<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, 1999
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 April 7, 2000 was $51,297,524.
The number of shares of the registrant outstanding on April 7, 2000 was
21,690,886 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 2000 Annual Meeting of Shareholders Part III
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
TABLE OF CONTENTS
PART I PAGE
Item 1. Business................................................ 3
Item 2. Properties.............................................. 9
Item 3. Legal Proceedings....................................... 10
Item 4. Submission of Matters to a Vote of Security Holders..... 11
PART II
Item 5. Market for the Registrant's Common Stock and
Related Shareholder Matters............................. 11
Item 6. Selected Financial Data................................. 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 13
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk............................................. 18
Item 8. Financial Statements and Supplementary Data............. 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 44
PART III
Items 10.-13 All Items are Incorporated by Reference to the Company's
Proxy Statement for the 2000 Annual Meeting of
Shareholders............................................ 44
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules,
and Reports on Form 8-K................................. 44
SIGNATURES..................................................... 46
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
PART I
Item 1. Business
--------
(a) General Development of Business
-------------------------------
Unless the context requires otherwise, as used herein, the term "Company" and
"CMI" means CMI Corporation and its consolidated subsidiaries. Information
regarding 1999 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 12 of
the Notes to Consolidated Financial Statements (Item 8).
(c) Narrative Description of Business
---------------------------------
CMI was organized in 1926. Since 1964, the Company has manufactured and
marketed a wide variety of equipment for the road building 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; and bridge and canal
paving equipment. The Company's materials processing equipment includes a wide
variety of paving material 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 materials 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 1999, the Company completed the Swisher Training Center, a 17,500 square
foot ultra-modern facility to be used for customer training. The number one
problem identified in surveys of our customer base has been the lack of
qualified, trained machinery operators and mechanics for them to hire. The
Swisher Training Center provides hands-on training in the operation and
maintenance of all equipment manufactured by the Company.
3
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
Also during 1999, the Company opened a prototype regional aftermarket center in
Oklahoma City. The 87,000 square foot facility combines the Company's parts,
machine rebuild and used equipment sales under a single operation. Using the
Oklahoma City facility as a model, the Company plans to open similar facilities
to serve key market geographic areas.
During the fourth quarter of 1999, the Company expanded its product offerings
with the acquisition of Drion Constructie B. V. B. A., Ogplabbeek, Belgium, a
manufacturer of a high-tech line of midrange concrete slipform pavers. These
newly designed pavers feature patented technology that permits fast adjustment
to paving width, reducing the field requirement for such changes from hours, to
just minutes. This capability brings significant cost savings and is of
greatest importance on smaller paving jobs like city streets, highway lane and
ramp additions and parking lots. These are market areas where heretofore CMI
has not played a leadership role. The Company is currently building these new
pavers in Europe. During 2000 the Company will also begin manufacturing the
Drion pavers in the United States.
Also during the fourth quarter 1999 the Company announced an agreement to
acquire the R. M. Barton Co., Inc. of Oklahoma City, Oklahoma. The Barton
acquisition was completed during the first quarter of 2000. Barton brings to
CMI, a line of small utility sized pavement profilers and pavement and base
reclaiming machines. The Barton machines are targeted to government and support
equipment markets that have not been served by CMI in recent years. Barton also
brings an important parts business to CMI specializing in equipping profiling
and reclaiming contractors with replacement drums. Barton replacement drums fit
well with the Company's goal to build a stronger aftermarket business.
Additional information regarding the Company's operating segments, including the
products produced by its segments, is contained in note 12 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 Equity Act for the 21/st/ Century) began October
1, 1998 and extends through September 30, 2003. TEA-21 provides $175 billion,
of its total $217 billion funding, for highway construction and rehabilitation
for the five-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 our 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.
4
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 that 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.
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. 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.
5
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 and PR-525-7 half lane width models; the PR-
800-7/12, half to full lane width models; the PR-1050 and PR-1200, full lane
width machines; and new utility rubber tire models from Barton. 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 for
recycling pavements; and have dramatically increased the productivity of
traditional stabilization and recycling methods. Current models include the RS-
425, RS-450, RS-500B, RS-650, and RS-800. New utility sized models from Barton
are also being added to the reclaimer/stabilizer line.
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 also offers
three green-waste and heavy materials grinding models that are sold to the
timber, landscaping, construction, 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, 1999
================================================================================
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.
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.
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. During March 1999, the Company exhibited at ConExpo in Las
Vegas, Nevada. The Company's display was the largest single display in the
show. Attendance was excellent and the Company's products were well received.
ConExpo is held every three years and is sponsored by the Construction Industry
Manufacturers Association, of which the Company is an active member. Backlog
for the Company's products was $77 million at December 31, 1999 compared to $68
million at December 31, 1998.
7
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
Sources and Availability of Raw Materials. The principal component parts used
- -----------------------------------------
in the Company's manufacturing of its road building and heavy construction
equipment that are supplied by others include gas and diesel engines,
hydraulic cylinders, tires, bearings, and raw steel. The Company has not
experienced any delays in deliveries of component parts 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 patents 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.
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. Generally, the Company recognizes
- -------------------------------------
revenue when sales transactions are completed, which is when products are
shipped or title has transferred to the customer. The Company is contemplating
changing its business practices and contracts to allow percentage-of-completion
accounting with respect to recognizing revenue for its asphalt and large
concrete plants in the first half of 2000. 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 is not
- ----------------------------------------------------
dependent on any single customer or group of customers.
Competitive Conditions. The Company is one of the largest producers of road
- ----------------------
building and heavy 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.
8
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 1,891 employees as of December 31,
- ----------
1999.
(d) Financial Information About Geographic Areas
--------------------------------------------
Information regarding revenues from external customers in different geographical
areas is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
United States $197,482 177,402 132,865
North and Central America, other than the
United States 6,300 15,322 8,043
South America 2,082 962 6,764
Asia 7,102 8,173 3,954
Australia 149 1,740 1,453
Europe 1,009 2,055 928
Other regions 401 32 7
-------- ------- -------
Total net revenues $214,525 205,686 154,014
======== ======= =======
</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 12 of the
Notes to Consolidated Financial Statements (Item 8).
Item 2. Properties
----------
The Company has total plant, office, and warehouse areas of approximately
939,000 square feet, which are located in four states.
9
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
The largest manufacturing plant (utilized by the Company's Oklahoma City
operating segment), including the corporate headquarters and training facility,
has approximately 635,000 square feet and is located in Oklahoma City, Oklahoma.
The Company's aftermarket division leases approximately 87,000 square feet of
warehouse and office space in Oklahoma City. 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 and office space
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 March 2000 this case was settled. The effects of the
settlement are reflected in the Company's financial statements at December 31,
1999.
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
Cedarapids' patent. Cedarapids subsequently filed a counterclaim against the
Company and is seeking damages in excess of $43 million, alleging that the
Company's patented Triple Drum Mixer product design infringes on a patent held
by Cedarapids. 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. In July 1999, the court granted Cedarapids' motion for partial
summary judgement, and ruled that the Company's Triple Drum Mixer product design
literally infringes certain claims of the Cedarapids' patent. The court's
judgement is limited to the issue of infringement and not the issue of validity.
The Company believes that Cedarapids' patent is invalid, and thus, that the
Triple Drum Mixer patent is valid. The Company has, at the court's invitation,
filed a motion for summary judgement on the issue of validity. The court has
not ruled on this motion. In the opinion of counsel, Cedarapids' claims are
highly inflated, and may not be recoverable under various defenses. The Company
anticipates this lawsuit going to trial in April 2000.
10
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
In September 1998, Cedarapids filed a separate 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
damages in excess of $10 million. The Company intends to vigorously defend both
lawsuits involving Cedarapids. No reserve has been established for these cases
as of December 31, 1999.
There are other claims and pending legal proceedings that generally involve
product liability and employment issues. These cases are, in the opinion of
management, ordinary 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 other proceedings will
not have a material 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
---------------------------------------------------
No matters were submitted to a vote by the security holders during the fourth
quarter of 1999.
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 April 7, 2000, was $4.44. The number of holders of record of the
Company's Class A Common Stock and Common Stock at March 31, 2000 was 1,434 and
32, respectively. The table below presents the high and low market prices for
the Company's Class A Common Stock for each three month period in 1999 and 1998.
The following information was obtained from the monthly market statistics report
prepared by the New York Stock Exchange.
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
----- ---- ----- ----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Common Stock:
High $7.88 9.69 12.38 8.69 $7.13 10.00 9.31 9.38
Low 6.25 6.63 6.56 6.25 4.56 6.25 5.75 5.31
</TABLE>
Dividend Information:
- --------------------
From December 1996 until September 1999, the Company paid a quarterly dividend
of one cent per common share. On November 9, 1999, the Company announced a 50%
increase in its 1999 fourth quarter cash dividend from 1 cent to 1.5 cents per
share. This dividend was paid on December 1, 1999. On November 9, 1999, the
Company also announced its intention to begin paying dividends on a semi-annual,
rather than quarterly, basis.
11
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
Recent Sales of Unregistered Securities:
- ----------------------------------------
On October 29, 1999, the Company issued 57,143 shares of Class A Common Stock to
Nelly Drion as part of the consideration paid for the capital stock of Drion
Constructie B. V. B. A. This sale was exempt from registration under Section 4
(2) of the Securities Act of 1933, no public offering being involved.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7) and Notes to Consolidated Financial Statements (Item 8).
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>
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues $214,525 205,686 154,014 138,788 130,578
Operating earnings 9,576 13,890 6,746 10,987 11,743
Net earnings (1) 2,489 6,217 3,165 5,461 17,501
Earnings per common share -
diluted (1) .11 .29 .15 .25 .82
Total assets (2) 215,475 189,711 144,428 113,454 109,219
Long-term debt and redeemable
preferred stock (2) 94,497 77,049 49,274 34,103 27,628
Cash dividends per common share $ .045 .04 .04 .01 -
</TABLE>
(1) Included in 1995 net earnings are deferred tax benefits of approximately
$8.8 million 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.
