipment
--------------------------------------------
The Company's TRASHMASTER landfill compactors enjoy strong market
acceptance. Their unique design offers full width compaction resulting in
10% to 15% greater landfill densities over conventional waste compactors.
The Company offers three green-waste and heavy materials grinding models
that are sold to the timber, landscaping, construction and demolition and
waste recycling industries. The Company's grinders have patented features
that provide excellent productivity and minimal downtime.
6
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Load King Division
------------------
Load King, headquartered in Elk Point, South Dakota, manufactures a broad
line of heavy-duty trailers for equipment and material hauling. Bottom
discharge material trailers and a family of redesigned rock hauler trailers
have been added to the broad line of folding gooseneck and lightweight
detachable gooseneck trailers engineered to meet individual state weight
distribution requirements. Load King also responds to customer requirements
for custom heavy-haul trailers. During 1995, the Company began
manufacturing its popular bottom dump trailers at its Oklahoma City
manufacturing facility. During 1996, the newly designed rock hauler
trailers were added to production at the Oklahoma City manufacturing
facility. The added production at the Oklahoma City manufacturing facility
has reduced Load King's response time for filling dealer orders for these
products and has permitted the Elk Point manufacturing facility to
concentrate on the production of custom heavy-hauling units.
Bid-Well Division
-----------------
Bid-Well, headquartered in Canton, South Dakota, is an industry leader in
the development and manufacture of a wide variety of specialized
lightweight grading and concrete paving and finishing machines for
construction markets. This equipment includes bridge deck pavers and
concrete overlay machines, building floor pavers and finishers, and
specialized graders, pavers, and finishers for slope and canal paving.
Remediation Equipment
---------------------
Soil remediation is a process whereby non-hazardous contaminates like oil,
jet fuel, and other hydrocarbon-based pollutants are removed from the soil
in a thermal process. Soil remediation systems use similar equipment and
processes as the Company's asphalt production systems.
The Company has engineered and is marketing remediation systems with
production ranges from 80 to 160 tons per hour. The Company's systems have
been used at military and industrial sites, where they have set new
production records, doubling the tons per hour produced on any previous
jobs of similar nature.
7
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Marketing and Distribution. The Company's construction equipment is sold
- --------------------------
directly to end users and through independent dealers. The Company's scale and
trailer products are sold through independent dealers. All products are sold in
the United States and in foreign markets, except for weighing equipment and
products manufactured by the Load King Division which are sold primarily in the
United States.
Sources and Availability of Raw Materials. The principal component parts used
- -----------------------------------------
in the Company's manufacturing of its pavement maintenance and construction
equipment that are supplied by others primarily include gas and diesel
engines, hydraulic cylinders, tires, bearings, and raw steel. The Company has
not experienced any delays in its component parts deliveries or received
inferior component parts that have adversely affected its business. In
addition, the Company purchases many of these components from a variety of
outside suppliers and believes that alternate sources of supply exist for
substantially all items.
Importance of Patents. The Company has obtained patent protection on certain
- ---------------------
components and features incorporated into its products, which expire on various
dates. The Company's patents, together with licenses under patents owned by
others, are considered by the Company to be adequate for the conduct of its
business. The Company is of the opinion that the loss of any single patent or
group of related patents would not materially affect the Company's business.
Seasonal Nature of the Business. The Company's business is seasonal in nature
- -------------------------------
and precedes the months in which highway and road construction and restoration
generally occur. A large portion of the Company's orders for its products are
received in the months of November through July, with heavy shipments occurring
in the months of March through August.
Practices Relating to Working Capital. The Company recognizes revenue when
- -------------------------------------
sales transactions are completed, which is when products are shipped or title
has transferred to the customer. Sales generally require a down payment or
trade allowance and are due within normal trade terms. The Company also sells
certain products under installment sales contracts. Inventories are carried in
proportion to customer requirements and fluctuate in relation to the seasonal
nature of the Company's business.
Dependence Upon a Single Customer or a Few Customers. The Company was not
- ----------------------------------------------------
dependent on any single customer or group of customers during 1996 through 1998.
8
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Competitive Conditions. The Company is one of the largest producers of pavement
- ----------------------
maintenance and construction equipment in the United States. The Company has won
substantial market recognition in the pavement maintenance and construction
industry by producing products emphasizing recycling and energy conservation.
The Company also has received market recognition for the quality and
productivity of its equipment and believes improvements can be made in
aftermarket services (i.e. parts availability and services). Numerous companies
produce equipment with similar features and the construction equipment market
remains competitive. Competition is based primarily on price, product quality,
financing, productivity, quality of construction, service, and availability of
replacement parts.
Company-Sponsored Engineering and Product Development Activities. The Company
- ----------------------------------------------------------------
invests significant resources in the development, enhancement, refinement, and
production of new technologies for the road and heavy construction industry.
The Company patents new technologies relating to significant changes and
development of finished products. See discussion regarding current engineering
and product development activities under principal product information and also
see Management's Discussion and Analysis of Financial Conditions and Results of
Operations (Item 7).
Environmental Laws and Regulations. The Company is subject to various
- ----------------------------------
environmental laws and regulations, none of which have a current or expected
future material financial impact on the Company.
Employees. The Company had approximately 1,890 employees as of December 31,
- ----------
1998.
(d) Financial Information About Geographic Areas
--------------------------------------------
Information regarding revenues from external customers in different geographical
areas is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
United States $177,402 132,865 109,349
North and Central America, other than the
United States 15,322 8,043 11,904
South America 962 6,764 5,177
Asia 8,173 3,954 4,284
Australia 1,740 1,453 5,071
</TABLE>
9
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Europe 2,055 928 2,607
Other regions 32 7 396
-------- ------- -------
Total net revenues $205,686 154,014 138,788
======== ======= =======
</TABLE>
Sales of Company products outside the United States are denominated in U.S.
dollars. International sales are generally secured by letters of credit from
financial institutions to reduce credit risk. Additional information about the
Company's operating segments is incorporated by reference from note 13 of the
Notes to Consolidated Financial Statements (Item 8).
Item 2. Properties
----------
The Company has total plant, office, and warehouse areas of approximately
923,000 square feet, which are located in four states.
The largest manufacturing plant (utilized by the Company's Oklahoma City
operating segment), including the corporate headquarters, has approximately
619,000 square feet and is located in Oklahoma City, Oklahoma. Other principal
manufacturing plants and offices owned by the Company, aggregating
approximately 304,000 square feet, are located in South Dakota, Texas, and Iowa.
The Company also leases approximately 95,000 square feet of manufacturing plants
and offices located in Illinois. These facilities are adequate for the current
and expected near future operations of the Company.
In addition, the Company owns 110 acres of land in Tennessee currently being
held for sale.
Item 3. Legal Proceedings
-----------------
As previously disclosed, on November 22, 1995, a Chicago law firm, previously
engaged by the Company in connection with prior patent litigation, filed suit
against the Company in the Circuit Court of Cook County, Illinois. On December
20, 1995, the case was removed to the United States District Court for the
Northern District of Illinois, Eastern Division. The law firm is seeking to
recover approximately $1.4 million of legal fees and costs alleged to be owing
by the Company, together with prejudgment and postjudgment interest and other
costs. The Company has denied these allegations and will continue to defend this
lawsuit.
10
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Since 1996, the Company has been involved in litigation in the U.S. District
Court for the Western District of Oklahoma with Cedarapids, Inc. The Company
sued Cedarapids seeking a declaratory judgement that a patent held by Cedarapids
is invalid or, in the alternative, that the Company was not infringing upon the
patent. Cedarapids subsequently filed a counterclaim against the Company
alleging that the Company was infringing Cedarapids' patent and seeking
unspecified monetary damages. In January 1997, the District Court issued an
order staying this lawsuit pending the resolution of litigation between
Cedarapids and Gencor, Industries involving the same patent. This stay was
lifted in December 1997 upon settlement of patent and other non-related
litigation between Cedarapids and Gencor, Industries. The Company anticipates
this lawsuit going to trial in mid 1999.
In September 1998, Cedarapids filed suit against the Company in the U.S.
District Court for the Northern District of Iowa alleging that the Company has
infringed upon a second patent held by Cedarapids. Cedarapids is seeking
unspecified monetary damages. The Company intends to vigorously defend both
lawsuits involving Cedarapids.
There are numerous other claims and pending legal proceedings that generally
involve product liability and employment issues. These cases are, in the
opinion of management, ordinary routine matters incidental to the normal
business conducted by the Company. In the opinion of the Company's management
after consultation with outside legal counsel, the ultimate disposition of
such proceedings, including the cases above, will not have a materially adverse
effect on the Company's consolidated financial position, liquidity or future
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Executive Officers of the Registrant
- ------------------------------------
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered item in Part I of this Form 10-K in lieu of being
included in the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on May 14, 1999.
11
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
The following is a list of names and ages of all the executive officers of the
registrant indicating all positions and offices with the registrant held by each
such person and each such person's principal occupations or employment during
the past five years.
<TABLE>
<CAPTION>
Age as of
Name March 19, 1999 Offices and Positions Held
- ---- -------------- --------------------------------------
<S> <C> <C>
Bill Swisher 68 Chairman of the Board and director (1)
Tom Engelsman 48 Chief Executive Officer since October
1998 (2) and director
Albert L. Basey 61 President and Chief Operating Officer
since February 1997
Jim D. Holland 54 Senior Vice President, Treasurer,
and Chief Financial Officer since
August 1984
Robert L. Curtis 59 Vice President, Sales and Marketing
since November 1996
Thane Swisher 42 Vice President and Secretary since
October 1987
</TABLE>
(1) Mr. Swisher served as the Company's Chief Executive Officer from 1965 to
October 1998.
(2) Mr. Engelsman has held general management positions with industrial
companies for over 25 years including the most recent position of president
and chief operating officer for Beloit Corporation.
12
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
------------------------------------------------------------------
Matters
- -------
Principal Market and Stock Prices:
- ----------------------------------
The Company's Class A Common Stock is traded on the New York Stock Exchange
under the symbol "CMI." The closing market price for the Company's Class A
Common Stock on March 19, 1999, was $7.25. The table below presents the high
and low market prices for the Company's Class A Common Stock for each three
month period in 1998 and 1997. The following information was obtained from the
monthly market statistics report prepared by the New York Stock Exchange.
<TABLE>
<CAPTION>
1998 1997
------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ---- -----
Common shares:
High $7.13 10.00 9.31 9.38 $5.13 4.75 5.50 6.50
Low 4.56 6.25 5.75 5.31 4.25 3.88 3.94 4.13
</TABLE>
Approximate Number of Shareholders:
- -----------------------------------
The number of holders of record of the Company's common shares as of March 19,
1999, was 1,565.
Dividend Information:
- --------------------
The Company has authorized and paid a one cent per common share dividend
beginning in the fourth quarter of 1996 through the first quarter of 1999. It is
the Board of Director's present intention to continue paying regular quarterly
cash dividends.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7) and Notes to Consolidated Financial Statements (Item 8).
13
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Item 6. Selected Financial Data
-----------------------
The following selected financial data should be read in conjunction with the
consolidated financial statements of the Company, including notes and
supplementary information appearing elsewhere herein.
Five-Year Selected Financial Data - (dollars in thousands, except per share
data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net revenues $205,686 154,014 138,788 130,578 128,005
Operating earnings 13,890 6,746 10,987 11,743 15,032
Net earnings (1) 6,217 3,165 5,461 17,501 22,618
Earnings per common share -
diluted (1) .29 .15 .25 .82 1.07
Total assets (2) 189,711 144,428 113,454 109,219 89,744
Long-term debt and redeemable
preferred stock (2) 77,049 49,274 34,103 27,628 27,599
Cash dividends per common share $ .04 .04 .01 - -
</TABLE>
(1) Included in 1995 and 1994 net earnings are deferred tax benefits of
approximately $8.8 million and $10 million, respectively, relating to
previously unrecognized tax benefits related to Statement of Financial
Accounting Standards No. 109.
(2) Total assets and long-term debt for 1997 reflects the impact of
acquisitions of businesses (See Notes to Consolidated Financial Statements,
Item 8).
The acquisitions did not have a material impact on net revenues, operating
earnings or net earnings in 1997.
14
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
- ---------------------
Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------
The Company's $30 million unsecured senior notes issued in September 1996 mature
from September 2000 to September 2006. The Company amended its revolving line of
credit agreement on October 13, 1998 which increased its borrowing line from $40
million to $60 million. As of December 31, 1998, the Company had utilized $43
million of the unsecured revolving line of credit. On March 12, 1999 the
borrowing line of credit was increased to $70 million for a period of 120 days
and will return to $60 million at the end of this period. As of March 19, 1999,
the Company had utilized $48 million of the unsecured revolving line of credit.
The line of credit matures September 2001. Other long-term debts have maturity
dates through September 2010 and are expected to be paid or refinanced when due.
As of December 31, 1998 the Company was in compliance with all debt covenants.
The Company maintains a fleet financing agreement with a third party lender
related to the rental of finished products to customers. Generally, these
financings range from three months to three years and are secured by the
specific finished product. These financing arrangements provide the Company with
additional short-term working capital and the ability to offer more attractive
financing to its customers. The fleet financing agreement provides for interest
at the prime rate. At December 31, 1998, the Company had no outstanding
obligations under this agreement.
The debt-to-total-capital percentage increased to 50.4% at December 31, 1998
compared to 41.2% at December 31, 1997. This increase is primarily the result of
funding the increase in inventories at December 31, 1998. The Company's
financing agreements should provide the Company with sufficient working capital
to finance its operations.
Other Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------------
The Company's current ratio at December 31, 1998 was 4.19-to-1 compared to 4.42-
to-1 at December 31, 1997. Working capital increased to approximately $116.2
million at December 31, 1998 from $84.0 million at December 31, 1997. The
increase in working capital is primarily the result of increased cash of $6.4
million and increased inventories of approximately $34.2 million, offset by an
increase in current liabilities of approximately $11.9 million. The increase in
inventories, primarily raw materials and purchased parts, from December 31, 1997
is largely the result of increased production and the working capital required
for operations related to the 1997 fourth quarter acquisitions. The Company's
finished goods inventories also increased in preparation for the 1999 selling
season.
15
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Cash used in operating activities was $7.8 million for the year ended December
31, 1998, compared to cash provided by operating activities of $8.5 million for
the year ended December 31, 1997. This significant change in cash from
operating activities is primarily attributed to the increased investment in
inventories. Financing activities for the year ended December 31, 1998 provided
$27.2 million, which included $28.0 million of borrowings from the Company's
revolving line of credit. These additional borrowings were used to fund the
increase in inventories.
Capital expenditures were $13.3 million, an increase of $8 million from the
prior year. Principal capital expenditures consisted primarily of computer
software and hardware, construction of a new paint facility in Oklahoma City and
equipment for use in manufacturing facilities. Capital expenditures for 1999 are
budgeted at $6.0 million. Capital expenditures are financed using internally
generated funds and debt.
During 1998, the Company paid a quarterly cash dividend of one cent per share.
During the first quarter of 1999, the Company's Board of Directors authorized
payment of a quarterly cash dividend of one cent per share. It is the Board of
Director's present intention to continue paying regular quarterly cash
dividends.
Accounting for Income Taxes
- ---------------------------
Income taxes are accounted for using the asset and liability method under which
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities and operating loss and tax credit
carryforwards. The effect on deferred taxes for a change in tax rates is
recognized as income in the period that includes the enactment date.
The Company has a net deferred tax asset after consideration of the valuation
allowance of approximately $9.1 million and $12.2 million at December 31, 1998
and 1997, respectively. The benefit of future tax deductions and credits not
utilized by the Company in the past is reflected as an asset to the extent that
the Company assesses that future operations will "more likely than not" be
sufficient to realize such benefits. The Company has assessed its past earnings
history and trends, sales backlog, budgeted sales, reversing taxable temporary
differences and expiration dates of carryforwards. As a result, the Company has
determined it is "more likely than not" that the $9.1 million of net deferred
tax assets will be realized. The ultimate realization of future tax deductions
and credits will require aggregate taxable income of approximately $17 million
to $22 million in future years.
16
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Results of Operations
- ---------------------
Years ended December 31, 1998 and 1997. During the fourth quarter of 1997, the
Company acquired all the outstanding stock of Brownwood Ross Company, a concrete
plant manufacturing company; certain assets of the successor of CS Johnson
Corporation, a concrete plant manufacturing company; and certain assets related
to the landfill and embankment compactor and material reduction grinder product
lines from Rexworks, Inc. The results of operations for the year ended December
31, 1998 include these operations.
Revenues increased 33.6 percent to $205.7 million for the year ended December
31, 1998 from $154.0 million for the year ended December 31, 1997. The revenue
increase for the year ended December 31, 1998 was primarily generated through
the newly acquired operations. Net earnings were $6.2 million in 1998 compared
to $3.2 million in 1997, or 29 cents per share for 1998 compared to 15 cents per
share for 1997.
The Company's international sales were $28.3 million in 1998 compared to $21.1
million in 1997, resulting in a increase of approximately 34% from 1997. The
Company's domestic sales were $177.4 million in 1998 and $132.9 million in 1997,
an increase of approximately 33%. The increase in net revenues both
internationally and domestically was primarily attributable to acquisitions
completed during the fourth quarter of 1997.
The increase in international revenues from 1997 is primarily attributed to
North and Central America (other than the United States) and Asia, offset by a
decrease in South America. International revenues as a percentage of the
Company's total revenues were 13.8% in 1998 and 13.7% in 1997.
Gross margin, as a percentage of net revenues, was 26.0% for the year ended
December 31, 1998, up from 25.2% for the year ended December 31, 1997. The
Company has improved its gross margins quarter over quarter during 1998.
Marketing and administrative expenses increased $5.0 million in 1998. The
majority of the increased expenses are the result of marketing efforts related
to the newly acquired operations. As a percentage of net revenues, marketing
and administrative expenses were 14.8% in 1998 compared to 16.5% in 1997.
17
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Engineering and product development expense increased $1.2 million in 1998. The
Company's increased expenses are the result of newly acquired operations and
increased product development. During 1998, the Company introduced the RS-450, a
new higher production road reclaimer and soil stabilization machine for
governmental and smaller project markets. Also, the Company substantially
completed the design of a Medical Waste Grinder for the health care industry.
Additional products including new and upgraded models will be introduced to the
industry during the CONEXPO trade show held in Las Vegas in March 1999. As a
percentage of net revenues, engineering and product development expenses were
3.8% percent in 1998 compared to 4.3% in 1997.
Product line relocation costs for the year ended December 31, 1998 were $1.4
million. These costs were incurred by the Company to move the landfill and
embankment compactor and material reduction grinder product lines from Rexworks,
Inc. in Milwaukee, Wisconsin to our Oklahoma City facility in the first and
second quarters of 1998. Future periods will not be impacted by relocation costs
related to this 1997 acquisition.
Interest expense increased $2.1 million from the prior year. The Company's
effective interest rate was approximately 7.87% in 1998 compared to
approximately 8.22% in 1997. The increase in interest expense is due to
additional borrowings on the Company's revolving line of credit primarily for
the acquisitions completed during the fourth quarter of 1997, capital
expenditures and increased working capital requirements, primarily inventories,
for the year ended December 31, 1998.
Income tax expense was $3.6 million in 1998 compared to $2.0 million in 1997.
The Company's financial effective tax rate in 1998 and 1997 was 36.9% and 39.1%,
respectively. Excluding losses of the Company's foreign subsidiary the Company's
financial effective tax rate was 36.5% in 1998 and 1997. The effective rate of
36.5% differs from the statutory federal rate of 35% primarily due to state
income taxes.
Years ended December 31, 1997 and 1996. Revenues for the year ended December 31,
1997 rose to $154.0 million from $138.8 million for the year ended December 31,
1996. Net earnings for 1997 were $3.2 million compared to $5.5 million in 1996,
or 15 cents per share for 1997 versus 25 cents per share for 1996.
The Company's international sales were $21.1 million in 1997 compared to $29.4
million in 1996, resulting in a decrease of approximately 28% over 1996. The
Company's domestic sales were $132.9 million in 1997 and $109.4 million in
1996, an increase of approximately 21%. The increase in net revenues was
primarily attributable to increased volume from the Company's core products.
The acquisitions completed during the fourth quarter of 1997 did not
significantly impact 1997 net revenues.
18
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
The decrease in international sales is primarily attributed to declines in
Australia and North and Central America (other than the United States) offset by
an increase in South America. The declines are primarily a result of unusually
strong sales realized in 1996.
The Company's gross margins were 25.2% for the year ended December 31, 1997,
compared to 28.9% for the year ended December 31, 1996. One reason for the
decline is the Company's strategy to gain market share in the asphalt arena and
the associated pricing pressures encountered. However, the primary cause for
the decrease is the plant reengineering program that began in 1997 with a long
term goal of lowering costs of goods sold primarily by controlling labor costs
while maximizing productivity and efficiency. In addition, in connection with
the reengineering efforts, the Company focused on improving the quality of its
products and ensuring stringent quality standards were met prior to shipping
equipment. These efforts required significant commitment of capital and man
hours during the transition and resulted in increases in costs of sales during
the first six months of 1997. The costs improved in the third and fourth
quarters, but the impact on overall 1997 margins was negative.
Marketing and administrative expenses increased $2.4 million in 1997 due to
increased sales efforts. As a percentage of net revenues, marketing and
administrative expenses were 16.5% in 1997 compared to 16.6% in 1996.
Engineering and product development expense increased $637,000 in 1997. As a
percentage of net revenues, engineering and product development costs remained
level at 4.3% for the year ended December 31, 1997 and 1996, respectively. The
Company continues to be committed to setting standards of quality within the
industry. During 1997 the Company introduced the PR-525, a track version of the
highly mobile PRT-525 mill.
Interest expense decreased $27,000 from the prior year. The Company's average
borrowings increased over 1996 largely due to the $30.0 million private
placement completed in September 1996 and the $15.0 million funding from the
Company's line-of-credit in December 1997. The Company's effective interest rate
was approximately 8.22% in 1997 compared to approximately 10.80% in 1996. The
increase in average borrowings in 1997 was partially offset by more favorable
borrowing rates under the Company's new financing arrangements.
Income tax expense was $2.0 million in 1997 compared to $3.2 million in 1996.
The Company's financial effective tax rate in 1997 and 1996 was 39.1% and 36.7%,
respectively. Excluding losses of the Company's foreign subsidiary the Company's
financial effective tax rate was 36.5% in 1997 and 1996. The effective rate of
36.5% differs from the statutory federal rate of 35% primarily due to state
income taxes.
19
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Impact of Recently Issued Accounting Standards Not Yet Adopted
- --------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 establishes standards for
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in fair value of a derivative depends
on the intended use of the derivative and the resulting designation. Adoption
of SFAS No. 133 is not expected to impact the Company.
Impact of Year 2000 Issue
- -------------------------
An issue exists for all companies that rely on computers as the Year 2000 (Y2K)
approaches. The Y2K problem is the result of past practices in the computer
industry of using two digits rather than four to identify the applicable year.
The Company is addressing the need to ensure that its operations will not be
adversely impacted by software or other system failures related to Y2K. The
Company has formed an oversight committee made up of key management positions
and has developed a plan to coordinate identification, evaluation and
implementation of any necessary changes to internal computer systems,
applications, and business processes.
As of December 31, 1998, the Y2K committee had identified the Company's
information systems (IT) and non-information systems (non IT) that could
potentially be impacted by Y2K. The Company plans to be complete with all Y2K
readiness and contingency planning by June 1999.
The Y2K process began in early 1996 when the Company began the software and
hardware selection and evaluation process for manufacturing and financial
reporting applications. During the third quarter of 1998 the Company
replaced the primary IT operations at the Oklahoma City location. Approximately
$2 million was spent by the Company on this phase of the Y2K project for new
computer software and hardware which was also part of the Company's factory
modernization plan. These costs were capitalized and will be amortized over
future periods.
The Company has also obtained a vendor readiness statement from approximately
99% of the Company's active vendors. These statements indicated that 95% were
either Y2K compliant or would be by June 1999. The Company has determined that
an alternative supply source exists for the vendors who do not appear to be
addressing the Y2K problem.
20
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Non IT systems being considered include communication technologies. The Company
has determined its communication technologies require certain upgrades to meet
Y2K requirements. The Company anticipates Y2K compliance in this area by June
1999 at an estimated cost of $75,000.
The Company has been testing its systems using internal programming staff and
outside computer consultants and intends to continue making any necessary
modifications to prevent disruption to its operations. The Company has not
identified the most reasonably likely worst case scenario in the event the
Company does not obtain Y2K readiness. This will be performed during
contingency planning which will occur during 1999. The Company does not
anticipate incurring any material outside costs for future Y2K activities. All
remaining remediation efforts will be performed primarily utilizing existing
employees. The Company does not separately identify internal costs related to
Y2K efforts.
No assurances can be given that the Company will be able to completely identify
or address all Year 2000 compliance issues. Additionally, no assurances can be
given that third parties with whom the Company does business will not experience
system failures as a result of the Year 2000 issue, nor can the Company fully
predict the consequences of noncompliance.
Federal Highway Legislation
- ---------------------------
The Company has assessed the longer-range impact of the $217 billion national
highway bill (TEA-21) which currently has guaranteed appropriations over the
next five to six years. The Company's significant investment in capital
improvements and plant modernization efforts should have the Company positioned
to take advantage of the anticipated increased business as a result of this new
legislation.
Forward Looking Statements
- --------------------------
Statements of the Company's or management's intentions, beliefs, anticipations,
expectations and similar expressions concerning future events contained in this
report constitute "forward looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. You can identify these statements by
forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate," and "continue" or similar words. As with any future event, there can
be no assurance that the events described in forward looking statements made in
this report will occur or that the results of future events will not vary
materially from those described in the forward looking statements made in this
report. Important factors that could cause the Company's actual performance and
operating results to differ materially from the forward looking statements
include, but are not limited to, highway funding, adverse weather conditions,
general economic conditions and political changes both domestically and
overseas.
21
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Clean Air Act
- -------------
In 1990, the United States Congress passed certain amendments to the National
Clean Air Act. The 1990 amendments have required certain products manufactured
by the Company to be equipped with new pollution control devices. Additional
products manufactured by the Company include pollution control devices. The
Company believes that it will continue to be able to meet the implementation
dates as required by the Clean Air Act.
Inflation
- ---------
The Company did not experience any significant inflationary impact on its costs
of materials.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The primary objective of the following information is to provide forward-looking
quantitative and qualitative information about the Company's potential exposure
to market risks. The term "market risk" for the Company refers to the risk of
loss arising from adverse changes in interest rates. The disclosures are not
meant to be precise indicators of expected future losses, but rather indicators
of reasonably possible losses. This forward-looking information provides
indicators of how the Company views and manages its ongoing market risk
exposures.
At December 31, 1998, the Company had long-term debt outstanding of $77.3
million. Of this amount, $30 million bears interest at a fixed rate of 7.68%,
and $4.3 million bears interest at fixed rates averaging approximately 8%. The
remaining $43 million bears interest at variable rates which averaged
approximately 7.15% at the end of 1998. A 10% increase in short-term interest
rates on the variable rate debt outstanding at the end of 1998 would approximate
72 basis points. Such an increase in interest rates would increase the
Company's interest expense by approximately $310,000 assuming borrowed amounts
remain outstanding.
The above sensitivity analysis for interest rate risk excludes accounts
receivable, accounts payable and accrued liabilities because of the short-term
maturity of such instruments. The analysis does not consider the effect this
movement may have on other variables including changes in revenue volumes that
could be indirectly attributed to changes in interest rates. The actions that
management would take in response to such a change are also not considered. If
it were possible to quantify this impact, the results could well be different
than the sensitivity effects shown above.
22
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
================================================================================
PAGE
Independent Auditors' Report............................................ 24
Consolidated Financial Statements
- ---------------------------------
Consolidated Statements of Earnings,
Years ended December 31, 1998, 1997, and 1996........................ 25
Consolidated Balance Sheets, December 31, 1998 and 1997............... 26
Consolidated Statements of Changes in Common Stock and Other Capital,
Years ended December 31, 1998, 1997, and 1996........................ 28
Consolidated Statements of Cash Flows,
Years ended December 31, 1998, 1997, and 1996........................ 29
Notes to Consolidated Financial Statements,
December 31, 1998, 1997, and 1996.................................... 30
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
CMI Corporation:
We have audited the consolidated financial statements of CMI Corporation and
subsidiaries (the Company) as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CMI Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Oklahoma City, Oklahoma
February 22, 1999
24
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1998, 1997, and 1996
(dollars in thousands, except per share data)
================================================================================
1998 1997 1996
---- ---- ----
Net revenues $205,686 154,014 138,788
-------- ------- -------
Costs and expenses:
Cost of goods sold 152,116 115,172 98,694
Marketing and administrative 30,445 25,450 23,098
Engineering and product development 7,816 6,646 6,009
Product line relocation costs 1,419 - -
-------- ------- -------
191,796 147,268 127,801
-------- ------- -------
Operating earnings 13,890 6,746 10,987
-------- ------- -------
Other expense (income):
Interest expense 5,000 2,906 2,933
Interest income (934) (1,351) (616)
Other, net (35) (4) 44
-------- ------- -------
Earnings before income taxes 9,859 5,195 8,626
Income tax expense 3,642 2,030 3,165
-------- ------- -------
Net earnings $ 6,217 3,165 5,461
======== ======= =======
Share data:
Net earnings applicable to common shares $ 6,217 3,165 5,189
Weighted average outstanding common
shares:
Basic 21,523 21,225 20,426
Diluted 21,660 21,318 20,708
Net earnings per average outstanding
common share:
Basic $ .29 .15 .25
======== ======= =======
Diluted $ .29 .15 .25
======== ======= =======
See notes to consolidated financial statements.
25
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
(dollars in thousands)
================================================================================
Assets 1998 1997
------ ---- ----
Current assets:
Cash and cash equivalents $ 13,559 7,131
Receivables less allowance for doubtful accounts
of $907 and $1,035 at December 31, 1998 and 1997,
respectively 28,013 26,917
Inventories:
Finished equipment 37,409 28,618
Work-in-process 14,189 14,910
Raw materials and parts 51,293 25,143
-------- -------
Total inventories 102,891 68,671
Other current assets 923 579
Deferred tax asset 7,200 5,300
-------- -------
Total current assets 152,586 108,598
-------- -------
Property, plant, and equipment:
Land 2,109 2,086
Buildings 16,870 14,995
Machinery and equipment 49,725 37,697
Other 535 1,961
-------- -------
69,239 56,739
Less accumulated depreciation and amortization 39,692 37,288
-------- -------
Net property, plant, and equipment 29,547 19,451
Long-term receivables 356 2,509
Deferred tax asset 1,900 6,900
Other assets, principally goodwill 5,322 6,970
-------- -------
Total assets $189,711 144,428
======== =======
See notes to consolidated financial statements.
26
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1998 and 1997
(dollars in thousands)
================================================================================
Liabilities, Common Stock and Other Capital 1998 1997
- ------------------------------------------- ---- ----
Current liabilities:
Current maturities of long-term debt $ 268 259
Accounts payable 21,551 14,655
Accrued liabilities 14,617 9,647
------- ------
Total current liabilities 36,436 24,561
------- ------
Long-term debt 77,049 49,274
Common stock and other capital:
Common stock:
Par value $.10; shares issued and outstanding
- 602 and 621 at December 31, 1998 and 1997,
respectively - -
Class A common stock:
Par value $.10; shares issued
- 21,548,883 and 21,506,383 at December 31, 1998
and 1997, respectively 2,155 2,151
Additional paid-in capital 50,057 49,816
Retained earnings 24,014 18,658
Treasury stock, 6,340 Class A common shares at
December 31, 1997, at cost - (32)
------- ------
76,226 70,593
Commitments and contingencies (notes 14 and 15)
------- ------
Total liabilities, common stock and other capital $189,711 144,428
======= =======
See notes to consolidated financial statements.