12
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 29, 1999 and February 3, 2000 increasing the line
from $60 million to $100 million. As of December 31, 1999, the Company had
utilized $65 million of the unsecured revolving line of credit. As of March 31,
2000, the Company had utilized $82 million of the unsecured revolving line of
credit. The revolving line of credit matures September 30, 2001. Other long-term
debts have maturity dates through September 2010 and are expected to be paid or
refinanced when due. For the year ended December 31, 1999, the Company was not
in compliance with one debt covenant related to the $30 million unsecured senior
notes and one debt covenant related to its revolving line of credit. Both
covenants are determined quarterly based on the trailing four quarters ending on
each determination date. The Company has obtained waivers from the lenders as
of December 31, 1999 waiving noncompliance through March 31, 2000 and expects to
meet the financial covenants at future determination dates.
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, 1999 and 1998, the Company had no
outstanding obligations under this agreement.
The debt-to-total-capital percentage increased to 55.9% at December 31, 1999
compared to 50.4% at December 31, 1998. This increase is primarily the result of
funding the increase in inventories at December 31, 1999. The Company's
financing agreements should provide the Company with sufficient working capital
to finance its operations, and to repay the portion of its borrowings that
become due in 2000.
Other Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------------
The Company's current ratio at December 31, 1999 was 4.06:1 compared to 4.14:1
at December 31, 1998. Working capital increased to approximately $131.3 million
at December 31, 1999 from $114.5 million at December 31, 1998. The increase in
working capital is primarily the result of increased accounts receivable of $3.2
million and increased inventories of approximately $19.0 million, offset by an
increase in current liabilities of approximately $6.5 million. The increase in
inventories from December 31, 1998 is partially the result of approximately
$14.3 million in sales orders which could not be
13
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
recognized as revenue at December 31, 1999 because the equipment had not left
the Company's premises, was not complete and ready-to-ship, or other revenue
recognition criteria had not been met. The Company expects to record these
orders as sales in the first half of 2000 with the costs of the equipment sold
reducing inventories.
Cash used in operating activities was $12.0 million for the year ended December
31, 1999, compared to cash used in operating activities of $7.8 million for the
year ended December 31, 1998. This significant increase in cash used in
operating activities is primarily attributed to the increased investment in
inventories. Financing activities for the year ended December 31, 1999 provided
$20.9 million, which included $22.0 million of net borrowings from the Company's
revolving line of credit. These additional borrowings were used primarily to
fund the increase in inventories.
Capital expenditures and acquisitions for 1999 were $7.1 million, a decrease of
$6.2 million from the prior year. Capital expenditures consisted primarily of
computer software and hardware, construction of a new training facility in
Oklahoma City and equipment for use in manufacturing facilities. Capital
expenditures for 2000 are budgeted at $5.6 million. Capital expenditures are
financed using internally generated funds and debt.
On November 9, 1999 the Company announced a 50 percent increase in its fourth
quarter cash dividend from 1 cent to 1.5 cents per share. The dividend was paid
on December 1, 1999. The Company has paid a quarterly dividend each quarter
since December 1996. The Company's Board of Director's intends to begin paying
regular semi-annual dividends in 2000.
Results of Operations
- ---------------------
Years ended December 31, 1999 and 1998. Revenues increased 4.3% to $214.5
million for the year ended December 31, 1999 from $205.7 million for the year
ended December 31, 1998. The revenue increase for the year ended December 31,
1999 was primarily generated through asphalt plants and concrete paving and
trimming products. The reclaimers/stabilizers and soil remediation lines
increased, but were offset by decreases in the compactor and grinder lines.
Revenues were also negatively impacted by the strike which occurred at the
Company's Load King Division in the first half of 1999.
The Company's international sales were $17.0 million in 1999 compared to $28.3
million in 1998, resulting in a decrease of approximately 40% from 1998. The
Company's domestic sales were $197.5 million in 1999 and $177.4 million in 1998,
an increase of approximately 11%. Excluding the impact of the decrease in
Canadian sales, foreign revenues declined 9.4%. The road building and
reconstruction program declined significantly in Canada due to an election year
spending freeze and a generally depressed economy across the country.
International revenues as a percentage of the Company's total revenues were 8.0%
in 1999 and 13.8% in 1998.
The Company is contemplating changing its business practices and contracts to
allow percentage-of-completion accounting with respect to recognizing revenue
for its asphalt and large concrete plants in the first half of 2000.
14
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
Gross margin, as a percentage of net revenues, was 25.8% for the year ended
December 31, 1999, down slightly from 26.0% for the year ended December 31,
1998.
Marketing and administrative expenses increased $6.9 million in 1999. As a
percentage of net revenues, marketing and administrative expenses were 17.4% in
1999 compared to 14.8% in 1998. The primary factors contributing to the
increase in marketing and administrative expenses were: (1) costs of
approximately $350,000 incurred in connection with the Company's restructuring
of its Oklahoma City manufacturing operations, (2) costs of $785,000 related to
the Company's participation in the trienniel CONEXPO-CONAGG tradeshow in Las
Vegas, (3) outside consulting fees of $794,000 to evaluate and improve the
Company's manufacturing processes, production efficiencies, and sales and
marketing operations, with the goal of overhauling the Company's overall
business structure, (4) $358,000 for executive moving and relocation costs, (5)
settlement of two long-standing litigation matters, (6) the termination of a
potential acquisition for which the Company had incurred due diligence costs of
approximately $368,000, and (7) overall higher business volume.
Engineering and product development expense increased $477,000 in 1999. As a
percentage of net revenues, engineering and product development expenses were
3.9% percent in 1999 compared to 3.8% in 1998.
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.
Interest expense increased $1.6 million from the prior year. The Company's
effective interest rate was approximately 7.29% in 1999 compared to
approximately 7.87% in 1998. The increase in interest expense is due to
additional borrowings on the Company's revolving line of credit primarily for
capital expenditures and increased working capital requirements, primarily
inventories, for the year ended December 31, 1999.
Income tax expense was $1.5 million in 1999 compared to $3.6 million in 1998.
The Company's effective tax rates in 1999 and 1998 were 37.8% and 36.9%,
respectively. Excluding losses of the Company's foreign subsidiaries, the
Company's effective tax rate was 36.5% in both 1999 and 1998. The effective
rate of 36.5% differs from the statutory federal rate of 35% primarily due to
state income taxes.
Net earnings were $2.5 million in 1999 compared to $6.2 million in 1998, or 11
cents per diluted share for 1999 compared to 29 cents per diluted share for
1998. Net earnings were negatively impacted due to $14.3 million in asphalt
plant orders at December 31, 1999 that could not be recognized as revenues in
1999 because the equipment had not left the Company's premises, was not complete
and ready-to-ship, or other revenue recognition criteria had not been met. The
Company expects to record these orders as sales in the first half of 2000.
15
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 an 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 was 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 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.
Engineering and product development expense increased $1.2 million in 1998. The
Company's increased expenses were the result of newly acquired operations and
increased product development. During 1998, the Company introduced the RS-450, a
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. 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.
16
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 was 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 effective tax rates in 1998 and 1997 were 36.9% and 39.1%,
respectively. Excluding losses of the Company's foreign subsidiary, the
Company's effective tax rate was 36.5% in both 1998 and 1997. The effective
rate of 36.5% differed from the statutory federal rate of 35% primarily due to
state income taxes.
Impact of Recently Issued Accounting Standards Not Yet Adopted
- --------------------------------------------------------------
In December 1999 the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin: No. 101 - "Revenue Recognition in Financial Statements,"
SAB 101. SAB 101A was issued by the SEC on March 24, 2000 and delays the
required implementation date of SAB 101 until the second quarter of 2000. SAB
101 summarizes certain views of the SEC staff in applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company has not yet determined the impact on its financial position or results
of operations of adopting SAB 101 in the second quarter of 2000, which will be
accomplished through a cumulative effect adjustment determined as of January 1,
2000.
The Company's normal terms of sale of its asphalt plants include an obligation
to assist customers by providing servicemen at the customer site to assist in
readying the plants for start-up. The Company understands the SEC staff is
preparing a document to address significant implementation issues related to SAB
101. To the extent that SAB 101 ultimately changes revenue recognition
practices, including those relative to "installment obligations," revenue from
asphalt plant sales may be required to be recorded later than under current
accounting policies of the Company.
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, 2000. 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 recognizes all derivatives as either assets or
liabilities in its balance sheet 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 materially impact the Company.
17
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
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 four 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.
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 a precise indication of expected future losses, but rather
indicators of reasonably possible losses. This forward-looking information
provides an indication of how the Company views and manages its ongoing market
risk exposures.
18
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
At December 31, 1999, the Company had long-term debt outstanding of $99 million.
Of this amount, $30 million bears interest at a fixed rate of 7.68%, and $4
million bears interest at fixed rates averaging approximately 8%. The remaining
$65 million bears interest at variable rates. At the end of 1999 the rate was
approximately 7.75%. The Company had $22 million more variable rate borrowings
at December 31, 1999 than at December 31, 1998, and the average rate at which
the variable rate borrowings accrue interest was 60 basis points (.60%) higher
at the end of 1999 compared to 1998. A 10% increase in short-term interest
rates on the variable rate debt outstanding at the end of 1999 would approximate
78 basis points. Such an increase in interest rates would increase the
Company's interest expense by approximately $504,000 assuming December 31, 1999
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.
19
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
- --------------------------------------------------------------------------------
PAGE
Independent Auditors' Report......................................... 21
Consolidated Financial Statements
- ---------------------------------
Consolidated Statements of Earnings
Years ended December 31, 1999, 1998, and 1997..................... 22
Consolidated Balance Sheets, December 31, 1999 and 1998............. 23
Consolidated Statements of Changes in Common Stock and Other
Capital, Years ended December 31, 1999, 1998, and 1997............ 25
Consolidated Statements of Cash Flows,
Years ended December 31, 1999, 1998, and 1997..................... 26
Notes to Consolidated Financial Statements,
December 31, 1999, 1998, and 1997................................. 27
20
<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, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Oklahoma City, Oklahoma
March 8, 2000, except as to
the last paragraph of note 3
and the first paragraph of
note 14, which are as of
March 30, 2000
21
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1999, 1998, and 1997
(in thousands, except per share data)
================================================================================
1999 1998 1997
-------- ------- -------
Net revenues $214,525 205,686 154,014
-------- ------- -------
Costs and expenses:
Cost of goods sold 159,264 152,116 115,172
Marketing and administrative 37,392 30,445 25,450
Engineering and product development 8,293 7,816 6,646
Product line relocation costs - 1,419 -
-------- ------- -------
204,949 191,796 147,268
-------- ------- -------
Operating earnings 9,576 13,890 6,746
-------- ------- -------
Other expense (income):
Interest expense 6,573 5,000 2,906
Interest income (980) (934) (1,351)
Other, net (18) (35) (4)
-------- ------- -------
Earnings before income taxes 4,001 9,859 5,195
Income tax expense 1,512 3,642 2,030
-------- ------- -------
Net earnings $ 2,489 6,217 3,165
======== ======= =======
Share data:
Weighted average outstanding common
shares:
Basic 21,566 21,523 21,225
Diluted 21,805 21,660 21,318
Net earnings per average outstanding
common share:
Basic $.12 .29 .15
======== ======= =======
Diluted $.11 .29 .15
======== ======= =======
See notes to consolidated financial statements.
22
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(dollars in thousands)
================================================================================
Assets 1999 1998
------ -------- -------
Current assets:
Cash and cash equivalents $ 12,681 11,954
Receivables less allowance for doubtful accounts
of $645 and $907 at December 31, 1999 and 1998,
respectively 31,257 28,013
Inventories:
Finished equipment 43,124 37,409
Work-in-process 20,212 14,189
Raw materials and parts 58,566 51,293
-------- -------
Total inventories 121,902 102,891
Other current assets 892 923
Deferred tax asset 7,400 7,200
-------- -------
Total current assets 174,132 150,981
-------- -------
Property, plant, and equipment:
Land 2,109 2,109
Buildings 18,600 16,870
Machinery and equipment 48,204 49,725
Other 1,070 535
-------- -------
69,983 69,239
Less accumulated depreciation and amortization 38,815 39,692
-------- -------
Net property, plant, and equipment 31,168 29,547
Long-term receivables 642 356
Marketable securities, at fair value 1,417 1,605
Deferred tax asset 600 1,900
Other assets, principally patents and goodwill 7,516 5,322
-------- -------
Total assets $215,475 189,711
======== =======
See notes to consolidated financial statements.
23
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1999 and 1998
(dollars in thousands)
================================================================================
Liabilities, Common Stock and Other Capital
- -------------------------------------------
1999 1998
------- -------
Current liabilities:
Current maturities of long-term debt $ 4,551 268
Accounts payable 22,002 21,551
Accrued liabilities 16,316 14,617
------- -------
Total current liabilities 42,869 36,436
------- -------
Long-term debt 94,497 77,049
Common stock and other capital:
Common stock:
Par value $.10; shares issued and outstanding
- 602 at December 31, 1999 and 1998 - -
Class A common stock:
Par value $.10; shares issued and outstanding
- 21,640,883 and 21,548,883 at December 31, 1999
and 1998, respectively 2,164 2,155
Additional paid-in capital 50,610 50,057
Accumulated other comprehensive loss (197) -
Retained earnings 25,532 24,014
------- -------
78,109 76,226
Commitments and contingencies (notes 13 and 14)
------- -------
Total liabilities, common stock and other capital $215,475 189,711
======= =======
See notes to consolidated financial statements.
24
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Common Stock and Other Capital
Years ended December 31, 1999, 1998, and 1997
(in thousands)
================================================================================
<TABLE>
<CAPTION>
Accumulated
Class A Common Stock Additional Other
--------------------- Paid-in Treasury Comprehensive Retained
Shares Amount Capital Stock Loss Earnings Total
---------- --------- ----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31,
1996 20,467 $2,047 $46,112 $ - $ - $16,344 $64,503
Net earnings - - - - - 3,165 3,165
Purchase of treasury
stock - - - (32) - - (32)
Dividends paid, common
stock ($.04 per share) - - - - - (851) (851)
Common stock issued 75 8 367 - - - 375
Exercise of stock
warrants 600 60 2,190 - - - 2,250
Exercise of stock
options 364 36 1,147 - - - 1,183
--------- --------- ---------- -------- ----------- -------- -------
Balance December 31,
1997 21,506 $2,151 $49,816 $(32) - $18,658 $70,593
Net earnings - - - - - 6,217 6,217
Retirement of treasury
stock (6) - (32) 32 - - -
Exercise of stock
options 49 4 273 - - - 277
Dividends paid, common
stock ($.04 per share) - - - - - (861) (861)
--------- --------- ---------- -------- ----------- -------- -------
Balance December 31,
1998 21,549 $2,155 $50,057 $ - - $24,014 $76,226
Net earnings - - - - - 2,489 2,489
Unrealized loss on available
for sale securities, net
of tax benefit of $113 - - - - (197) - (197)
-------
Comprehensive income $ 2,292
Retirement of voting
common stock - - (1) - - - (1)
Exercise of stock
options 35 3 160 - - - 163
Common stock issued 57 6 394 - - - 400
Dividends paid,
common stock
($.045 per share) - - - - - (971) (971)
--------- --------- ---------- -------- ----------- -------- -------
Balance December 31,
1999 21,641 $2,164 $50,610 $ - $(197) $25,532 $78,109
========= ========= ========== ======== =========== ======== =======
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998, and 1997
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 2,489 6,217 3,165
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation 3,995 2,944 2,527
Amortization 326 300 47
Gain on sale of assets (18) (36) (4)
Change in assets and liabilities net of effects
of acquisitions of businesses:
Receivables (3,008) (1,096) (1,645)
Inventories (18,799) (34,220) 532
Other current assets 31 (344) (249)
Accounts payable 286 6,896 5,414
Accrued liabilities 1,563 4,970 (203)
Deferred tax asset 1,213 3,100 2,343
Long-term receivables (286) 2,153 (2,157)
Other non-current assets 209 1,348 (1,275)
-------- ------ ------
Net cash and cash equivalents provided by
(used in) operating activities (11,999) (7,768) 8,495
-------- ------ ------
Investing activities:
Proceeds from sale of assets 119 305 113
Capital expenditures (5,717) (13,309) (5,259)
Purchases of marketable securities (122) (107) (80)
Cash paid for acquisitions of businesses (1,405) - (19,876)
Cash paid to defend patent (1,072) - -
-------- ------ ------
Net cash and cash equivalents used in
investing activities (8,197) (13,111) (25,102)
-------- ------ ------
Financing activities:
Payments on long-term debt (269) (216) (1,052)
Net borrowings on revolving credit note 22,000 28,000 15,000
Proceeds from stock options exercised 163 277 1,183
Proceeds from stock warrants exercised - - 2,250
Payment of common stock dividends (971) (861) (851)
Purchase of treasury stock - - (32)
-------- ------ ------
Net cash and cash equivalents provided by
financing activities 20,923 27,200 16,498
-------- ------ ------
Increase (decrease) in cash and cash equivalents 727 6,321 (109)
Cash and cash equivalents at beginning of year 11,954 5,633 5,742
-------- ------ ------
Cash and cash equivalents at end of year $ 12,681 11,954 5,633
======== ====== ======
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999, 1998, and 1997
================================================================================
(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 its 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.
Reclassifications
-----------------
Certain reclassifications have been made to the prior periods to conform to
the 1999 presentation.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers cash
equivalents with original 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 receivables 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 from commercial banks.
27
<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
$3,440,000 and $1,771,000 at December 31, 1999 and 1998, respectively.
Inventories
-----------
Inventories are stated at the lower of cost or market, with 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 15 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, patents and other intangible
assets. Loan acquisition and patent costs are being amortized on a
straight-line basis over the life of the related loan agreement or patent.
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 $505,000 and $253,000 at December 31, 1999 and 1998,
respectively. 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. At the
customer's request, the Company also enters into certain bill and hold
transactions whereby title transfers to the customer, but the goods do not
ship until a later date. The Company recognizes revenue under bill and hold
transactions when products are complete, ready-to-ship, and all performance
obligations have been met.
28
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
In the fourth quarter of 1999, the Company modified its revenue recognition
policy with respect to sales of asphalt plants under bill and hold
criteria. The Company's normal terms of sale of its asphalt plants include
an obligation to assist customers by providing servicemen at the customer
site to assist in readying the plants for start-up. The Company modified
its policy to not recognize revenue for completed asphalt plants which were
not shipped at the customer's request, until the make-ready obligation was
complete. Prior year results would not have been materially affected by the
change, and accordingly, were not restated. Previously reported 1999
quarterly results were restated to reflect this change and other
adjustments (see note 10).
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
-------------
Statement of Financial Accounting Standards No. 123. "Accounting for Stock-
Based Compensation" (SFAS No. 123), encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25. "Accounting for Stock Issued to
Employees" (APB No. 25), and related Interpretations. Accordingly, the
Company records expense in an amount equal to the excess of the quoted
market price on the grant date over the option price. Such expense is
recognized at the grant date for options fully vested. For options with a
vesting period, the expense is recognized over the vesting period. The
Company has not recognized any expense for the periods ended December 31,
1999, 1998 and 1997.
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.
29
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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 approximates fair value as the effective rates for these
instruments are comparable to market rates at year-end. The carrying
amount of investments approximates fair market value. The carrying amount
of long-term debt is approximately $99.1 million and $77.3 million and the
estimated fair value is $98.0 million and $77.3 million at December 31,
1999 and 1998, respectively. The estimated fair valve of debt is based on
borrowing rates currently available with similar terms and average
maturities.