27
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Common Stock and Other Capital
Years ended December 31, 1998, 1997, and 1996
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
Common Stock Class A Common Stock Additional
------------ -------------------- Paid-in Treasury Retained
Shares Amount Shares Amount Capital Stock Earnings
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31,
1995 621 $ - 20,381,383 $2,038 $46,001 $ - $11,360
Net earnings - - - - - - 5,461
Dividends declared
and accretion on
preferred stock - - - - - - (272)
Dividends paid, common
stock ($.01 per share) - - - - - - (205)
Exercise of stock
options - - 86,000 9 111 - -
------ ------ ----------- ------- ---------- -------- --------
Balance December 31,
1996 621 - 20,467,383 2,047 46,112 - 16,344
Net earnings - - - - - - 3,165
Purchase of treasury
stock - - - - - (32) -
Dividends paid, common
stock ($.04 per share) - - - - - - (851)
Common stock issued - - 75,000 8 367 - -
Exercise of stock
warrants - - 600,000 60 2,190 - -
Exercise of stock
options - - 364,000 36 1,147 - -
------ ------ ----------- ------- ---------- -------- --------
Balance December 31,
1997 621 - 21,506,383 2,151 49,816 (32) 18,658
Net earnings - - - - - - 6,217
Retirement of voting
common stock (19) - (20) - - - -
Retirement of treasury
stock - - (6,340) - (32) 32 -
Exercise of stock
options - - 48,860 4 273 - -
Dividends paid, common
stock ($.04 per share) - - - - - - (861)
Balance December 31,
1998 602 $ - 21,548,883 $2,155 $50,057 $ - $24,014
====== ====== =========== ======= ========== ======== ========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net earnings $ 6,217 3,165 5,461
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation 2,944 2,527 2,199
Amortization 300 47 176
Loss (gain) on sale of assets (36) (4) 59
Change in assets and liabilities net of effects
of acquisitions of businesses:
Receivables (1,096) (1,645) (6,126)
Inventories (34,220) 532 4,402
Other, current assets (344) (249) 202
Accounts payable 6,896 5,414 (5,008)
Accrued liabilities 4,970 (203) (252)
Deferred tax asset 3,100 2,343 3,000
Long-term receivables 2,153 (2,157) 783
Other, non-current assets 1,348 (1,275) (610)
-------- ------- -------
Net cash and cash equivalents provided by
(used in) operating activities (7,768) 8,495 4,286
-------- ------- -------
Investing activities:
Sale of cash equivalents - restricted - - 150
Proceeds from sale of assets 305 113 41
Capital expenditures (13,309) (5,259) (3,413)
Payments made for acquisitions of businesses - (19,876) -
-------- ------- -------
Net cash and cash equivalents used in
investing activities (13,004) (25,022) (3,222)
-------- ------- -------
Financing activities:
Payments on long-term debt (216) (1,052) (3,449)
Borrowings on long-term debt - - 30,000
Net borrowings (payments) on revolving credit note 28,000 15,000 (14,526)
Net borrowings (payments) on fleet financing agreement - - (3,097)
Proceeds from stock options exercised 277 1,183 120
Proceeds from stock warrants exercised - 2,250 -
Payment of common stock dividends (861) (851) (205)
Payment of preferred stock dividends - - (272)
Redemption of preferred stock - - (4,537)
Purchase of treasury stock - (32) -
-------- ------- -------
Net cash and cash equivalents provided by
financing activities 27,200 16,498 4,034
-------- ------- -------
Increase (decrease) in cash and cash equivalents 6,428 (29) 5,098
Cash and cash equivalents at beginning of year 7,131 7,160 2,062
-------- ------- -------
Cash and cash equivalents at end of year $ 13,559 7,131 7,160
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
================================================================================
(1) Description of Business and Summary of Significant Accounting Policies
----------------------------------------------------------------------
Description of Business
-----------------------
Since 1964, CMI Corporation and its subsidiaries (the Company) have
manufactured and marketed equipment for the road and heavy construction
industry. The Company's construction equipment has a wide variety of uses
in the maintenance, construction, paving, and resurfacing of highways, city
streets, parking lots, airport runways, tunnels, and bridges. With the
acquisition discussed in note 2, the Company entered the landfill
compaction industry and significantly expanded their product line offering
for industrial grinders which are utilized in numerous industries,
including the road and heavy construction industry. The Company's raw
materials are readily available, and the Company is not dependent on a
single supplier or only a few suppliers.
Seasonal Nature of the Business
-------------------------------
The Company's business is seasonal in nature and precedes the months in
which highway and road construction and restoration generally occur. A
large portion of the Company's orders for its products are received in the
months of November through July, with heavy shipments occurring in the
months of March through August.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of CMI
Corporation and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers
unrestricted cash and cash equivalents with maturities of less than three
months to be cash equivalents.
Business and Credit Concentrations
----------------------------------
The Company's customers are not concentrated in any specific geographic
region, but are concentrated in the road and heavy construction business.
No single customer accounted for a significant amount of the Company's
sales, and there were no significant accounts receivable from a single
customer. The Company reviews a customer's credit history before extending
credit. The Company establishes an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends, and other information. To reduce credit risk, the Company
generally requires a down payment on large equipment orders, and
international sales are generally secured by letters of credit.
30
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
The Company had short-term notes receivable and sales-type lease payments
due from customers included in accounts receivable of approximately
$1,771,000 and $5,874,000 at December 31, 1998 and 1997, respectively.
Inventories
-----------
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out (FIFO) method. Costs included in
inventories consist of materials, labor, and manufacturing overhead which
are related to the purchase and production of inventories.
Property, Plant, and Equipment
------------------------------
Property, plant, and equipment, stated at cost or the present value of
minimum lease payments for assets under capital leases, are depreciated
over the estimated useful lives of the assets using the straight-line
method. Estimated useful lives for buildings, machinery and equipment, and
other property, plant, and equipment range from 3 to 33, 3 to 15, and 2 to
10 years, respectively. Significant improvements and betterments are
capitalized if they extend the useful life of the asset. Routine repairs
and maintenance are expensed when incurred.
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment
recognized is measured by the amount by which the carrying amount of the
assets exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
Other Assets
------------
Other assets include loan acquisition costs and other intangible assets.
Loan acquisition costs are being amortized on a straight-line basis over
the life of the related loan agreement. Also included in other assets is
the excess of acquisition costs over the fair value of net assets acquired
(goodwill). Goodwill is being amortized on a straight-line basis over
fifteen years. Accumulated amortization for goodwill was $253,000 at
December 31, 1998. Intangible assets are evaluated periodically, and if
conditions warrant, an impairment valuation allowance is provided.
Revenue Recognition
-------------------
Revenue is recognized when sales transactions are completed, which is when
products are shipped or title has transferred to the customer.
31
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Income Taxes
------------
Income taxes are accounted for using the asset and liability method under
which deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable
to future years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities and operating
losses and tax credit carry forwards. The effect on deferred taxes for a
change in tax rates is recognized in income in the period that includes the
enactment date.
Stock Options
-------------
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net income and pro forma earnings per
share disclosures for employee stock option grants made in 1995 and
thereafter as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the provisions
of APB Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS No. 123. Under APB Opinion No. 25, compensation expense is recorded
on the date of grant only if the current market price of the underlying
stock exceeds the exercise price.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash and cash equivalents, receivables, accounts
payable, and accrued liabilities approximate fair value because of the
short maturity of these instruments. The carrying amounts of long-term
receivables and long-term debt approximates fair value as the effective
rates for these instruments are comparable to market rates at year-end.
32
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Earnings Per Common Share
-------------------------
Basic earnings per share is computed by dividing net earnings applicable to
common stock by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution
that could occur if the Company's outstanding stock options were exercised
(calculated using the treasury stock method).
The following table reconciles net earnings to net earnings applicable to
common shares and weighted average common shares outstanding used in the
calculation of basic earnings per common share to the number of shares used
in the calculation of diluted earnings per share for the years 1998, 1997
and 1996 (dollars in thousands, except per share data):
Year ended December 31
-----------------------
1998 1997 1996
---- ---- ----
Net earnings $ 6,217 3,165 5,461
Less dividends on preferred stock and
accretion of preferred stock discount - - 272
------- ------ ------
Net earnings applicable to common shares,
basic and diluted $ 6,217 3,165 5,189
======= ====== ======
Weighted average number of common
shares outstanding - basic 21,523 21,225 20,426
Dilutive effect of potential common shares
issuable upon exercise of employee
stock options and stock purchase warrants 137 93 282
------- ------ ------
Weighted average number of common
shares outstanding - diluted 21,660 21,318 20,708
======= ====== ======
Earnings per share
Basic $ 0.29 0.15 0.25
Diluted $ 0.29 0.15 0.25
Comprehensive Income
--------------------
In 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of
"comprehensive income" and its components in a set of financial statements.
It requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company currently does not have any components
of comprehensive income that are not included in net earnings. Therefore
no separate statement is presented.
33
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(2) Acquisition of Businesses and Product Lines
-------------------------------------------
On December 17, 1997, the Company acquired substantially all of the assets
of Rexworks, Inc's TRASHMASTER Landfill compaction product line and three
hard materials grinding machines for approximately $20.5 million which
included assumption of certain liabilities related to the product lines.
The purchase price was allocated to the assets acquired based on their
estimated fair values, and approximately $16 million was allocated to
receivables and inventory. The excess of the purchase price over the fair
value of the net assets acquired (goodwill) was approximately $3.8 million
and is being amortized on a straight-line basis over 15 years. The Company
moved the production of these product lines to its principal manufacturing
location in 1998. The costs associated with integration were approximately
$1.4 million and were expensed as incurred.
In October 1997, the Company acquired all of the outstanding stock of
Brownwood Ross Company for $2.4 million in cash, and certain assets of the
successor of CS Johnson Corporation for $425,000 in cash and 75,000 shares
of the Company's common stock (valued at $375,000), and the assumption of
approximately $321,000 in liabilities. The purchase price was allocated to
the assets acquired based on their estimated fair values.
The 1997 acquisitions described above were accounted for by the purchase
method of accounting for business combinations. Accordingly, the
accompanying consolidated statements of earnings do not include any
revenues or expenses related to these acquisitions prior to the respective
closing dates. The cash portions of the acquisitions were financed through
available cash and borrowings from the Company's line of credit. Following
are the Company's unaudited pro forma results for 1997 and 1996 assuming
the acquisitions occurred on January 1, 1996 (dollars in thousands, except
for per share data):
1997 1996
---- ----
Net revenues $189,199 $176,635
Net earnings 4,146 6,566
Net earnings per common share:
Basic .19 .32
Diluted .19 .32
Weighted average outstanding common shares:
Basic 21,281 20,501
Diluted 21,375 20,783
34
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations which would have actually resulted had the combinations been in
effect on January 1, 1996, or of future results of operations.
(3) Long-Term Debt and Notes Payable
--------------------------------
Long-term debt and notes payable at December 31 are summarized as follows
(dollars in thousands):
1998 1997
---- ----
Series A Senior Notes, unsecured, with interest at
7.68%, due from September 2000 to September 2006 $30,000 30,000
Revolving line of credit, unsecured, with weighted
average interest of 7.15% at December 31, 1998 and
7.66% at December 31, 1997, due September 2001 43,000 15,000
4.4% to 8.25% (8.1% weighted average rate) fixed rate
bonds, collateralized by a first security interest
in certain real property, due September 2010 3,895 4,092
Lease-purchase obligations and notes payable due
through September 2008, with interest from 6.25% to
10.25%, collateralized by certain buildings and
equipment 422 441
------- ------
77,317 49,533
Less current maturities of long-term debt 268 259
------- ------
$77,049 49,274
======= ======
In September 1996, the Company completed a $30 million private placement of
unsecured Series A Senior Notes and established an unsecured line of
credit. A portion of the proceeds from the senior notes were used to retire
higher-interest debt and to redeem the Company's preferred stock. The
Company amended its revolving line of credit agreement on October 13, 1998
which increased its borrowing line from $40 million to $60 million. The
$60 million unsecured revolving line of credit provides for interest at the
LIBOR rate plus 1.25% to 2.0% or prime rate less 0.5% to 1.25%. The rate is
determined based on the ratio of funded debt to earnings before interest,
taxes, depreciation and amortization and is adjusted every ninety days.
35
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
The Company maintains a fleet financing agreement which allows the Company
to borrow 100 percent of the net sales price of specific equipment under
lease contracts. The terms of the individual borrowings under the
financing agreement are consistent with the lease contracts and generally
range from three months to three years. Borrowings under the fleet
financing agreement are secured by the specific equipment. As of December
31, 1998 and 1997, the Company had no borrowings outstanding under the
fleet financing agreement.
Certain debt agreements contain restrictions on working capital, net worth
(minimum of approximately $52.4 million at December 31, 1998), and other
restrictive covenants. At December 31, 1998, the Company was in compliance
with these covenants.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998, are as follows (dollars in thousands):
1999 $ 268
2000 4,551
2001 47,574
2002 4,596
2003 4,610
Thereafter 15,718
-------
$77,317
=======
(4) Redeemable Preferred Stock
--------------------------
In connection with a 1985 acquisition, the Company issued 4,800 shares of
7% Series B Preferred Stock with a $4.8 million redemption value. The
preferred stock accrued dividends at the rate of $70 per share per year.
The cumulative dividends were payable each January and July and had to be
fully paid or declared with funds set aside for payment before any dividend
could be declared or paid on any other class of the Company's stock. The
preferred stock carried a redemption price of $1,000 per share. During the
period from 1988 to 1995, 1,350 shares of the preferred stock were redeemed
and certain dividends were accrued and paid. During 1996, the Company paid
approximately $4.8 million for the redemption of 3,450 shares of preferred
stock plus accrued dividends. As of December 31, 1996 the Company had
redeemed all outstanding preferred shares.
36
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(5) Common Stock and Other Capital
------------------------------
In 1991, the Company entered into an Investment Agreement with Recovery
Equity Investors, L.P. (REI) pursuant to which, the Company sold REI
6,666,667 shares of Common Stock (subsequently Class A Common Stock) at
$.75 per share. The Investment Agreement contains various covenants and
restricts the Company from taking certain actions without the prior written
consent of REI.
On February 14, 1992, the Company filed an amended and restated certificate
of incorporation, which authorizes 20,000 shares of common stock and
45,000,000 shares of Class A Common Stock. Additionally, the Company
effected a 1-for-2,000 reverse split of the common stock and declared a
stock dividend of 1,999 shares of Class A Common Stock for each whole share
of common stock outstanding following the reverse split. Owners of the
remaining common stock could exchange each share of common stock for one
share of Class A Common Stock. The exchange offer expired on April 30,
1992. At December 31, 1998 602 shares of common stock had not been
exchanged. The Class A Common Stock has certain transfer restrictions in
order to prevent a change in ownership, which could limit or eliminate the
Company's income tax net operating loss carryforwards (see note 8).
In January 1993, the Company entered into separate loan agreements with
REI, a shareholder, and Mr. Larry Hartzog, a shareholder and member of the
Company's board of directors. The loan agreements included the issuance of
stock purchase warrants entitling REI and Mr. Hartzog to purchase up to
600,000 aggregate shares of the Company's Class A Common Stock. In January
1997, REI and Mr. Hartzog exercised the stock purchase warrants at an
exercise price of $3.75 per share purchasing 600,000 shares of the
Company's Class A Common Stock.
(6) Stock Option Plans
------------------
The Company has established the 1992 Incentive Stock Option Plan (the Plan)
for its employees, as approved by the shareholders. The Plan has two
features: (1) stock options and (2) stock appreciation rights. The Plan
is administered by the Compensation Committee of the Board of Directors.
The granting of stock options and/or appreciation rights is at the sole
discretion of the Compensation Committee. Board members are not allowed to
participate in the Plan. A maximum of 1,000,000 stock options and/or
appreciation rights may be granted under the Plan. The exercise price of
the stock options is the market
37
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
value of Class A Common Stock at the date of grant. Generally, the options
vest and become exercisable ratably over a four-year period, commencing six
months after the grant date. The Compensation Committee is entitled in its
discretion to grant options with vesting periods which are different from
the standard four year period. In a limited number of instances, the
Compensation Committee has exercised its discretion and has granted options
with both shorter and longer vesting periods than the standard four year
period.
The Company granted options for 500,000 shares of Class A Common Stock
under the 1992 Incentive Stock Option Plan to the Company's new chief
executive officer in October 1998. This grant is subject to approval of
certain amendments to the Plan by stockholders of the Company at the next
annual meeting. If the stockholers of the Company do not approve the
necessary amendments, the options will be deemed to have been granted
outside the 1992 Incentive Stock Option Plan. Excluding the 500,000
options granted in 1998 there were 271,348 options available for grant
under the plan.
The per share weighted-average fair value of stock options granted during
1998, 1997, and 1996 was $3.77, $2.21, and $2.14 respectively, on the date
of grant using the Black Scholes option-pricing model with the following
assumptions: 1998 - expected volatility 55%, expected dividend yield .6%,
risk-free interest rate of 5.5%, and an expected life of 7.3 years; 1997 -
expected volatility 56%, expected dividend yield .9%, risk-free interest
rate of 5.5%, and an expected life of 4.7 years; 1996 - expected volatility
58%, expected dividend yield 1%, risk-free interest rate of 5.5%, and an
expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for stock
options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net earnings would have been
reduced to the pro forma amounts indicated below:
1998 1997 1996
---- ---- ----
Net earnings As reported $6,217 3,165 5,461
Pro forma 6,040 2,942 5,405
Earnings per share - diluted As reported $ 0.29 0.15 0.25
Pro forma 0.28 0.14 0.25
38
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Pro forma net earnings reflects only options granted from January 1, 1995
through December 31, 1998. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected in
the pro forma net earnings amounts presented above because compensation
cost is reflected over the options' vesting period and compensation cost
for options granted prior to January 1, 1995 is not considered.
Stock appreciation rights may be issued with stock options or separately,
at the sole discretion of the Compensation Committee. Stock appreciation
rights, if granted, would be payable in shares of Class A Common Stock over
the same vesting period as the stock options. At December 31, 1998, no
stock appreciation rights had been granted.
Stock option activity during the periods indicated is as follows:
Number of Weighted-Average
Shares Exercise Price
------ --------------
Balance at December 31, 1995 500,000 $3.89
Granted 150,000 4.17
Exercised 1,000 3.25
-------
Balance at December 31, 1996 649,000 $3.95
Granted 185,000 4.50
Exercised 364,000 3.25
Expired 35,000 3.25
-------
Balance at December 31, 1997 435,000 $4.83
Granted 550,000 6.25
Exercised 48,860 5.66
Forfeited 51,140 4.61
-------
Balance at December 31, 1998 885,000 $5.68
=======
At December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $4.125 - $6.75 and
6.3 years, respectively.
At December 31, 1998, 1997, and 1996, the number of options exercisable was
243,533, 183,764, and 374,125, respectively, and the weighted-average
exercise price of those options was $5.04, $5.08, and $3.46, respectively.
39
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
In 1992, a consulting firm, of which a former board member is a director,
received options for the purchase of up to 100,000 shares of Class A Common
Stock for past services rendered. These options were immediately
exercisable at an exercise price of $1.38 per share. The Company recorded
approximately $125,000 in expense in 1992 for these options. These options
were exercised in 1996.
(7) Leases
------
The Company leases equipment to customers under short-term and long-term
contracts. Short-term contracts generally range from three to six months.
Rental income from short-term leases was approximately $1,384,000,
$1,961,000, and $2,935,000, for the years ended December 31, 1998, 1997,
and 1996, respectively.
The Company's long-term leases generally qualify as sales-type leases. The
net investment in such leases is included in receivables. Future minimum
lease payments to be received for long-term leases are as follows (dollars
in thousands):
1999 $1,771
2000 105
2001 114
2002 107
2003 30
------
$2,127
======
(8) Income Taxes
------------
Income tax expense consisted of the following (dollars in thousands):
1998 1997 1996
---- ---- ----
Current tax expense $ 542 173 165
Deferred tax expense 3,100 1,857 3,000
----- ----- -----
$3,642 2,030 3,165
===== ===== =====
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 35% to earnings before income taxes in 1998,
1997, and 1996, as a result of the following (dollars in thousands):
40
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
1998 1997 1996
---- ---- ----
Computed expected tax expense $3,451 1,818 3,019
State income taxes 410 185 336
Reduction of valuation allowance (177) (357) (37)
Other, net (42) 384 (153)
------ ----- -----
$3,642 2,030 3,165
====== ===== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998
and 1997 are as follows (dollars in thousands):
1998 1997
---- ----
Net operating loss and other carryforwards $ 7,124 11,735
Other, primarily accrued liabilities 4,804 3,255
------- ------
Deferred tax assets 11,928 14,990
Deferred tax liability (plant and equipment
temporary differences) (2,362) (2,147)
------- ------
9,566 12,843
Less valuation allowance 466 643
------- ------
Net deferred tax asset $ 9,100 12,200
======= ======
The net deferred tax asset at December 31, 1998 and 1997 was $9.1 million
and $12.2 million, respectively. The recognized deferred tax asset is based
on expected utilization of net operating loss and other carryforwards and
reversal of certain taxable temporary differences. The ultimate
realization of the deferred tax asset will require aggregate taxable income
of approximately $17 million to $22 million in future years.
The estimated taxable income for 1998 before utilization of income tax net
operating loss carryforwards was approximately $14 million. The estimated
taxable income for 1997 before utilization of income tax net operating loss
carryforwards was approximately $5.8 million.
The Company has assessed its past earnings history and trends, sales
backlog, budgeted sales, reversing taxable temporary differences and
expiration dates of carryforwards and has determined that it is more likely
than not that the $9,100,000 of net deferred tax assets will be realized.
The remaining valuation allowance of approximately $466,000 is maintained
against deferred tax assets which the Company has determined are
potentially not realizable.
41
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
At December 31, 1998 the Company has tax net operating loss carry forwards
of approximately $6,800,000 for federal income tax purposes. Such
carryforwards, which may provide future tax benefits, expire in 2010. At
December 31, 1998 the Company also has tax net operating loss carryforwards
of approximately $33,500,000 for state income tax purposes. Such
carryforwards expire as follows: $4,100,000 in 1999; $1,300,000 in 2001;
$100,000 in 2002; $4,100,000 in 2004; $7,300,000 in 2005; $4,400,000 in
2006; and $12,200,000 in 2010. Future changes in ownership, as defined by
section 382 of the Internal Revenue Code, could limit the amount of net
operating loss carryforwards used in any one year (see note 5).
At December 31, 1998 the Company has tax credit carryforwards of
approximately $1,600,000 which expire in varying amounts from 2000 to 2010,
and depletion carryforwards and AMT credit carryforwards of approximately
$1,900,000 and $1,300,000, respectively, which do not expire.
(9) Export Sales
------------
The Company had export sales of approximately $28.3 million, $21.1 million,
and $29.4 million in 1998, 1997, and 1996, respectively. These sales were
made through foreign dealers and representatives. A significant portion of
these sales were made in Asia, Australia, South America, and North and
Central America, excluding the United States.
(10) Employee Benefit Plan
---------------------
The Company has a defined contribution plan whereby eligible employees may
contribute pre-tax wages in accordance with the provisions of the plan. At
the discretion of the Board of Directors, the Company matches certain
contributions made by eligible employees. Discretionary matching
contributions of approximately $346,000, $269,000, and $155,000 were made
in 1998, 1997, and 1996, respectively.
(11) Supplemental Quarterly Financial Information (Unaudited)
--------------------------------------------------------
Following is a summary of the unaudited interim results of operations for
the years ended December 31 (dollars in thousands, except per share data):
42
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
1998
--------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
Net revenues $44,022 65,892 48,860 46,912 205,686
Net earnings(loss) $ (667) 4,368 1,851 665 6,217
Net earnings(loss)
per common share:
Basic $ (.03) .20 .09 .03 .29
Diluted $ (.03) .20 .09 .03 .29
In the fourth quarter of 1998, the Company recorded adjustments to reduce
the carrying value of inventory and to increase accrued liabilities for
legal contingencies. The after-tax effect of the fourth quarter adjustments
decreased net income by approximately $830,000.
1997
--------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
Net revenues $41,713 46,105 36,078 30,118 154,014
Net earnings(loss) $ 1,424 2,230 1,433 (1,922) 3,165
Net earnings(loss)
per common share:
Basic $ .07 .11 .07 (.09) .15
Diluted $ .07 .11 .07 (.09) .15
In the fourth quarter of 1997, the Company recorded adjustments to reduce
the carrying value of inventory and accounts receivable, and to increase
accrued liabilities for warranty and legal contingencies. The after-tax
effect of the fourth quarter adjustments increased the net loss by
approximately $1.6 million.
(12) Supplemental Cash Flow Information
----------------------------------
Cash paid for interest approximated $4,731,000, $2,804,000, and $2,346,000
in 1998, 1997, and 1996, respectively.
Cash paid for income taxes approximated $229,000, $249,000 and $315,000 in
1998, 1997, and 1996, respectively.
A 1997 acquisition (see note 2) included consideration in the form of the
Company's Voting Class A Common Stock. The fair value of stock issued was
approximately $375,000.
43
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(13) Segment Information
-------------------
The Company currently manages its business by operating location. As such,
the Company identifies its segments based on the geographic locations of
its manufacturing facilities. The Company has one reportable segment, its
Oklahoma City manufacturing facility. The manufacturing facilities
manufacture and market products in the mobile and materials processing
equipment categories as well as parts for the products. The specific
products manufactured at the Oklahoma City plant are as follows: mobile
equipment - the Company's primarily line of concrete paving systems, and
pavement profiling and reclaiming/ stabilizing equipment, specific lines of
heavy-duty trailers, weighing equipment, municipal landfill compactors, and
industrial and green waste grinding machines; materials processing
equipment - hot-mix asphalt production systems, and thermal systems for
remediating contaminated soils and sanitizing medical waste. The specific
products manufactured at the other geographic locations are as follows:
mobile equipment - lightweight grading and concrete paving and finishing
machines, and custom heavy hauling trailers; processing equipment -
concrete batching plants.
Following is certain financial information regarding the Company's
segments. The specific lines of heavy-duty trailers manufactured in
Oklahoma City are transferred to another operating segment through
intercompany accounts at cost and are excluded from net revenues. As a
result, the revenues reported below are all from external customers.
General corporate expenses are not allocated to the other operating
segments; therefore, are included as a reconciling item to reported
operating earnings.
Oklahoma All
City Other Total
--------------------------
As of December 31, 1998:
Total assets $162,493 27,218 189,711
======== ====== =======
Year ended December 31, 1998:
Net revenues $161,190 44,496 205,686
Costs and expenses 146,685 40,083 186,768
-------- ------ -------
Segment measure of operating profit $ 14,505 4,413 18,918
======== ======
General corporate expenses 5,028
-------
Operating earnings 13,890
Interest expense (5,000)
Interest income 934
Other, net 35
-------
Earnings before income taxes 9,859
44
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Oklahoma All
City Other Total
--------------------------
Year ended December 31, 1998 (cont.):
Income tax expense 3,642
-------
Net earnings $ 6,217
=======
Capital expenditures $ 12,804 505 13,309
======= ====== =======
Depreciation and amortization $ 2,520 724 3,244
======= ====== =======
As of December 31, 1997:
Total assets $117,053 27,375 144,428
======= ====== =======
Year ended December 31, 1997:
Net revenues $122,043 31,971 154,014
Costs and expenses 112,353 30,402 142,755
------- ------ -------
Segment measure of operating profit $ 9,690 1,569 11,259
======= ======
General corporate expenses 4,513
-------
Operating earnings 6,746
Interest expense (2,906)
Interest income 1,351
Other, net 4
-------
Earnings before income taxes 5,195
Income tax expense 2,030
-------
Net earnings $ 3,165
=======
Capital expenditures $ 4,376 883 5,259
======= ====== =======
Depreciation and amortization $ 2,093 481 2,574
======= ====== =======
45
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Oklahoma All
City Other Total
--------------------------
As of December 31, 1996:
Total assets $ 91,003 22,451 113,454
======= ======= =======
Year ended December 31, 1996:
Net revenues $109,873 28,915 138,788
Costs and expenses 97,114 27,765 124,879
------- ------ -------
Segment measure of operating profit $ 12,759 1,150 13,909
======= ======
General corporate expenses 2,922
-------
Operating earnings 10,987
Interest expense (2,933)
Interest income 616
Other, net (44)
-------
Earnings before income taxes 8,626
Income tax expense 3,165
-------
Net earnings $ 5,461
=======
Capital expenditures $ 2,930 483 3,413
======= ====== =======
Depreciation and amortization $ 1,997 378 2,375
======= ====== =======
The Company has one operating location in the United Kingdom. The location
serves as a sales office and has approximately $600,000 of assets comprised
primarily of inventory, receivables, and property, plant and equipment.
All remaining assets are located in the United States. See note 9 for
information on export sales.
Revenues for products in 1998, 1997 and 1996 were as follows (dollars in
thousands):
1998 1997 1996
---- ---- ----
Mobile Equipment $ 78,528 82,349 80,709
Materials Processing Equipment 95,257 44,806 37,716
Parts and Used Equipment 31,901 26,859 20,363
------- ------- -------
$205,686 154,014 138,788
======= ======= =======
46
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(14) Commitments and Contingencies
-----------------------------
The Company and its subsidiaries are parties to various leases relating to
plants, warehouses, office facilities, transportation vehicles, and certain
other equipment. Real estate taxes, insurance, and maintenance expenses are
normally obligations of the Company. It is expected that in the normal
course of business, the majority of the leases will be renewed or replaced
by other leases. Leases do not restrict dividends, debt, or future leasing
arrangements. All leasing arrangements contain normal leasing terms without
unusual purchase options or escalation clauses. Rent expense was $1,402,000
in 1998, $715,000 in 1997, and $419,000 in 1996.
Minimum rental commitments under all non-cancelable leases for five years
subsequent to December 31, 1998, are approximately as follows: $716,000 in
1999, $286,000 in 2000, $270,000 in 2001, $270,000 in 2002, and $117,000 in
2003.
At December 31, 1998, the Company was contingently liable as guarantor for
certain accounts receivable sold with recourse of approximately $3,292,000
through September 2006.
(15) Litigation
----------
As previously disclosed, on November 22, 1995, a Chicago law firm,
previously engaged by the Company in connection with prior patent
litigation, filed suit against the Company in the Circuit Court of Cook
County, Illinois. On December 20, 1995 the case was removed to the United
States District Court for the Northern District of Illinois, Eastern
Division. The law firm is seeking to recover approximately $1.4 million of
legal fees and costs alleged to be owing by the Company, together with
prejudgment and postjudgment interest and other costs. The Company has
denied these allegations and will continue to defend this lawsuit.
Since 1996, the Company has been involved in litigation in the U.S.
District Court for the Western District of Oklahoma with Cedarapids, Inc.
The Company sued Cedarapids seeking a declaratory judgement that a patent
held by Cedarapids is invalid or, in the alternative, that the Company was
not infringing upon the patent. Cedarapids subsequently filed a
counterclaim against the Company alleging that the Company was infringing
Cedarapids' patent and seeking unspecified monetary damages. In January
1997, the District Court issued an order staying this lawsuit pending the
resolution of litigation between Cedarapids and Gencor, Industries
involving the same patent. This stay was lifted in December 1997 upon
settlement of patent and other non-related litigation between Cedarapids
and Gencor, Industries. The Company anticipates this lawsuit going to
trial in mid 1999.
47
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
In September 1998, Cedarapids filed suit against the Company in the U.S.
District Court for the Northern District of Iowa alleging that the Company
has infringed upon a second patent held by Cedarapids. Cedarapids is
seeking unspecified monetary damages. The Company intends to vigorously
defend both lawsuits involving Cedarapids.
There are numerous other claims and pending legal proceedings that
generally involve product liability and employment issues. These cases
are, in the opinion of management, ordinary routine matters incidental to
the normal business conducted by the Company. In the opinion of the
Company's management after consultation with outside legal counsel, the
ultimate disposition of such proceedings, including the cases above, will
not have a materially adverse effect on the Company's consolidated
financial position, liquidity or future results of operations.
(16) Related Party Transactions
--------------------------
During 1997, the Company leased certain manufacturing plants and offices
located in Champaign, Illinois, from the now active President of CMI
Johnson-Ross. The current lease is for twenty-four months at a rate of
$15,000 per month. Aggregate lease payments for the years ended December
31, 1998 and 1997 were $150,000 and $33,500, respectively.
48
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Item 9. Changes in and Disagreements With Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
PART III
In accordance with the provisions of General Instruction G(3), Items 10, 11, 12,
and 13 are incorporated herein by reference to the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on May 14, 1999.
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports
-----------------------------------------------------------------
on Form 8-K
-----------
(a) Consolidated Financial Statements and Consolidated Financial Statement
-----------------------------------------------------------------------
Schedules
---------
1. Consolidated Financial Statements:
----------------------------------
See Index to Consolidated Financial Statements at Item 8 on Page 23 of this
Form 10-K.
2. Consolidated Financial Statement Schedules:
-------------------------------------------
Information required by schedules called for under Regulation S-X is either
not applicable, not material, or is included in the consolidated financial
statements or notes thereto.
3. Exhibits
--------
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ------------------------------------------- ----------------------
(3.1) Amended and Restated Certificate Exhibit 2 on Form 8-K,
of Incorporation dated February 18, 1992;
and Exhibit (3i) on Form
10-Q dated August 14,
1995
49
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------ ------------------------------------------- ----------------------
(3.2) Amended and Restated By-Laws Exhibit 6 on Form 8-K,
dated August 26, 1991
(4.1) Series A Senior Notes Loan Agreement Exhibit 4.1 of this
Form 10-K
(4.2) Revolving Line of Credit Loan Agreement Exhibit 4.2 of this
and Amendments Form 10-K
(4.3) The registrant, by signing this report,
agrees to furnish the Securities and
Exchange Commission, upon its request,
a copy of any instrument which defines
the right of holders of long-term debt of
the registrant and all of its subsidiaries
for which consolidated or unconsolidated
financial statements are required to be
filed, and which authorizes a total amount
of securities not in excess of 10 percent
of the total assets of the registrant and
its subsidiaries on a consolidated basis.
(10.1) Employment Agreement dated October 1, 1998 Exhibit 10.1 of this
between the Company and Tom Engelsman. Form 10-K
(10.2) Employment Agreement dated October 1, 1998 Exhibit 10.2 of this
between the Company and Jim Holland. Form 10-K
(10.3) Asset Purchase Agreement dated October 1, Exhibit 10.1 of Form
1997 between Rexworks, Inc. and CMI 8-K dated December 31,
Corporation. 1997
50
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
(21) Subsidiaries of the Registrant:
Place of Incorporation
Name or Organization
---- ---------------
CMI Limited Partnership Oklahoma
CMI Sales Co. Oklahoma
Product Support, Inc. Oklahoma
Machinery Investment Corporation Oklahoma
CMI International (U.K.), Ltd. England
CMI Energy Conversion Systems, Inc. Oklahoma
CMI OIL Corporation Oklahoma
CMI Dakota Co. South Dakota
CMI Metro-Pav, Inc. Iowa
Transport Trailer Manufacturing Company Oklahoma
Brownwood Ross Company Texas
CMI Johnson Corporation Illinois
(23) Consent of Independent Auditors Exhibit 23 of this
Form 10-K
(27) Financial Data Schedule Exhibit 27 on this
Form 10-K
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of 1998.