Marketable Securities
---------------------
The Company classifies its marketable securities as available for sale.
The securities consist of equity securities, which are stated at fair
value, with net unrealized gains or losses on the securities, net of tax,
recorded as accumulated other comprehensive income (loss) in shareholders'
equity. Realized gains and losses are included in earnings and are derived
using the specific identification method for determining the cost of the
securities. There were no realized gains in 1999, 1998 or 1997.
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 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
1999, 1998 and 1997 (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Weighted average number of common
shares outstanding - basic 21,566 21,523 21,225
Dilutive effect of potential common shares
issuable upon exercise of employee
stock options 239 137 93
------ ------ ------
Weighted average number of common
shares outstanding - diluted 21,805 21,660 21,318
====== ====== ======
</TABLE>
30
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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 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. Comprehensive income consists of net earnings and the net
unrealized gains or losses on available for sale marketable securities and
is presented in the consolidated statement of changes in common stock and
other capital.
Impact of Recently Issued Accounting Standards Not Yet Adopted
--------------------------------------------------------------
In December 1999 the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin: No. 101 - "Revenue Recognition in Financial
Statements," SAB 101. SAB 101A was issued by the SEC on March 24, 2000 and
delays the required implementation date of SAB 101 until the second quarter
of 2000. SAB 101 summarizes certain views of the SEC staff in applying
generally accepted accounting principles to revenue recognition in
financial statements. The Company has not yet determined the impact on its
financial position or results of operations of adopting SAB 101 in the
second quarter of 2000, which will be accomplished through a cumulative
effect adjustment determined as of January 1, 2000.
The Company's normal terms of sale of its asphalt plants include an
obligation to assist customers by providing servicemen at the customer site
to assist in readying the plants for start-up. The Company understands the
SEC staff is preparing a document to address significant implementation
issues related to SAB 101. To the extent that SAB 101 ultimately changes
revenue recognition practices, including those relative to "installment
obligations," revenue from asphalt plant sales may be required to be
recorded later than under current accounting policies of the Company.
(2) Acquisition of Businesses and Product Lines
-------------------------------------------
In October 1999 the Company acquired all of the outstanding stock of Drion
Constructie B. V. B. A. (Drion) for approximately $1.4 million in cash,
57,143 shares of the Company's Class A Common Stock (valued at $400,000),
and the assumption of approximately $300,000 in liabilities. The purchase
price was allocated to the assets acquired based on their estimated fair
values and resulted in goodwill and other intangible assets of
approximately $1.5 million. Drion did not have significant operations
during 1999 and 1998, and on a pro forma basis, assuming the acquisition
occurred on January 1, 1998, the impact to earnings would not have been
material.
31
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
On December 17, 1997, the Company acquired substantially all of the assets
of Rexworks, Inc.'s TRASHMASTER Landfill compaction product line and the
materials grinding line 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.
(3) Long-Term Debt and Notes Payable
--------------------------------
Long-term debt and notes payable at December 31 are summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
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 7.75% at December 31, 1999 and
7.15% at December 31, 1998, due September 2001 65,000 43,000
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 3,682 3,895
Lease-purchase obligations and notes payable due
through September 2008, with interest from 6.25% to
10.25%, collateralized by certain buildings and
equipment 366 422
------- ------
99,048 77,317
Less current maturities of long-term debt 4,551 268
------- ------
$94,497 77,049
======= ======
</TABLE>
32
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
In September 1996, the Company completed a $30 million private placement of
unsecured Series A Senior Notes and established an unsecured revolving line
of credit. A portion of the proceeds from the senior notes was 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 29,
1999, increasing borrowing capacity from $60 million to $70 million. As of
February 3, 2000 the line of credit was increased to $100 million. The
revolving line of credit provides for interest at the LIBOR rate plus 1.50%
to 2.25%. The specific rate is determined based on the ratio of funded debt
to earnings before interest, taxes, depreciation and amortization and is
adjusted every ninety days.
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, 1999 and 1998,
the Company had no borrowings outstanding under the fleet financing
agreement.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1999, are as follows (dollars in thousands):
<TABLE>
<S> <C>
2000 $ 4,551
2001 69,574
2002 4,596
2003 4,610
2004 4,638
Thereafter 11,079
-------
$99,048
=======
</TABLE>
Certain debt agreements contain restrictions on working capital, net worth
(minimum of approximately $53.7 million at December 31, 1999), and other
restrictive covenants. For the year ended December 31, 1999, the Company
was not in compliance with one debt covenant related to the $30 million
unsecured senior notes and one debt covenant related to the revolving line
of credit. Both covenants are determined quarterly based on the trailing
four quarters ending on each determination date. The Company has obtained
waivers from the lenders as of December 31, 1999 waiving noncompliance
through March 31, 2000 and expects to meet the covenants at future
determination dates.
(4) 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.
33
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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 shares of Common Stock were offered the opportunity to 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, 1999, 602 shares
of Common Stock were still outstanding. 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 7).
In January 1993, the Company entered into separate loan agreements with REI
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 aggregate shares of the Company's Class A
Common Stock.
(5) Stock Option Plans
------------------
In 1992 the Company established a Stock Option Plan (the Plan) for its
employees. In 1999 the Board of Directors and the shareholders of the
Company approved certain amendments to the Plan. The Plan has two features:
(1) stock options and (2) stock appreciation rights. The Plan is
administered by a committee comprised of at least two members of the Board
of Directors. The granting of stock options and/or appreciation rights is
at the sole discretion of the committee. A maximum of 2,100,000 stock
options and/or appreciation rights may be granted under the Plan. The
exercise price of the stock options is the market 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 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 committee has exercised
its discretion and has granted options with both shorter and longer vesting
periods than the standard four year period. There were 946,348 options
available for grant under the Plan at December 31, 1999.
During 1999, no stock options were granted. The per share weighted-average
fair value of stock options granted during 1998 and 1997 was $3.77 and
$2.21 respectively, on the date of grant using the Black Scholes option-
pricing model with the following assumptions:
34
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Expected volatility 55.0% 56.0%
Expected dividend yield 0.6% 0.9%
Risk free interest rate 5.5% 5.5%
Expected life 7.3 yrs 4.7 yrs
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net earnings As reported $2,489 6,217 3,165
Pro forma 2,186 6,040 2,942
Earnings per share - diluted As reported $ 0.11 0.29 0.15
Pro forma $ 0.10 0.28 0.14
</TABLE>
Stock appreciation rights may be issued with stock options or separately,
at the sole discretion of the 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, 1999, no stock
appreciation rights had been granted.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Number of Weighted-Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
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
Granted - -
Exercised 35,000 4.70
Forfeited 75,000 5.41
-------
Balance at December 31, 1999 775,000 $5.75
=======
</TABLE>
35
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
At December 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $4.125 - $6.75 and
5.4 years, respectively.
At December 31, 1999, 1998, and 1997, the number of options exercisable was
333,642, 243,533, and 183,764, respectively, and the weighted-average
exercise price of those options was $5.35, $5.04, and $5.08, respectively.
(6) 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 $770,000,
$1,384,000, and $1,961,000, for the years ended December 31, 1999, 1998,
and 1997, 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):
2000 $3,440
2001 129
2002 142
2003 156
2004 122
Thereafter 93
------
$4,082
======
(7) Income Taxes
------------
Income tax expense consisted of the following (dollars in thousands):
1999 1998 1997
---- ---- ----
Current tax expense $ 299 542 173
Deferred tax expense 1,213 3,100 1,857
------ ----- -----
$1,512 3,642 2,030
====== ===== =====
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34% (35% in 1998 and 1997) to earnings before
income taxes in 1999, 1998, and 1997, as a result of the following (dollars
in thousands):
1999 1998 1997
------- ------ ------
Computed expected tax expense $1,360 3,451 1,818
State income taxes 181 410 185
Increase (decrease) in
valuation allowance 29 (177) (357)
Other, net (58) (42) 384
------ ----- -----
$1,512 3,642 2,030
====== ===== =====
36
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31,1999 and
1998 are as follows (dollars in thousands):
1999 1998
---- ----
Net operating loss and other carryforwards $ 5,566 7,124
Other, primarily accrued liabilities 5,592 4,804
------- ------
Deferred tax assets 11,158 11,928
Deferred tax liability (plant and equipment
temporary differences) (2,663) (2,362)
------- ------
8,495 9,566
Less valuation allowance 495 466
------- ------
Net deferred tax asset $ 8,000 9,100
======= ======
The net deferred tax asset at December 31, 1999 and 1998 was $8.0 million
and $9.1 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 $20 million to $25 million in future years.
The estimated taxable income for 1999 before utilization of income tax net
operating loss carryforwards was approximately $6 million. The estimated
taxable income for 1998 before utilization of income tax net operating loss
carryforwards was approximately $14 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 $8.0 million of net deferred tax assets will be realized.
The remaining valuation allowance of approximately $495,000 is maintained
against deferred tax assets which the Company has determined are
potentially not realizable.
At December 31, 1999 the Company had tax net operating loss carry forwards
of approximately $2.1 million for federal income tax purposes. Such
carryforwards, which may provide future tax benefits, expire in 2010. At
December 31, 1999 the Company also had tax net operating loss carryforwards
of approximately $28.4 million for state income tax purposes. Such
carryforwards expire as follows: $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
carry-forwards used in any one year (see note 4).
37
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
At December 31, 1999 the Company had tax credit carryforwards of
approximately $1.7 million which expire in varying amounts from 2000 to
2010, and depletion carryforwards and AMT credit carryforwards of
approximately $1.9 million and $1.4 million, respectively, which do not
expire.
(8) Export Sales
------------
The Company had export sales of approximately $17.0 million, $28.3 million,
and $21.1 million in 1999, 1998, and 1997, respectively. These sales were
made through foreign dealers and representatives. A significant portion of
these sales were made in Asia, Europe, South America, and North and Central
America, excluding the United States.
(9) 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 $339,000, $346,000, and $269,000 were made
in 1999, 1998 and 1997, respectively.
(10) Supplemental Quarterly Financial Information (Unaudited)
--------------------------------------------------------
In fourth quarter 1999, the Company modified its revenue recognition policy
with respect to sales of asphalt plants for which the customer had taken
ownership but which had not been shipped at the customer's request, as
discussed in note 1. Previously reported 1999 quarterly results for the
first, second, and third quarters are being restated to reflect this
revenue recognition policy change. The third quarter also reflects
correction of revenue recognition errors. The after-tax effect of the
restatements resulting from revenue recognition issues decreased net income
from that previously reported on Form 10-Q approximately $536,000 and
$389,000 for the first and third quarters, respectively, and increased net
income approximately $90,000 for the second quarter. Additionally, the
first and third quarters reflect correction of errors made in accounting
for inventories. The after-tax effect of the restatements resulting from
inventory corrections decreased net income from that previously reported on
Form 10-Q approximately $952,000 and $1,397,000 for the first and third
quarters, respectively.
Following is a summary of the unaudited interim results of operations for
the years ended December 31, 1999 and 1998 (dollars in thousands, except
per share data):
38
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
<TABLE>
<CAPTION>
1999
--------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
As restated:
Net revenues $52,577 70,781 53,392 37,775 214,525
Net earnings (loss) 172 5,239 331 (3,253) 2,489
Earnings (loss) per share
Basic $ .01 .24 .02 (.15) .12
Diluted $ .01 .24 .02 (.15) .11
As previously reported:
Net revenues $57,200 69,368 54,591 N/A N/A
Net earnings (loss) 1,660 5,149 2,117 N/A N/A
Earnings per share
Basic $ .08 .24 .10 N/A N/A
Diluted $ .08 .24 .10 N/A N/A
</TABLE>
In the fourth quarter of 1999, the Company recorded adjustments to reflect
changes in the Company's revenue recognition policy with respect to asphalt
plants (see note 1), reduce the carrying value of inventory, increase
accrued liabilities for legal contingencies and warranties, and to expense
incurred due diligence costs related to the termination of a potential
acquisition. The after tax effect of the fourth quarter adjustments
decreased net earnings by approximately $1.2 million.
<TABLE>
<CAPTION>
1998
--------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues $44,022 65,892 48,860 46,912 205,686
Net earnings(loss) $ (667) 4,368 1,851 665 6,217
Earnings (loss) per share
Basic $ (.03) .20 .09 .03 .29
Diluted $ (.03) .20 .09 .03 .29
</TABLE>
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.
(11) Supplemental Cash Flow Information
----------------------------------
Cash paid for interest approximated $6,734,000, $4,731,000, and $2,804,000
in 1999, 1998, and 1997, respectively.
Cash paid for income taxes approximated $554,000, $229,000, and $249,000 in
1999, 1998, and 1997, 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.
39
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
In October 1999, the Company acquired Drion Constructie B.V.B.A. The
consideration paid to the former owner of Drion included shares of the
Company's Class A Common Stock. The fair value of the stock issued was
approximately $400,000.
(12) 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 three reportable segments,
its Oklahoma City, Oklahoma, Canton, South Dakota, and Cedar Falls, Iowa
manufacturing facilities. 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
primary line of concrete paving systems, and pavement profiling and
reclaiming/ stabilizing equipment, weighing equipment, municipal landfill
compactors, and industrial and green waste grinding machines; and materials
processing equipment - hot-mix asphalt production systems, and thermal
systems for remediating contaminated soils and sanitizing medical waste.
Both the Canton and Cedar Falls facilities manufacture light weight grading
and concrete paving and finishing machines, which fall into the mobile
equipment category. The specific products manufactured at the other
geographic locations include: custom heavy hauling and heavy-duty trailers
and processing equipment - concrete batching plants.
Following is certain financial information regarding the Company's
segments. The revenues reported below are all from external customers.
General corporate expenses are not allocated to the operating segments;
rather, such expenses are included as a reconciling item to reported
operating earnings.
<TABLE>
<CAPTION>
Oklahoma Cedar All
City Canton Falls Other Total
-----------------------------------------
<S> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total assets $180,333 3,841 2,211 29,090 215,475
Year ended December 31, 1999:
Net revenues $170,950 8,488 3,236 31,851 214,525
Costs and expenses 157,322 7,008 2,649 31,489 198,468
-------- ----- ----- ------ --------
Segment measure of
operating profit $ 13,628 1,480 587 362 16,057
======== ===== ===== ======
General corporate expenses (6,481)
--------
Operating earnings 9,576
Interest expense (6,573)
Interest income 980
Other, net 18
--------
Earnings before income taxes 4,001
Income tax expense 1,512
--------
Net earnings $ 2,489
========
Capital expenditures $ 4,648 265 9 795 5,717
======== ===== ===== ====== ========
Depreciation and amortization $ 3,578 96 82 565 4,321
======== ===== ===== ====== ========
</TABLE>
40
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
<TABLE>
<CAPTION>
Oklahoma Cedar All
City Canton Falls Other Total
-----------------------------------------
<S> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total assets $166,036 4,029 2,205 17,441 189,711
Year ended December 31, 1998:
Net revenues $161,190 6,132 2,678 35,686 205,686
Costs and expenses 146,685 5,171 2,336 32,576 186,768
-------- ------ ----- ------ --------
Segment measure of
operating profit $ 14,505 961 342 3,110 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
Income tax expense 3,642
--------
Net earnings $ 6,217
========
Capital expenditures $ 12,804 58 57 390 13,309
======== ====== ===== ====== ========
Depreciation and amortization $ 2,520 87 59 578 3,244
======== ====== ===== ====== ========
As of December 31, 1997
Total assets $126,801 3,646 1,693 12,288 144,428
Year ended December 31, 1997
Net revenues $122,043 6,608 2,571 22,792 154,014
Costs and expenses 112,353 5,537 2,236 22,629 142,755
-------- ------ ----- ------ --------
Segment measure of
operating profit $ 9,690 1,071 335 163 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 $ 4,376 344 371 168 5,259
======== ====== ===== ====== ========
Depreciation and amortization $ 2,093 63 45 373 2,574
======== ====== ===== ====== ========
</TABLE>
The Company has one operating location in the United Kingdom and another in
Belgium. The United Kingdom location serves as a sales office and has
approximately $533,000 of assets comprised primarily of inventory,
receivables, and property, plant and equipment. All remaining assets are
located in the United States. See note 8 for information on export sales.
41
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Revenues for products were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Mobile Equipment $ 86,776 78,528 82,349
Materials Processing Equipment 95,986 95,257 44,806
Parts and Used Equipment 31,763 31,901 26,859
-------- ------- -------
$214,525 205,686 154,014
======== ======= =======
</TABLE>
(13) 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 $1,502,000
in 1999, $1,402,000 in 1998, $715,000 in 1997.
Minimum rental commitments under all non-cancelable leases for five years
subsequent to December 31, 1999, are approximately as follows: $751,000 in
2000, $542,000 in 2001, $454,000 in 2002, $302,000 in 2003, and $267,000 in
2004.
At December 31, 1999, the Company was contingently liable as guarantor for
certain accounts receivable sold with recourse of approximately $6,830,000
through September 2006.
(14) 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 seeking to recover approximately
$1.4 million of legal fees and costs alleged to be owing by the Company,
together with pre-judgement and post-judgement interest and other costs. In
March 2000 this case was settled. The effects of the settlement are
reflected in the Company's financial statements at December 31, 1999.
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 Cedarapids' patent. Cedarapids subsequently filed a
counterclaim against the Company and is seeking damages in excess of $43
million, alleging that the Company's patented Triple Drum Mixer product
design infringes on a patent held by Cedarapids. In January 1997, the
District Court issued an order staying this lawsuit
42
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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. In July 1999, the court granted
Cedarapids' motion for partial summary judgement, and ruled that the
Company's Triple Drum Mixer product design literally infringes certain
claims of the Cedarapids' patent. The court's judgement is limited to the
issue of infringement and not the issue of validity. The Company believes
that Cedarapids' patent is invalid, and thus, that the Triple Drum Mixer
patent is valid. The Company has, at the court's invitation, filed a motion
for summary judgement on the issue of validity. The court has not ruled on
this motion. In the opinion of counsel, Cedarapids' claims are highly
inflated, and may not be recoverable under various defenses. The Company
anticipates this lawsuit going to trial in April 2000.
In September 1998, Cedarapids filed a separate 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 damages in excess of $10 million. The Company intends
to vigorously defend both lawsuits involving Cedarapids. No reserve has
been established for these cases as of December 31, 1999.
The Company capitalized approximately $1 million in legal fees incurred
during 1999 in defense of the Triple Drum patent. These costs will be
expensed in the case of an unfavorable outcome or amortized over the
remaining life of the patent if the Company is successful in its defense.
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 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 other proceedings will not have a material adverse
effect on the Company's consolidated financial position, liquidity or
future results of operations.
(15) Related Party Transactions
--------------------------
During 1997, the Company leased a manufacturing facility and offices
located in Champaign, Illinois from Steve Hillard, the current President of
CMI Johnson-Ross. This lease was renewed in 1999 and will expire on October
23, 2004. As renewed, the lease provides for rental payments of $15,000 per
month. Aggregate lease payments for the years ended December 31, 1999 and
1998 were $180,000 and $150,000, respectively.
43
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
Item 9. Changes in and Disagreements With Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
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 2000 Annual Meeting of Shareholders.