51
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized:
(Registrant)
CMI CORPORATION
By: /s/ Tom Engelsman Dated: March 19,1999
------------------------------------ -----------------------------
Tom Engelsman
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Kenneth J. Barker Dated: March 19,1999
------------------------------------ -----------------------------
Kenneth J. Barker
Director
By: /s/ Albert L. Basey Dated: March 19,1999
------------------------------------ -----------------------------
Albert L. Basey
President and Chief Operating Officer
By: /s/ Robert L. Curtis Dated: March 19,1999
------------------------------------ -----------------------------
Robert L. Curtis
Vice President, Sales and Marketing
By: /s/ Joseph J. Finn-Egan Dated: March 19,1999
------------------------------------ -----------------------------
Joseph J. Finn-Egan
Director
By: /s/ Larry D. Hartzog Dated: March 19,1999
------------------------------------ -----------------------------
Larry D. Hartzog
Director
By: /s/Jim D. Holland Dated: March 19,1999
------------------------------------ -----------------------------
Jim D. Holland
Senior Vice President, Treasurer
and Chief Financial Officer
52
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1998
================================================================================
SIGNATURES
By: /s/ David Jolly Dated: March 19,1999
------------------------------------ -----------------------------
David Jolly
Corporate Controller
By: /s/ Jeffrey A. Lipkin Dated: March 19,1999
------------------------------------ -----------------------------
Jeffrey A. Lipkin
Director
By: /s/ J. Larry Nichols Dated: March 19,1999
------------------------------------ -----------------------------
J. Larry Nichols
Director
By: /s/ Matthew J. Rohwer Dated: March 19,1999
------------------------------------ -----------------------------
Matthew J. Rohwer
Assistant Treasurer
By: /s/ Thomas P. Stafford Dated: March 19,1999
------------------------------------ -----------------------------
Thomas P. Stafford
Director
By: /s/ Bill Swisher Dated: March 19,1999
------------------------------------ -----------------------------
Bill Swisher
Chairman of the Board
53
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
================================================================================
CMI CORPORATION
$30,000,000
7.68 % Series A Senior Notes due September 15, 2006
__________
NOTE PURCHASE AGREEMENT
__________
Dated as of September 1, 1996
================================================================================
PPN: 125761 A# 3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<C> <S> <C>
1. AUTHORIZATION OF NOTES.............................................................. 1
2. SALE AND PURCHASE OF NOTES.......................................................... 1
3. CLOSING............................................................................. 1
4. CONDITIONS TO CLOSING............................................................... 2
4.1. Representations and Warranties................................................ 2
4.2. Performance; No Default....................................................... 2
4.3. Compliance Certificates....................................................... 2
4.4. Opinions of Counsel........................................................... 3
4.5. Purchase Permitted By Applicable Law, etc..................................... 3
4.6. Payment of Special Counsel Fees............................................... 3
4.7. Private Placement Number...................................................... 3
4.8. Changes in Corporate Structure................................................ 3
4.9. Proceedings and Documents..................................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 4
5.1. Organization; Power and Authority............................................. 4
5.2. Authorization, etc............................................................ 4
5.3. Disclosure.................................................................... 4
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates; Agreements.. 5
5.5. Financial Statements.......................................................... 6
5.6. Compliance with Laws, Other Instruments, etc.................................. 6
5.7. Governmental Authorizations, etc.............................................. 6
5.8. Litigation; Observance of Agreements, Statutes and Orders..................... 6
5.9. Taxes......................................................................... 7
5.10. Title to Property; Leases..................................................... 7
5.11. Licenses, Permits, etc........................................................ 7
5.12. Compliance with ERISA......................................................... 8
5.13. Private Offering by the Company............................................... 9
5.14. Use of Proceeds; Margin Regulations........................................... 9
5.15. Existing Indebtedness; Future Liens........................................... 9
5.16. Foreign Assets Control Regulations, etc....................................... 10
5.17. Status Under Certain Statutes................................................. 10
5.18. Environmental Matters......................................................... 10
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
6. REPRESENTATIONS OF THE PURCHASER.......................... 11
6.1. Purchase for Investment............................. 11
6.2. Source of Funds..................................... 11
7. INFORMATION AS TO COMPANY................................. 12
7.1. Financial and Business Information.................. 12
7.2. Officer's Certificate............................... 15
7.3. Inspection.......................................... 16
8. PREPAYMENT OF THE NOTES................................... 16
8.1. Required Prepayments................................ 16
8.2. Optional Prepayments with Make-Whole Amount......... 17
8.3. Allocation of Partial Prepayments................... 18
8.4. Maturity; Surrender, etc............................ 18
8.5. Purchase of Notes................................... 18
8.6. Make-Whole Amount................................... 18
9. AFFIRMATIVE COVENANTS..................................... 20
9.1. Compliance with Law................................. 20
9.2. Insurance........................................... 20
9.3. Maintenance of Properties........................... 20
9.4. Payment of Taxes and Claims......................... 21
9.5. Corporate Existence, etc............................ 21
10. NEGATIVE COVENANTS........................................ 21
10.1. Transactions with Affiliates....................... 21
10.2. Merger, Consolidation, etc......................... 22
10.3. Sale of Assets..................................... 22
10.4. Liens.............................................. 23
10.5. Net Worth.......................................... 24
10.6. Funded Debt........................................ 24
10.7. Fixed Charge Coverage Ratio........................ 25
10.8. Disposition of Stock of Subsidiaries............... 25
10.9. Nature of Business................................. 25
11. EVENTS OF DEFAULT......................................... 25
12. REMEDIES ON DEFAULT, ETC.................................. 28
12.1. Acceleration....................................... 28
12.2. Other Remedies..................................... 28
12.3. Rescission......................................... 29
12.4. No Waivers or Election of Remedies, Expenses, etc.. 29
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES......... 29
13.1. Registration of Notes.......................... 29
13.2. Transfer and Exchange of Notes................. 30
13.3. Replacement of Notes........................... 30
14. PAYMENTS ON NOTES..................................... 31
14.1. Place of Payment............................... 31
14.2. Home Office Payment............................ 31
15. EXPENSES, ETC......................................... 31
15.1. Transaction Expenses........................... 31
15.2. Survival....................................... 32
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT............................................. 32
17. AMENDMENT AND WAIVER.................................. 32
17.1. Requirements................................... 32
17.2. Solicitation of Holders of Notes............... 33
17.3. Binding Effect, etc............................ 33
17.4. Notes Held by Company, etc..................... 33
18. NOTICES............................................... 34
19. REPRODUCTION OF DOCUMENTS............................. 34
20. CONFIDENTIAL INFORMATION.............................. 34
21. SUBSTITUTION OF PURCHASERS............................ 35
22. ADDITIONAL SERIES OF NOTES............................ 36
23. MISCELLANEOUS......................................... 36
23.1. Successors and Assigns......................... 36
23.2. Payments Due on Non-Business Days.............. 36
23.3. Severability................................... 37
23.4. Construction................................... 37
23.5. Counterparts................................... 37
23.6. Governing Law.................................. 37
23.7. Accounting Principles.......................... 37
23.8. Valuation Principles........................... 38
</TABLE>
iii
<PAGE>
SCHEDULE B - Defined Terms
EXHIBIT 1 - Form of Note
iv
<PAGE>
CMI CORPORATION
I-40 & Morgan Road
P.O. Box 1985
Oklahoma City, Oklahoma 73101
(405) 787-6020
7.68% Series A Senior Notes due September 15, 2006
As of September 1, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
CMI Corporation, an Oklahoma corporation (the "Company"), agrees with you as
follows:
1. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of $30,000,000 aggregate
principal amount of its 7.68% Series A Senior Notes due September 15, 2006 (the
"Notes," such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Note Purchase Agreement (the "Agreement")). The
Notes shall be substantially in the form set out in Exhibit 1, with such changes
therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified opposite your
name in Schedule A at the purchase price of 100% of the principal amount
thereof.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you shall occur
at the office of Gardner, Carton & Douglas, 321 North Clark Street, Chicago,
Illinois 60010 at 9:00 a.m., Chicago time, at a closing (the "Closing") on
September 17, 1996 or on such other
<PAGE>
Business Day thereafter on or prior to September 30, 1996 as may be agreed upon
by the Company and you. At the Closing the Company will deliver to you the Notes
to be purchased by you in the form of a single Note (or such greater number of
Notes in denominations of at least $100,000 as you may request) dated the date
of the Closing and registered in your name (or in the name of your nominee),
against delivery by you to the Company or its order of immediately available
funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of CMI Corporation Depository
Account to account number 814032955 at Bank of Oklahoma, N.A., 201 Robert S.
Kerr, P.O. Box 24128, Oklahoma City, Oklahoma 73124, ABA #103900036. If at the
Closing the Company shall fail to tender such Notes to you as provided above in
this Section 3, or any of the conditions specified in Section 4 shall not have
been fulfilled to your satisfaction, you shall, at your election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
you may have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. Representations and Warranties.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum (as defined below) that would have
been prohibited by this Agreement had it applied since such date.
4.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
---------------------
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.8 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you
-----------------------
a certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery
of the Notes and the Agreements.
2
<PAGE>
4.4. Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to
you, dated the date of Closing, (a) from Hartzog Conger & Cason, counsel for the
-
Company, covering the matters set forth in Exhibit 4.4(a) and covering such
other matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company hereby instructs its counsel to
deliver such opinion to you) and (b) from Gardner, Carton & Douglas, your
-
special counsel in connection with such transactions, substantially in the form
set forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as you may reasonably request.
4.5. Purchase Permitted By Applicable Law, etc.
On the date of Closing your purchase of Notes shall (i) be permitted by
-
the laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (ii) not violate any
--
applicable law or regulation (including, without limitation, Regulations G, T or
X of the Board of Governors of the Federal Reserve System) and (iii) not subject
---
you to any tax, penalty or liability under or pursuant to any applicable law or
regulation, which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer's Certificate certifying as
to such matters of fact as you may reasonably specify to enable you to determine
whether such purchase is so permitted.
4.6. Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.7. Private Placement Number.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.8. Changes in Corporate Structure.
Except as specified in Schedule 4.8, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
3
<PAGE>
4.9. Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. Organization; Power and Authority.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or to be in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Notes and to perform the provisions hereof and thereof.
5.2. Authorization, etc.
This Agreement and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement constitutes, and
upon execution and delivery thereof each Note will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
-
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
--
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3. Disclosure.
The Company, through its agents, SPP Hambro & Co., LLC and Boatmen's
Capital Markets, has delivered to you a copy of the Confidential Direct
Placement Memorandum, dated July 1996 (the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in this Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf
4
<PAGE>
of the Company in connection with the transactions contemplated hereby and the
financial statements listed in Schedule 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum,
or in one of the documents, certificates or other writings delivered to you by
or on behalf of the Company in connection with the transactions contemplated
hereby, or in the financial statements listed in Schedule 5.5, since December
31, 1995, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any Subsidiary except
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. There is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect that has not been
set forth herein or in the Memorandum or in the other documents, certificates
and other writings delivered to you by or on behalf of the Company specifically
for use in connection with the transactions contemplated hereby.
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates;
Agreements.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each
-
Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by the Company and each other
Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries and
--
(iii) of the Company's directors and senior officers. Schedule 5.4 also
----
identifies each Subsidiary that is inactive and has no, or only minimal,
assets and liabilities.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or to
be in good standing could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Each such Subsidiary has
the corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law
statutes) restricting the ability of such
5
<PAGE>
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that
owns outstanding shares of capital stock or similar equity interests of
such Subsidiary.
5.5. Financial Statements.
The Company has delivered to you copies of the financial statements of
the Company and its Subsidiaries listed on Schedule 5.5. All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
5.6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
-
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
--
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
---
or other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.
5.7. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any property of the
Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
6
<PAGE>
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it
is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including, without limitation, Environmental
Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.9. Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
-
individually or in the aggregate Material or (ii) the amount, applicability or
--
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate.
5.10. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11. Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit,
7
<PAGE>
franchise, authorization, patent, copyright, service mark, trademark, trade
name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries.
5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by
the Company or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of the Company or any ERISA Affiliate,
in either case pursuant to Title I or IV of ERISA or to such penalty or
excise tax provisions or to Section 401(a)(29) or 412 of the Code, other
than such liabilities or Liens as would not be individually or in the
aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA
and the terms "current value" and "present value" have the meaning
specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities)
under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by section
4980B of the Code) of the Company and its Subsidiaries is not Material.
8
<PAGE>
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is
subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code. The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of
your representation in Section 6.2 as to the sources of the funds used to
pay the purchase price of the Notes to be purchased by you.
5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you and not more than 30 other Institutional Investors,
each of which has been offered the Notes as a private sale for investment.
Neither the Company nor anyone acting on its behalf has taken, or will take, any
action that would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act.
5.14. Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 0.1% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 0.1% of
the value of such assets. As used in this Section 5.14, the terms "margin stock"
and "purpose of buying or carrying" shall have the meanings assigned to them in
said Regulation G.
5.15. Existing Indebtedness; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of August 31, 1996, since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal
or interest on any Indebtedness of the Company or any Subsidiary and no
event or condition exists with respect to any Indebtedness of the Company
or any Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such
9
<PAGE>
Indebtedness to become due and payable before its stated maturity or before
its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.4.
5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. Status Under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring
on or in any way related to real properties now or formerly owned, leased
or operated by any of them or to other assets or their use, except, in each
case, such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials in
a manner contrary to any Environmental Laws in each case in any manner that
could reasonably be expected to result in a Material Adverse Effect; and
10
<PAGE>
(c) all buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase for Investment.
You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
- --------
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2. Source of Funds.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other than a
separate account that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or credited, to
such plan and to any participant or beneficiary of such plan (including any
annuitant) are not affected in any manner by the investment performance of
the separate account; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-
1 (issued January 29, 1990), or (ii) a bank collective investment fund,
within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as
you have disclosed to the Company in writing pursuant to this paragraph
(b), no employee benefit plan or group of plans maintained by the same
employer or employee organization beneficially owns more than 10% of all
assets allocated to such pooled separate account or collective investment
fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee
11
<PAGE>
benefit plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the total
client assets managed by such QPAM, the conditions of Part I(c) and (g) of
the QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in Section
V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and (ii) the names of all employee benefit
- --
plans whose assets are included in such investment fund have been disclosed
to the Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA; or
(g) the Source is an "insurance company general account" as such term
is defined in the Department of Labor Prohibited Transaction Class
Exemption 95-60 (issued July 12, 1995) ("PTE 95-60") and as of the date of
this Agreement there is no "employee benefit plan" with respect to which
the aggregate amount of such general account's reserves and liabilities for
the contracts held by or on behalf of such employee benefit plan and all
other employee benefit plans maintained by the same employer (and
affiliates thereof as defined in Section V(a)(1) of PTE 95-60) or by the
same employee organization (in each case determined in accordance with the
provisions of PTE 95-60) exceeds 10% of the total reserves and liabilities
of such general account (as determined under PTE 95-60) (exclusive of
separate account liabilities) plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with the
state of domicile of such Purchaser.
As used in this Section 6.2, the terms "employee benefit plan," "governmental
plan," "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. Financial and Business Information.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
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<PAGE>
(a) Quarterly Statements -- within 45 days after the end of each
--------------------
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such quarter
and (in the case of the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
--------
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission, if any, shall be deemed to satisfy the requirements of this Section
7.1(a);
(b) Annual Statements -- within 90 days after the end of each fiscal
-----------------
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as of the end of such year, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
such financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their results
of operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable basis for
such opinion in the circumstances, and
13
<PAGE>
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their audit,
they have become aware of any condition or event that then constitutes a
Default or an Event of Default, and, if they are aware that any such
condition or event then exists, specifying the nature and period of the
existence thereof (it being understood that such accountants shall not be
liable, directly or indirectly, for any failure to obtain knowledge of any
Default or Event of Default unless such accountants should have obtained
knowledge thereof in making an audit in accordance with generally accepted
auditing standards or did not make such an audit),
provided that the delivery within the time period specified above of the
--------
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, if any, together with the accountant's certificate described in
clause (B) above, shall be deemed to satisfy the requirements of this
Section (b);
(c) SEC and Other Reports -- promptly upon their becoming available,
---------------------
one copy of (i) each financial statement, report, notice or proxy statement
-
sent by the Company or any Subsidiary to public securities holders
generally, if any, and (ii) each regular or periodic report, each
--
registration statement (without exhibits except as expressly requested by
such holder), and each prospectus and all amendments thereto filed by the
Company or any Subsidiary with the Securities and Exchange Commission, if
any, and of all press releases and other statements made available
generally by the Company or any Subsidiary to the public concerning
developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days after
-------------
a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
14
<PAGE>
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions
of the Code relating to employee benefit plans, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to have a
Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
-----------------------------------
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to
any order, ruling, statute or other law or regulation that could reasonably
be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
---------------------
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. Officer's Certificate.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1 (a) or Section (b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
-------------------
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.2 through Section 10.8,
inclusive, during the quarterly or annual period covered by the statements
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then in
existence); and
(b) Event of Default -- a statement that such officer has reviewed the
----------------
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and
its Subsidiaries from the
15
<PAGE>
beginning of the quarterly or annual period covered by the statements then
being furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition or
event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation, any
such event or condition resulting from the failure of the Company or any
Subsidiary to comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
7.3. Inspection.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent
will not be unreasonably withheld) its independent public accountants, and
(with the consent of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent public
accountants (and by this provision the Company authorizes said accountants
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1. Required Prepayments.
(a) On September 15, 2000 and on each September 15 thereafter to and
including September 15, 2005 the Company will prepay $4,285,715 principal
amount (or such lesser principal amount as shall then be outstanding) of
the Notes at 100% of the principal amount thereof and without payment of
the Make-Whole Amount or any premium, provided that upon any partial
--------
prepayment of the Notes pursuant to Section 8.2 or purchase of the Notes
permitted by Section 8.5, the principal amount of each required
16
<PAGE>
prepayment of the Notes becoming due under this Section 8.1 on and after
the date of such prepayment or purchase shall be reduced in the same
proportion as the aggregate unpaid principal amount of the Notes is reduced
as a result of such prepayment or purchase.
(b) In the event of a Change of Control Event, the Company, upon
notice as provided below, shall offer to prepay the entire principal amount
of the Notes at 100% of the principal amount thereof and without payment of
the Make-Whole Amount or any premium. The Company shall give notice of any
offer to prepay the Notes to each holder of the Notes immediately and in
any event not later than the date of a Change of Control Event. Such
notice shall be certified by a Senior Financial Officer and shall specify
(i) the nature of the Change of Control Event, (ii) the date fixed for
prepayment which shall be not less than 30 or more than 60 calendar days
after the date of such notice but in any event shall not be later than the
Effective Date of the Change of Control, (iii) the accrued interest
applicable to the prepayment and (iv) the date by which any holder of a
Note that wishes to accept such offer must deliver notice thereof to the
Company which shall not be later than 7 Business Days prior to the date
fixed for prepayment. Not later than 5 Business Days prior to the date
fixed for prepayment, the Company shall give written notice to each holder
of the Notes of those holders who have given notices of acceptance of the
Company's offer, and the principal amount of Notes held by each, and
thereafter any holder may change its response to the Company's offer by
written notice to such effect delivered to the Company not less than 2
Business Days prior to the date fixed for prepayment. Upon receipt by the
Company of any non-revoked notice of acceptance from any holder within the
required time period, the aggregate principal amount of Notes held by such
holder shall become due and payable on the prepayment date. Failure of a
holder to respond to a notice shall be deemed to be an election by such
holder to accept the offer to prepay.
8.2. Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes, in an amount not less
than $1,000,000 in the case of a partial prepayment, at 100% of the principal
amount so prepaid, plus the Make-Whole Amount determined for the prepayment date
with respect to such principal amount. The Company will give each holder of
Notes written notice of each optional prepayment under this Section 8.2 not less
than 30 days and not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify such date, the aggregate principal
amount of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with Section
8.3), and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid, and shall be accompanied by a certificate of a
Senior Financial Officer as to the estimated Make-Whole Amount due in connection
with such prepayment (calculated as if the date of such notice were the date of
the
17
<PAGE>
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
8.3. Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
8.4. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and canceled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5. Purchase of Notes.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.6. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
--------
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
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<PAGE>
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with respect to the Called Principal of any
Note, .60% over the yield to maturity implied by (i) the yields reported,
-
as of 10:00 a.m. (New York City time) on the second Business Day preceding
the Settlement Date with respect to such Called Principal, on the display
designated as "Page 500" on the Telerate Access Service (or such other
display as may replace Page 500 on Telerate Access Service) for actively
traded U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date or (ii) if
--
such yields are not reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (a) converting U.S.
-
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1) the
- -
actively traded U.S. Treasury security with the final maturity closest to
and greater than the Remaining Average Life and (2) the actively traded
-
U.S. Treasury security with the final maturity closest to and less than the
Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
- --
obtained by multiplying (a) the principal component of each Remaining
-
Scheduled Payment with respect to such Called Principal by (b) the number
-
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
--------
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
19
<PAGE>
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1. Compliance with Law.
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, including, without limitation, Environmental Laws, and will obtain
and maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.2. Insurance.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are maintained with respect
thereto) as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
9.3. Maintenance of Properties.
The Company will and will cause each of its Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided that this Section 9.3 shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
20
<PAGE>
9.4. Payment of Taxes and Claims.
The Company will and will cause each of its Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
--------
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
-
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
--
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. Corporate Existence, etc.
The Company will at all times preserve and keep in full force and effect
its corporate existence. Subject to Sections 10.2 and 10.3, the Company will at
all times preserve and keep in full force and effect the corporate existence of
each of its Subsidiaries (unless merged into the Company or a Subsidiary) and
all rights and franchises of the Company and its Subsidiaries unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
could not, individually or in the aggregate, have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1. Transactions with Affiliates.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or Material group of related transactions
(including, without limitation, the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable arm's-
length transaction with a Person not an Affiliate.
21
<PAGE>
10.2. Merger, Consolidation, etc.
The Company will not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case
may be, shall be a solvent corporation organized and existing under the
laws of the United States or any State thereof (including the District of
Columbia), and, if the Company is not such corporation, (i) such
-
corporation shall have executed and delivered to each holder of any Notes
its assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement and the Notes and (ii) shall have
--
caused to be delivered to each holder of any Notes an opinion of nationally
recognized independent counsel, or other independent counsel reasonably
satisfactory to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof;
(b) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under this Agreement or the Notes.
10.3. Sale of Assets.
The Company will not and will not permit any Subsidiary to sell, lease,
transfer or otherwise (including by way of merger) dispose of (collectively a
"Disposition") any assets, including any shares of capital stock of Subsidiaries
in one or a series of transactions, other than in the ordinary course of
business, to any Person, except to the Company or a Wholly-Owned Subsidiary, (i)
if, after giving effect to such Disposition and all prior Dispositions since the
Date of Closing, the aggregate net book value of assets subject to Dispositions
would exceed, on a cumulative basis, 25% of Consolidated Total Assets as of the
end of the immediately preceding fiscal quarter or (ii) if a Default or Event of
Default exists; provided, that such Disposition shall not be subject to or
included in the foregoing limitation and computation in clause (i) if the net
proceeds of such Disposition are (x) reinvested or committed to be reinvested in
productive assets of a similar nature and at least equivalent value within 12
months of such Disposition, or (y) applied to reduce Funded Debt of the Company
or its Subsidiaries, including the Notes (other than Funded Debt that by its
terms is subordinate to the Notes), on a pro rata basis, and in the
22
<PAGE>
case of those proceeds applied to reduce the Notes, the provisions of Sections
8.2 and 8.3 shall apply.
10.4. Liens.
The Company will not and will not permit any Subsidiary to permit to
exist, create, assume or incur, directly or indirectly, any Lien on its
properties or assets, whether now owned or hereafter acquired, except:
(a) Liens existing on property or assets of the Company or any
Subsidiary as of the date of this Agreement that are described in Schedule
10.4;
(b) Liens for taxes, assessments or governmental charges not then due
and delinquent or the validity of which is being contested in good faith by
appropriate proceedings and as to which the Company has established
adequate reserves on its books in accordance with GAAP;
(c) Liens arising in connection with court proceedings, provided the
execution of such Liens is effectively stayed, such Liens are being
contested in good faith by appropriate proceedings and as to which the
Company has established adequate reserves on its books in accordance with
GAAP;
(d) Liens arising in the ordinary course of business and not incurred
in connection with the borrowing of money (including encumbrances in the
nature of zoning restrictions, easements, rights and restrictions of record
on the use of real property, defects in title and landlord's, lessor's,
mechanics' and materialmen's liens) that in the aggregate do not materially
interfere with the conduct of the business of the Company and its
Subsidiaries taken as a whole or materially impair the use or value of the
property or assets subject thereto;
(e) Liens securing Indebtedness of a Subsidiary to the Company or to a
Wholly-Owned Subsidiary;
(f) Liens (i) existing on property at the time of its acquisition by
the Company or a Subsidiary and not created in contemplation thereof,
whether or not the Indebtedness secured by such Lien is assumed by the
Company or a Subsidiary; or (ii) on property created contemporaneously with
its acquisition or within 180 days of the acquisition or completion of
construction thereof to secure or provide for all or a portion of the
purchase price or cost of construction of such property; or (iii) existing
on property of a Person at the time such Person is merged or consolidated
with, or substantially all of its assets are acquired by, the Company or a
Subsidiary and not created in contemplation thereof; provided that in the
case of clauses (i), (ii) and (iii) such Liens do not extend to other
property of the Company or any Subsidiary and that the aggregate principal
amount of
23
<PAGE>
Indebtedness secured by each such Lien does not exceed 100% of the fair
market value of the property subject thereto;
(g) Additional Liens securing Indebtedness not otherwise permitted by
paragraphs (a) through (f) above, provided that at the time of creation,
assumption or incurrence thereof and immediately after giving effect
thereto and to the application of the proceeds therefrom, the sum (without
duplication) of (i) the outstanding principal amount of Indebtedness of the
Company and its Subsidiaries secured by Liens, and (ii) the outstanding
principal amount of Funded Debt of Subsidiaries, does not exceed 15% of
Consolidated Net Worth; and
(h) Liens resulting from extensions, renewals or replacements of Liens
permitted by paragraphs (a) and (f), provided that there is no increase in
the principal amount of Indebtedness secured thereby at the time of
extension, renewal or replacement and any new Lien attaches only to the
same property theretofore subject to such earlier Lien.
10.5. Net Worth.
The Company will not permit its Consolidated Net Worth at any time to
be less than $45,000,000 plus the cumulative sum of 50% of Consolidated Net
Income (without reduction for any losses) for each of its fiscal years ending
after December 31, 1995.
10.6. Funded Debt.
The Company will not and will not permit any Subsidiary to create,
assume, incur or otherwise become liable for, directly or indirectly, any Funded
Debt other than:
(a) the Notes;
(b) outstanding Funded Debt of the Company and its Subsidiaries
described in Schedule 5.15 and extensions, renewals or replacements of such
Funded Debt, provided that the outstanding principal amount of such Funded
Debt at the time of such extension, renewal or replacement is not
increased;
(c) additional Funded Debt, provided that at the time of incurrence
and after giving effect thereto and to the application of the proceeds
therefrom, the Consolidated Funded Debt then to be outstanding does not
exceed 60% of Consolidated Total Capitalization; and
(d) additional Funded Debt of Subsidiaries, provided that at the time
of incurrence and after giving effect thereto and to the application of the
proceeds therefrom,
24
<PAGE>
(i) such Funded Debt may be incurred pursuant to paragraph (c)
of this Section 10.6, and
(ii) the sum (without duplication) of outstanding (x) Funded
Debt of Subsidiaries (other than Funded Debt of Subsidiaries owed to the
Company) and (y) Indebtedness of the Company or any Subsidiary secured by
Liens permitted by Section 10.4(g) does not exceed 15% of Consolidated Net
Worth.
10.7. Fixed Charge Coverage Ratio.
The Company will not permit the ratio (calculated as of the end of each
fiscal quarter) of Consolidated Income Available for Fixed Charges to
Consolidated Fixed Charges for the period of four quarters ending as of each
fiscal quarter to be less than 2.00 to 1.00. If any Indebtedness is incurred or
assumed by the Company or any Subsidiary in connection with an acquisition, the
Company shall determine compliance with this Section 10.7 for the applicable
period ending as of its most recently completed fiscal quarter, (A) calculating
Consolidated Income Available for Fixed Charges, on a pro forma basis, as if the
acquisition had occurred on the first day of the period of four consecutive
fiscal quarters ending with the most recently completed fiscal quarter, and (B)
calculating Consolidated Fixed Charges, on a projected basis, giving effect to
any Indebtedness incurred in connection with the acquisition for the four fiscal
quarters following the acquisition.
10.8. Disposition of Stock of Subsidiaries.
The Company will not, and will not permit any Subsidiary to, issue, sell
or transfer capital stock of a Subsidiary to any Person other than the Company
or a Wholly-Owned Subsidiary if such issuance, sale or transfer would cause it
to cease to be a Subsidiary, unless (i) all shares of capital stock of such
Subsidiary and all Indebtedness of such Subsidiary owned by the Company and by
every other Subsidiary shall simultaneously be sold, transferred or otherwise
disposed of, (ii) such Subsidiary does not thereafter own any shares of capital
stock or Indebtedness of the Company or another Subsidiary and (iii) such sale
would not be prohibited under Section 10.3.
10.9. Nature of Business.
The Company will not, and will not permit any of its Subsidiaries to,
engage to any substantial extent in any business other than the businesses in
which the Company and its Subsidiaries are engaged on the date of this Agreement
as described in the Memorandum and businesses reasonably related thereto or in
furtherance thereof.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
25
<PAGE>
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 7.1(d) or Sections 10.1 through 10.9; or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this Section 11) and such default is not remedied within 30 days
after the earlier of (i) a Responsible Officer obtaining actual knowledge
-
of such default and (ii) the Company receiving written notice of such
--
default from any holder of a Note; or
(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any
writing furnished in connection with the transactions contemplated hereby
proves to have been false or incorrect in any material respect on the date
as of which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
-
as guarantor or other surety) in the payment of any principal of or premium
or make-whole amount or interest on any Indebtedness that is outstanding in
an aggregate principal amount of at least $2,000,000 beyond any period of
grace provided with respect thereto, or (ii) the Company or any Subsidiary
--
is in default in the performance of or compliance with any term of any
evidence of any Indebtedness in an aggregate outstanding principal amount
of at least $2,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Indebtedness has become, or has been
declared (or one or more Persons are entitled to declare such Indebtedness
to be), due and payable before its stated maturity or before its regularly
scheduled dates of payment, or (iii) as a consequence of the occurrence or
---
continuation of any event or condition (other than the passage of time or
the right of the holder of Indebtedness to convert such Indebtedness into
equity interests), (x) the Company or any Subsidiary has become obligated
-
to purchase or repay Indebtedness before its regular maturity or before its
regularly scheduled dates of payment in an aggregate outstanding principal
amount of at least $2,000,000, or (y) one or more Persons have the right to
-
require the Company or any Subsidiary so to purchase or repay such
Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or
-
admits in writing its inability to pay, its debts as they become due, (ii)
--
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or
26
<PAGE>
arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or
other similar law of any jurisdiction, (iii) makes an assignment for the
---
benefit of its creditors, (iv) consents to the appointment of a custodian,
--
receiver, trustee or other officer with similar powers with respect to it
or with respect to any substantial part of its property, (v) is adjudicated
-
as insolvent or to be liquidated or (vi) takes corporate action for the
--
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Company or any of its Subsidiaries, or any such petition shall be filed
against the Company or any of its Subsidiaries and such petition shall not
be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money aggregating
in excess of $5,000,000 are rendered against one or more of the Company and
its Subsidiaries which judgments are not, within 45 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within 45 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
-
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
--
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (iii) the aggregate "amount
---
of unfunded benefit liabilities" (within the meaning of section 4001(a)(18)
of ERISA) under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $2,000,000, (iv) the Company or any ERISA Affiliate shall have
--
incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (v) the Company or any ERISA Affiliate
-
withdraws from any Multiemployer Plan, or (vi) the Company or any
--
Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase
the liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
27
<PAGE>
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i)
of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 25% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
-
thereon and (y) the Make-Whole Amount determined in respect of such principal
-
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2. Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
28
<PAGE>
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3. Rescission.
At any time after any Notes have been declared due and payable pursuant
to clause (b) or (c) of Section 12.1, the holders of not less than 66-2/3% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
-
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
-
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
-
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. Registration of Notes.
The Company will keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
29
<PAGE>
13.2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $1,000,000 provided that if necessary
--------
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $1,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.
13.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a
--------
nominee for, an original Purchaser or another holder of a Note which is an
Institutional Investor, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
30
<PAGE>
14. PAYMENTS ON NOTES.
14.1. Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Oklahoma City, Oklahoma at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
14.2. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel) incurred
by you or any other holder of a Note in connection with such transactions and in
connection with any amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and expenses incurred
-
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the Notes, or by
31
<PAGE>
reason of being a holder of any Note, and (b) the costs and expenses, including
-
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2. Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
-
provisions of Sections 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it is
used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
-
the holder of each Note at the time outstanding affected thereby, (i) subject to
-
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
--
amount of the Notes the holders of which are required to consent to any such
amendment or waiver or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
---
20.