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 20 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, as amended dated February 18, 1992;
and Exhibit (3i) on Form 10-Q
dated August 14, 1995
(3.2) Amended and Restated By-Laws Exhibit (3ii) on Form 10-Q,
dated August 13, 1999
(4.1) Series A Senior Notes Loan Agreement Exhibit 4.1 on Form 10-K
dated March 19, 1999
(4.2) Revolving Line of Credit Loan Exhibit 4.2 of this Form 10-K
Agreement and Amendments
44
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
(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 on
between the Company and Tom Engelsman. Form 10-K dated
March 19, 1999
(10.2) Employment Agreement dated October 1, 1998 Exhibit 10.2 on
between the Company and Jim Holland. Form 10-K dated
March 19, 1999
(10.3) Consulting Agreement dated August 12, 1999 Exhibit 10.4 on
Between the Company and George William Form 10-Q dated
Swisher, Jr. November 15, 1999
(10.4) REI Investment Agreement dated August 19, Exhibit 28.1 on
1991 between Recovery Equity Investors, Form 8-K filed
L. P. and the Company on/or about
September 10, 1991
(10.5) Amendment No. 1 to REI Investment Exhibit 10.5 of this
Agreement dated November 6, 1998 Form 10-K
between Recovery Equity Investors,
L. P. and the Company
(10.6) Registration Rights Agreement dated Exhibit 28.2 on
August 19, 1991 between Recovery Equity Form 8-K filed
Investors, L. P. and the Company on/or about
September 10, 1991
(10.7) Amendment No. 1 to Registration Rights Exhibit 10.7 of this
Agreement dated January 15, 1993 between Form 10-K
Recovery Equity Investors, L. P. and
the Company
45
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
(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 Cedar Falls, Inc. Iowa
Transport Trailer Manufacturing Company Oklahoma
Brownwood Ross Company Texas
CMI Johnson Corporation Illinois
CMI Belgium NV Belgium
Drion Constructie B. V. B. A. Belgium
R. M. Barton Co., Inc. Oklahoma
(23) Consent of Independent Auditors Exhibit 23
(27) Financial Data Schedule Exhibit 27
(27.1) Restated Financial Data Schedule Exhibit 27.1
for the first quarter of 1999
(27.2) Restated Financial Data Schedule Exhibit 27.2
for the second quarter of 1999
(27.3) Restated Financial Data Schedule Exhibit 27.3
for the third quarter of 1999
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of 1999.
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: April 7, 2000
----------------- ---------------
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: April 7, 2000
--------------------- ---------------
Kenneth J. Barker
Director
By: /s/ Joseph J. Finn-Egan Dated: April 7, 2000
----------------------- ---------------
Joseph J. Finn-Egan
Director
46
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1999
================================================================================
By: /s/ Larry D. Hartzog Dated: April 7, 2000
-------------------------- -----------------
Larry D. Hartzog
Director
By: /s/ Jim D. Holland Dated: April 7, 2000
-------------------------- -----------------
Jim D. Holland
Senior Vice President, Treasurer
and Chief Financial Officer
By: /s/ David Jolly Dated: April 7, 2000
-------------------------- -----------------
David Jolly
Corporate Controller
By: /s/ Jeffrey A. Lipkin Dated: April 7, 2000
-------------------------- -----------------
Jeffrey A. Lipkin
Director
By: /s/ J. Larry Nichols Dated: April 7, 2000
-------------------------- -----------------
J. Larry Nichols
Director
By: /s/ Thomas P. Stafford Dated: April 7, 2000
-------------------------- -----------------
Thomas P. Stafford
Director
By: /s/ Bill Swisher Dated: April 7, 2000
-------------------------- -----------------
Bill Swisher
Chairman of the Board
47
<PAGE>
EXHIBIT 4.2
RESTATED
CREDIT AGREEMENT
Between
CMI CORPORATION
And
BANK OF OKLAHOMA, N.A.
February 3, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I................................................................... 1
- ---------
1 DEFINITIONS....................................................... 1
-----------
1.1 Terms Defined Above......................................... 1
-------------------
1.2 Additional Defined Terms.................................... 1
------------------------
1.3 Undefined Financial Accounting Terms........................ 14
------------------------------------
1.4 References.................................................. 14
----------
ARTICLE II.................................................................. 15
- ----------
2 AMOUNT AND TERMS OF FACILITY...................................... 15
----------------------------
2.1 Revolving Line of Credit.................................... 15
------------------------
2.2 Letter of Credit............................................ 15
----------------
2.3 Manner of Borrowing......................................... 16
-------------------
2.4 Notes Evidencing Loans...................................... 17
----------------------
2.5 Interest Rates.............................................. 20
--------------
2.6 Interest Rate Options....................................... 20
---------------------
2.7 Change of Circumstances..................................... 21
-----------------------
2.8 Repayment of Advances and Interest Thereon.................. 25
------------------------------------------
2.9 Advances and Payments on Note............................... 25
-----------------------------
2.10 Voluntary Prepayments....................................... 25
---------------------
2.11 Non-Use Fees................................................ 25
------------
2.12 Letter of Credit Fees....................................... 25
---------------------
2.13 Commitment Fees............................................. 26
---------------
2.14 Cash Collateral Account..................................... 26
-----------------------
2.15 General Provisions Relating to Interest..................... 28
---------------------------------------
ARTICLE III................................................................ 28
- ------------
3 CONDITIONS........................................................ 28
----------
3.1 Receipt of Loan Documents and Other Items................... 29
-----------------------------------------
3.2 Each Advance................................................ 30
------------
3.3 Each Issuance of a Letter of Credit......................... 31
-----------------------------------
ARTICLE IV.................................................................. 32
- ----------
4 REPRESENTATIONS AND WARRANTIES.................................... 32
------------------------------
4.1 Due Authorization and Corporate Existence................... 32
-----------------------------------------
4.2 Consents, Conflicts and Creation of Liens................... 32
-----------------------------------------
4.3 Valid and Binding Obligations............................... 32
-----------------------------
4.4 Title to Assets............................................. 33
---------------
4.5 Scope and Accuracy of Financial Statements.................. 33
------------------------------------------
4.6 Liabilities, Litigation, and Restrictions................... 33
-----------------------------------------
4.7 Authorizations and Consents................................. 33
---------------------------
4.8 Compliance with Laws........................................ 33
--------------------
4.9 Proper Filing of Tax Returns and Payment of Taxes Due....... 33
-----------------------------------------------------
i
<PAGE>
4.10 ERISA....................................................... 33
-----
4.11 Environmental Laws.......................................... 34
------------------
4.12 Investment Company Act Compliance........................... 35
---------------------------------
4.13 Public Utility Holding Company Act Compliance............... 35
---------------------------------------------
4.14 No Material Misstatements................................... 35
-------------------------
4.15 Casualties or Taking of Property............................ 35
--------------------------------
4.16 Locations of Business, Offices, and Property................ 35
--------------------------------------------
4.17 Subsidiaries................................................ 35
------------
ARTICLE V................................................................... 35
- ---------
5 AFFIRMATIVE COVENANTS............................................. 35
---------------------
5.1 Maintenance and Access to Records........................... 36
---------------------------------
5.2 Annual Financial Statements................................. 36
---------------------------
5.3 Quarterly Financial Statement............................... 36
-----------------------------
5.4 Annual Budget............................................... 36
-------------
5.5 Notices of Certain Events................................... 36
-------------------------
5.6 Additional Information...................................... 37
----------------------
5.7 Compliance with Laws........................................ 37
--------------------
5.8 Payment of Assessments and Charges.......................... 38
----------------------------------
5.9 Maintenance of Corporate Existence and Good Standing........ 38
----------------------------------------------------
5.10 Further Assurances.......................................... 38
------------------
5.11 Initial Fees and Expenses of Agent and/or Legal Counsel
-------------------------------------------------------
to Agent.................................................... 38
--------
5.12 Subsequent Fees and Expenses................................ 38
----------------------------
5.13 Maintenance and Inspection of Tangible Properties........... 39
-------------------------------------------------
5.14 Maintenance of Insurance and Evidence Thereof............... 39
---------------------------------------------
5.15 Payment of Note and Performance of Obligations.............. 39
----------------------------------------------
5.16 Primary Depository.......................................... 39
------------------
5.17 Agreement to Pledge Collateral.............................. 39
------------------------------
ARTICLE VI.................................................................. 40
- ----------
6 FINANCIAL COVENANTS............................................... 40
-------------------
6.1 Tangible Net Worth.......................................... 40
------------------
6.2 Debt Service Coverage Ratio................................. 40
---------------------------
6.3 Liabilities to Net Worth.................................... 40
------------------------
6.4 Inventory Turnover Ratio.................................... 40
------------------------
6.5 Net Funded Debt to Cash Flow Ratio.......................... 40
----------------------------------
ARTICLE VII................................................................. 41
- -----------
7 NEGATIVE COVENANTS................................................ 41
------------------
7.1 Indebtedness................................................ 41
------------
7.2 Negative Pledge............................................. 41
---------------
7.3 Sales of Assets............................................. 41
---------------
7.4 Cancellation of Insurance................................... 41
-------------------------
7.5 Changes in Corporate Structure.............................. 41
------------------------------
ii
<PAGE>
7.6 Transactions with Affiliates................................ 42
----------------------------
7.7 Organization or Acquisition of Subsidiaries................. 42
-------------------------------------------
7.8 Line of Business............................................ 42
----------------
7.9 Executive Management........................................ 42
--------------------
7.10 Repurchase of Treasury Stock................................ 42
----------------------------
7.11 Dividends and Distributions................................. 42
---------------------------
ARTICLE VIII................................................................ 43
- ------------
8 EVENTS OF DEFAULT................................................. 43
-----------------
8.1 Enumeration of Events of Default............................ 43
--------------------------------
8.2 Remedies.................................................... 45
--------
ARTICLE IX.................................................................. 46
- ----------
9 THE AGENT AND THE BANKS........................................... 46
-----------------------
9.1 Appointment and Authorization............................... 46
-----------------------------
9.2 Note Holders................................................ 47
------------
9.3 Consultation with Counsel................................... 47
-------------------------
9.4 Documents................................................... 47
---------
9.5 Resignation or Removal of Agent............................. 47
-------------------------------
9.6 Responsibility of Agent..................................... 48
-----------------------
9.7 Independent Investigation................................... 49
-------------------------
9.8 Indemnification............................................. 49
---------------
9.9 Benefit of Section 9........................................ 50
--------------------
9.10 Pro Rata Treatment.......................................... 50
------------------
9.11 Assumption as to Payments................................... 50
-------------------------
9.12 Other Financings............................................ 50
----------------
9.13 Interests of Banks.......................................... 51
------------------
9.14 Investments................................................. 51
-----------
ARTICLE X................................................................... 51
- ---------
10 MISCELLANEOUS..................................................... 51
-------------
10.1 Transfers and Participations................................ 51
----------------------------
10.2 Indemnity................................................... 53
---------
10.3 Survival of Representations. Warranties and Covenants....... 54
-----------------------------------------------------
10.4 Notices and Other Communications............................ 54
--------------------------------
10.5 Parties in Interest......................................... 55
-------------------
10.6 Rights of Third Parties..................................... 55
-----------------------
10.7 Articles and Sections....................................... 55
---------------------
10.8 Number and Gender........................................... 55
-----------------
10.9 Renewals and Extensions..................................... 55
-----------------------
10.10 No Waiver: Rights Cumulative................................ 55
----------------------------
10.11 Incorporation of Exhibits................................... 56
-------------------------
10.12 Survival Upon Unenforceability.............................. 56
------------------------------
10.13 Amendments or Modifications................................. 56
---------------------------
iii
<PAGE>
10.14 Controlling Provision Upon Conflict......................... 56
-----------------------------------
10.15 Choice of Forum: Consent to Service of Process and
--------------------------------------------------
Jurisdiction................................................ 56
------------
10.16 Waiver of Jury Trial........................................ 56
--------------------
10.17 Entire Agreement............................................ 56
----------------
10.18 Counterparts................................................ 57
------------
iv
<PAGE>
EXHIBIT A
RESTATED
CREDIT AGREEMENT
THIS RESTATED CREDIT AGREEMENT (the "Agreement"), made and entered into
this 3rd day of February, 2000, by and between CMI CORPORATION, an Oklahoma
corporation (the "Borrower") and BANK OF OKLAHOMA, N.A., a national banking
association ("BOK"), and each of the financial institutions which is a party
hereto (as evidenced by the signature pages to this Agreement) or which may from
time to time become a party hereto pursuant to the provisions of Section 9
hereof or any successor or assignee thereof (hereinafter collectively referred
to as "Banks", and individually, "Bank") and BOK as "Agent".
W I T N E S S E T H:
WHEREAS, the Borrower and BOK entered into a Credit Agreement dated as of
September 17, 1996 (the "Original Credit Agreement") under the terms of which
BOK agreed, subject to the satisfaction of certain conditions precedent set
forth therein, to provide Borrower with a revolving loan facility in amounts of
up to $25,000,000.00; and
WHEREAS, the Original Credit Agreement was amended pursuant to a First
Amendment to Credit Agreement dated as of December 30, 1997, a Second Amendment
to Credit Agreement dated as of October 13, 1998, and a Third Amendment to
Credit Agreement dated as of March 5, 1999, and a Fourth Amendment to Credit
Agreement dated as of October 29, 1999;
WHEREAS, Borrower and BOK have agreed to restate the Original Credit
Agreement to increase the amount of the revolving loan facility available
thereunder and to make certain other changes thereto.
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 parties hereby agree to
restate the Original Credit Agreement as follows:
ARTICLE I
---------
1 DEFINITIONS
-----------
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
-------------------
"Agent", "Agreement","Bank", "Banks", "BOK", "Borrower," and "Original Credit
- ------ --------- ---- ----- --- -------- ---------------
Agreement" 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:
<PAGE>
"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 pursuant to the terms hereof.
-------
"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 Restated 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, 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.
The Applicable Percentage is subject to adjustment (upwards or downwards, as
appropriate) based on the ratio of Net 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>
Tier Funded Debt to Applicable Percentage Non-Use Fee
Cash Flow For LIBOR Loans
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
1 Less than or equal to 2.00 1.50% .125%
- -------------------------------------------------------------------------------
2 Greater than 2.00 but less than 1.75% .250%
or equal to 2.50
- -------------------------------------------------------------------------------
3 Greater than 2.50 but less than 2.00% .250%
or equal to 3.00
- -------------------------------------------------------------------------------
4 Greater than 3.00 2.25% .375%
- -------------------------------------------------------------------------------
</TABLE>
The Applicable Percentage shall be 2.25 for LIBOR Loans from the date
hereof until March 31, 2000 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
2
<PAGE>
of Funded Debt to Cash Flow to an amount so that another Applicable Percentage
shall be applied. The Borrower must demonstrate to Agent'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 Agent 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; 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 Total Outstandings
-----
at such time.
"Assignment and Acceptance" shall mean a document substantially in the
-------------------------
form of Exhibit "I" hereto.
"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 Banks 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 Banks 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
3
<PAGE>
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 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 Banks, subject to
----------
applicable provisions of this Agreement, to make Advances to or for the benefit
of the Borrower pursuant to Section 2.1.
"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 Agent 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 Banks 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
4
<PAGE>
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 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 earnings before interest, taxes, depreciation, and amortization 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.
"Defaulting Bank" shall mean the term "Defaulting Bank" as used herein
---------------
is defined in Section 2.4(g) hereof.
"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.
"Eligible Assignee" shall mean any of (i) a Bank or any Affiliate of a
-----------------
Bank; (ii) a commercial bank organized under the laws of the United States, or
any state thereof, and having a combined capital and surplus of at least
$100,000,000; (iii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000.00, provided that such
bank is acting through a branch or agency located in the United States; (iv) a
Person that is primarily engaged in the business of commercial banking and that
(A) is a subsidiary of a Bank, (B) a subsidiary of a Person of which a Bank is a
subsidiary, or (C) a Person of which a Bank is a subsidiary; (v) any other
entity (other than a natural person) which is an "accredited investor" (as
defined in Regulation D under the Securities Act) which extends credit or buys
loans as one of its businesses, including, but not limited to, insurance
5
<PAGE>
companies, mutual funds, investments funds and lease financing companies; and
(vi) with respect to any Bank that is a fund that invests in loans, any other
fund that invests in loans and is managed by the same investment advisor of such
Bank or by an Affiliate of such investment advisor (and treating all such funds
so managed as a single Eligible Assignee); provided, however, that no Affiliate
of either Borrower shall be an Eligible Assignee.
"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
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.
6
<PAGE>
"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., LLC,
---------
formerly known as 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 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
7
<PAGE>
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, three or six 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, 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);
(iii) 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;
(iv) 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 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;
(v) 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
(vi) no Interest Period shall end after the Maturity Date.
8
<PAGE>
"Inventory Turnover Ratio" shall mean that ratio determined by
------------------------
dividing Borrower's costs of goods sold by its inventory.
"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 Agent. 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 Agent, for
--------------------
the ratable benefit of the Banks, 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
arithmetic average of the rate at which dollar deposits in immediately available
funds and for a maturity equal to the applicable three-month period are offered
or available in the London Interbank Market for Eurodollars as of 11:00 a.m.
(London time) on the date of a determination, as reported in the "Money Rates"
section of The Wall Street Journal (Southwest Edition) or a substitute source
reasonably determined by Agent in the event such source is no longer available.
If more than one LIBOR Rate is published in The Wall Street Journal (Southwest
Edition) for the three-month time period, then the LIBOR Rate shall be the
highest of such published rates. The LIBOR rate determined by Agent with respect
to a particular LIBOR Portion shall be fixed at such rate for the duration of
the associated Interest Period. If Agent 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.
9
<PAGE>
"Litigation" shall mean any proceeding, claim, lawsuit, and/or
----------
investigation conducted by or before any Tribunal.
"Loan" shall mean the loan or loans made under the Revolving
----
Commitment pursuant to Section 2 herein.
"Loan Balance" shall mean, at any time, the outstanding principal
------------
balance of the Notes at such time.
"Loan Documents" shall mean this Agreement, the Notes, 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 Notes 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.
"Majority Banks" shall mean Banks holding 66-2/3% or more of the
--------------
Revolving Commitments or if the Revolving Commitments have been terminated,
Banks holding 66-2/3% of the outstanding Loan.
"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 30,
----------------------------
2001.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
------------------
as defined in Section 4001(a)(3) of ERISA.
"Net Funded Debt" shall mean Borrower's Funded Debt less cash on hand.
---------------
"Non-Use Fees" shall mean the fees payable to the Agent for the
------------
ratable benefit of the Banks by the Borrower pursuant to Section 2.11.
"Notes" shall mean the promissory notes of the Borrower, in the form
-----
attached hereto as Exhibit B, and further described in Section 2.1 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.
"Obligations" shall mean, without duplication, (a) all Indebtedness
-----------
evidenced by the Notes, (b) all obligations arising pursuant to Agent'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
10
<PAGE>
of the Borrower to the Banks, 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 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.
11
<PAGE>
"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.
"Pro Rata or Pro Rata Part" shall mean for each Bank, (i) for all
-------------------------
purposes where no Loan is outstanding, such Bank's Revolving Commitment
Percentage and (ii) otherwise, the proportion which the portion of the
outstanding Loans owed to such Bank bears to the aggregate outstanding Loans
owed to all Banks at the time in question.
"Property" shall mean any interest in any kind of property or asset,
--------
whether real, personal or mixed, tangible or intangible.
"Reimbursement Obligations"shall mean at any time, the obligations of
-------------------------
the Borrower in respect of all Letters of Credit then outstanding to reimburse
amounts actually paid by any Bank in respect of any drawing or drawings under a
Letter of Credit.
"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.
12
<PAGE>
"Required Payment" is used herein as defined in Section 2.4(h) hereof.
----------------
"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.
"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 Agent by two of the previously mentioned
officers.