32
<PAGE>
17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision
with respect to any proposed amendment, waiver or consent in respect of any
of the provisions hereof or of the Notes. The Company will deliver
executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this Section 17 to each holder of
outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders
of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
-------
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes
as consideration for or as an inducement to the entering into by any holder
of Notes or any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes
then outstanding even if such holder did not consent to such waiver or
amendment.
17.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. Notes Held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
33
<PAGE>
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
-
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
-
requested (postage prepaid) or (c) by a recognized overnight delivery service
-
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address
as such other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of the Chief Financial Officer, or at
such other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
-
executed, (b) documents received by you at the Closing (except the Notes
-
themselves) and (c) financial statements, certificates and other information
-
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when
34
<PAGE>
received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
-------- -
publicly known or otherwise known to you prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by you or any
-
person acting on your behalf, (c) otherwise becomes known to you other than
-
through disclosure by the Company or any Subsidiary or (d) constitutes financial
-
statements delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with your current practice or your policies and
procedures from time to time in effect to protect confidential information of
third parties delivered to you, provided that you may deliver or disclose
--------
Confidential Information to (i) your directors, officers, employees, agents,
-
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
--
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 20, (iii) any other holder of any Note, (iv) any
--- --
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein, (v) any Person from which you offer to
-
purchase any security of the Company, (vi) any federal or state regulatory
--
authority having jurisdiction over you, (vii) the National Association of
---
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about your
investment portfolio or (viii) any other Person to which such delivery or
----
disclosure may be necessary or appropriate (w) to effect compliance with any
-
law, rule, regulation or order applicable to you, (x) in response to any
-
subpoena or other legal process, (y) in connection with any litigation to which
-
you are a party or (z) if an Event of Default has occurred and is continuing, to
-
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASERS.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
35
<PAGE>
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. ADDITIONAL SERIES OF NOTES.
The Company may, from time to time, issue and sell additional series of
its unsecured promissory notes (each additional series being designated by the
next succeeding letter of the alphabet following designation of the immediately
preceding series) to one or more additional purchasers (which may include one or
more of the Purchasers if such Purchaser or Purchasers shall in its or their
sole discretion consent thereto) and may, in connection with the documentation
of such additional series, incorporate by reference all of or certain of the
provisions of this Agreement; provided, however, that such incorporation by
--------
reference shall not dilute or otherwise affect the relative priority or other
rights of the Purchasers of the Notes hereunder or any subsequent series of
notes, including, without limitation, the percentages of the Notes required to
approve an amendment to this Agreement or to effect a waiver pursuant to Section
17.1 hereof or the percentages of the Notes required to accelerate the maturity
of the Notes or to rescind such an acceleration of the maturity of the Notes
pursuant to Sections 12.1 and 12.3 hereof. This Section 22 does not in any
manner obligate any of the Purchasers or the holders of the Notes to purchase or
agree to purchase additional series of the Company's unsecured promissory notes
now or at any time in the future. In the event that the Company and one or more
of the Purchasers shall mutually agree to such an additional purchase, the
issuance of each such additional series of promissory notes shall occur upon the
execution by the Company and each of such Purchasers participating therein of a
terms agreement substantially in the form of Exhibit 22 hereto, appropriately
completed, and satisfaction by the Company of all of the conditions to closing
and funding set forth in Section 4 hereof, with such changes as shall be
appropriate to such additional series of promissory notes, and the delivery of
such additional closing documents and opinions as such Purchasers shall request.
23. MISCELLANEOUS.
23.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
23.2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including
36
<PAGE>
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.
23.3. Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
23.4. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
23.5. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
23.6. Governing Law.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
23.7. Accounting Principles.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, except where such
principles are inconsistent with the requirements of this Agreement.
37
<PAGE>
23.8. Valuation Principles.
Except where indicated expressly to the contrary by the use of terms
such as "fair value," "fair market value" or "market value," each asset, each
liability and each capital item of any Person, and any quantity derivable by a
computation involving any of such assets, liabilities or capital items, shall be
taken at the net book value thereof for all purposes of this Agreement. "Net
book value" with respect to any asset, liability or capital item of any Person
shall mean the amount at which the same is recorded or, in accordance with GAAP
should have been recorded, in the books of account of such Person, as reduced by
any reserves which have been or, in accordance with GAAP should have been, set
aside with respect thereto, but in every case (whether or not permitted in
accordance with GAAP) without giving effect to any write-up, write-down or
write-off (other than any write-down or write-off the entire amount of which was
charged to Consolidated Net Income or to a reserve which was a charge to
Consolidated Net Income) relating thereto which was made after the date of this
Agreement.
* * * * *
38
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
CMI CORPORATION
By: ________________________________
Title: _______________________________
The foregoing is agreed
to as of the date thereof.
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: __________________________________
Title: _________________________________
By: __________________________________
Title: _________________________________
39
<PAGE>
SCHEDULE B
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person and (b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Business Day" means (a) for the purposes of Section 8.6 only, any day other
-
than a Saturday, a Sunday or a day on which commercial banks in New York City
are required or authorized to be closed and (b) for the purposes of any other
-
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City, Chicago or Des Moines, Iowa are
required or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the lessee
is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capitalized Lease Obligation" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such balance
sheet.
"Change of Control Event" means, the (i) acquisition through purchase or
otherwise by any Person, or group of Persons acting in concert, directly or
indirectly, in one or more transactions, of beneficial ownership or control of
securities representing more than 50% of the combined voting power of the
Company's Voting Stock (including the agreement to act in concert by Persons who
beneficially own or control securities representing more than 50% of the
combined voting power of the Company's Voting Stock), (ii) expiration, without
withdrawals reducing such percentage to 50% or less, of ten days following the
date on which shares
Schedule B
<PAGE>
representing more than 50% of the combined voting power of the Company's Voting
Stock have been tendered pursuant to a tender offer by any Person for securities
representing more than 50% of the combined voting power of the Company's Voting
Stock, whether or not such securities are purchased pursuant to such tender
offer or (iii) entering into by the Company of a written agreement providing for
or contemplating an acquisition described in clause (i) or (ii) hereof. For
purposes of the foregoing sentence, "Person" or "group of Persons" shall not
include (x) the Company (y) the Principal Stockholders of the Company, their
heirs, or personal representatives or trusts created for the benefit of the
families of the Principal Stockholders, their heirs or personal representatives,
or (z) the Current Management of the Company or a "group of Persons" that
includes the Current Management of the Company. The date on which an acquisition
described in the first sentence hereof occurs is referred to as the "Effective
Date of the Change of Control."
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.
"Company" means CMI Corporation, an Oklahoma corporation.
"Confidential Information" is defined in Section 20.
"Consolidated Fixed Charges" means, for any period, the sum of (i)
Consolidated Interest Expense for such period and (ii) Consolidated Rentals for
such period under all leases other than Capitalized Leases.
"Consolidated Funded Debt" means Funded Debt of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Income Available for Fixed Charges" means, for any period,
Consolidated Net Income for such period, plus, to the extent deducted in
determining such Consolidated Net Income, (i) income tax expense and (ii)
Consolidated Fixed Charges.
"Consolidated Interest Expense" means, for any period, the consolidated
interest expense of the Company and its Subsidiaries for such period determined
in accordance with GAAP, including imputed interest on Capitalized Lease
Obligations, amortization of debt discount and expense, fees and commissions for
letters of credit and bankers' acceptance financing and Swaps.
"Consolidated Net Income" means, for any period, the net income (or deficit)
of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, but excluding in any event (a) net
-
earnings and losses of any Subsidiary accrued prior to the date it became a
Subsidiary; (b) net earnings and losses of any Person (other
-
2
Schedule B
<PAGE>
than a Subsidiary), substantially all the assets of which have been acquired in
any manner, realized by such other Person prior to the date of such acquisition;
(c) net earnings and losses of any Person (other than a Subsidiary) with which
-
the Company or a Subsidiary shall have consolidated or which shall have merged
into or with the Company or a Subsidiary prior to the date of such consolidation
or merger; (d) net earnings of any business entity (other than a Subsidiary) in
-
which the Company or any Subsidiary has an ownership interest unless such net
earnings shall have actually been received by the Company or such Subsidiary in
the form of cash distributions and (e) extraordinary, unusual or nonrecurring
gains or losses.
"Consolidated Net Worth" means the sum of consolidated stockholders' equity
and minority interests of the Company and its Subsidiaries determined in
accordance with GAAP.
"Consolidated Rentals" means, for any period, the Rentals of the Company and
its Subsidiaries for such period under all leases, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Total Assets" means the total assets of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" means the sum of Consolidated Net Worth
and Consolidated Funded Debt.
"Current Management of the Company" means Bill Swisher, Jim D. Holland, Ralph
P. Cordes, Thane A. Swisher, Murray A. Rowe and Ronald Markwood.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means that rate of interest that is 2.0% per annum above the
rate of interest stated in clause (a) of the first paragraph of the Notes.
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.
3
Schedule B
<PAGE>
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funded Debt" means, as of any date of determination, all Indebtedness
properly classified as long-term debt in accordance with GAAP, including but not
limited to (i) Indebtedness which by its terms matures more than one year from
the date of creation or which may be renewed or extended at the option of the
obligor for more than one year from such date, (ii) all Capitalized Lease
Obligations, (iii) any Guaranty of Funded Debt of another Person, and (iv)
notwithstanding clause (i) above, the smallest average daily amount of
Indebtedness, if any, outstanding under any revolving credit or similar
agreement of an obligor for borrowed money during a period of 30 consecutive
days during the 12 calendar months immediately preceding the date of
determination of Funded Debt, provided that reductions of such Indebtedness
using a short-term credit facility shall be ignored in determining average daily
amounts.
"GAAP" means generally accepted accounting principles as in effect from time
to time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary conducts
all or any part of its business, or which asserts jurisdiction over any
properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
4
Schedule B
<PAGE>
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
-
such indebtedness or obligation or (ii) to maintain any working capital or
--
other balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous wastes
or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such Note
is registered in the register maintained by the Company pursuant to Section
13.1.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any such
property);
(c) its Capitalized Lease Obligations;
5
Schedule B
<PAGE>
(d) all liabilities for borrowed money secured by any Lien with respect
to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and
other financial institutions (whether or not representing obligations for
borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a Note, (b) any
- -
holder of a Note holding more than 5% of the aggregate principal amount of the
Notes then outstanding and (c) any bank, trust company, savings and loan
-
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Lien" means, with respect to any Person, any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or Capital Lease, upon or with respect
to any property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the business,
-
operations, affairs, financial condition, assets or properties of the Company
and its Subsidiaries taken as a whole, or (b) the ability of the Company to
-
perform its obligations under this Agreement and the Notes or (c) the validity
-
or enforceability of this Agreement or the Notes.
"Memorandum" is defined in Section 5.3.
6
Schedule B
<PAGE>
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial Officer or
of any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and defined
in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA)
that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation that is
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Principal Stockholder" means Bill Swisher and members of his immediate family
("Swisher") or Recovery Equity Investors, L.P. ("REI"), so long as Swisher or
REI, as the case may be, owns at least 15% of the outstanding Voting Stock of
the Company at the time of determination.
"Property" or "Properties" means, unless otherwise specifically limited, real
or personal property of any kind, tangible or intangible, choate or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by
the United States Department of Labor.
"Rentals" means, as of the date of any determination thereof, all fixed
payments (including all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the Property) payable by the
Company or any Subsidiary, as lessee or sublessee under any lease of real or
personal property, but exclusive of (i) the amount of any fixed rents paid to
the Company or any Subsidiary under noncellable subleases of one year or greater
on the Properties subject to such leases and (ii) any amounts required to be
paid (whether
7
Schedule B
<PAGE>
or not designated as rents or additional rents) on account of maintenance,
repairs, insurance, taxes, assessments, amortization and similar charges. Fixed
rents under any so-called "percentage leases" shall be computed on the basis of
the actual rents paid by the lessee.
"Required Holders" means, at any time, the holders of at least 66-2/3% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"Swaps" means, with respect to any Person, payment obligations with respect to
interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
"Voting Stock" means capital stock of any class of a corporation having power
under ordinary circumstances to vote for the election of members of the board of
directors of such corporation, or persons performing similar functions.
8
Schedule B
<PAGE>
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company's other Wholly-Owned Subsidiaries at such time.
9
Schedule B
<PAGE>
EXHIBIT 1
---------
[FORM OF NOTE]
CMI CORPORATION
7.68% SERIES A SENIOR NOTE DUE SEPTEMBER 15, 2006
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, CMI CORPORATION (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Oklahoma, hereby promises to pay to [______________________], or registered
assigns, the principal sum of [_______________________________] DOLLARS on
[____________, _________], with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
-
7.68% per annum from the date hereof, payable semiannually, on the fifteenth day
of March and September in each year, commencing with the March 15 or September
15 next succeeding the date hereof, until the principal hereof shall have become
due and payable and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreement referred to below), payable semiannually as aforesaid (or, at
the option of the registered holder hereof, on demand), at the rate of 9.68% per
annum.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Series A Senior Notes (herein called the
"Notes") issued pursuant to a Note Purchase Agreement, dated as of September 1,
1996 (as from time to time amended, the "Note Purchase Agreement"), between the
Company and the Purchaser named therein and is entitled to the benefits thereof.
Each holder of this Note will be deemed, by its acceptance hereof, (i) to have
-
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreement and (ii) to have made the representation set forth in Section
--
6.2 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
Exhibit 1
<PAGE>
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates and in
the amounts specified in the Note Purchase Agreement. This Note is also subject
to optional prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.
This Note and the Note Purchase Agreement are governed by and construed in
accordance with the laws of the State of Illinois.
CMI CORPORATION
By:
------------------------------------
Title:
2
Exhibit 1
<PAGE>
EXHIBIT 4.2
CREDIT AGREEMENT
AMONG
CMI CORPORATION
AND
BANK OF OKLAHOMA, N.A.
SEPTEMBER 17, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I.................................................................. 1
---------
1 DEFINITIONS.......................................................... 1
----------
1.1 Terms Defined Above............................................. 1
-------------------
1.2 Additional Defined Terms........................................ 1
------------------------
1.3 Undefined Financial Accounting Terms............................ 13
------------------------------------
1.4 References...................................................... 13
----------
ARTICLE II................................................................. 13
----------
2 AMOUNT AND TERMS OF FACILITY......................................... 13
----------------------------
2.1 Revolving Line of Credit........................................ 13
------------------------
2.2 Letter of Credit................................................ 14
----------------
2.3 Manner of Borrowing............................................. 14
-------------------
2.4 Revolving Promissory Note....................................... 14
-------------------------
2.5 Interest Rates.................................................. 15
--------------
2.6 Interest Rate Options........................................... 15
---------------------
2.7 Use of Proceeds................................................. 16
---------------
2.8 Repayment of Advances and Interest Thereon...................... 16
------------------------------------------
2.9 Advances and Payments on Note................................... 16
-----------------------------
2.10 Voluntary Prepayments........................................... 17
---------------------
2.11 Non-Use Fees.................................................... 17
------------
2.12 Letter of Credit Fees........................................... 17
---------------------
2.13 General Provisions Relating to Interest......................... 18
---------------------------------------
ARTICLE III................................................................ 19
-----------
3 CONDITIONS........................................................... 19
----------
3.1 Receipt of Loan Documents and Other Items....................... 19
-----------------------------------------
3.2 Each Advance.................................................... 20
------------
3.3 Each Issuance of a Letter of Credit............................. 21
-----------------------------------
ARTICLE IV................................................................. 22
----------
4 REPRESENTATIONS AND WARRANTIES....................................... 22
------------------------------
4.1 Due Authorization and Corporate Existence....................... 22
-----------------------------------------
4.2 Consents, Conflicts and Creation of Liens....................... 22
-----------------------------------------
4.3 Valid and Binding Obligations................................... 22
-----------------------------
4.4 Title to Assets................................................. 23
---------------
4.5 Scope and Accuracy of Financial Statements...................... 23
------------------------------------------
4.6 Liabilities, Litigation, and Restrictions....................... 23
-----------------------------------------
4.7 Authorizations and Consents..................................... 23
---------------------------
4.8 Compliance with Laws............................................ 23
--------------------
4.9 Proper Filing of Tax Returns and Payment of Taxes Due........... 23
-----------------------------------------------------
4.10 ERISA........................................................... 24
-----
4.11 Environmental Laws.............................................. 24
------------------
4.12 Investment Company Act Compliance............................... 25
---------------------------------
4.13 Public Utility Holding Company Act Compliance................... 25
---------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.14 No Material Misstatements....................................... 25
-------------------------
4.15 Casualties or Taking of Property................................ 25
--------------------------------
4.16 Locations of Business, Offices, and Property.................... 25
--------------------------------------------
4.17 Subsidiaries.................................................... 25
------------
ARTICLE V.................................................................. 25
---------
5 AFFIRMATIVE COVENANTS................................................ 25
---------------------
5.1 Maintenance and Access to Records............................... 26
---------------------------------
5.2 Annual Financial Statements..................................... 26
---------------------------
5.3 Quarterly Financial Statement................................... 26
-----------------------------
5.4 Annual Budget................................................... 26
-------------
5.5 Notices of Certain Events....................................... 26
-------------------------
5.6 Additional Information.......................................... 27
----------------------
5.7 Compliance with Laws............................................ 27
--------------------
5.8 Payment of Assessments and Charges.............................. 28
----------------------------------
5.9 Maintenance of Corporate Existence and Good Standing............ 28
----------------------------------------------------
5.10 Further Assurances.............................................. 28
------------------
5.11 Initial Fees and Expenses of Bank and/or Legal Counsel to Bank.. 28
--------------------------------------------------------------
5.12 Subsequent Fees and Expenses.................................... 28
----------------------------
5.13 Maintenance and Inspection of Tangible Properties............... 29
-------------------------------------------------
5.14 Maintenance of Insurance and Evidence Thereof................... 29
---------------------------------------------
5.15 Payment of Note and Performance of Obligations.................. 29
----------------------------------------------
5.16 Primary Depository.............................................. 29
------------------
ARTICLE VI................................................................. 29
----------
6 FINANCIAL COVENANTS.................................................. 29
-------------------
6.1 Tangible Net Worth.............................................. 29
------------------
6.2 Debt Service Coverage Ratio..................................... 29
---------------------------
6.3 Liabilities to Net Worth........................................ 29
------------------------
6.4 Inventory Turnover Ratio........................................ 30
------------------------
ARTICLE VII................................................................ 30
-----------
7 NEGATIVE COVENANTS................................................... 30
------------------
7.1 Indebtedness.................................................... 30
------------
7.2 Negative Pledge................................................. 30
---------------
7.3 Sales of Assets................................................. 30
---------------
7.4 Cancellation of Insurance....................................... 30
-------------------------
7.5 Changes in Corporate Structure.................................. 30
------------------------------
7.6 Transactions with Affiliates.................................... 31
----------------------------
7.7 Organization or Acquisition of Subsidiaries..................... 31
-------------------------------------------
7.8 Line of Business................................................ 31
----------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7.9 Executive Management................................... 31
--------------------
7.10 Repurchase of Treasury Stock........................... 31
----------------------------
ARTICLE VIII...................................................... 31
------------
8 EVENTS OF DEFAULT........................................... 31
-----------------
8.1 Enumeration of Events of Default....................... 31
--------------------------------
8.2 Remedies............................................... 33
--------
ARTICLE IX........................................................ 34
----------
9 MISCELLANEOUS............................................... 34
-------------
9.1 Transfers and Participations........................... 34
----------------------------
9.2 Survival of Representations. Warranties and Covenants.. 35
-----------------------------------------------------
9.3 Notices and Other Communications....................... 35
--------------------------------
9.4 Parties in Interest.................................... 35
-------------------
9.5 Rights of Third Parties................................ 36
-----------------------
9.6 Articles and Sections.................................. 36
---------------------
9.7 Number and Gender...................................... 36
-----------------
9.8 Renewals and Extensions................................ 36
-----------------------
9.9 No Waiver: Rights Cumulative........................... 36
----------------------------
9.10 Incorporation of Exhibits.............................. 36
-------------------------
9.11 Survival Upon Unenforceability......................... 36
------------------------------
9.12 Amendments or Modifications............................ 37
---------------------------
9.13 Controlling Provision Upon Conflict.................... 37
-----------------------------------
9.14 Time, Place and Method of Payments..................... 37
----------------------------------
9.15 Governing Law.......................................... 37
-------------
9.16 Jurisdiction and Venue................................. 37
----------------------
9.17 Entire Agreement....................................... 37
----------------
</TABLE>
iii
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, made and entered into this 17th day of September,
1996, but effective as of the date of the first Borrowing hereunder, by and
among CMI CORPORATION, an Oklahoma corporation (the "Borrower") and BANK OF
OKLAHOMA, N.A., a national banking association (the "Bank"), evidences the
arrangements concerning certain advances to the Borrower by the Bank.
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank have agreed to certain extensions of
credit by Bank to Borrower in the form of a revolving form of credit evidenced
by this Agreement in a principal amount not to exceed $25,000,000.00 and as
evidenced by a certain revolving promissory note as described herein; and
WHEREAS, the Borrower will use the funds available under this Agreement to
meet seasonal working capital needs.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank hereby
agree as follows:
ARTICLE I
---------
1 DEFINITIONS
-----------
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
-------------------
"Borrower," and "Bank" shall have the meaning assigned to such terms
-------- ----
hereinabove.
1.2 Additional Defined Terms. As used in this Agreement, each of the
------------------------
following terms shall have the meaning assigned thereto in this Section, unless
the context otherwise requires:
"Adjusted Base Rate" shall mean, with respect to each Base Rate Loan,
------------------
a rate per annum calculated by Bank determined on a daily basis equal to the
Base Rate minus the Applicable Percentage.
"Adjusted LIBOR Rate" shall mean, with respect to each LIBOR Loan, a
-------------------
rate per annum calculated by Bank (rounded to the nearest 0.001%) determined on
a daily basis equal to the LIBOR Rate plus the Applicable Percentage.
"Advance" shall mean an advance of funds made by the Bank to the
-------
Borrower
<PAGE>
under this Agreement including any payment by Bank pursuant to a Letter
of Credit.
"Affiliate" shall mean any Person directly or indirectly
---------
controlling, or under common control with, the Borrower and includes any
"affiliate" of the Borrower within the meaning of the regulations
promulgated pursuant to the Securities Act of 1933, as amended, with "control,"
as used in this definition, meaning possession, directly or indirectly, of the
power to direct or cause the direction of management, policies or action through
ownership of voting securities, contract, voting trust, membership in management
or in the group appointing or electing management or otherwise through formal or
informal arrangements or business relationships.
"Agreement" shall mean this Credit Agreement and all exhibits and
---------
schedules hereto, as the same may be amended, modified, supplemented or restated
from time to time according to the terms hereof.
"Applicable Percentage" shall mean for any day, (a) with respect to a
---------------------
LIBOR Loan, the margin of interest over the LIBOR Rate that is applicable when
any Applicable Rate based on the LIBOR Rate is determined under this Agreement,
and (b) with respect to a Base Rate Loan, the margin of interest under the Base
Rate that is applicable when any Applicable Rate based on the Base Rate is
determined under this Agreement. The Applicable Percentage is subject to
adjustment (upwards or downwards, as appropriate) based on the ratio of Funded
Debt to Cash Flow. On each March 31, May 15, August 15 and November 15 (or if
any such day falls on a day other than a Business Day, then on the next
succeeding Business Day), the Applicable Percentage shall be adjusted to reflect
the Applicable Percentage prescribed below for the ratio of Funded Debt to Cash
Flow as demonstrated by the most recently delivered Compliance Certificate:
<TABLE>
<CAPTION>
Funded Debt to Applicable Margin Applicable Margin For
Cash Flow For LIBOR Loans Base Rate Loans
<S> <C> <C>
Less than or equal to 2.00 1.25% 1.25%
Greater than 2.01 but 1.50% 1.00%
less than or equal to
2.50
Greater than 2.51 but 1.75% .75%
less than or equal to
3.00
Greater than 3.01 2.00% .50%
</TABLE>
The Applicable Percentage shall be 1.50 for LIBOR Loans and 1.00% for Base Rate
Loans from the date hereof until the first March 31, May 15, August 15 or
November 15 after the date hereof that the Compliance Certificate demonstrates a
change in the ratio of Funded Debt to Cash Flow to an amount so that another
Applicable Percentage shall be applied. After each adjustment of the Applicable
Percentage in accordance herewith, the new Applicable Percentage shall apply
until the next March 31, May 15, August 15 or November 15 or until the
Compliance Certificate
2
<PAGE>
demonstrates a change in the ratio of Funded Debt to Cash Flow to an amount so
that another Applicable Percentage shall be applied. Upon the request of Bank,
the Borrower must demonstrate to Bank's reasonable satisfaction the required
applicable ratio in order to obtain an adjustment to a lower Applicable
Percentage. If the Borrower fails to furnish to the Bank any Compliance
Certificate by the date required by this Agreement, then the maximum Applicable
Percentage shall apply until the Borrower furnishes the required Compliance
Certificate.
"Applicable Rate" shall mean: (i) during the period that a Loan is a
---------------
Base Rate Loan, the Base Rate minus the Applicable Percentage; and (ii) during
the period that a Loan is a LIBOR Loan, the LIBOR Rate plus the Applicable
Percentage.
"Available Commitment" shall mean, at any time, an amount equal to the
--------------------
remainder, if any, of (a) the Commitment Amount minus (b) the Loan Balance at
-----
such time.
"Base Rate" shall mean, at any time, an interest rate per annum equal
---------
to the interest rate then most recently announced or published by the Chase
Manhattan Bank, N.A. ("Chase") as its prime rate, which may not be the lowest
interest rate charged by the Bank, and which Base Rate shall change upon any
change in such announced or published base rate of Chase, all without notice to
the Borrower.
"Base Rate Loan" shall mean that portion of the Loan which bears
--------------
interest at a rate of interest determined by reference to the Base Rate.
"Borrowing" shall mean the combined Advances and/or Letters of Credit
---------
made and/or issued by Bank to or on behalf of Borrower on a single date pursuant
to a Notice of Borrowing and/or request for the issuance of a Letter of Credit.
"Borrowing Date" shall mean any date specified in a Notice of
--------------
Borrowing delivered in accordance with the provisions of Section 2.3 as a date
on which Borrower requests Bank to make a Borrowing hereunder.
"Business Day" shall mean a day other than a Saturday, Sunday or legal
------------
holiday for commercial banks under the laws of the State of Oklahoma.
"Cash Flow" shall mean earnings before interest, taxes, depreciation,
---------
and amortization for the previous twelve (12) months at the time of calculation.
"Change of Control " means, the (i) acquisition through purchase or
------------------
otherwise by any Person, or group of Persons acting in concert, directly or
indirectly, in one or more transactions, of beneficial ownership or control of
securities representing more than 50% of the combined voting power of the
Company's Voting Stock (including the agreement to act in concert by Persons who
beneficially own or control securities representing more than 50% of the
combined voting power of the Company's Voting Stock); (ii) expiration, without
withdrawals reducing such percentage to 50% or less, of ten days following the
date on which shares representing more than 50% of the combined voting power of
the Company's Voting Stock, whether or not such securities are purchased
pursuant to such tender offer; or (iii) entering into
3
<PAGE>
by the Company of a written agreement providing for or contemplating an
acquisition described in clause (i) or (ii) hereof. For purposes of the
foregoing sentence, "Person" or "group of Persons" shall not include (i) the
Company; or (ii) the Current Management of the Company or a "group of Persons"
that includes the Current Management of the Company. The date on which an
acquisition described in the first sentence hereof occurs is referred to as the
"Effective Date of the Change of Control."
"Closing Date" shall mean the effective date of this Agreement.
------------
"Code" shall mean the United States Internal Revenue Code as amended
----
from time to time.
"Commitment" shall mean the obligation of the Bank, subject to
----------
applicable provisions of this Agreement, to make Advances to or for the benefit
of the Borrower pursuant to Section 2.1.
"Commitment Amount" shall mean the amount the Bank is obligated to
-----------------
loan to and/or issue Letters of Credit on behalf of, Borrower. The Commitment
Amount shall be $25,000,000.
"Commitment Period" shall mean the period from and including the
-----------------
Closing Date to but not including the Maturity Date.
"Commonly Controlled Entity" shall mean any Person which is under
--------------------------
common control with the Borrower within the meaning of Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
----------------------
the form attached hereto as Exhibit C, executed by a Responsible Officer of the
Borrower and furnished to the Bank from time to time in accordance with this
Agreement.
"Contested in Good Faith" shall mean a matter (a) which is being
-----------------------
contested in good faith and, if applicable, for which a reserve has been
established in an amount determined in accordance with GAAP, (b) in which
foreclosure, distraint, sale, forfeiture, levy, execution or other similar
proceedings have not been initiated or have been stayed and continue to be
stayed, and (c) in which a good faith contest will not materially jeopardize the
rights of the Bank or the Borrower with respect thereto, materially interfere
with the operation by the Borrower of its business, or otherwise have a Material
Adverse Effect.
"Contingent Obligation" shall mean, as to any Person, any obligation
---------------------
of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations of any other Person (for purposes of this
definition, a "primary obligation") in any manner, whether directly or
-------------------
indirectly, including, without limitation, any obligation of such Person,
regardless of whether such obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or indirect security therefore,
(b) to advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working capital or equity capital of any other
Person in respect of any primary obligation, or
4
<PAGE>
otherwise to maintain the net worth or solvency of any other Person, (c) to
purchase Property, securities or services primarily for the purpose of assuring
the owner of any primary obligation of the ability of the Person primarily
liable for such primary obligation to make payment thereof, or (d) otherwise to
assure or hold harmless the owner of any such primary obligation against loss in
respect thereof, with the amount of any Contingent Obligation being deemed to be
equal to the stated or determinable amount of the primary obligation in respect
of which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith.
"Current Assets" and "Current Liabilities" shall mean, at any time,
-------------- -------------------
all assets or liabilities, respectively, that should, in accordance with GAAP,
be classified as current assets or current liabilities, respectively, on a
balance sheet of the Borrower.
"Debt Service Coverage Ratio" shall mean that ratio computed by
---------------------------
dividing EBITDA for the previous twelve (12) months by the sum of current
maturities of long term debt and capital leases for the next twelve (12) months
plus cash interest and cash taxes for the previous twelve (12) months.
"Default" shall mean any event or occurrence which with the lapse of
-------
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum variable interest rate equal to
------------
the Base Rate plus "five" percent (5%), calculated on the basis of a year of 360
days and actual number of days elapsed (including the first day but excluding
the last day), but in no event exceeding the Highest Lawful Rate.
"Environmental Complaint" shall mean any written complaint, order,
-----------------------
directive, claim, citation, notice of environmental report or investigation or
other notice by any Governmental Authority or any other Person with respect to
(a) air emissions, (b) spills, releases or discharges to soils or any
improvements located thereon, surface water, groundwater or the sewer, septic
system or waste treatment, storage or disposal systems servicing any Property of
the Borrower, (c) solid or liquid waste disposal, (d) either the use,
generation, storage, transportation or disposal of any Hazardous Substance, or
(e) other environmental, health or safety matters affecting any Property of the
Borrower or the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as they
------------------
may be cited, referenced and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Water Pollution Control Act,
the Environmental Pesticides Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Resource
Conservation and Recovery Act, the Occupational Safety and Health Act, the
Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of the Borrower
is situated, as they may be cited, referenced and amended from time to time; (c)
any so-called federal, state or local "Superfund" or "Superlien" statutes, (d)
any rules or regulations promulgated under or adopted pursuant to the above
federal and state laws; and (e) any other equivalent federal, state or local
5
<PAGE>
statute or any requirement, rule, regulation, code, ordinance or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling or
release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
----------------
8.
"Financial Statements" shall mean the statements of the financial
--------------------
condition of the Borrower as at the point in time and for the period indicated
and consisting of at least a balance sheet, statement of income, statement of
cash flow and related statements of operations, common stock and other
stockholders' equity prepared substantially in accordance with the same
principles and in the same form as financial statements previously provided to
the Bank, and in comparative form with respect to the corresponding period of
the preceding fiscal period.
"Funded Debt" shall mean all short and long-term notes and capital
-----------
leases payable plus redeemable preferred stock at the time of calculation.
"GAAP" shall mean generally accepted accounting principles established
----
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time to
time during the term of this Agreement.
"Governmental Authority" shall mean any nation, country, commonwealth,
----------------------
territory, government, state, county, parish, municipality or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guarantor" shall mean CMI Limited Partnership and CMI Sales Co.
---------
"Hazardous Substances" shall mean flammables, explosives, radioactive
--------------------
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCB's), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances," "hazardous materials", "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority, including, without limitation, those elements or
compounds which are contained in the list of hazardous substances adopted by the
United States Environmental Protection Agency and the list of toxic pollutants
designated by Congress or the Environmental Protection Agency or under any
Environmental Law.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
-------------------
rate
6
<PAGE>
permissible under applicable laws of the State of Oklahoma or those of the
United States of America applicable to the Bank, whichever authorizes the
greater rate.
"Indebtedness" shall mean, with respect to any Person, without
------------
duplication, (a) all liabilities which would appear on a balance sheet of such
Person, prepared in accordance with GAAP (b) all obligations of such Person
evidenced by bonds, debentures, promissory notes or such similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed money, and
(d) all obligations of others, to the extent any such obligation is secured by a
Lien, except a Permitted Lien, on the assets of such Person (whether or not such
Person has assumed or become liable for the obligation secured by such Lien).
"Insolvent" or "Insolvency" shall mean, with respect to any
--------- ----------
Multiemployer Plan, that such Plan is insolvent within the meaning of such term
as used in Section 4245 of ERISA.
"Insolvency Proceeding" shall mean application (whether voluntary or
---------------------
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian or liquidator of any Person or of all
or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization or
rearrangement or taking advantage of any bankruptcy, insolvency, debtor's relief
or other similar Law of the United States, the State of Oklahoma or any other
jurisdiction.
"Interest Option" shall have the meaning assigned to such term in
---------------
Section 2.6.
"Interest Payment Date" shall mean (i) as to any Base Rate Loan or
---------------------
LIBOR Loan, the last day of each month commencing on the first of such days to
occur after such Loan is made, and, (ii) as to any LIBOR Loan in respect of
which Borrower has selected an Interest Period of one, two or three months the
last day of such Interest Period.
"Interest Period" shall mean with respect to any LIBOR Loan requested
---------------
by Borrower:
(i) initially, the period commencing on the Borrowing Date with respect to such
LIBOR Loan and ending one, two, or three months thereafter as selected by
Borrower in its Notice of Borrowing as provided in Section 2.3 or its
irrevocable Rollover Notice as provided in Section 2.6(b); and
(ii) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such LIBOR Loan and ending one, two or three
months thereafter, as selected by Borrower in its irrevocable Rollover Notice as
provided in Section 2.6(b);
(A) if any Interest Period pertaining to a LIBOR Loan would otherwise end on a
day which is not a LIBOR Business Day, such Interest Period shall be extended to
the next succeeding LIBOR Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding LIBOR Business Day;
7
<PAGE>
(B) if, with respect to any Advance or LIBOR Loan, Borrower shall fail to give
due notice as provided in Section 2.3 or 2.6(b), as the case may be, Borrower
shall be deemed to have selected the Adjusted Base Rate to be applicable to such
Advance or LIBOR Loan and such Loan shall be automatically converted to a Base
Rate Loan upon the expiration of the Interest Period with respect thereto;
(C) any Interest Periods pertaining to a LIBOR Loan that begins on the last
LIBOR Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last LIBOR Business Day of a calendar month;
(D) no Interest Period shall end after the Maturity Date; and
(E) no Interest Period shall end after March 31, May 15, August 15 and November
15 of any year during the term hereof.
"Law(s)" shall mean all applicable statutes, laws, ordinances, rules,
------
rulings, interpretations, regulations, judgments, requirements, governmental
authorizations (including licenses, permits, franchises and other governmental
consents necessary for the ownership or operation of Property), orders, writs,
injunctions or decrees (or interpretations of any of the foregoing) of any
Governmental Authority or Tribunal.
"Letter of Credit" shall mean a stand-by or commercial letter of
----------------
credit in a form which is acceptable to the Bank. No Letter of Credit shall be
issued with a maturity beyond the Maturity Date.
"Letter of Credit Fee" shall mean the fees payable to the Bank by the
--------------------
Borrower pursuant to Section 2.12.
"LIBOR Business Day" shall mean a Business Day on which dealings in
------------------
dollars are conducted in the London Interbank Market.
"LIBOR Loan" shall mean, with respect to any Interest Period, any
----------
portion of the Loan which bears interest at a LIBOR Rate for such Interest
Period.
"LIBOR Portion" shall mean any portion of the unpaid principal balance
-------------
of the loan which Borrower designates as such in a rate election.
"LIBOR Rate" shall mean, with respect to each particular LIBOR Portion
----------
within a tranche and with respect to the related Interest Period, the rate of
interest per annum determined by Bank in accordance with its customary general
practices to be representative of the rates at which deposits of dollars are
offered to Bank at approximately 9:00 a.m. Oklahoma City, Oklahoma time two
Business Days prior to the first day of such Interest Period (by prime banks in
the London Interbank Market which have been selected by Bank in accordance with
its customary general practices) for delivery on the first day of such Interest
Period in an amount
8
<PAGE>
equal or comparable to the amount of Bank's LIBOR Portion within such tranche
and for a period of time equal or comparable to the length of such Interest
Period. The LIBOR rate determined by Bank with respect to a particular LIBOR
Portion shall be fixed at such rate for the duration of the associated Interest
Period. If Bank is unable to so determine the LIBOR rate for any LIBOR Portion,
Borrower shall be deemed not to have elected such LIBOR Portion.
"Lien" shall mean any lien, mortgage, security interest, tax lien,
----
pledge, conditional sale or title retention arrangement, or any other interest
in or encumbrance upon, property, which is designed to secure the repayment of
Indebtedness, whether arising by agreement, under any Law or otherwise.
"Litigation" shall mean any proceeding, claim, lawsuit, and/or
----------
investigation conducted by or before any Tribunal.
"Loan" shall mean the Revolving Credit Loan described in Section 2
----
herein.
"Loan Balance" shall mean, at any time, the outstanding principal
------------
balance of the Note at such time.
"Loan Documents" shall mean this Agreement, the Note, any Letter of
--------------
Credit and all other documents and instruments now or hereafter delivered
pursuant to the terms of or in connection with this Agreement, or the Note and
any Letter of Credit and all renewals and extensions of, or amendments or
supplements to, or restatements of any or all of the foregoing from time to time
in effect.
"Material Adverse Effect" shall mean any set of circumstances or
-----------------------
events which (a) would have a material adverse effect upon the validity or
enforceability of any of the Loan Documents, (b) would have a material adverse
effect upon the Borrower's ability to fulfill its obligations under the terms of
the Loan Documents, or (c) causes a Default or an Event of Default.
"Maturity" or "Maturity Date" shall mean the later of September 17,
----------------------------
1999 or three years from the date of the initial Advance hereunder.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
------------------
as defined in Section 4001(a)(3) of ERISA.
"Non-Use Fees" shall mean the fees payable to the Bank by the Borrower
------------
pursuant to Section 2.11.
"Note" shall mean the promissory note of the Borrower, in the original
----
face amount of $25,000,000.00, in the form attached hereto as Exhibit A,
together with any and all renewals, extensions for any period, increases and
rearrangements thereof.
"Notice of Borrowing" shall have the meaning assigned to such term in
-------------------
Section 2.3.
9
<PAGE>
"Obligations" shall mean, without duplication, (a) all Indebtedness
-----------
evidenced by the Note, (b) all obligations arising pursuant to Bank's issuance
of a Letter of Credit, (c) the obligation of the Borrower for the payment of the
Commitment Fees, and (d) all other obligations and liabilities of the Borrower
to the Bank, now existing or hereafter incurred, under, arising out of or in
connection with any Loan Document, and with respect to all of the foregoing to
the extent that any of the same includes or refers to the payment of amounts
deemed or constituting interest, only so much thereof as shall have accrued,
been earned and remains unpaid at each relevant time of determination.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
----
established pursuant to Subtitle A of Title IV of ERISA or any entity succeeding
to any or all of its functions under ERISA.
"Permitted Liens" shall mean:(i) Liens described on Exhibit D attached
--------------- ---------
hereto, (ii) pledges or deposits made to secure payment of worker's compensation
insurance (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs, (iii) Liens imposed by mandatory provisions of law such as for
materialmen's, mechanics', warehousemen's and other like Liens arising in the
ordinary course of business, securing Indebtedness whose payment is not yet due,
(iv) Liens for taxes, assessments and governmental charges or levies imposed
upon a Person or upon such Person's income or profits or property, if the same
are not yet due and payable or if the same are being contested in good faith and
as to which adequate cash reserves have been provided, (v) Liens arising from
good faith deposits in connection with tenders, leases, real estate bids or
contracts (other than contracts involving the borrowing of money), pledges or
deposits to secure public or statutory obligations and deposits to secure (or in
lieu of) surety, stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or other similar charges, (vi)
encumbrances consisting of zoning restrictions, easements, or other restrictions
on the use of real property, provided that such items do not impair the use of
such property for the purposes intended, and none of which is violated by
existing or proposed structures or land use, (vii) Liens arising in connection
with court proceedings, provided the execution of such Liens is effectively
stayed, such Liens are being contested in good faith by appropriate proceedings
and as to which the Borrower has established adequate reserves on its books in
accordance with GAAP, (viii) Liens arising in the ordinary course of business
and not incurred in connection with the borrowing of money that in the aggregate
do not materially interfere with the conduct of the business of Borrower and its
Subsidiaries taken as a whole or materially impair the use or value of the
Property subject thereto, (ix) Liens (a) existing on property at the time of its
acquisition by Borrower or a Subsidiary and not created in contemplation
thereof, whether or not the Indebtedness secured by such Lien is assumed by
Borrower or its Subsidiary, or (b) on property created contemporaneously with
its acquisition or within 180 days of the acquisition or completion of
construction thereof to secure or provide for all or a portion of the purchase
price or cost of construction of such property, or (c) existing on property of a
Person at the time such person is merged or consolidated with, or substantially
all of its assets are acquired by, Borrower or its Subsidiary and not created in
contemplation thereof; provided that in the case of clauses (a), (b), and (c)
such Liens do not extend to other Property of the Borrower or any Subsidiary and
that the aggregate principal amount of Indebtedness secured
10
<PAGE>
by such Lien does not exceed 100% of the fair market value of the Property
subject thereto, and (x) purchase-money Liens on any property hereafter
acquired.
"Person" shall mean an individual, corporation, partnership, trust,
------
unincorporated organization, limited liability company or a government or any
agency or political subdivision thereof.
"Plan" shall mean, at any time, any employee benefit plan which is
----
covered by ERISA and in respect of which the Borrower or any Commonly Controlled
Entity is or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be an "employer" as defined in Section 3(5) of ERISA.
"Principal Office" shall mean the principal office of the Bank in
----------------
Oklahoma City, Oklahoma County, Oklahoma presently located at 201 Robert S.
Kerr, Oklahoma City, Oklahoma 73102.
"Prohibited Transaction" shall have the meaning assigned to such term
----------------------
in Section 406 of ERISA or Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or asset,
--------
whether real, personal or mixed, tangible or intangible.
"Release of Hazardous Substances" shall mean any emission, spill,
-------------------------------
release, disposal or discharge, except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental Authority, and
notice of which is required to be given thereof by the person responsible for
such emission, spill, release, disposal or discharge to a Governmental
Authority, of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer, septic system or waste treatment, storage or disposal system servicing
any Property of the Borrower.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
--------------
that such Plan is in reorganization within the meaning of such term in Section
4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
52615.
"Requirement of Law" shall mean, as to any Person, the certificate or
------------------
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable Law, treaty, ordinance, order,
judgment, rule, decree or regulation or determination of any Tribunal or other
Governmental Authority, including, without limitation, rules, regulations and
orders and requirements for permits, licenses, registrations, approvals or
authorizations, in each case as such now exist or may be hereafter amended and
are applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject.
11
<PAGE>
"Responsible Officer" shall mean, as to the Borrower, its President,
-------------------
Chief Executive Officer, Treasurer or such other officer of the Borrower as
shall be designated in writing to the Bank by two of the previously mentioned
officers.
"Rollover Notice" shall have the meaning assigned to such term in
---------------
Section 2.6(b).
"Single Employer Plan" shall mean any Plan which is covered by Title
--------------------
IV of ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a corporation of which
----------
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the Environmental
--------------
Protection Agency National Priority List (NPL) and eligible for remedial action,
or any comparable state registry or list in any state of the United States.
"Tangible Net Worth" shall mean (a) total assets, as would be
------------------
reflected on a balance sheet of the Borrower in accordance with GAAP, exclusive
of intangible assets, including, without limitation, patents, patent
applications, copyrights, trademarks, trade names, experimental or
organizational expenses, franchises, licenses, permits and other like
intangibles, treasury stock, unamortized underwriters' debt discount and
expenses, and goodwill minus (b) total liabilities, as would be reflected on a
-----
balance sheet of the Borrower in accordance with GAAP.
"Taxes" shall mean all taxes, assessments, filing or other fees,
-----
levies, imposts, duties, deductions, withholdings, stamp taxes, interest
equalization taxes, capital transaction taxes, foreign exchange taxes or
charges, or other charges of any nature whatsoever from time to time or at any
time imposed by any Law or Tribunal.
"Transferee" shall mean any state or national bank to which the Bank
----------
has sold, assigned, transferred or granted a participation in any of the
Obligations, as authorized pursuant to Section 9.1, and any Person acquiring, by
purchase, assignment, transfer or participation, from any such purchaser,
assignee, transferee or participant, any part of such Obligations.
"Tribunal" shall mean any court, governmental department or authority,
--------
commission, board, bureau, agency, arbitrator or instrumentality of any state,
political subdivision, commonwealth, nation, territory, county, parish, or
municipality, whether now or hereafter existing, having jurisdiction over the
Bank, the Borrower or their respective Property.
"Unused Portion of the Commitment" shall mean the difference between
--------------------------------
the average daily amount of the Obligations during any specific quarter and the
Commitment Amount.
12
<PAGE>
1.3 Undefined Financial Accounting Terms. Undefined financial accounting
------------------------------------
terms used in this Agreement shall be defined according to GAAP at the time in
effect.
1.4 References. References in this Agreement to Exhibit, Article or
----------
Section numbers shall be to Exhibits, Articles or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article or Section in which
such reference appears.
ARTICLE II
----------
2 AMOUNT AND TERMS OF FACILITY
----------------------------
2.1 Revolving Line of Credit. Subject to the terms and conditions
------------------------
(including, without limitation, the right of the Bank to decline to make any
Advance so long as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement the Bank agrees,
during the Commitment Period, to make Advances, in immediately available funds
at the Principal Office to or for the benefit of the Borrower from time to time
in accordance with the terms and following receipt by the Bank of a Notice of
Borrowing; provided, however, the Advances plus the face amount of all issued
-----------------
and outstanding Letters of Credit shall not exceed, at any one time outstanding,
the Commitment Amount. Subject to the terms of this Agreement, during the
Commitment Period, the Borrower may borrow, repay and reborrow in respect of
such Advances. No individual Advance or any Letter of Credit shall exceed the
then existing Available Commitment. The Advances shall be made and written
evidence thereof maintained at the Principal Office and shall be evidenced by
the Note.
2.2 Letter of Credit. Subject to the terms and conditions (including,
----------------
without limitation, the right of Bank to decline to issue any Letter of Credit
so long as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement the Bank agrees,
during the Commitment Period, to issue Letters of Credit to or for the benefit
of Borrower from time to time in accordance with the terms and following receipt
by the Bank of a request for the issuance of a Letter of Credit; provided,
however, the outstanding face amount of all issued Letters of Credit plus the
sum of all Advances shall not exceed, at any one time outstanding, the
Commitment Amount. Subject to the terms of this Agreement, during the Commitment
Period, Letters of Credit may be funded and paid off; and, as long as the
Available Commitment is not exceeded, new Letters of Credit may be issued.
2.3 Manner of Borrowing.
-------------------
(a) Notice of Borrowing. Borrower shall give Bank prior written
-------------------
notice (a "Notice of Borrowing") of each requested Borrowing hereunder in
-------------------
substantially the form of Exhibit B specifying (i) the aggregate amount of such
---------
Borrowing, (ii) the requested date of such Borrowing, and (iii) the initial
Interest Option selected in accordance with Section 2.6 hereof. If Borrower
shall specify a LIBOR Rate, such Notice of Borrowing shall also specify the
length of the initial Interest Period selected by Borrower for such Borrowing.
In the case of a Base Rate
13
<PAGE>
Loan, Borrower shall give Bank the Notice of Borrowing at least one (1) Business
Day prior to the requested date of the Borrowing. If Borrower selects a LIBOR
Loan, Borrower shall give Bank the Notice of Borrowing at least three (3) LIBOR
Business Days prior to the requested date of the Borrowing.
(b) Notice Irrevocable. Each Notice of Borrowing shall be irrevocable
------------------
and binding on Borrower, and Borrower shall indemnify Bank against any cost,
loss or expense incurred by Bank as a result of Borrower's failure to fulfill,
on or before the date specified for a Borrowing, the conditions to such
Borrowing set forth herein, including without limitation, any cost, loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by Bank to fund the Borrowing to be made by Bank as part of
such Borrowing.
(c) Funding. After receiving a Notice of Borrowing in the manner
-------
provided herein, Bank shall, before 11:00 a.m. (Oklahoma time) on the date a
Borrowing is requested as specified in a Notice of Borrowing, upon fulfillment
of all applicable conditions set forth herein, pay or deliver all funds so
requested to the order of Borrower at the principal office of Bank.
2.4 Revolving Promissory Note. The Advances made under Section 2.1 hereof
-------------------------
by Bank shall be evidenced by the Note executed by Borrower, which Note shall
(i) be dated the date hereof, (ii) be payable to the order of Bank, (iii) bear
interest in accordance with Section 2.5 hereof, and (iv) be in the form of
Exhibit A attached hereto with blanks appropriately completed in conformity
herewith. The Note shall also support the amount of each Letter of Credit issued
pursuant to Section 2.2 herein. Upon the funding of any Letter of Credit by the
Bank, Borrowers shall provide Bank with a Notice of Borrowing in such an amount
as is necessary to pay off the funded Letter of Credit. Such Notice of Borrowing
shall be given to Bank at most one (1) Business Day after Borrower is notified
of the funding upon the Letter of Credit. If the required Notice of Borrowing
shall not have been timely received by Bank, Borrowers shall be deemed to have
selected the rate set forth in Section 2.5(a) to be applicable to such portion
of the Loan necessary to pay off the Letter of Credit and to have given Bank
notice of such selection. Notwithstanding the principal amount of the Note as
stated on the face thereof, the amount of principal actually owing on such Note
at any given time shall be the aggregate of all Advances theretofore made to
Borrower hereunder, less all payments of principal theretofore actually received
hereunder by Bank. Bank is authorized, but is not required, to endorse on the
schedule attached to the Note appropriate notations evidencing the date and
amount of each Advance as well as the amount of each payment made by Borrower
thereunder.
2.5 Interest Rates. The interest rate for both Base Rate Loans and LIBOR
--------------
Loans shall be computed on the basis of a year of 360 days, but counting the
actual days elapsed (including the first day but excluding the last day) during
the period for which payable and be based upon the ratio of Funded Debt to Cash
Flow existing as of the date the Notice of Borrowing is received by Bank. The
interest rate shall be determined as set forth below and Borrower's election of
a particular rate shall be set forth in a Notice of Borrowing.
(a) Base Rate Loans. The unpaid principal of the Base Rate Loans
---------------
shall bear interest from the date of advance to maturity at a rate per annum
which shall from day to day be equal to the lesser of: (i) the Adjusted Base
Rate in effect from day to day, or (ii) the Highest
14
<PAGE>
Lawful Rate.
(b) LIBOR Loans. The unpaid principal of each LIBOR Loan shall bear
-----------
interest for the Interest Period applicable thereto at a rate per annum which
shall be equal to the lesser of (i) the Adjusted LIBOR Rate for the Interest
Period applicable thereto, or (ii) the Highest Lawful Rate.
(c) Past Due Interest. Overdue principal on the Loans shall bear
-----------------
interest, to the extent permitted by applicable law, at a rate per annum equal
to the Default Rate.
2.6 Interest Rate Options. Subject to the provisions of this Section 2.6,
---------------------
Borrower shall have the option of having all or any portion of the Loan bear
interest at the Adjusted LIBOR Rate, or a rate based upon the Adjusted Base Rate
(an "Interest Option"); provided, however, that each LIBOR Loan shall be in the
minimum amount of $1,000,000.00 in $500,000.00 multiples. Each change in an
Interest Option made pursuant to this Section 2.6 shall be deemed both a payment
of the Base Rate Loan or LIBOR Loan from which such change was made and
(notwithstanding that the unpaid principal amount of the Loan is not thereby
changed) a LIBOR Loan or Base Rate Loan into which such change was made on the
date of such change.
(a) At Time of Borrowing. Borrower shall, in accordance with Section
--------------------
2.3 hereof, give Bank notice of the initial Interest Option selected with
respect to each Borrowing made hereunder.
(b) At Expiration of Interest Periods. Prior to the termination of
---------------------------------
each Interest Period with respect to each LIBOR Loan, Borrower shall give
written notice (a " Rollover Notice") to Bank of the Interest Option which shall
be applicable to such portion of the Loan upon the expiration of such Interest
Period. Such Rollover Notice shall be given to Bank at least one (1) Business
Day, in the case of a Base Rate selection, or three (3) LIBOR Business Days, in
the case of a LIBOR Rate selection, prior to the termination of such Interest
Period. If Borrower shall specify a LIBOR Rate, such Rollover Notice shall also
specify the length of the succeeding Interest Period (subject to the provisions
of the definitions of such term), selected by Borrower with respect to such
portion of the Loan. Each Rollover Notice shall be irrevocable and effective
upon notification thereof to Bank. If the required Rollover Notice shall not
have been timely received by Bank (in accordance with the above provisions of
this Section 2.6(b)) prior to the expiration of the then relevant Interest
Period in effect when such notice was required to be given, Borrower shall be
deemed to have selected the rate set forth in Section 2.5(a) to be applicable to
such portion of the Loan upon expiration of such Interest Period and to have
given Bank notice of such selection.
(c) Options Upon Default. Notwithstanding anything in this Section
--------------------
2.6 to the contrary, no Base Rate Loan may be converted to a LIBOR Loan and no
LIBOR Loan may be continued as such when any Default or Event of Default has
occurred and is continuing, but each such Loan shall be automatically converted
to a Base Rate Loan on the last day of each applicable Interest Period.
15
<PAGE>
2.7 Use of Proceeds. Proceeds of the Advances and/or Letters of Credit
---------------
shall be used by the Borrower solely to meet seasonal working capital needs of
the Borrower.
2.8 Repayment of Advances and Interest Thereon. During the Commitment
------------------------------------------
Period, accrued and unpaid interest on the Note shall be due and payable monthly
in arrears commencing on the first day of November, 1996, and continuing on the
first day of each month thereafter while any Loan Balance remains outstanding,
the payment in each instance to be the amount of interest which has accrued and
remains unpaid. The principal amount of the Note together with any accrued but
unpaid interest shall be due and payable in full on the Maturity Date, if there
has not been an Event of Default which has resulted in all Obligations becoming
immediately due and payable in accordance with Section 8.2 of this Agreement or
before the Maturity Date if there has been an Event of Default which has
resulted in all Obligations becoming immediately due and payable in accordance
with Section 8.2 of this Agreement.
2.9 Advances and Payments on Note. The Bank is irrevocably authorized by
-----------------------------
the Borrower to account for advances, payments, prepayments, etc. by any
appropriate method with its customary documentation or other evidence thereof
delivered to the Borrower within a reasonable time after each such advance,
payment, prepayment, etc. The outstanding principal balance reflected by the
accounting method utilized by the Bank shall be deemed rebuttably presumptive
evidence of the principal amount owing on the Note. Interest provided for herein
shall be calculated on unpaid sums actually advanced and outstanding pursuant to
the terms of this Agreement and only for the period from the date or dates of
such Advances until repayment. The liability for payment of principal and
interest evidenced by the Note shall be limited to principal amounts actually
advanced and outstanding pursuant to this Agreement and interest on such amounts
calculated in accordance with this Agreement.
2.10 Voluntary Prepayments. The Borrower shall have the right at any time
---------------------
or from time to time to prepay without premium or penalty, all or any part of
the Loan Balance outstanding on the Note pertaining to a Base Rate Loan;
provided, however, that no such prepayment shall, until all Obligations are
fully paid and satisfied, excuse the payment as it becomes due of any payment
provided for herein. All prepayments made pursuant to this Section shall be
applied first to accrued and unpaid interest and then to the Loan Balance.
Borrower shall not prepay any LIBOR Loan prior to the end of the applicable 30,
60, or 90 day period.
2.11 Non-Use Fees. In addition to interest on the Note as provided
------------
herein, to compensate the Bank for maintaining funds available, the Borrower
shall pay to the Bank a Non-Use Fee each quarter during the Commitment Period.
Beginning quarter ending December 31, 1996, the amount of the Non-Use Fee shall
be one quarter of one percent (.25%) of the Unused Portion of the Commitment for
each of the calendar quarters ending on the last days of March, June, September,
and December. The Borrower shall pay the Non-Use Fee to the Bank within two (2)
business days after the Bank notifies Borrower of the amount of the Non-Use Fee
calculated as described above.
2.12 Letter of Credit Fees. In addition to interest on the Note as
---------------------
provided herein, to compensate the Bank for issuing any Letters of Credit, the
Borrowers shall pay to the Bank a fee
16
<PAGE>
for such issuance pursuant to the following schedule:
(a) Standby Letters of Credit
. 1% of the face amount of the Letter of Credit per annum,
payable upon issuance and on each anniversary thereafter.
The minimum fee shall be $50.00 for each 90 days the Letter
of Credit is outstanding.
. $60.00 issuance fee
. $25.00 fee to amend a Letter of Credit
. $25.00 fee if the Letter of Credit is invoiced rather than
debited to Borrower's account(s).
17
<PAGE>
(b) Commercial Letter of Credit
. 0.15% of the face amount of the Letter of Credit for each 90
days the Letter of Credit is outstanding, payable upon
issuance of the Letter of Credit ($50.00 minimum).
(c) Other Letter of Credit Fees
. $25.00 minimum fee to increase or extend any Letter of
Credit
. 0.125% negotiation fee ($45.00 minimum)
. 100% of all expenses (telecopy, courier, etc.)
2.13 General Provisions Relating to Interest. It is the intention of the
---------------------------------------
parties hereto to comply strictly with any applicable usury laws as in effect
from time to time and, in this regard, there shall never be taken, received,
contracted for, collected, charged or received on any sums advanced hereunder
interest in excess of that which would accrue at the Highest Lawful Rate.
If, under any circumstances, the aggregate amounts paid on the Note or
under this Agreement or any other Loan Document include amounts which by law are
deemed interest and which would exceed the amount permitted if the Highest
Lawful Rate were in effect, the Borrower stipulates that such payment and
collection will have been and will be deemed to have been, to the fullest extent
permitted by applicable laws of the State of Oklahoma or the United States of
America, the result of mathematical error on the part of the Borrower and the
Bank; and the Bank shall promptly credit the amount of such excess to the
principal amount of the outstanding Obligations, or if the principal amount of
the Obligations shall have been paid in full, refund the amount of such excess
to the Borrower (to the extent only of such interest payments in excess of that
which would have accrued and been payable on the basis of the Highest Lawful
Rate) upon discovery of such error by the Bank or notice thereof from the
Borrower.
If the maturity of the Note is accelerated by reason of an election of the
Bank resulting from any Event of Default or otherwise, or in the event of any
prepayment, then such consideration that constitutes interest under applicable
laws may never include amounts which are more than the Highest Lawful Rate, and
the amount of such excess, if any, provided for in this Agreement or otherwise
shall be canceled automatically by the Bank as of the date of such acceleration
or prepayment and, if theretofore paid, shall be credited by the Bank on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded by the Bank to the Borrower.
All sums paid, or agreed to be paid, to the Bank for the use, forbearance
and detention of the proceeds of any Advance hereunder shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term hereof until paid in full so that the actual rate of
interest is uniform but does not exceed the Highest Lawful Rate throughout the
full term hereof.
18
<PAGE>
ARTICLE III
-----------
3 CONDITIONS
----------
The obligations of the Bank to enter into this Agreement and to make the
initial Advance are subject to the satisfaction of the following conditions
precedent unless waived in writing by Bank:
3.1 Receipt of Loan Documents and Other Items. The Bank shall have no
-----------------------------------------
obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein shall be satisfactory in
the good faith judgment of the Bank, and the Bank shall have received, reviewed
and approved the following documents and other items, appropriately executed
when necessary and, where applicable, acknowledged, all in form and substance
satisfactory in the good faith judgment of the Bank and dated, where applicable,
of even date herewith or a date prior thereto (unless specifically noted below
to the contrary) and acceptable in the good faith judgment of the Bank:
(a) multiple counterparts of this Agreement, as reasonably requested
by the Bank;
(b) the Note;
(c) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the by-laws and all amendments
thereto of the Borrower, accompanied by a certificate issued by the secretary or
an assistant secretary of the Borrower, to the effect that each such copy is
correct and complete;
(d) certificate of incumbency and signatures of all officers of the
Borrower who are authorized to execute Loan Documents on behalf of the Borrower,
executed by the secretary or an assistant secretary of the Borrower;
(e) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted by
the board of directors of the Borrower, accompanied by a certificate of the
respective secretary or an assistant secretary of the Borrower, to the effect
that such copies are true and correct copies of resolutions duly adopted at a
meeting or by unanimous consent of the board of directors of the Borrower and
that such resolutions constitute all the resolutions adopted with respect to
such transactions, have not been amended, modified, or revoked in any respect,
and are in full force and effect as of the date of such certificate;
(f) Financial Statements of the Borrower dated as of June 30, 1996;
(g) certificates dated as of a recent date from the Secretary of State
or other appropriate Governmental Authority evidencing the existence or
qualification and good standing
19
<PAGE>
of the Borrower and each Guarantor in the State of Oklahoma;
(h) guaranty agreements, in the form appended hereto as Exhibit H,
executed by CMI Limited Partnership and CMI Sales Co.
(i) copies of the Articles of Incorporation, Articles of Limited
Partnership, or comparable document and all amendments thereto and the Bylaws
and/or Limited Partnership Agreement and all amendments thereto of each
Guarantor, accompanied by a certificate issued by the Secretary or an Assistance
Secretary and/or the General Partner of each Guarantor, to the effect that such
copies are correct and complete;
(j) Certificate of Incumbence and signatures of all officers of each
Guarantor who are authorized to execute the Guaranty Agreements on behalf of
each Guarantor, executed by the Secretary or an Assistant Secretary and/or the
General Partner of each Guarantor;
(k) copies of corporate and/or limited partnership resolutions
approving the Guaranty Agreements and authorizing the transactions contemplated
therein, duly adopted by the Board of Directors and/or the General Partner of
each Guarantor, accompanied by a certificate of the respective Secretary or
Assistant Secretary and/or the General Partner of each Guarantor, to the effect
that such copies are true and correct copies of resolutions duly adopted at a
meeting or by unanimous consent of the Board of Directors and/or the General
Partner of the Guarantor and that such resolutions constitute all of the
resolutions adopted with respect to such transactions, have not been amended,
modified, or revoked in any respect, and are in full force and effect as of the
date of such certificate;
(l) opinion of Borrower's counsel substantially in the form of
Exhibit F;
(m) certificates evidencing the insurance maintained by the Borrower
in compliance with applicable provisions of this Agreement;
(n) a Notice of Borrowing received by the Bank on or before 11:00
a.m., Central Standard or Daylight Savings Time, as the case may be, on the day
preceding the Closing Date; and
(o) such other agreements, documents, items, instruments, opinions,
certificates, waivers, consents and evidence as the Bank may reasonably request.
3.2 Each Advance. In addition to the conditions precedent stated in
------------
Section 3.1 having been fulfilled as of the Closing Date, the Bank shall not be
obligated to make any Advance unless;
(a) the Borrower shall have delivered to the Bank a Notice of
Borrowing at least the requisite time prior to the requested date for the
relevant Borrowing; and each statement or certification made in such Notice of
Borrowing shall be true and correct in all material respects on the requested
date for such Borrowing;
20
<PAGE>
(b) no Event of Default or Default exists or, by virtue of any
requested Advance, shall exist or will occur;
(c) if requested by the Bank, the Borrower shall have delivered
evidence satisfactory in the good faith judgment of the Bank substantiating any
of the matters contained in this Agreement which are necessary to enable the
Borrower to qualify for such Borrowing;
(d) no event shall have occurred which, has caused or could cause a
Material Adverse Effect;
(e) each of the representations and warranties contained in this
Agreement shall be true and correct in all material respects and shall be deemed
to be repeated by the Borrower as if made on the requested date for such
Borrowing;
(f) the Bank shall have received reimbursement from the Borrower, or
legal counsel for the Bank shall have received payment from the Borrower, for
all reasonable fees and expenses of counsel to the Bank for which the Borrower
is responsible pursuant to applicable provisions of this Agreement and for which
invoices have been presented as of or prior to the date of the relevant
Borrowing; and
(g) all conditions set forth in Section 3.1 above shall have been
accomplished to Bank's satisfaction.
3.3 Each Issuance of a Letter of Credit. In addition to the conditions
-----------------------------------
precedent stated in Section 3.1 having been fulfilled as of the Closing Date,
the Bank shall not be obligated to issue a Letter of Credit unless:
(a) the Borrowers shall have delivered to the Bank a Letter of Credit
application or agreement, stand-by and/or commercial, in the form of Exhibit E
appended hereto; and each statement or certification made in such application
shall be true and correct in all material respects;
(b) no Event of Default or Default exists or, by virtue of the
issuance of any Letter of Credit, shall exist or will occur;
(c) if requested by the Bank, Borrower shall have delivered evidence
satisfactory in a good faith judgment of the Bank substantiating any of the
matters contained in this Agreement which are necessary to enable the Borrower
to qualify for the issuance of such Letter of Credit;
(d) no event shall have occurred which has caused or could cause a
Material Adverse Effect;
(e) each of the representations and warranties contained in this
Agreement shall be true and correct in all material respects and shall be deemed
to be repeated by the Borrower as if made on the requested date for the issuance
of the Letter of Credit;
21
<PAGE>
(f) all material matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory in a good faith judgment
of the Bank.
ARTICLE IV
----------
4 REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Bank to enter into this Agreement and to make the Advances,
the Borrower represents and warrants to the Bank (which representations and
warranties shall survive the delivery of the Note) that:
4.1 Due Authorization and Corporate Existence. The execution and delivery
-----------------------------------------
by the Borrower of this Agreement and the Borrowings hereunder; the execution
and delivery by the Borrower of the Note; the repayment of the Note and interest
and fees provided for in the Note and this Agreement; the performance of all
obligations of the Borrower under the Loan Documents are within the power of the
Borrower and have been duly authorized by all necessary corporate action of the
Borrower. The Borrower is a corporation duly organized, legally existing and in
good standing under the laws of the State of Oklahoma and is duly qualified as a
foreign corporation and is in good standing in all states in which it is doing
business except where failure to be so qualified will not have a Material
Adverse Effect.
4.2 Consents, Conflicts and Creation of Liens. The execution and
-----------------------------------------
delivery by the Borrower of the Loan Documents and the performance (except upon
the occurrence of an Event of Default) of the obligations of the Borrower
thereunder do not and will not (a) require the consent of any Governmental
Authority, (b) contravene or conflict with any Requirement of Law which
contravention or conflict would have a Material Adverse Effect, (c) contravene
or conflict with any indenture, instrument or other agreement to which the
Borrower is a party or by which any Property of the Borrower may be presently
bound or encumbered, or (d) result in or require the creation or imposition of
any Lien in, upon or of any Property of the Borrower under any such indenture,
instrument or other agreement, other than the Loan Documents.
4.3 Valid and Binding Obligations. All of the Loan Documents, when duly
-----------------------------
executed and delivered by the Borrower, will be the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower by the Bank in
accordance with their respective terms, except as limited by equitable
principles and applicable liquidation, conservatorship, bankruptcy, moratorium,
arrangement, receivership, insolvency, reorganization or similar laws from time-
to-time affecting the rights of creditors generally.
4.4 Title to Assets. The Borrower has defensible title to all of its
---------------
Properties, free and clear of all Liens and such defects in title that
individually or in the aggregate would cause a Material Adverse Effect except
Permitted Liens.
4.5 Scope and Accuracy of Financial Statements. The Financial Statements
------------------------------------------
of the Borrower, as of June 30, 1996 present fairly the financial position and
results of operations of the Borrower as at the relevant point in time or for
the period indicated. No event or circumstance
22
<PAGE>
has occurred since June 30, 1996 which would cause a Material Adverse Effect.
4.6 Liabilities, Litigation, and Restrictions. Other than as disclosed on
-----------------------------------------
the Financial Statements of the Borrower dated June 30, 1996, the Borrower has
no liabilities, direct or contingent, which may materially and adversely affect
its business. Except as set forth under the heading "Litigation" on Exhibit D
hereto, no Litigation of any nature affecting the Borrower is pending before any
Tribunal or, to the best knowledge of the Borrower, threatened against or
affecting the Borrower which might reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Borrower, after due inquiry, no
unusual or unduly burdensome restriction, restraint or hazard exists by
contract, Requirement of Law, or otherwise relative to the material business
operations of the Borrower other than such as relate generally to Persons
engaged in business activities similar to those conducted by the Borrower.
4.7 Authorizations and Consents. Except as expressly contemplated by this
---------------------------
Agreement, no authorization, consent, approval, exemption, franchise, permit or
license of, or filing with, any Governmental Authority, Tribunal or any other
Person is required to authorize or is otherwise required in connection with the
valid execution and delivery by the Borrower of the Loan Documents, or any
instrument contemplated hereby or thereby, the repayment by the Borrower of the
Note and the interest and fees provided in the Note and this Agreement, or the
performance (except in the Event of Default) by the Borrower of the Obligations.
4.8 Compliance with Laws. To the best of the Borrower's knowledge, the
--------------------
Borrower and its Property are in compliance in all material respects with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, and ERISA, except such noncompliance that would not have a Material
Adverse Effect.
4.9 Proper Filing of Tax Returns and Payment of Taxes Due. The Borrower
-----------------------------------------------------
has duly and properly filed its United States income tax return and all other
tax returns which are required to be filed by the Borrower and has paid all
taxes due except such as are being Contested in Good Faith and as to which
adequate provisions and disclosures have been made. The charges and reserves of
the Borrower with respect to taxes and other governmental charges are adequate,
and the Borrower has no knowledge of any deficiency or additional assessment in
a material amount in connection with taxes, assessments, or charges not provided
for on its books.
4.10 ERISA. To the extent applicable, the Borrower is in compliance in
-----
all material respects with all applicable provisions of ERISA. No Reportable
Event, which could reasonably be expected to have a Material Adverse Effect, has
occurred with respect to any Single Employer Plan, and each Single Employer Plan
has complied with and been administered in all material respects in accordance
with applicable provisions of ERISA and the Code. To the best knowledge of the
Borrower, (a) no Reportable Event has occurred with respect to any Multiemployer
Plan, which could reasonably be expected to have a Material Adverse Effect, and
(b) each Multiemployer Plan has complied with and been administered in all
material respects with applicable provisions of ERISA and the Code. The present
value of all benefits vested under each Single Employer Plan maintained by the
Borrower or any Commonly Controlled Entity (based on the assumptions used to
fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed, to any material extent, the value of the assets of such Plan
23
<PAGE>
allocable to such vested benefits. Neither the Borrower nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan for which there is, to any material extent, any withdrawal
liability. As of the most recent valuation date applicable to any Multiemployer
Plan, neither the Borrower nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Borrower or Commonly Controlled
Entity were to withdraw completely from such Multiemployer Plan, which could
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any Commonly Controlled Entity has received notice that any Multiemployer
Plan is Insolvent or in Reorganization. To the best knowledge of the Borrower,
no such Insolvency or Reorganization is reasonably likely to occur. Based upon
GAAP existing as of the date of this Agreement and current factual
circumstances, the Borrower has no reason to believe that the annual cost during
the term of this Agreement to the Borrower and all Commonly Controlled Entities
for post-retirement benefits to be provided to the current and former employees
of the Borrower and all Commonly Controlled Entities under Plans which are
welfare benefit plans (as defined in Section 3(1) of ERISA) will, in the
aggregate, have a Material Adverse Effect.
4.11 Environmental Laws. To the best knowledge and belief of the
------------------
Borrower, except as would not have a Material Adverse Effect, or as described on
Exhibit D under the heading "Environmental Matters" or "Litigation";
(a) no Property of the Borrower is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any federal or
state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported and/or
disposed of by the Borrower at a site which was, at the time of such generation,
transportation and/or disposal, or has since become, a Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower or
from, affecting or related to any Property of the Borrower or adjacent to any
Property of the Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.12 Investment Company Act Compliance. The Borrower is not, directly or
---------------------------------
indirectly, controlled by or acting on behalf of any Person which is, an
"investment company" or an "affiliated person" of an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, which control or
action could reasonably be expected to have a Material Adverse Effect.
4.13 Public Utility Holding Company Act Compliance. The Borrower is not a
---------------------------------------------
"holding company," or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended, which, as a result thereof, could
reasonably be expected to have a Material Adverse Effect.
24
<PAGE>
4.14 No Material Misstatements. To the Borrower's knowledge, no
-------------------------
information, exhibit, statement or report furnished to the Bank by or at the
direction of the Borrower in connection with this Agreement contains any
material misstatement of fact or omits to state a material fact necessary to
make the statements contained therein not misleading as of the date made or
deemed made.
4.15 Casualties or Taking of Property. Since June 30, 1996, neither the
--------------------------------
business nor any Property of the Borrower has been materially adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property or cancellation of contracts, permits or concessions by any
Governmental Authority, riot, activities of armed forces or acts of God, which,
as a result thereof, could reasonably be expected to have a Material Adverse
Effect.
4.16 Locations of Business, Offices, and Property. The principal place of
--------------------------------------------
business and chief executive office of the Borrower is located at the address of
the Borrower set forth in Section 9.3 or at such other location as the Borrower
may have, by proper written notice hereunder, advised the Bank.
4.17 Subsidiaries. The Borrower has several Subsidiaries as described on
------------
Exhibit G attached hereto.
ARTICLE V
---------
5 AFFIRMATIVE COVENANTS
---------------------
Unless agreed in writing by the Bank to the contrary, so long as any
Obligation remains outstanding or unpaid or any Commitment exists the Borrower
shall:
5.1 Maintenance and Access to Records. Maintain records adequate to
---------------------------------
determine its true and complete financial condition at any time. Within five (5)
Business Days after Borrower receives a written request from the Bank to inspect
records, specifying the nature of the records and the purpose of the desired
inspection, Borrower shall make the appropriate records available for the Bank's
review at Borrower's offices during Burrower's customary business hours. The
Borrower shall honor the Bank's reasonable request to make copies of such
records and remove them from Borrower's offices unless the Borrower deems those
records to be proprietary or privileged information.
5.2 Annual Financial Statements. Deliver to the Bank, (a) on or before
---------------------------
the 90th day after the close of each of its fiscal years, a copy of its annual
audited Financial Statements and 10-K statement, and (b) concurrent with (a)
above, a Compliance Certificate executed by Borrower's Responsible Officer
stating that such Officer, after due inquiry, has no knowledge of a Default or
Event of Default and containing a computation of, and demonstrating compliance
with, each financial covenant set forth in Section 6 herein.
25
<PAGE>
5.3 Quarterly Financial Statement. Deliver to the Bank on or before the
-----------------------------
45th day after the close of each quarter other than the final quarter of the
fiscal year, (a) quarterly unaudited Financial Statements and 10-Q statements,
and (b) concurrent with (a) above, a Compliance Certificate executed by
Borrower's Responsible Officer after due diligence and to the best of such
officer's knowledge that no default as set forth in Section 8 herein has
occurred and is continuing or whether there exists any event which might, with
the passage of time or otherwise, might become an Event of Default. If such an
Event of Default exists, the certificate must specify the steps being taken to
rectify the situation.
5.4 Annual Budget. Deliver to Bank on or before December 31 of each year
-------------
an annual budget for the upcoming year.
5.5 Notices of Certain Events. Deliver to the Bank, immediately upon a
-------------------------
Responsible Officer's having knowledge of the occurrence of any of the following
events or circumstances, a written statement with respect thereto, signed by a
Responsible Officer and setting forth the relevant event or circumstance and the
steps being taken by the Borrower with respect to such event or circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any material contractual
obligation of the Borrower, or any material new Litigation, affecting the
Borrower before any Governmental Authority or Tribunal;
(c) any new Litigation involving the Borrower as a defendant or in
which any Property of the Borrower is subject to a claim (i) in which the amount
involved is $250,000.00 or more and which is not covered by insurance, and (ii)
in which injunctive or similar relief is sought which affects a Property having
a fair market value (net to the Borrower's interest therein) of more than
$250,000.00 or could reasonably be expected to result in an expenditure by the
Borrower of more than $250,000;
(d) any Reportable Event or imminently expected Reportable Event with
respect to any Plan; any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan; the institution of proceedings or the
taking of any other action by the PBGC, the Borrower or any Commonly Controlled
Entity or Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Single Employer Plan or
Multiemployer Plan; or any Prohibited Transaction in connection with any Plan or
any trust created thereunder and the action being taken by the Internal Revenue
Service with respect thereto, which could reasonably be expected to have a
Material Adverse Effect;
(e) the receipt by the Borrower of any Environmental Complaint or any
formal request from any Governmental Authority or other Person for information
(other than requirements for compliance reports) regarding any Release of
Hazardous Substances by the Borrower from, affecting or related to any Property
of the Borrower or adjacent to any Property of the Borrower which Environmental
Complaint or request could reasonably be expected to have a Material Adverse
Effect;
26
<PAGE>
(f) any actual, proposed or threatened testing or other investigation
by any Governmental Authority or other Person concerning the environmental
condition of, or relating to, any Property of the Borrower or adjacent to any
Property of the Borrower following any allegation of a violation of any
Environmental Law which testing or investigation could reasonably be expected to
have a Material Adverse Effect;
(g) any Release of Hazardous Substances by the Borrower from,
affecting or related to any Property of the Borrower or adjacent to any Property
of the Borrower except in accordance with applicable Environmental Law or the
terms of a valid permit, license, certificate or approval of the relevant
Governmental Authority, or the violation of any Environmental Law, or the
revocation, suspension or forfeiture of or failure to renew, any permit,
license, registration, approval or authorization, which Release, violation,
revocation, suspension, forfeiture or failure could reasonably be expected to
have a Material Adverse Effect; and
(h) any other event or condition which could reasonably be expected to
have a Material Adverse Effect.
5.6 Additional Information. Furnish to the Bank, promptly upon the
----------------------
reasonable request of the Bank, such additional financial or other information
concerning the assets, liabilities, operations and transactions of the Borrower
as the Bank may from time to time reasonably request.
5.7 Compliance with Laws. In all reasonable and in all material respects,
--------------------
comply with all applicable Requirements of Law, including, without limitation,
(a) the Natural Gas Policy Act of 1978, as amended, (b) the minimum funding
requirements of ERISA so as not to give rise to any material liability or
Reportable Event thereunder, (c) Environmental Laws (i) related to any natural
or environmental resource or media located on, above, within, in the vicinity
of, related to or affected by any Property of the Borrower, (ii) required for
the performance or conduct of the operations of the Borrower, including, without
limitation, all permits, licenses, registrations, approvals and authorizations,
or (iii) applicable to the use, generation, handling, storage, treatment,
transport or disposal of any Hazardous Substances, the resulting non-compliance
of which could have a Material Adverse Effect; and cause all operators,
employees, crew members, agents, contractors, subcontractors and future lessees
(pursuant to appropriate lease provisions) of the Borrower, while such Persons
are acting within the scope of their relationship with the Borrower, to comply
with all such Requirements of Law as may be necessary or appropriate to enable
the Borrower to so comply. Notwithstanding the reasonable efforts of the
Borrower to comply with its obligations under this Section 5.7, should any non-
compliance with any Requirement of Law cause a Material Adverse Effect, the Bank
shall be notified of such event pursuant to Section 5.5 and the Bank shall be
entitled to exercise its rights and remedies pursuant to Subsection 8.1 and
Section 8.2.
5.8 Payment of Assessments and Charges. Pay all taxes, assessments,
----------------------------------
governmental charges, rent and other Indebtedness which, if unpaid, might become
a Lien, other than a Permitted Lien, against the Property of the Borrower,
except any of the foregoing being Contested in Good Faith.
5.9 Maintenance of Corporate Existence and Good Standing. Maintain its
----------------------------------------------------
corporate existence or qualification and good standing in all states in which it
is doing business, except where
27
<PAGE>
failure to so preserve will not have a Material Adverse Effect.
5.10 Further Assurances. Promptly cure any defects in the execution and
------------------
delivery of any of the Loan Documents and all agreements contemplated thereby,
and execute, acknowledge and deliver such other assurances and instruments as
shall, in the good faith and reasonable opinion of the Bank, be necessary to
fulfill the terms of the Loan Documents.
5.11 Initial Fees and Expenses of Bank and/or Legal Counsel to Bank.
--------------------------------------------------------------
Promptly reimburse the Bank for all reasonable and customary out-of-pocket
expenses of the Bank (including the Bank's attorney's fees) in connection with
the preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein and the consummation
of the transactions contemplated in this Agreement.
5.12 Subsequent Fees and Expenses. The Borrower shall promptly reimburse
----------------------------
the Bank (after the Borrower's receipt of the Bank's request for reimbursement)
for all amounts reasonably expended, advanced or incurred by the Bank, together
with interest thereon as provided in this Subsection 5.12 (i) to satisfy any of
the Obligations which have not been satisfied by Borrower pursuant to the terms
of this Agreement, or (ii) to protect or enforce the Bank's rights under any of
the Loan Documents; provided, however, if an uncured Event of Default does not
exist, the Bank must obtain the Borrower's contemporaneous written consent prior
to making any such expenditure or advance, or incurring such reimbursable
amount. The amount so reimbursable pursuant to this Subsection 5.12 shall bear
interest at the per annum interest rate equal to Base Rate, calculated on a
basis of a calendar year of 360 days, but counting the actual number of days
elapsed, on each such amount from the date notification that the same was
expended, advanced or incurred by the Bank until the date that it is repaid to
the Bank, with the obligations under this Subsection 5.12 surviving the non-
assumption of this Agreement in a case commenced under any Insolvency Proceeding
and being binding upon the Borrower and/or a trustee, receiver, custodian or
liquidator of the Borrower appointed in any such case.
5.13 Maintenance and Inspection of Tangible Properties. Maintain all of
-------------------------------------------------
its material tangible Properties in good repair and condition, ordinary wear and
tear and sales in the ordinary course of business excepted; make all necessary
replacements thereof and operate, if operated by the Borrower, such Properties
in a good and workmanlike manner; and permit any authorized representative or
representatives of the Bank to reasonably visit and inspect any tangible
Property of the Borrower.
5.14 Maintenance of Insurance and Evidence Thereof. Continue to maintain
---------------------------------------------
or continue to be maintained, insurance with respect to its Properties and
businesses against such liabilities, casualties, risks and contingencies as is
customary in the relevant industry and sufficient to prevent a Material Adverse
Effect, all such insurance to be in amounts and from insurers reasonably
acceptable to the Bank, and, on the Closing Date or upon any renewal of any such
insurance and at other times upon the reasonable request by the Bank, furnish to
the Bank evidence, satisfactory in the good faith judgment of the Bank of the
maintenance of such insurance.
5.15 Payment of Note and Performance of Obligations. Pay the Note
----------------------------------------------
according to the reading, tenor and effect thereof, as modified hereby, and do
and perform every act as required in the Loan Documents and discharge all other
Obligations.
28
<PAGE>
5.16 Primary Depository. Maintain all operating and depository accounts
------------------
with Bank. Bank shall provide depository services at competitive market prices.
ARTICLE VI
----------
6 FINANCIAL COVENANTS.
--------------------
Unless agreed in writing by the Bank to the contrary, so long as any
Obligation remains outstanding or unpaid or any Commitment exists the Borrower
shall:
6.1 Tangible Net Worth. Maintain at the end of each calendar quarter
------------------
Tangible Net Worth of no less than $55,000,000.00 as determined by Borrower's
Financial Statements. Beginning quarter ending September 30, 1996, the minimum
Tangible Net Worth shall increase each quarter thereafter by the sum of net
income after taxes less dividends and less treasury stock purchases.
6.2 Debt Service Coverage Ratio. Maintain at the end of each calendar
---------------------------
quarter a Debt Service Coverage Ratio of, at least, 1.50 to 1.00.
6.3 Liabilities to Net Worth. Maintain a maximum ratio of total
------------------------
liabilities to Tangible Net Worth of 1.25 to 1.00 for the first three quarters
of each calendar year throughout the term hereof and no more than 1.50 to 1.00
for the fourth calendar quarter of each year throughout the term hereof.
6.4 Inventory Turnover Ratio. Maintain as of December 31st of each year
------------------------
throughout the term hereof, an Inventory Turnover Ratio of, at least, 1.25 to
1.00. Should the Inventory Turnover Ratio be, at any point in time, below this
level, Borrower shall have six months to cure this breach.
ARTICLE VII
-----------
7 NEGATIVE COVENANTS
------------------
Unless agreed in writing by the Bank to the contrary, which agreement
will not be unreasonably withheld, so long as any Obligation remains outstanding
or unpaid or any Commitment exists the Borrower shall not:
7.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness or Contingent Obligation, other than as represented on the June 30,
1996 Financial Statements whether by way of loan or otherwise which exceeds, in
the aggregate the sum of $1,000,000.00; provided however, the foregoing
----------------
restriction shall not apply to (a) the Obligations, (b) debts or obligations in
existence and effective as of the date hereof and as disclosed in the financial
statements previously provided to the Bank and any and all extensions or
renewals thereof; (c) those certain $30,000,000.00 7.68% Series A Senior Notes
due September 15, 2006; and (d) amounts payable and accrued liabilities arising
in the ordinary course of Borrower's business.
29
<PAGE>
7.2 Negative Pledge. Create, incur, assume, permit or suffer to exist any
---------------
Lien on any of its Property or assets, whether now owned or hereafter acquired
except for Permitted Liens.
7.3 Sales of Assets. Sell, transfer or otherwise dispose of in any one
---------------
fiscal year, in one or any series of transactions, any of its Property, whether
now owned or hereafter acquired, or enter into any agreement to do so without
the Bank's prior written consent, which such consent shall not be unreasonably
withheld or unless it should otherwise not have a Material Adverse Effect. This
restriction shall not apply to any sales of property wherein the proceeds
resulting from said sale are reinvested in productive assets.
7.4 Cancellation of Insurance. Allow any insurance policy required to be
-------------------------
carried hereunder to be terminated or lapse or expire without provision for
adequate renewal or comparable substitution.
7.5 Changes in Corporate Structure. Enter into any transaction of
------------------------------
consolidation, merger or amalgamation, or liquidate, wind up or dissolve (or
suffer any liquidation or dissolution) without the prior written consent of Bank
which consent will not unreasonably be withheld; provided, however, that the
foregoing restrictions shall not apply to the merger or consolidation of the
Borrower with another person, if (i) the Borrower is the corporation that
results from such merger, amalgamation or consolidation (the "surviving
corporation") and a majority of the Persons serving on the Board of Directors of
the Surviving Corporation formerly served on Borrower's Board of Directors, (ii)
immediately after the consummation of the proposed merger or consolidation, and
after giving effect thereto, the Surviving Corporation will be able to satisfy
the financial covenants provided at Sections 6.1 and 6.2 of this Agreement,
(iii) the Surviving Corporation's Property is not subject to any Lien not
permitted to be incurred by the Borrower pursuant to this Agreement and (iv)
immediately after the consummation of the proposed merger or consolidation, and
after giving effect thereto, no Default or Event of Default would exist.
7.6 Transactions with Affiliates. Directly or indirectly, enter into any
----------------------------
sale, lease or exchange of Property or any contract for the rendering of goods
or services for amounts in excess of $100,000 with any Affiliate or any of them,
other than upon fair and reasonable terms no less favorable than could be
obtained in an arm's length transaction with a Person which was not an Affiliate
if such transaction would have a Material Adverse Effect.
7.7 Organization or Acquisition of Subsidiaries. Organize or acquire any
-------------------------------------------
Subsidiary in addition to those existing as of the Closing Date, if any such
organization or acquisition would have a Material Adverse Effect without Bank's
prior written consent provided; however, the foregoing restriction shall not
apply to acquisitions of companies in comparable business lines, if the purchase
price is less than 10% of Borrower's net worth as of the date of the
acquisition.
7.8 Line of Business. Change its existing primary line of business or
----------------
enter into any new line of business without the consent of Bank, which such
consent shall not be unreasonably withheld.
7.9 Executive Management. Change or alter its current executive
--------------------
management without the prior written consent of Bank, which such consent shall
not be unreasonably withheld.
30
<PAGE>
7.10 Repurchase of Treasury Stock. Repurchase in excess of $5,000,000.00
----------------------------
worth of Treasury stock without the prior written consent of Bank.
ARTICLE VIII
------------
8 EVENTS OF DEFAULT
-----------------
8.1 Enumeration of Events of Default. Any of the following events shall
--------------------------------
constitute an Event of Default as that term is used herein:
(a) default shall be made in the payment when due of any installment of
principal or interest under this Agreement or the Note or any Commitment Fee;
(b) an Event of Default as defined in any Loan Document shall have
occurred;
(c) default shall be made by the Borrower in the due observance or
performance of any of its obligations, covenants or agreements contained in any
of the Loan Documents and such default could be expected to have a Material
Adverse Effect;
(d) any representation or warranty made by the Borrower in any of the
Loan Documents, including, without limitation, in a Request for Advance, proves
to have been untrue in any material respect or any representation, statement
(including Financial Statements), certificate or data furnished or made to the
Bank in connection herewith proves to have been untrue in any material respect
as of the date the facts therein set forth were stated or certified and such
misrepresentation or breach of warranty could reasonably be expected to have a
Material Adverse Effect;
(e) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any bond, debenture, note,
lease or other evidence of indebtedness or under any credit agreement, loan
agreement, indenture, promissory note or similar agreement or instrument for
borrowed money executed in connection with any of the foregoing including, but
not limited to, those certain 7.68% Series A Senior Notes due September 15,
2006, and such default shall remain unremedied for in excess of the period of
grace, if any, with respect thereto and such default is not being contested in
good faith by the Borrower;
(f) the Borrower shall be unable to satisfy any condition or cure any
circumstance specified in Section 3.2, unless the failure to so satisfy would
not have a Material Adverse Effect, the satisfaction or curing of which is
precedent to the right of the Borrower to receive an Advance hereunder, and such
inability shall continue for a period in excess of 30 days;
(g) the Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee or liquidator of it or all or a substantial part of its
assets, (ii) file a voluntary petition commencing an Insolvency Proceeding
concerning Borrower, or (iii) make a general assignment for the benefit of
creditors, (iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material
allegations of a petition filed against it
31
<PAGE>
in any Insolvency Proceeding;
(h) an order, judgment or decree shall be entered against the Borrower
by any court of competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise, granting relief in any
Insolvency Proceeding or approving a petition seeking reorganization or an
arrangement of its debts or appointing a receiver, trustee, conservator,
custodian or liquidator of it or all or any substantial part of its assets and
such order, judgment or decree shall not be dismissed or stayed within 30 days
after the issuance and entry thereof;
(i) the levy against any portion of the Property (valued in excess of
$1,000,000.00) of the Borrower, or any execution, garnishment, attachment,
sequestration or other writ or similar proceeding which is not permanently
dismissed or discharged within 30 days after the levy and which could
reasonably be expected to have a Material Adverse Effect;
(j) a final and non-appealable order, judgment or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in an
amount in excess of $1,000,000.00 and such order, judgment or decree shall not
be dismissed or the execution thereof stayed within 30 days;
(k) a Material Effect occurs as a result of any of the following: (i)
any Person shall engage in any Prohibited Transaction involving any Plan; any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan for which an excise tax is
due or would be due in the absence of a waiver; (ii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Bank, likely to
result in the termination of such Plan for purposes of Title IV of ERISA; (iii)
any Single Employer Plan shall terminate for purposes of Title IV of ERISA; (iv)
the Borrower or any Commonly Controlled Entity shall incur, or in the reasonable
opinion of the Bank, be likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan;
and (v) or any other event or condition shall occur or exist with respect to a
Plan and the result of such events or conditions referred to in this Section
8.01(k) could subject the Borrower or any Commonly Controlled Entity to any tax
(other than an excise tax under Section 4980 of the Code), penalty or other
liabilities which taken in the aggregate would have a Material Adverse Effect
and any such circumstance shall exist for in excess of 30 days;
(l) the Borrower shall have failed to cure within 180 days its failure
to comply with the Inventory Turnover Ratio described in Section 6.4 herein.
(m) the occurrence of a Change of Control.
(n) the dissolution or the permanent loss of legal existence of any
Guarantor.
8.2 Remedies.
--------
(a) Upon the occurrence of an Event of Default specified in
Subsections 8.1(g),
32
<PAGE>
(h), or (n) immediately and without notice, (i) all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest, notice of protest, default or dishonor, notice of intent to accelerate
maturity, notice of acceleration of maturity or other notice of any kind, except
as may be provided to the contrary elsewhere herein, all of which are hereby
expressly waived by the Borrower, and (ii) the Commitment shall immediately
cease and terminate unless and until reinstated by the Bank in writing, and in
such event, the Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to set-off and apply any and all deposits of the Borrower (general or
special, time or demand, provisional or final) held by the Bank, except to the
extent any such deposits contain funds of persons other than Borrower, or
Borrower's subsidiaries and any and all other indebtedness at any time owing by
the Bank to or for the credit or account of the Borrower against any and all of
the Obligations.
(b) Upon the occurrence of any Event of Default specified in Section
8.1(a), Borrower shall have five (5) days after receiving written notification
of the Event of Default to cure such Default but, during such cure period, the
Bank will not, as a result of such Default, accelerate the Note or exercise any
of its rights pursuant to the Loan Documents, and notwithstanding subsection
8.1, such Default will not constitute an "Event of Default", unless such Default
is not remedied to the reasonable satisfaction of Bank within five days after
Borrower's receipt of such written notification. In the event Borrower shall
fail to effectuate such a cure Bank may declare all Obligations immediately due
and payable, without presentment, demand, protest, notice of protest, default or
dishonor, notice of intent to accelerate maturity, notice of acceleration of
maturity or other notice of any kind, except as may be provided to the contrary
elsewhere herein, all of which are hereby expressly waived by the Borrower, and
the Commitment shall immediately cease and terminate unless and until reinstated
by the Bank in writing, and in such event, the Bank is hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set-off and apply any and all
deposits containing funds of the Borrower (general or special, time or demand,
provisional or final) held by the Bank, and any and all other indebtedness at
any time owing by the Bank to or for the credit or account of the Borrower
against any and all of the Obligations although such Obligations may be
unmatured.
(c) Upon the occurrence of any Event of Default other than those
specified in Subsections 8.1(a), (g), (h), or (n) Borrower shall have thirty
(30) days after receiving written notification of the Event of Default to cure
such Default but, during such cure period, the Bank will not, as a result of
such Default, accelerate the Note or exercise any of its rights pursuant to the
Loan Documents, and notwithstanding subsection 8.1, such Default will not
constitute an "Event of Default", unless such Default is not remedied to the
reasonable satisfaction of Bank within 30 days after Borrower's receipt of such
written notification. In the event Borrower shall fail to effectuate such a
cure Bank may declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower, and the Commitment
shall immediately cease and terminate unless and until reinstated by the Bank in
writing, and in such event, the Bank is hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all deposits containing
funds of the Borrower (general or special, time or demand, provisional or final)
33
<PAGE>
held by the Bank, and any and all other indebtedness at any time owing by the
Bank to or for the credit or account of the Borrower against any and all of the
Obligations although such Obligations may be unmatured.
(d) Subject to the provisions of this Agreement, upon the occurrence
of any Event of Default the Bank may, in addition to the foregoing, exercise any
or all of its rights and remedies provided by law or pursuant to the Loan
Documents.
ARTICLE IX
----------
9 MISCELLANEOUS
-------------
9.1 Transfers and Participations. The Bank may, at any time, sell,
----------------------------
transfer, assign or grant participations in the Obligations or any portion
thereof; and the Bank may forward to each Transferee and each prospective
Transferee all documents and information relating to such obligations, whether
furnished by the Borrower or otherwise obtained, as the Bank determines
necessary or desirable. The Bank agrees that each such Transferee shall assume
all of the obligations of the Bank pursuant to the Loan Documents. All
participating banks must act in unison with the Bank as the lead and agent for
all participants. The Borrower will make all reports, elections, notices,
payments and fulfill all requirements of this agreement only to the Bank. The
Bank agrees not to transfer 100% participation for two years from the effective
date of this Agreement without the approval of Borrower.
9.2 Survival of Representations. Warranties and Covenants. All
---------------------------
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and shall
remain in force and effect so long as any Obligation is outstanding or any
Commitment exists.
9.3 Notices and Other Communications. Except as to verbal notices
--------------------------------
expressly authorized herein, which verbal notices shall be confirmed in writing,
all notices, requests and communications hereunder shall be in writing
(including by telegraph or telecopy). Unless otherwise expressly provided
herein, any such notice, request, demand or other communication shall be deemed
to have been duly given or made when delivered by hand, or, in the case of
delivery by mail, deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telegraphic notice, when
delivered to the telegraph company, or, in the case of telecopy notice, when
receipt thereof is acknowledged orally, addressed as follows:
(a) if to the Bank, to:
BANK OF OKLAHOMA, N.A.
201 Robert S. Kerr Avenue
Oklahoma City, Oklahoma 73102
Attention: John D. Higginbotham, Vice President
(b) if to the Borrower, to:
34
<PAGE>
CMI CORPORATION
P.O. Box 1985
Oklahoma City, Oklahoma 73101-1985
Attention: Jim D. Holland, Chief Financial Officer
(with a courtesy copy to Joseph P. Hogsett at Hartzog
Conger & Cason)
Any party may, by proper written notice hereunder to the other, change the
individuals or addresses to which such notices to it shall thereafter be sent.
9.4 Parties in Interest. Subject to applicable restrictions contained
-------------------
herein, all covenants and agreements herein contained by or on behalf of the
Borrower or the Bank shall be binding upon and inure to the benefit of the
Borrower or the Bank, as the case may be, and their respective legal
representatives, successors and assigns.
9.5 Rights of Third Parties. All provisions herein are imposed solely and
-----------------------
exclusively for the benefit of the Bank and the Borrower. No other Person shall
have any right, benefit, priority or interest hereunder or as a result hereof or
have standing to require satisfaction of provisions hereof in accordance with
their terms, and any or all of such provisions may be freely waived in whole or
in part by the Bank at any time if in its sole discretion it deems it advisable
to do so.
9.6 Articles and Sections. This Agreement, for convenience only, has been
---------------------
divided into Articles and Sections and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
9.7 Number and Gender. Whenever the context requires, reference herein
-----------------
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
9.8 Renewals and Extensions. All provisions of this Agreement relating to
-----------------------
the Note shall apply with equal force and effect to each promissory note
hereafter executed or issued which in whole or in part represents a renewal or
extension of any part of the Indebtedness of the Borrower under this Agreement,
the Note, or any other Loan Document.
9.9 No Waiver: Rights Cumulative. No course of dealing on the part of the
----------------------------
Bank, its officers or employees, nor any failure or delay by the Bank with
respect to exercising any of its rights under any Loan Document shall operate as
a waiver thereof. The rights of the Bank under the Loan Documents shall be
cumulative and the exercise or partial exercise of any such right shall not
preclude the exercise of any other right. No Advance hereunder shall constitute
a waiver of any of the covenants, warranties or conditions of the Borrower
contained herein. In the event the Borrower is unable to satisfy any such
covenant, warranty or condition, no such Advance shall have the effect of
precluding the Bank from thereafter declaring such inability to be an Event of
Default if same
35
<PAGE>
constitutes an Event of Default under the terms of this Agreement as hereinabove
provided.
9.10 Incorporation of Exhibits. The Exhibits attached to this Agreement
-------------------------
are incorporated herein and shall be considered a part of this Agreement for all
purposes.
9.11 Survival Upon Unenforceability. In the event any one or more of the
------------------------------
provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
9.12 Amendments or Modifications. Neither this Agreement nor any
---------------------------
provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by both the Bank and the Borrower.
9.13 Controlling Provision Upon Conflict. In the event of a conflict
-----------------------------------
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control.
9.14 Time, Place and Method of Payments. All payments required pursuant
----------------------------------
to this Agreement or the Note shall be made in lawful money of the United States
of America and in immediately available funds; shall be deemed received by the
Bank on the next Business Day following receipt if such receipt is after 2:00
p.m. Central Standard or Daylight Savings Time, as the case may be, on any
Business Day; and shall be made at the Principal Office of the Bank. Except as
provided to the contrary herein, if the due date of any payment hereunder or
under the Note would otherwise fall on a day which is not a Business Day, such
date shall be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
9.15 Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
-------------
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF OKLAHOMA.
9.16 Jurisdiction and Venue. All actions or proceedings with respect to,
----------------------
arising directly or indirectly in connection with, out of, related to or from
this Agreement or any other loan document will be litigated in courts having
situs in Oklahoma City, Oklahoma County, Oklahoma. The Borrower hereby submits
to the jurisdiction of any local, state or federal court located in Oklahoma
City, Oklahoma County, Oklahoma and hereby waives any rights it may have to
transfer or change the jurisdiction or venue of any litigation brought against
it by the Bank in accordance with this section.
9.17 Entire Agreement. This Agreement constitutes the entire Agreement
----------------
among the parties hereto with respect to the parties hereof and shall supersede
any prior agreement between the parties hereto, whether written or oral,
relating to the subject hereof. Furthermore, in this regard, this written
Agreement and the other written loan documents represent, collectively, the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous, or
36
<PAGE>
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
37
<PAGE>
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the
date first above written.
BORROWER: CMI CORPORATION
-------------------------------------
By:
----------------------------------
Title:
-------------------------------
BANK: BANK OF OKLAHOMA, N.A.
-------------------------------------
By: John D. Higginbotham
Title: Vice President
38
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT BY AND BETWEEN
BETWEEN CMI CORPORATION AND BANK OF OKLAHOMA, N.A.
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is made this
30th day of December, 1997 ("Effective Date"), by and between CMI CORPORATION,
an Oklahoma corporation ("Borrower"), and BANK OF OKLAHOMA, N.A. (the "Bank").
W I T N E S S E T H:
WHEREAS, on September 17, 1996 Borrower and Bank entered into a lending
transaction as evidenced by a certain Credit Agreement of even date therewith
(the "Original Agreement");
WHEREAS, pursuant to the Original Agreement, Borrower and Bank agreed to a
revolving line of credit in a principal amount not to exceed $25,000,000.00 as
evidenced by a certain revolving promissory note (the "Note").
WHEREAS, Borrower used the funds available under the Note to refinance
existing indebtedness with Congress Financial, existing long-term indebtedness
with Bank, and to refinance loan balances under Borrower's fleet-financing
arrangement.
WHEREAS, CMI Limited Partnership and CMI Sales Co. agreed to
unconditionally guarantee the Obligations of Borrower and the Note in
consideration of the loans contemplated by this Agreement.
WHEREAS, all capitalized terms not otherwise defined herein shall have
those meanings assigned to such terms in the Agreement; and
WHEREAS, Borrower and Bank desire to amend the Agreement for the first time
in order to, among other things not specifically set forth herein, (i) extend
the Maturity to September 17, 2000; (ii) increase the Commitment Amount to
$40,000,000.00; and (iii) reduce the non-use fee to 12.5 basis points effective
January 1, 1998.
NOW, THEREFORE, in consideration of the foregoing and for such other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. CHANGES TO THE AGREEMENT
Borrower and Bank have agreed to modify, supplement and amend certain
portions and/or terms of the Agreement in order to effectuate those matters set
forth above as follows:
1. The definition of "Commitment Amount" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended to delete the
------------------------
reference
<PAGE>
therein to "$25,000,000.00" and replace same with "$40,000,000.00".
2. The definition of "Interest Payment Date" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended to delete the
------------------------
reference to the word "two" from the last line of said definition and
section, it being the intent hereof, that Borrower have a one month or
three month Interest Period and deleting any ability of Borrower to select
a two month Interest Period.
3. The definition of "Maturity" or "Maturity Date" at Section 1.2 of
the Agreement, Additional Defined Terms, is hereby amended to delete the
------------------------
reference to "September 17, 1999" and replace same with "September 17,
2000".
4. The definition of "Note" at Section 1.2 of the Agreement,
Additional Defined Terms, is hereby amended to delete the reference therein
------------------------
to "$25,000,000.00" and replace same with "$40,000,000.00".
5. The Amended and Restated Revolving Promissory Note executed in
conjunction with this Amendment ("Amended Note"), a copy of which is
appended hereto as Annex 1, shall replace and be substituted for that
-------
certain $25,000,000.00 Revolving Promissory Note dated September 17, 1996
from Borrower in favor of Bank. Further, the form of Note appended hereto
as Annex 1 shall replace and be substituted for the form note attached to
-------
the Agreement as Exhibit A. All references in the Agreement to the term
---------
"Note" shall be deemed to refer to the Amended Note.
6. The Notice of Borrowing attached hereto as Annex II, shall replace
--------
and be substituted for the form of the Notice of Borrowing attached to the
Agreement as Exhibit B referenced in Paragraph (a), Notice of Borrowing, of
--------- -------------------
Section 2.3 of the Agreement, Manner of Borrowing. All references in the
-------------------
Agreement to the term Exhibit B shall be deemed to refer to the document
---------
attached hereto as Annex II.
--------
7. Paragraph (a), Notice of Borrowing, of Section 2.3 of the
-------------------
Agreement, Manner of Borrowing, is hereby amended to insert the following
-------------------
sentence immediately following the second sentence of said Paragraph (a) on
line 6 thereof:
The LIBOR rate to be utilized for the Interest Period selected shall
be the rate effective as of the date of the Notice of Borrowing as
published in the "Money Rates" section of The Wall Street Journal.
8. Effective January 1, 1998, Section 2.11 of the Agreement, Non-Use
-------
Fees, is hereby amended to replace the reference to "one quarter of one
----
percent (.25%)" appearing in the second sentence of said section with
"twelve and one-half basis points (12.5)".
2
<PAGE>
B. REPRESENTATIONS AND WARRANTIES
Borrowers hereby represent and warrant to Bank that:
1. Borrower is a corporation, duly organized, legally existing, and
in good standing under the laws of the State of Oklahoma, and is duly qualified
as a foreign corporation and in good standing in all other states wherein the
nature of its business or its assets make such qualification necessary.
2. Borrower's execution and delivery of this Amendment and
performance of its obligations hereunder: (a) are and will be within its
corporate powers; (b) are duly authorized by the Borrower's boards of directors;
(c) are not and will not be in contravention of any law, statute, rule or
regulation, the terms of Borrower's articles or certificates of incorporation
and bylaws, nor of any preferred stock provision, indenture, agreement or
undertaking to which Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of Liens, charges or
encumbrances on any of their properties or assets, except those in favor of Bank
hereunder.
3. This Amendment, when duly executed and delivered, will constitute
the legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms.
4. All balance sheets, income statements and other financial data
which have been or are hereafter furnished to Bank by the Borrower to induce
Bank to make the loans hereunder due, and as to subsequent financial statements
will, fairly represent Borrower's financial condition as of the dates for which
the same are furnished. All such financial statements, reports, papers and
other data furnished to Bank are and will be, when furnished, accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Bank a true and accurate knowledge of the subject matter and,
since the date of such financial statements, no material adverse change has
occurred in the operations or condition, financial or otherwise, of Borrower,
nor has Borrower incurred since September 30, 1997, any material liabilities or
made any material investment or guarantees, direct or contingent, in any single
case or in the aggregate.
5. All of the Borrower's representations and warranties set forth in
Sections 4.1 through 4.17 of the Agreement are true and correct on and as of the
date hereof with the same effect as though made and repeated by Borrower as of
the date hereof.
3
<PAGE>
C. CONDITIONS
Bank's obligations under the Agreement, as hereby amended, to advance
any funds under the Note on this date or hereafter are subject to the following
conditions:
1. Bank and Borrower shall have executed and delivered this
Amendment.
2. Borrower shall have executed and delivered to Bank the Amended
Note dated of even date herewith and each Guarantor shall have executed the
Amended and Restated Guaranty Agreement of even date herewith.
3. Borrower and each Guarantor, as the case shall be, shall have
executed and provided resolutions of Borrower and/or each Guarantor approving
the execution, delivery and performance of this Agreement, the Note, the Amended
and Restated Guaranty Agreement, the other Loan Documents and the transactions
contemplated herein, duly adopted by the respective Board of Directors each of
Borrower and each Guarantor and accompanied by a certificate by the Secretary or
Assistant Secretary of Borrower and each Guarantor stating that such resolutions
are true and correct, have not been altered or repealed and are in full force
and effect.
4. The Borrower's representations and warranties set forth in Section
B hereof shall be true and correct on and as of the Effective Date, and the date
of any subsequent Advance with the same effect as though such representation and
warranty had been on and as of such date.
5. Borrowers shall have satisfied all conditions set forth in Section
3.1, Section 3.2, Section 3.3 of the Agreement.
6. As of the Effective Date, and the date of any subsequent Advance
no Event of Default nor any event which, with the giving of notice or lapse of
time, would constitute an Event of Default shall have occurred and be
continuing.
D. OTHER COVENANTS AND MISCELLANEOUS TERMS
1. Except as expressly amended and supplemented hereby, the Agreement
shall remain unchanged and in full force and effect, and the same is hereby
ratified and extended.
2. The Borrower hereby agrees to pay all reasonable attorney fees and
legal expenses incurred by Bank in preparation, execution and implementation of
this Amendment and the Amended Note.
3. The Borrower hereby agrees to cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, executed, acknowledged and deliver such other assurances, documents,
and instruments as shall, in the good faith and reasonable opinion of Bank, is
necessary to fulfill the terms of this amendment.
4
<PAGE>
4. This Amendment shall be construed in accordance with and governed
by the laws of the State of Oklahoma, and shall be binding on and inure to the
benefit of the Borrower and Bank, and their respective successors and assigns.
All obligations of the Borrower under the Agreement and all rights of Bank and
any other holder of the Notes, whether expressed herein or in any Note, shall be
in addition to and not in limitation of those provided by applicable law.
Borrower irrevocably agrees that, subject to Bank's sole election, all suits or
proceedings arising from or related to the Agreement, as amended, or the Notes
may be litigated in courts (whether State or Federal) sitting in Oklahoma City,
Oklahoma, and the Borrower hereby irrevocably waives any objection to such
jurisdiction and venue.
5. This Amendment may be executed in as many counterparts as are
deemed necessary or convenient, and it shall not be necessary for the signature
of more than any one party to appear on any single counterpart. Each
counterpart shall be deemed an original, but all shall be construed together as
one and the same instrument. The failure of any party to sign shall not affect
or limit the liability of any party executing any such counterpart.
BORROWER:
CMI CORPORATION
---------------------------------------------
By: Jim D. Holland
Title: Senior Vice President
LENDER:
BANK OF OKLAHOMA, N.A.
---------------------------------------------
By: John D. Higginbotham
Title: Vice President
5
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT BY AND BETWEEN
BETWEEN CMI CORPORATION AND BANK OF OKLAHOMA, N.A.
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is made this
____ day of October, 1998 ("Effective Date"), by and between CMI CORPORATION, an
Oklahoma corporation ("Borrower"), and BANK OF OKLAHOMA, N.A. (the "Bank").
W I T N E S S E T H:
WHEREAS, on September 17, 1996 Borrower and Bank entered into a lending
transaction as evidenced by a certain Credit Agreement of even date therewith
(the "Original Agreement");
WHEREAS, pursuant to the Original Agreement, Borrower and Bank agreed to a
revolving line of credit in a principal amount not to exceed $25,000,000.00 as
evidenced by a certain revolving promissory note (the "Note");
WHEREAS, Borrower used the funds available under the Note to refinance
existing indebtedness with Congress Financial, existing long-term indebtedness
with Bank, and loan balances under Borrower's fleet-financing arrangement;
WHEREAS, CMI Limited Partnership and CMI Sales Co. agreed to
unconditionally guarantee the Obligations of Borrower and the Note in
consideration of the loans contemplated by this Agreement;
WHEREAS, on December 30, 1997, Borrower and Bank amended the Original
Agreement for the first time (the "First Amendment") in order to (i) extend the
Maturity until September 17, 2000; (ii) increase the Commitment Amount to
$40,000,000.00; and (iii) to reduce the non-use fee;
WHEREAS, pursuant to the Original Agreement as amended by the First
Amendment, Borrower amended and restated the Note in order to refinance the
outstanding balances due thereon and to increase the availability thereof to
$40,000,000.00;
WHEREAS, on May 13, 1998, the Original Agreement as amended by the First
Amendment was further amended (the "Letter Amendment") in order to increase the
ratio of Total Liabilities to Tangible Net Worth to 1.75:1.00 (the Original
Agreement as amended by the First Amendment and the Letter Amendment is referred
to herein as the "Agreement");
WHEREAS, all capitalized terms not otherwise defined herein shall have
those meanings assigned to such terms in the Agreement; and
WHEREAS, Borrower and Bank desire to further amend the Agreement in order
to, among other things not specifically set forth herein, (i) increase the
Commitment Amount to $60,000,000.00; (ii) alter the non-use fee; (iii) change
the financial covenants set forth at Article VI; and (iv) such other changes as
set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for such other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. CHANGES TO THE AGREEMENT
Borrower and Bank have agreed to modify, supplement and amend certain
portions and/or terms of the Agreement in order to effectuate those matters set
forth above as follows:
1. The definition of "Applicable Percentages" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended and restated in its
------------------------
entirety as follows:
"Applicable Percentage" shall mean for any day, (a) with respect
---------------------
to a LIBOR Loan, the margin of interest over the LIBOR Rate that is
applicable when any Applicable Rate based on the LIBOR Rate is
determined under this Agreement, and (b) with respect to a Base Rate
Loan, the margin of interest under the Base Rate that is applicable
when any Applicable Rate based on the Base Rate is determined under
this Agreement. The Applicable Percentage is subject to adjustment
(upwards or downwards, as appropriate) based on the ratio of Funded
Debt to Cash Flow. On each March 31, May 15, August 15 and November
15 (or if any such day falls on a day other than a Business Day, then
on the next succeeding Business Day), the Applicable Percentage shall
be adjusted to reflect the Applicable Percentage prescribed below for
the ratio of Funded Debt to Cash Flow as demonstrated by the most
recently delivered Compliance Certificate:
Funded Debt to Applicable Percentage Applicable
Percentage
Cash Flow For LIBOR Loans For Base Rate Loans
Less than or equal 1.25% 1.25%
to 2.00
Greater than 2.01 but less 1.50% 1.00%
than or equal to 3.0
Greater than 3.01 but less 1.75% .75%
than or equal to 4.00
Greater than 4.01 but less 2.00% .50%
than 5.00
Greater than or equal to 5.01 2.25% .25%
2
<PAGE>
The Applicable Percentage shall be 2.00 for LIBOR Loans and .50 for
Base Rate Loans from the date hereof until May 15, 1999 unless a
lesser rate would apply. After each adjustment of the Applicable
Percentage in accordance herewith, the new Applicable Percentage shall
apply until the next March 31, May 15, August 15 or November 15 or
until the Compliance Certificate demonstrates a change in the ratio of
Funded Debt to Cash Flow to an amount so that another Applicable
Percentage shall be applied. Upon the request of Bank, the Borrower
must demonstrate to Bank's reasonable satisfaction the required
applicable ratio in order to obtain an adjustment to a lower
Applicable Percentage. If the Borrower fails to furnish to the Bank
any Compliance Certificate by the date required by this Agreement,
then the maximum Applicable Percentage shall apply until the Borrower
furnishes the required Compliance Certificate.
2. The definition of "Commitment Amount" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended to delete the
------------------------
reference therein to "$40,000,000.00" and replace same with
"$60,000,000.00".
3. The definition of "Interest Payment Date" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended and restated in its
------------------------
entirety as follows:
"Interest Payment Date" shall mean (i) as to any Base Rate Loan
or LIBOR Loan, the last day of each month commencing on the first of
such days to occur after such Loan is made, and (ii) as to any LIBOR
Loan in respect of which Borrower has selected an Interest Period of
one, three or six months, the last day of such Interest Period.
4. The definition of "Interest Period" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended and restated in its
------------------------
entirety as follows:
"Interest Period" shall mean with respect to any LIBOR Loan
---------------
requested by Borrower:
(i) initially, the period commencing on the Borrowing Date with
respect to such LIBOR Loan and ending one, three or six months
thereafter as selected by Borrower in its Notice of Borrowing as
provided in Section 2.3 or its irrevocable Rollover Notice as provided
in Section 2.6(b); and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending
one, three or six months thereafter, as selected by Borrower in its
irrevocable Rollover Notice as provided in Section 2.6(b);
3
<PAGE>
(A) if any Interest Period pertaining to a LIBOR Loan would otherwise
end on a day which is not a LIBOR Business Day, such Interest Period
shall be extended to the next succeeding LIBOR Business Day unless the
result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end
on the immediately preceding LIBOR Business Day;
(B) if, with respect to any Advance or LIBOR Loan, Borrower shall fail
to give due notice as provided in Section 2.3 or 2.6(b), as the case
may be, Borrower shall be deemed to have selected the Adjusted Base
Rate to be applicable to such Advance or LIBOR Loan and such Loan
shall be automatically converted to a Base Rate Loan upon the
expiration of the Interest Period with respect thereto;
(C) any Interest Periods pertaining to a LIBOR Loan that begins on the
last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last LIBOR Business Day
of a calendar month; and
(D) no Interest Period shall end after the Maturity Date.
5. The definition of "Maturity" or "Maturity Date" at Section 1.2 of
the Agreement, Additional Defined Terms, is hereby amended to delete the
------------------------
reference to "September 17, 2000" and replace same with "September 17,
2001".
6. The definition of "Note" at Section 1.2 of the Agreement,
Additional Defined Terms, is hereby amended to delete the reference therein
------------------------
to "$40,000,000.00" and replace same with "$60,000,000.00".
7. The Amended and Restated Revolving Promissory Note executed in
conjunction with this Amendment ("Amended Note"), a copy of which is
appended hereto as Annex 1, shall replace and be substituted for that
-------
certain $40,000,000.00 Revolving Promissory Note dated December 30, 1997
from Borrower in favor of Bank. Further, the form of Note appended hereto
as Annex 1 shall replace and be substituted for the form note attached to
-------
the Agreement as Exhibit A. All references in the Agreement to the term
---------
"Note" shall be deemed to refer to the Amended Note.
8. Subsection (a), Notice of Borrowing, of Section 2.3 of the
-------------------
Agreement, Manner of Borrowing is hereby amended and restated as follows:
-------------------
(a) Notice of Borrowing. Borrower shall give Bank prior written
-------------------
notice (a "Notice of Borrowing") of each requested Borrowing hereunder
-------------------
in substantially the form of Exhibit B specifying (i) the aggregate
---------
amount of such Borrowing, (ii) the requested date of such
4
<PAGE>
Borrowing, and (iii) the initial Interest Option selected in
accordance with Section 2.6 hereof. If Borrower shall specify a LIBOR
Rate, such Notice of Borrowing shall also specify the length of the
initial Interest Period selected by Borrower for such Borrowing. In
the case of a Base Rate Loan or LIBOR Loan, Borrower shall give Bank
the Notice of Borrowing on the requested date of the Borrowing prior
to 12:00 p.m. Central Standard Time. The LIBOR rate to be utilized for
the Interest Period selected shall be the rate quoted in the "Money
Rates" section of The Wall Street Journal on the date of the Notice of
Borrowing.
9. Section 2.11 of the Agreement, Non-Use Fees, is hereby amended
------------
and restated in its entirety as follows:
In addition to interest on the Note as provided herein, in order
to compensate Bank for maintaining funds available for Borrower,
Borrower shall pay to Bank a "Non-Use Fee" each quarter during the
Commitment Period. The Non-Use Fee rate shall be determined based on
Borrower's ratio of Funded Debt to Cash Flow as calculated in the
quarterly Compliance Certificate provided to the Bank. The rate
charged will be .125%, provided Borrower's ratio of Funded Debt to
Cash Flow remains less than 5.01. In the event the ratio is equal to
or greater than 5.01, the rate charged will be .25%. The rate may
change each March 31, May 15, August 15 and November 15 dependent upon
the Borrower's ratio of Funded Debt to Cash Flow. Notwithstanding
anything contained in this Section 2.1.1 to the contrary, the Non-Use
Fee shall remain at .125% until May 15, 1999 at which time it shall be
subject to the appropriate Non-Use Fee as determined herein.
10. Section 6.1 of the Agreement, Tangible Net Worth, is hereby
------------------
amended and restated in its entirety as follows:
6.1 Tangible Net Worth. Maintain at the end of each calendar
------------------
quarter Tangible Net Worth of no less than $62,000,000.00 as
determined by Borrower's Financial Statements. Beginning quarter
ending September 30, 1998, the minimum Tangible Net Worth shall
increase each quarter thereafter by the sum of net income after cash
taxes less dividends less treasury stock purchases. This figure shall
not be reduced by incurred losses. In the event Borrower completes an
acquisition with the use of its stock, Bank reserves the right to
negotiate with Borrower an increase to the required Tangible Net
Worth.
11. Section 6.3 of the Agreement, Liabilities to Net Worth, is hereby
------------------------
amended and restated in its entirety as follows:
6.3 Liabilities to Net Worth. Maintain a maximum ratio of total
------------------------
liabilities to Tangible Net Worth of 2.0 to 1.0 for each quarter of
the
5
<PAGE>
calendar year throughout the term hereof.
12. Section 7.7 of the Agreement, Organization or Acquisition of
------------------------------
Subsidiaries, is hereby amended and restated in its entirety as follows:
------------
7.7 Organization or Acquisition of Subsidiaries. Organize or
-------------------------------------------
acquire any Subsidiary in addition to those existing as of the date
hereof, if any such organization or acquisition would have a Material
Adverse Effect without Bank's prior written consent; provided,
however, the foregoing restriction shall not apply to acquisitions of
companies in comparable business lines, if the purchase price is less
than 10% of Borrower's Tangible Net Worth (as of the date of the
acquisition) and Borrower's ratio of total liabilities to Tangible Net
Worth is less than 1.75 to 1.00.
13. An new Section identified as "Section 7.13" and entitled
"Dividends and Distributions" shall be added to the Agreement immediately
-----------------------------
after current Section 7.12 and shall state as follows:
7.13 Dividends and Distributions. Declare, pay or make, whether
---------------------------
in cash or property, or set aside or apply any money or assets to pay
or make, any dividend or distribution during any fiscal year that
would exceed, in the aggregate, Borrower's Net Income for the prior
twelve month period.
B. REPRESENTATIONS AND WARRANTIES
Borrowers hereby represent and warrant to Bank that:
1. Borrower is a corporation, duly organized, legally existing, and
in good standing under the laws of the State of Oklahoma, and is duly qualified
as a foreign corporation and in good standing in all other states wherein the
nature of its business or its assets make such qualification necessary.
2. Borrower's execution and delivery of this Amendment and
performance of its obligations hereunder: (a) are and will be within its
corporate powers; (b) are duly authorized by the Borrower's boards of directors;
(c) are not and will not be in contravention of any law, statute, rule or
regulation, the terms of Borrower's articles or certificates of incorporation
and bylaws, nor of any preferred stock provision, indenture, agreement or
undertaking to which Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of Liens, charges or
encumbrances on any of their properties or assets, except those in favor of Bank
hereunder.
3. This Amendment, when duly executed and delivered, will constitute
the legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms.
6
<PAGE>
4. All balance sheets, income statements and other financial data
which have been or are hereafter furnished to Bank by the Borrower to induce
Bank to make the loans hereunder due, and as to subsequent financial statements
will, fairly represent Borrower's financial condition as of the dates for which
the same are furnished. All such financial statements, reports, papers and
other data furnished to Bank are and will be, when furnished, accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Bank a true and accurate knowledge of the subject matter and,
since the date of such financial statements, no material adverse change has
occurred in the operations or condition, financial or otherwise, of Borrower,
nor has Borrower incurred since September 30, 1997, any material liabilities or
made any material investment or guarantees, direct or contingent, in any single
case or in the aggregate.
5. All of the Borrower's representations and warranties set forth in
Sections 4.1 through 4.17 of the Agreement are true and correct on and as of the
date hereof with the same effect as though made and repeated by Borrower as of
the date hereof.
C. CONDITIONS
Bank's obligations under the Agreement, as hereby amended, to advance
any funds under the Note on this date or hereafter are subject to the following
conditions:
1. Bank and Borrower shall have executed and delivered this
Amendment.
2. Borrower shall have executed and delivered to Bank the Amended
Note dated of even date herewith and each Guarantor shall have executed the
Amended and Restated Guaranty Agreement of even date herewith.
3. Borrower and each Guarantor, as the case shall be, shall have
executed and provided resolutions of Borrower and/or each Guarantor approving
the execution, delivery and performance of this Agreement, the Note, the Amended
and Restated Guaranty Agreement, the other Loan Documents and the transactions
contemplated herein, duly adopted by the respective Board of Directors each of
Borrower and each Guarantor and accompanied by a certificate by the Secretary or
Assistant Secretary of Borrower and each Guarantor stating that such resolutions
are true and correct, have not been altered or repealed and are in full force
and effect.
4. The Borrower's representations and warranties set forth in Section
B hereof shall be true and correct on and as of the Effective Date, and the date
of any subsequent Advance with the same effect as though such representation and
warranty had been on and as of such date.
5. Borrowers shall have satisfied all conditions set forth in Section
3.2 and Section 3.3 of the Agreement.
6. As of the Effective Date, and the date of any subsequent Advance
no
7
<PAGE>
Event of Default nor any event which, with the giving of notice or lapse of
time, would constitute an Event of Default shall have occurred and be
continuing.
D. OTHER COVENANTS AND MISCELLANEOUS TERMS
1. Except as expressly amended and supplemented hereby, the Agreement
shall remain unchanged and in full force and effect, and the same is hereby
ratified and extended.
2. The Borrower hereby agrees to pay all reasonable attorney fees and
legal expenses incurred by Bank in preparation, execution and implementation of
this Amendment and the Amended Note.
3. The Borrower hereby agrees to cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, executed, acknowledged and deliver such other assurances, documents,
and instruments as shall, in the good faith and reasonable opinion of Bank, is
necessary to fulfill the terms of this amendment.
4. This Amendment shall be construed in accordance with and governed
by the laws of the State of Oklahoma, and shall be binding on and inure to the
benefit of the Borrower and Bank, and their respective successors and assigns.
All obligations of the Borrower under the Agreement and all rights of Bank and
any other holder of the Notes, whether expressed herein or in any Note, shall be
in addition to and not in limitation of those provided by applicable law.
Borrower irrevocably agrees that, subject to Bank's sole election, all suits or
proceedings arising from or related to the Agreement, as amended, or the Notes
may be litigated in courts (whether State or Federal) sitting in Oklahoma City,
Oklahoma, and the Borrower hereby irrevocably waives any objection to such
jurisdiction and venue.
5. This Amendment may be executed in as many counterparts as are
deemed necessary or convenient, and it shall not be necessary for the signature
of more than any one party to appear on any single counterpart. Each
counterpart shall be deemed an original, but all shall be construed together as
one and the same instrument. The failure of any party to sign shall not affect
or limit the liability of any party executing any such counterpart.
BORROWER:
CMI CORPORATION
--------------------------------------------------
By: Jim D. Holland
Title: Senior Vice President
LENDER:
BANK OF OKLAHOMA, N.A.
8
<PAGE>
------------------------------------------------
By: John D. Higginbotham
Title: Vice President
9
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT BY AND BETWEEN
BETWEEN CMI CORPORATION AND BANK OF OKLAHOMA, N.A.
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is made this ___
day of March, 1999 ("Effective Date"), by and between CMI CORPORATION, an
Oklahoma corporation ("Borrower"), and BANK OF OKLAHOMA, N.A. (the "Bank").
W I T N E S S E T H:
WHEREAS, on September 17, 1996 Borrower and Bank entered into a lending
transaction as evidenced by a certain Credit Agreement of even date therewith
(the "Original Agreement");
WHEREAS, pursuant to the Original Agreement, Borrower and Bank agreed to a
revolving line of credit in a principal amount not to exceed $25,000,000.00 as
evidenced by a certain revolving promissory note (the "Note");
WHEREAS, Borrower used the funds available under the Note to refinance
existing indebtedness with Congress Financial, existing long-term indebtedness
with Bank, and loan balances under Borrower's fleet-financing arrangement;
WHEREAS, CMI Limited Partnership and CMI Sales Co. agreed to
unconditionally guarantee the Obligations of Borrower and the Note in
consideration of the loans contemplated by this Agreement;
WHEREAS, on December 30, 1997, Borrower and Bank amended the Original
Agreement for the first time (the "First Amendment") in order to (i) extend the
Maturity until September 17, 2000; (ii) increase the Commitment Amount to
$40,000,000.00; and (iii) to reduce the non-use fee;
WHEREAS, pursuant to the Original Agreement as amended by the First
Amendment, Borrower amended and restated the Note in order to refinance the
outstanding balances due thereon and to increase the availability thereof to
$40,000,000.00;
WHEREAS, on May 13, 1998, the Original Agreement as amended by the First
Amendment was further amended (the "Letter Amendment") in order to increase the
ratio of Total Liabilities to Tangible Net Worth to 1.75:1.00;
WHEREAS, on October 13, 1998, Borrower and Bank amended the Original
Agreement as amended by the First Amendment and as further amended by the Letter
Amendment for the second time (the "Second Amendment") in order to: (i) increase
the Commitment Amount to $60,000,000.00; (ii) alter the non-use fee; (iii)
change the financial covenants set forth at Article VI; and (iv) such other
changes as set forth herein (the Original Agreement as amended by the
<PAGE>
First Amendment, the Letter Amendment and the Second Amendment is referred to
herein as the "Agreement").
WHEREAS, Borrower and Bank desire to further amend the Agreement in order
to increase the line by $10,000,000.00 for 120 days to be evidenced by an
additional promissory note.
WHEREAS, all capitalized terms not otherwise defined herein shall have
those meanings assigned to such terms in the Agreement; and
NOW, THEREFORE, in consideration of the foregoing and for such other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. CHANGES TO THE AGREEMENT
Borrower and Bank have agreed to modify, supplement and amend certain
portions and/or terms of the Agreement in order to effectuate those matters set
forth above as follows:
1. The definition of "Commitment Amount" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended to temporarily
------------------------
increase the Commitment Amount by $10,000,000.00 until July ___, 1999 at
which time the Commitment Amount shall reduce back to $60,000,000.00.
2. The definition of "Commitment Period" at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended and restated in
------------------------
order to accommodate the new note as follows:
"Commitment Period" shall mean, as for the Revolving Promissory
-----------------
Note, that period of time from the Closing Date to, but not including,
the Maturity Date. As for the Short Term Revolving Note, the term
shall refer to that period of time from March ___, 1999 to, but not
including, the Short Term Maturity Date.
3. The definition of "Note" at Section 1.2 of the Agreement,
Additional Defined Terms, is hereby amended and restated in its entirety in
------------------------
order to include the new note as follows:
"Notes" shall collectively mean (i) the Revolving Promissory
Note, in the form attached hereto as Exhibit A-1 and (ii) the Short
Term Revolving Note, in the form attached hereto as Exhibit A-2. .
4. Section 1.2 of the Agreement, Additional Defined Terms, is hereby
------------------------
2
<PAGE>
amended to include a new and additional definition for the term "Revolving
Promissory Note". The "Revolving Promissory Note" is the note evidencing
the original obligation described in the Agreement and is defined as
follows and placed in the Agreement in its designated alphabetical
location:
"Revolving Promissory Note" shall mean the revolving promissory
---------------------------
note dated as of October 13, 1998 in the amount of $60,000,000.00, a
copy of which is attached hereto as Exhibit A-1, together with any and
all renewals, extensions for any period, increases and rearrangements
thereof.
5. Section 1.2 of the Agreement, Additional Defined Terms, is hereby
------------------------
amended to include a new and additional definition for the term "Short Term
Revolving Note" which such note represents the new obligation and which
shall be defined as follows and placed in the Agreement in its designated
alphabetical location:
"Short Term Revolving Note" shall mean the short term revolving
---------------------------
promissory note dated as of March ___, 1999 in the amount of
$10,000,000.00 attached hereto as Exhibit A-2, together with any and
all renewals, extensions for any period, increases and rearrangements
thereof.
6. The last sentence of Section 2.1 of the Agreement, Revolving Line
--------------
of Credit, is hereby amended and restated in its entirety as follows:
---------
The Advances shall be made and written evidence thereof maintained at
the Principal Office and shall be evidenced by the Revolving
Promissory Note and the Short Term Revolving Note.
7. Section 2.4 of the Agreement, Revolving Promissory Note, shall be
-------------------------
retitled and amended and restated in order to include the Short Term
Revolving Promissory Note as follows:
2.4 Notes. Advances made under Section 2.1 hereof shall be
-----
evidenced by the Revolving Promissory Note, which such Revolving
Promissory Note shall be (i) dated October 13, 1998, (ii) be payable
to the order of Bank, (iii) bear interest in accordance with Section
2.5 hereof, and (iv) be in the form of Exhibit A-1 attached hereto
with the blanks appropriately completed in conformity herewith. The
Revolving Promissory Note shall also support the amount of each Letter
of Credit issued pursuant herein. Upon the funding of any Letter of
Credit by the Bank, Borrowers shall provide Bank with a Notice of
Borrowing in
3
<PAGE>
such an amount as is necessary to pay off the funded Letter of Credit.
Such Notice of Borrowing shall be given to Bank at most one (1)
Business Day after Borrower is notified of the funding upon the Letter
of Credit. If the required Notice of Borrowing shall not have been
timely received by Bank, Borrowers shall be deemed to have selected
the rate set forth in Section 2.5(a) to be applicable to such portion
of the Loan necessary to pay off the Letter of Credit and to have
given Bank notice of such selection. Notwithstanding the principal
amount of the Revolving Promissory Note as stated on the face thereof,
the amount of principal actually owing on such Revolving Promissory
Note at any given time shall be the aggregate of all Advances
theretofore made to Borrower thereunder, less all payments of
principal theretofore actually received thereunder by Bank. Bank is
authorized, but is not required, to endorse on the schedule attached
to the Revolving Promissory Note appropriate notations evidencing the
date and amount of each Advance as well as the amount of each payment
made by Borrower thereunder.
Advances made under Section 2.1 hereof may also be evidenced by
the Short Term Revolving Note, which such Short Term Revolving Note
shall (i) be dated March 5, 1999, (ii) be payable to the order of
Bank, (iii) bear interest in accordance with Section 2.5 hereof, and
(iv) be in the form of Exhibit A-2 attached hereto with the blanks
appropriately completed in conformity herewith. Notwithstanding the
principal amount of the Short Term Revolving Note as stated on the
face thereof, the amount of principal actually owing on such Short
Term Revolving Note at any given time shall be the aggregate of all
Advances theretofore made to Borrower thereunder, less all payments of
principal theretofore actually received thereunder by Bank. Bank is
authorized, but is not required, to endorse on the schedule attached
to the Short Term Revolving Note appropriate notations evidencing the
date and amount of each Advance as well as the amount of each payment
made by Borrower thereunder. No Advance shall be made on the Short
Term Revolving Note until such time as there is no availability
remaining under the Revolving Promissory Note.
8. Section 2.7 of the Agreement, Use of Proceeds, shall be amended
---------------
and restated in order to include the Short Term Revolving Note as follows:
2.7 Use of Proceeds. Proceeds of Advances and/or Letters of
---------------
Credit under the Revolving Promissory Note shall be
4
<PAGE>
used by the Borrower solely to meet seasonal working capital needs.
Proceeds of Advances under the Short Term Revolving Note shall be used
by the Borrower solely to meet seasonal working capital requirements.
9. Section 2.8 of the Agreement, Repayment of Advances and Interest
----------------------------------
Thereon, shall be amended and restated in order to include the Short Term
-------
Revolving Note as follows:
2.8 Repayment of Advances and Interest Thereon.
------------------------------------------
(a) Revolving Promissory Note. During the Commitment
-------------------------
Period, accrued and unpaid interest on the Revolving Promissory Note
shall be due and payable monthly in arrears commencing on the first
day of November, 1996, and continuing on the first day of each month
thereafter while any Loan Balance remains outstanding, the payment in
each instance to be the amount of interest which has accrued and
remains unpaid. The principal amount of the Note together with any
accrued but unpaid interest shall be due and payable in full on the
Maturity Date, if there has not been an Event of Default which has
resulted in all Obligations becoming immediately due and payable in
accordance with Section 8.2 of this Agreement or before the Maturity
Date if there has been an Event of Default which has resulted in all
Obligations becoming immediately due and payable in accordance with
Section 8.2 of this Agreement.
(b) Short Term Revolving Note. During the Commitment
-------------------------
Period, accrued and unpaid interest on the Short Term Revolving Note
shall be due and payable monthly in arrears commencing on the last day
of March, 1999, and continuing on the last day of each month
thereafter while any Loan Balance remains outstanding on the Short
Term Revolving Note, the payment in each instance to be the amount of
interest which has accrued and remains unpaid. The principal amount
of the Short Term Revolving Note together with any accrued but unpaid
interest shall be due and payable in full on the Short Term Maturity
Date, if there has not been an Event of Default which has resulted in
all Obligations becoming immediately due and payable in accordance
with Section 8.2 of this Agreement or before the Maturity Date if
there has been an Event of Default which has resulted in all
Obligations becoming immediately due and payable in accordance with
Section 8.2 of this Agreement.
5
<PAGE>
10. Section 8.1 of the Agreement, Enumeration of Events of Default
--------------------------------
shall be amended at subsection (a) in order to restate such subsection in
order to specifically include the Short Term Revolving Note as follows:
(a) default and/or nonpayment when due of any payment of
principal or interest under this Agreement, the Revolving Promissory
Note, the Short Term Revolving Note or any Commitment Fee.
11. All references in the Agreement to the term "Note" shall be
hereinafter deemed to include both the Revolving Promissory Note and the
Short Term Revolving Note until such time as the Short Term Revolving Note
is paid in full at which time the term "Note" shall only refer to the
Revolving Promissory Note.
12. The document attached to the Agreement as Exhibit A shall
hereinafter be designated as Exhibit A-1.
13. All fees applicable to the Revolving Promissory Note shall
equally apply to the Short Term Revolving Promissory Note including, but
not limited to, Non-Use Fees.
B. REPRESENTATIONS AND WARRANTIES
Borrowers hereby represent and warrant to Bank that:
1. Borrower is a corporation, duly organized, legally existing, and
in good standing under the laws of the State of Oklahoma, and is duly qualified
as a foreign corporation and in good standing in all other states wherein the
nature of its business or its assets make such qualification necessary.
2. Borrower's execution and delivery of this Amendment and
performance of its obligations hereunder: (a) are and will be within its
corporate powers; (b) are duly authorized by the Borrower's boards of directors;
(c) are not and will not be in contravention of any law, statute, rule or
regulation, the terms of Borrower's articles or certificates of incorporation
and bylaws, nor of any preferred stock provision, indenture, agreement or
undertaking to which Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of Liens, charges or
encumbrances on any of their properties or assets, except those in favor of Bank
hereunder.
3. This Amendment, when duly executed and delivered, will constitute
the legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms.
6
<PAGE>
4. All balance sheets, income statements and other financial data
which have been or are hereafter furnished to Bank by the Borrower to induce
Bank to make the loans hereunder due, and as to subsequent financial statements
will, fairly represent Borrower's financial condition as of the dates for which
the same are furnished. All such financial statements, reports, papers and
other data furnished to Bank are and will be, when furnished, accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Bank a true and accurate knowledge of the subject matter and,
since the date of such financial statements, no material adverse change has
occurred in the operations or condition, financial or otherwise, of Borrower,
nor has Borrower incurred since September 30, 1997, any material liabilities or
made any material investment or guarantees, direct or contingent, in any single
case or in the aggregate.
5. All of the Borrower's representations and warranties set forth in
Sections 4.1 through 4.17 of the Agreement are true and correct on and as of the
date hereof with the same effect as though made and repeated by Borrower as of
the date hereof.
C. CONDITIONS
Bank's obligations under the Agreement, as hereby amended, to advance
any funds under the Note on this date or hereafter are subject to the following
conditions:
1. Bank and Borrower shall have executed and delivered this
Amendment.
2. Borrower shall have executed and delivered to Bank the Short Term
Revolving Note dated of even date herewith and each Guarantor shall have
executed a Third Amended and Restated Guaranty Agreement of even date herewith.
3. Borrower and each Guarantor, as the case shall be, shall have
executed and provided resolutions of Borrower and/or each Guarantor approving
the execution, delivery and performance of this Agreement, the Short Term
Revolving Note, the Amended and Restated Guaranty Agreement, the other Loan
Documents and the transactions contemplated herein, duly adopted by the
respective Board of Directors each of Borrower and each Guarantor and
accompanied by a certificate by the Secretary or Assistant Secretary of Borrower
and each Guarantor stating that such resolutions are true and correct, have not
been altered or repealed and are in full force and effect.
4. The Borrower's representations and warranties set forth in Section
B hereof shall be true and correct on and as of the Effective Date, and the date
of any subsequent Advance with the same effect as though such representation and
warranty had been on and as of such date.
5. Borrowers shall have satisfied all conditions set forth in Section
3.2 and Section 3.3 of the Agreement.
7
<PAGE>
6. As of the Effective Date, and the date of any subsequent Advance
no Event of Default nor any event which, with the giving of notice or lapse of
time, would constitute an Event of Default shall have occurred and be
continuing.
D. OTHER COVENANTS AND MISCELLANEOUS TERMS
1. Except as expressly amended and supplemented hereby, the Agreement
shall remain unchanged and in full force and effect, and the same is hereby
ratified and extended.
2. The Borrower hereby agrees to pay all reasonable attorney fees and
legal expenses incurred by Bank in preparation, execution and implementation of
this Amendment and the Amended Note.
3. The Borrower hereby agrees to cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, executed, acknowledged and deliver such other assurances, documents,
and instruments as shall, in the good faith and reasonable opinion of Bank, is
necessary to fulfill the terms of this amendment.
4. This Amendment shall be construed in accordance with and governed
by the laws of the State of Oklahoma, and shall be binding on and inure to the
benefit of the Borrower and Bank, and their respective successors and assigns.
All obligations of the Borrower under the Agreement and all rights of Bank and
any other holder of the Notes, whether expressed herein or in any Note, shall be
in addition to and not in limitation of those provided by applicable law.
Borrower irrevocably agrees that, subject to Bank's sole election, all suits or
proceedings arising from or related to the Agreement, as amended, or the Notes
may be litigated in courts (whether State or Federal) sitting in Oklahoma City,
Oklahoma, and the Borrower hereby irrevocably waives any objection to such
jurisdiction and venue.
5. This Amendment may be executed in as many counterparts as are
deemed necessary or convenient, and it shall not be necessary for the signature
of more than any one party to appear on any single counterpart. Each
counterpart shall be deemed an original, but all shall be construed together as
one and the same instrument. The failure of any party to sign shall not affect
or limit the liability of any party executing any such counterpart.
BORROWER:
CMI CORPORATION,
an Oklahoma corporation
______________________________________
By: Jim D. Holland
Title: Senior Vice President
8
<PAGE>
[signatures continued on following page]
LENDER:
BANK OF OKLAHOMA, N.A.
______________________________________
By: John D. Higginbotham
Title: Vice President
9
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st day of
October, 1998, by and between CMI CORPORATION, an Oklahoma corporation (the
"Corporation"), and TOM ENGELSMAN (the "Employee").
WITNESSETH:
WHEREAS, the Corporation desires to employ the Employee upon the terms and
conditions herein set forth; and
WHEREAS, the Employee desires to be so employed upon such terms and
conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
----------
the Corporation hereby employs the Employee as the Chief Executive Officer of
the Corporation, and the Employee hereby accepts and agrees to such employment.
2. Term of Employment. The term of this Agreement shall commence on
------------------
October 1, 1998 (the "Commencement Date") and shall continue until April 1,
2004, unless terminated as provided in Section 9. The expiration date of the
term of this Agreement shall be automatically extended until September 30, 2008
unless, on or before January 1, 2004, either party gives notice to the other
that it elects not to extend the term of this Agreement beyond April 1, 2004.
Notice given by the Corporation to the Employee of its election not to extend
the term of this Agreement beyond April 1, 2004 shall not constitute or be
deemed to constitute a termination of this Agreement by the Corporation.
3. Duties and Responsibilities.
---------------------------
3.1 As Chief Executive Officer. Subject to the authority of the
--------------------------
Board of Directors of the Corporation, as Chief Executive Officer, the Employee
shall have executive and active overall responsibility, control and supervision
of all of the business and operations of the Corporation. The Employee shall
directly report to the Board of Directors of the Corporation and shall perform
such duties as are commensurate with his position as Chief Executive Officer.
The Employee's place of employment shall be in the Oklahoma City, Oklahoma
metropolitan area, subject to travel necessary for the performance of his duties
hereunder. The Corporation shall provide to the Employee adequate office
<PAGE>
facilities, staff and reporting relationships commensurate with his position to
enable him to perform his duties hereunder.
3.2 Extent of Services. The Employee shall devote his full
------------------
professional time, attention, knowledge and skill to the interests of the
Corporation. Notwithstanding the preceding sentence, the Employee shall not be
prohibited from engaging in other activities, whether for family, recreation,
investment, civic, charity, or other purposes, so long as those activities do
not unduly interfere with the ability of the Employee to carry out his duties
and responsibilities hereunder and so long as they are not inconsistent or
competitive with the interests of the Corporation.
3.3 Duty of Loyalty. The Employee recognizes that he owes a duty of
---------------
loyalty and good faith to the Corporation (including each subsidiary thereof)
and agrees that during the term of this Agreement he will not take advantage of
any corporate opportunity of the Corporation, engage in self-dealing with the
Corporation, sell or disclose any confidential or proprietary information of the
Corporation, have or obtain any material economic interest in any entity or
arrangement which is competitive with the business of the Corporation or engage
in any activities which are competitive with the business of the Corporation,
without first disclosing all facts and details relating thereto to the Board of
Directors and obtaining the approval of the Board of Directors.
4. Compensation.
------------
4.1 Base Salary. The Corporation shall pay to the Employee for the
-----------
services to be rendered by the Employee hereunder a base salary of $300,000 per
year (the "Base Salary"). The Base Salary shall be payable in equal
installments (subject to withholding tax) in accordance with the Corporation's
regular payroll schedule.
4.2 Incentive Compensation. Within ninety (90) days after the end of
----------------------
each fiscal year or partial fiscal year (other than 1998 and 2004) during which
the Employee is employed hereunder, the Employee shall be entitled to receive an
annual bonus equal to seventy-five percent (75%) of his Base Salary in the event
that the Corporation's basic earnings per share ("EPS"), as determined in
accordance with generally accepted accounting principles, for the applicable
fiscal year equal or exceed the target level (the "Targeted EPS Level") set
forth in Exhibit "A" attached hereto. The Employee shall be entitled to receive
a prorated bonus for each partial fiscal year (other than 1998 and 2004) that
the Employee is employed hereunder; provided, however, that if this Agreement is
terminated pursuant to either Section 9.2 or Section 9.3 hereof, the Employee
shall not be entitled to receive a prorated bonus for the fiscal year in which
such
-2-
<PAGE>
termination occurs. In the event that the expiration date of this
Agreement is extended until September 30, 2008 in accordance with the terms of
Section 2 hereof, the Board of Directors of the Corporation and the Employee
shall negotiate in good faith Targeted EPS Levels or other performance criteria
for fiscal years 2004, 2005, 2006, 2007 and 2008.
5. Benefits.
--------
5.1 Executive Benefits Generally. The Employee shall be entitled to
----------------------------
participate in and receive benefits from any insurance, medical, dental, health
and accident, hospitalization, disability, defined benefit, defined
contribution, or other employee benefit plan of the Corporation which may be in
effect at any time during the term of this Agreement and which is generally
available to executives of the Corporation; provided, however, that, except as
set forth in Section 4.2 hereof or unless otherwise agreed to by the Board of
Directors of the Corporation, the Employee shall not be entitled to participate
in any stock purchase programs or programs for incentive and/or bonus
compensation established from time to time for executives of the Corporation.
During the term of this Agreement, the Corporation shall maintain term life
insurance on the life of the Employee in an amount not less than the greater of
(i) three (3) times the Employee's then current Base Salary, or (ii) $1,000,000.
The Employee shall be entitled to designate the beneficiary or beneficiaries of
such insurance coverage.
5.2 Reimbursement of Expenses. The Corporation shall reimburse the
-------------------------
Employee for all reasonable and ordinary expenses incurred by him on behalf of
the Corporation in the course of his duties hereunder upon the presentation by
the Employee of appropriate documentation substantiating the amount of and
purpose for which such expenses were incurred.
5.3 Vacations. The Employee shall be entitled to four (4) weeks of
---------
paid vacation in each calendar year (to be prorated for any calendar year during
which the Employee is employed by the Corporation for less than the full
calendar year), which vacation shall be taken at times consistent with the
performance by the Employee of his obligations hereunder.
6. Stock Option.
------------
6.1 General. As of the Commencement Date, the Corporation shall
-------
grant to the Employee options (the "Options") to purchase a total of 500,000
shares of the Corporation's Voting Class A Common Stock, par value $.10, at a
price of $6.25 per share. Provided that the stockholders of the Corporation
approve all amendments to the Corporation's 1992 Incentive Stock Option Plan
(the "Plan") necessary to grant the Options under the Plan, the Options will be
granted under the Plan. The Options will be evidenced by Grants of Option in
substantially the forms attached
-3-
<PAGE>
hereto as Exhibits "B", "C" and "D". In the event of any inconsistency between
this Agreement and any such Grant of Option executed by the Corporation in favor
of the Employee, the Grant of Option shall control.
6.2 Amendment of Form S-8. On or before March 31, 2000, the
---------------------
Corporation will file with the Securities and Exchange Commission a post-
effective amendment to its Registration Statement on Form S-8 (Registration No.
33-66274) permitting reoffers and resales of control securities (as defined in
Instruction C to Form S-8) acquired by the Employee under the Plan to be made by
the Employee. The Corporation will use its commercially reasonable efforts to
keep the Registration Statement, as so amended, effective until the earlier of
(i) the Employee's disposition of all such control securities, and (ii) December
31, 2008. The Employee agrees that he will offer and sell such control
securities in compliance with all applicable state and federal securities laws
and such procedures as may reasonably be established from time to time by the
Corporation. The Employee shall indemnify and hold the Corporation harmless
against any and all losses, claims, damages or liabilities to which the
Corporation may become subject under the Securities Act of 1933 or otherwise as
a result of the Employee's breach of the agreement set forth in the preceding
sentence.
7. Negative Covenants.
------------------
7.1 Covenant Not to Compete. The Employee hereby agrees that, during
-----------------------
his employment by the Corporation and for a period of two (2) years after the
date of termination of such employment, the Employee shall not, directly or
indirectly, as an employee, principal, owner, consultant, officer, director,
agent or otherwise, compete anywhere in the world with the Business of the
Corporation. As used in this Agreement, the term "Business" means (i) the
manufacture of asphalt plants; asphalt pavement recycling systems; concrete
pavers; machines for concrete placing and spreading, finishing, texturing and
curing; pavement profiling machines; pavement reclaimers; automated fine
grading, materials spreading and placing equipment; soil stabilizers; concrete
plants; landfill compactors; soil compactors; materials grinders; soil
remediation equipment; electronic scales for construction, material processing,
mining, agricultural and industrial applications; and heavy-duty trailers for
equipment and material hauling, (ii) any other business engaged in by the
Corporation on the date of termination of the Employee's employment and (iii)
any business that, as of the date of such termination, the Employee was aware
that the Corporation was planning to engage. As used in this Agreement, the
term "compete" means to (x) attempt in any fashion to solicit business similar
in nature to the Business from any of the customers of the Corporation existing
as of the date of termination of the Employee's employment, or (y) invest in,
own, be employed by, manage, operate, control or render services or advice
relating to the Business to any individual, firm, company or
-4-
<PAGE>
organization which engages in the Business (hereinafter collectively referred to
as "Competitor"), in whole or in part. This covenant not to compete shall apply
and be binding upon the Employee regardless of the reason for the termination of
the employment of the Employee, whether by discharge, with or without cause, by
voluntary resignation, or by expiration of this Agreement, or by any other
manner whatsoever; provided, however, that if the employment of the Employee is
terminated by the Corporation without cause, then this covenant not to compete
shall only apply for that period of time during which the Corporation is
obligated to pay the Employee's Base Salary in accordance with the provisions of
Section 9.1(a) hereof.
7.2 Nonsolicitation of Other Employees. The Employee hereby agrees
----------------------------------
that, for two (2) years after the termination of his employment by the
Corporation, he will in no way attempt to attract, induce or solicit any
employee of the Corporation to leave his or her employment or to accept
employment with or provide services or advice to any Competitor.
7.3 Acknowledgment of Irreparable Harm. The Employee understands and
----------------------------------
acknowledges that his violation of any of the covenants contained in this
Section 7 would cause irreparable harm to the Corporation and, thus, the
Corporation shall be entitled to an injunction by any court of competent
jurisdiction enjoining and restraining the Employee from any employment, service
or other act prohibited by this Section 7. The Employee and the Corporation
recognize and acknowledge that the scope, area and time limitations contained in
this Agreement are reasonable. In addition, the Employee and the Corporation
recognize and acknowledge that the scope, area and time limitations are properly
required for the protection of the business interests of the Corporation due to
the Employee's status and reputation in the industry and the knowledge to be
acquired by the Employee through his association with the Corporation. The
parties agree that nothing in this Agreement shall be construed as prohibiting
the Corporation from pursuing any other remedies available to it for any breach
or threatened breach of this Section 7 including, without limitation, the
recovery of damages from the Employee or any other person or entity acting in
concert with the Employee. The Employee further agrees that, in the event he
breaches any of the covenants contained in this Section 7, the period of time
during which the Employee shall be restricted from the activities described
herein shall be extended for a period of time equal to any period(s) of time
during which the Employee engages in any conduct that violates this Section 7,
the purpose of this provision being to secure for the benefit of the Corporation
the entire period of time being bargained for by the Corporation for the
restrictions upon the Employee's activities. In the event that any part of this
Section 7 should for any reason be determined by a court of competent
jurisdiction to be unenforceable, but would be valid and enforceable if any part
hereof were deleted or otherwise modified, then the covenants and
-5-
<PAGE>
obligations of the Employee as set forth herein shall apply with such
modification as shall be absolutely necessary to make it enforceable.
7.4 Subsidiaries. For purposes of this Section 7, references to "the
------------
Corporation" shall include any and all subsidiaries of the Corporation.
8. Confidential Information. The Employee shall not at any time during
------------------------
the term of this Agreement or after the termination hereof directly or
indirectly divulge, furnish, use, publish or make accessible to any person or
entity any Confidential Information (as hereinafter defined). All records of
Confidential Information prepared by the Employee or which come into the
Employee's possession during the term of this Agreement are and shall remain the
property of the Corporation, and upon termination of the Employee's employment
by the Corporation all such records and copies thereof shall be either left with
or returned to the Corporation. The term "Confidential Information" shall mean
information disclosed to the Employee or known, learned, created or observed by
him as a consequence of or through his employment by the Corporation, not
generally known in the relevant trade or industry, about the Corporation's
business activities, products, customers, suppliers, services, manufacturing
processes and procedures including, but not limited to, information concerning
costs, product performance, customer requirements, advertising, sales promotion,
publicity, sales data, research, finances, accounting, manufacturing methods and
procedures, trade secrets, business plans, client or supplier lists and records,
potential client or supplier lists, and client or supplier billing.
Notwithstanding the foregoing, "Confidential Information" shall not include
information publicly disclosed by the Corporation or known by the Employee other
than because of his employment with the Corporation.
9. Termination of Employment.
-------------------------
9.1 Termination By the Corporation Without Cause.
--------------------------------------------
(a) The Corporation may terminate this Agreement at any time, without
cause and for any reason, upon not less than sixty (60) days notice to the
Employee setting forth the date of termination. In this event, the Employee
shall be entitled to continue to receive his Base Salary (in the manner and
as described in Section 4.1) for a period of eighteen (18) months following
the early termination date. Additionally, if the Corporation terminates
this Agreement without cause within two (2) years after the Commencement
Date, the Corporation shall reimburse the Employee for all reasonable
relocation and moving expenses to return to the Chicago area.
-6-
<PAGE>
(b) This Agreement shall terminate immediately upon the Employee's
death. In this event, the Employee shall not be entitled to earn any
further compensation or benefits under this Agreement. This provision is
not intended to and shall not interfere with any pension or deferred
compensation to which the Employee or his heirs or beneficiaries is
entitled under the Corporation's employee benefit plans.
9.2 By the Corporation with Cause. The Corporation may terminate
-----------------------------
this Agreement at any time for cause, upon notice to the Employee setting forth
the early termination date. For purposes of this Section 9.2, the term "cause"
shall mean (a) willful failure by the Employee to perform any duty reasonably
requested to be performed by the Corporation's Board of Directors for any reason
other than illness or other emergency, (b) the breach by Employee of any term or
provision of this Agreement, which breach is not cured within thirty (30) days
after notice of such breach to the Employee by the Corporation setting forth the
facts upon which the breach is based, (c) conviction of a felony, (d) fraud by
the Employee with respect to the business or affairs of the Corporation, or (e)
alcohol or drug abuse by the Employee. In such event, the Employee shall not
be entitled to earn any further compensation or benefits under this Agreement.
9.3 By Employee Without Cause. The Employee may terminate this
-------------------------
Agreement at any time, without cause and for any reason, upon not less than
sixty (60) days notice to the Corporation setting forth the early termination
date. In such event, the Employee shall not be entitled to earn any further
compensation or benefits under this Agreement.
9.4 By Employee With Cause. The Employee may terminate this
----------------------
Agreement at any time for cause, upon notice to the Corporation setting forth
the early termination date. For purposes of this Section 9.4, the term "cause"
shall mean a material breach by the Corporation of any material term or
provision of this Agreement, which breach is not cured within thirty (30) days
after notice of such breach to the Corporation by the Employee setting forth the
facts upon which the breach is based. In such event, the Employee shall be
entitled to receive his Base Salary (in the manner and as described in Section
4.1) for a period of eighteen (18) months following the early termination date.
9.5 Compensation and Benefits Payable or Accrued as of Termination
--------------------------------------------------------------
Date. In the event this Agreement is terminated, regardless of the reason for
- ----
termination, the Employee shall be entitled to receive all compensation,
reimbursements and benefits hereunder which were either payable to the Employee,
or which had accrued to the benefit of the Employee, as of the date of
termination. Any such compensation, reimbursements or benefits shall be paid or
provided to the Employee no less quickly than they
-7-
<PAGE>
would have been paid or provided to the Employee had the termination date not
occurred.
10. General.
-------
10.1 Assignment. This Agreement shall not be assignable.
----------
10.2 Notices. All notices under this Agreement shall be in writing
-------
and shall be deemed to have been given on the second business day after mailed
by registered or certified mail, addressed to the address below of the party to
which notice is given, or to such changed address as such party may have fixed
by notice:
To the Corporation: CMI Corporation
------------------
P. O. Box 1985
Oklahoma City, Oklahoma 73101
ATTN: Chairman of the Board of Directors
With a copy to: Hartzog Conger & Cason
--------------
201 Robert S. Kerr Ave.
1600 Bank of Oklahoma Plaza
Oklahoma City, Oklahoma 73102
Attn: John D. Robertson
To the Employee: Tom Engelsman
---------------
c/o Vicki Lafer Abrahamson
Abrahamson Vorachek & Mikva
120 N. LaSalle St.
Chicago, IL 60602
10.3 Entire Agreement. This instrument and its attachments contain
----------------
and constitute the entire agreement between and among the parties herein and
supersedes all prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
10.4 Applicable Law. This Agreement shall be construed, enforced and
--------------
governed in accordance with the laws of the State of Oklahoma.
10.5 Invalidity. If any provision contained in this Agreement shall
----------
for any reason be held to be invalid, illegal, void or unenforceable in any
respect, such provision shall be deemed modified so as to constitute a provision
conforming as nearly as possible to such invalid, illegal, void or unenforceable
provision while still remaining valid and enforceable, and the remaining terms
or provisions contained herein shall not be affected thereby.
-8-
<PAGE>
10.6 Dispute Resolution. Any dispute arising in any way out of this
------------------
Agreement and which cannot be resolved by good faith negotiations between the
parties within sixty (60) days after either party shall have notified the other
party in writing of its desire to arbitrate the dispute shall be submitted to
and settled through binding arbitration in accordance with the rules of the
American Arbitration Association as from time to time in effect. The arbitration
proceedings shall be conducted by a sole arbitrator mutually agreed upon by the
parties, who shall be an attorney with not less than ten (10) years experience
in commercial law. In the event the parties are unable to mutually agree upon
an arbitrator, the American Arbitration Association shall appoint a sole
arbitrator who shall be an attorney with not less than ten (10) years experience
in commercial law. All disputes or claims of the parties subject to arbitration
shall be consolidated into a single arbitration proceeding. The arbitration
proceedings shall be conducted in Oklahoma City, Oklahoma. The award or
determination of the arbitrator shall be final and binding upon all parties and
shall be subject to enforcement in any court of competent jurisdiction. The
arbitrator shall have the authority to award costs and expenses of arbitration
to either party as the arbitrator sees fit. The parties acknowledge and agree
that nothing in this Section 10.6 shall be construed as prohibiting the
Corporation from pursuing in any court of competent jurisdiction any remedies
available to it for any breach or threatened breach of any of the covenants of
the Employee contained in Section 7 hereof.
10.7 Binding Effect. This Agreement shall be binding upon, inure to
--------------
the benefit of and be enforceable by the parties hereto and their respective
heirs, executors, personal representatives and successors.
10.8 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.9 Relocation Expenses. The Corporation will reimburse the Employee
-------------------
for all expenses reasonably incurred by the Employee in connection with his
relocation to Oklahoma City, Oklahoma. The Company will also pay the legal fees
and expenses (up to $11,000) incurred by the Employee in connection with the
negotiation and execution of this Agreement.
10.10 Survival. The provisions of Sections 7, 8 and 9 shall survive
--------
the termination of this Agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CORPORATION: CMI CORPORATION
By: /s/ Jim D. Holland
___________________________
Jim D. Holland, Senior Vice
President and Chief
Financial Officer
EMPLOYEE: /s/ Tom Engelsman
______________________________
Tom Engelsman
-10-
<PAGE>
EXHIBIT 10.2
AGREEMENT
---------
This Agreement (the "Agreement") is made and entered into this 1st day of
November, 1998, by and between CMI Corporation, an Oklahoma corporation (the
"Corporation"), and Jim D. Holland (the "Employee").
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Term. This Agreement shall commence on November 1, 1998 and shall
----
continue for a period of two years from such date.
2. Termination of Employment Without Cause. In the event that, during
---------------------------------------
the term of this Agreement, the Corporation terminates the employment of the
Employee without cause, the Employee shall be entitled to continue to receive
his base salary then in effect for a period of one (1) year following the
termination of his employment. Payments of such base salary shall be made in
accordance with the Corporation's regular payroll schedule. The parties
acknowledge and agree that, as of the date of this Agreement, the Employee's
base salary is $160,000. The parties further acknowledge and agree that, during
the term of this Agreement, the Employee's base salary may not be decreased
below $160,000 without the consent of the Employee.
3. Definition of Cause. For purposes of this Agreement, the term "cause"
-------------------
shall mean:
(a) willful failure to perform any duty reasonably requested to be
performed by the Corporation's Board of Directors or Chief Executive
Officer for any reason other than illness or other emergency;
(b) conviction of a felony;
(c) any drug use other than as prescribed by a physician; or
(d) fraud with respect to the business or affairs of the Corporation.
4. Entire Agreement. This instrument contains and constitutes the entire
----------------
agreement between the parties herein and supersedes all prior understandings,
arrangements and agreements, between the parties relating to the subject matter
hereof.
5. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Oklahoma.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CORPORATION: CMI CORPORATION
By: /s/ Tom Engelsman
---------------------------------------
Name: Tom Engelsman
---------------------------------
Title: Chief Executive Officer
--------------------------------
EMPLOYEE: /s/ Jim D. Holland
---------------------------------------
Jim D. Holland
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CMI Corporation:
We consent to incorporation by reference in the registration statement on Form
S-8 (No. 33-66274) of CMI Corporation of our report dated February 22, 1999,
relating to the consolidated balance sheets of CMI Corporation and subsidiaries
as of December 31, 1998 and 1997, and the related consolidated statements of
earnings, changes in common stock and other capital, and cash flows for each of
the years in the three-year period ended December 31, 1998, which report appears
in the December 31, 1998, annual report on Form 10-K of CMI Corporation.
KPMG LLP
Oklahoma City, Oklahoma
March 19, 1999
54
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 13,559
<SECURITIES> 0
<RECEIVABLES> 28,013
<ALLOWANCES> 0
<INVENTORY> 102,891
<CURRENT-ASSETS> 152,586
<PP&E> 69,239
<DEPRECIATION> 39,692
<TOTAL-ASSETS> 189,711
<CURRENT-LIABILITIES> 36,436
<BONDS> 77,049
0
0
<COMMON> 2,155
<OTHER-SE> 74,071
<TOTAL-LIABILITY-AND-EQUITY> 189,711
<SALES> 205,686
<TOTAL-REVENUES> 205,686
<CGS> 152,116
<TOTAL-COSTS> 191,796
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 9,859
<INCOME-TAX> 3,642
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