"Revolving Commitment" shall mean (A) for all Banks $100,000,000 , and
--------------------
(B) as to any Bank, its obligation to make Advances hereunder on the Loan and
purchase participations in Letters of Credit issued hereunder by the Agent in
amounts not exceeding, in the aggregate, an amount equal to such Bank's
Revolving Loan Commitment Percentage times the total Revolving Commitment as of
any date. The Revolving Commitment of each Bank hereunder shall be adjusted
from time to time to reflect assignments made by such Bank pursuant to Section 9
hereof. Each reduction in the Revolving Commitment shall result in a Pro Rata
reduction in each Bank's Revolving Commitment.
"Revolving Commitment Percentage" shall mean for each Bank the
-------------------------------
percentage derived by dividing its Revolving Commitment at the time of the
determination by the Revolving Commitments of all Banks at the time of
determination. The Revolving Commitment Percentage of each Bank hereunder shall
be adjusted from time to time to reflect assignments made by such Bank pursuant
to Section 9 hereof.
"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.
13
<PAGE>
"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.
"Total Outstandings" shall mean shall mean as of any date, the sum of
------------------
(i) the total principal balance outstanding on the Notes, plus (ii) the total
face amount of all outstanding Letters of Credit, plus (iii) the total amount of
all unpaid Reimbursement Obligations..
"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.
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.
14
<PAGE>
ARTICLE II
----------
2 AMOUNT AND TERMS OF FACILITY
----------------------------
2.1 Revolving Line of Credit. On the terms and conditions hereinafter set
------------------------
forth, each Bank agrees severally to make Advances to the Borrower from time to
time during the period beginning on the Effective Date and ending on the
Maturity Date in such amounts as the Borrower may request up to an amount not to
exceed, in the aggregate principal amount outstanding at any time, the Revolving
Commitment. The obligation of the Borrower hereunder shall be evidenced by this
Agreement and the Notes issued in connection herewith, said Notes to be as
described in Section 2.4 hereof. Notwithstanding any other provision of this
Agreement, no Advance shall be required to be made hereunder if any Event of
Default (as hereinafter defined) has occurred and is continuing or if any event
or condition has occurred or failed to occur which with the passage of time or
service of notice, or both, would constitute an Event of Default. Each Advance
under the Revolving Commitment shall be an aggregate amount of at least $100,000
or a whole number multiple thereof except an Advance of the entire remaining
unborrowed Revolving Commitment. Irrespective of the face amount of the Notes,
the Banks shall never have the obligation to Advance any amount or amounts in
excess of the Revolving Commitment or to increase the Revolving Commitment. The
total number of Tranches under the Revolving Commitment which may be outstanding
at any time hereunder shall never exceed ten (10), whether such Tranches are
Base Rate Loans, LIBOR Loans, or a combination thereof. Within the limit of
each Bank's Revolving Commitment, the Borrowers may borrow, repay and reborrow
under this Section 2 prior to the Maturity Date.
2.2 Letter of Credit. On the terms and conditions hereinafter set forth,
----------------
the Agent shall from time to time during the period beginning on the Effective
Date and ending on the Maturity Date upon request of Borrower issue standby
and/or commercial Letters of Credit for the account of Borrower (the "Letters of
Credit") in such face amounts as Borrower may request. The face amount of all
Letters of Credit issued and outstanding hereunder shall be considered as
Advances and all payments made by the Agent on such Letters of Credit shall be
considered as Advances under the Notes. Each Letter of Credit issued for the
account of Borrower hereunder shall (i) be in favor of such beneficiaries as
specifically requested by Borrower, (ii) have an expiration date not exceeding
the earlier of (a) one year or (b) the Maturity Date, and (iii) contain such
other terms and provisions as may be reasonably required by Agent. Each Bank
(other than Agent) agrees that, upon issuance of any Letter of Credit hereunder,
it shall automatically acquire a participation in the Agent's liability under
such Letter of Credit in an amount equal to such Bank's Revolving Commitment
Percentage of such liability, and each Bank (other than Agent) thereby shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not
as surety, and shall be unconditionally obligated to Agent to pay and discharge
when due, its Revolving Commitment Percentage of Agent's liability under such
Letter of Credit. The Borrower hereby unconditionally agrees to pay and
reimburse the Agent for the amount of each demand for payment under any Letter
of Credit that is in substantial compliance with the provisions of any such
Letter of Credit at or prior to the date on which payment is to be made by the
Agent to the beneficiary thereunder, without presentment, demand, protest or
other formalities of any kind. Upon receipt from any beneficiary of any Letter
of Credit of any
15
<PAGE>
demand for payment under such Letter of Credit, the Agent shall promptly notify
the Borrower of the demand and the date upon which such payment is to be made by
the Agent to such beneficiary in respect of such demand. Forthwith upon receipt
of such notice from the Agent, Borrower shall advise the Agent whether or not it
intends to borrow hereunder to finance its obligations to reimburse the Agent,
and if so, submit a Notice of Borrowing as provided in Section 2.3(a) hereof. If
Borrower fails to so advise Agent and thereafter fail to reimburse Agent, the
Agent shall notify each Bank of the demand and the failure of the Borrower to
reimburse the Agent, and each Bank shall reimburse the Agent for its Revolving
Commitment Percentage of each such draw paid by the Agent and unreimbursed by
the Borrower. All such amounts paid by Agent and/or reimbursed by the Banks
shall be treated as an Advance or Advances under the Revolving Commitment, which
Advances shall be immediately due and payable and shall bear interest at the
Default Rate.
2.3 Manner of Borrowing.
-------------------
(a) Procedure for Borrowing. Whenever the Borrower desires an Advance
-----------------------
hereunder, it shall give Agent telegraphic, telex, facsimile or telephonic
notice ("Notice of Borrowing") of such requested Advance, which in the case
of telephonic notice, shall be promptly confirmed in writing. Each Notice
of Borrowing shall be in the form of Exhibit "A" attached hereto and shall
be received by Agent not later than 11:00 a.m. Oklahoma City, Oklahoma
time, one London Business Day prior to any proposed Borrowing Date in the
case of LIBOR Loans and at any time up to 11:00 a.m. on the day of the
requested Advance for Base Rate Loans. 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. Each Notice of Borrowing shall specify (i) the
Borrowing Date (which, if a Base Rate Loan, shall be a Business Day and if
a LIBOR Loan, a London Business Day), (ii) the principal amount to be
borrowed, (iii) the portion of the Advance constituting Base Rate Loans
and/or LIBOR Loans and (iv) if any portion of the proposed Advance is to
constitute LIBOR Loans, the initial Interest Period selected by Borrower
pursuant to Section 4 hereof to be applicable thereto. Upon receipt of
such Notice, Agent shall advise each Bank thereof no later than 12:00 p.m.;
provided, that if the Banks have received notice as of the date of funding
of such Advance prior to funding of a Base Rate Loan, or at least one (1)
days' notice of each Advance prior to funding in the case of a LIBOR Loan,
each Bank shall provide Agent at its office at 201 Robert S. Kerr Avenue,
Oklahoma City, Oklahoma 73102, not later than 3:00 p.m., Oklahoma City,
Oklahoma time, on the Borrowing Date, in immediately available funds, its
pro rata share of the requested Advance, but the aggregate of all such
fundings by each Bank shall never exceed such Bank's Revolving Commitment.
Not later than 4:00 p.m., Oklahoma City, Oklahoma time, on the Borrowing
Date, Agent shall make available to the Borrower at the same office, in
like funds, the aggregate amount of such requested Advance. Neither Agent
nor any Bank shall incur any liability to the Borrower in acting upon any
Notice of Borrowing which Agent or such Bank believes in good faith to have
been given by a duly authorized officer or other person authorized to
borrow on behalf of Borrower or for otherwise acting in good faith under
this Section 2.3(a). Upon funding of Advances by
16
<PAGE>
Banks in accordance with this Agreement, pursuant to any such Notice, the
Borrower shall have effected Advances hereunder.
(b) Letters of Credit. The amount and date of issuance, renewal,
-----------------
extension or reissuance of a Letter of Credit pursuant to the Banks'
commitment above in Section 2.2 shall be designated by Borrower's written
request delivered to Agent at least three (3) Business Days prior to the
date of such issuance, renewal, extension or reissuance. Concurrently with
or promptly following the delivery of the request for a Letter of Credit,
Borrower shall execute and deliver to the Agent an application and
agreement with respect to the Letters of Credit, said application and
agreement to be in the form used by the Agent. The Agent shall not be
obligated to issue, renew, extend or reissue such Letters of Credit if the
amount thereof when added to the Total Outstandings would exceed the
Revolving Commitment. Borrower agrees to pay the Agent for the benefit of
the Banks the Letter of Credit Fees for issuing the Letters of Credit
(calculated separately for each Letter of Credit) . Such Letter of Credit
Fees shall be payable prior to the issuance of each Letter of Credit and
thereafter on each anniversary date of such issuance while such Letter of
Credit is outstanding. Agent shall pay such Letter of Credit Fees to Banks
within 45 days of the issuance thereof in accordance with each Bank's
Revolving Commitment Percentage.
2.4 Notes Evidencing Loans. The loans described above in Section 2.1
----------------------
shall be evidenced by promissory notes of Borrowers as follows:
(a) Form of Revolving Notes - The Revolving Loan shall be evidenced
-----------------------
by by a Note or Notes in the aggregate face amount of $100,000,000, and
shall be in the form of Exhibit "B" hereto with appropriate insertions
(each a "Note"). Notwithstanding the face amount of the Notes, the actual
principal amount due from the Borrower to Banks on account of the Notes, as
of any date of computation, shall be the sum of Advances then and
theretofore made on account thereof, less all principal payments actually
received by Banks in collected funds with respect thereto. Although the
Notes may be dated as of the Effective Date, interest in respect thereof
shall be payable only for the period during which the loans evidenced
thereby are outstanding and, although the stated amount of the Notes may be
higher, the Notes shall be enforceable, with respect to Borrower's
obligation to pay the principal amount thereof, only to the extent of the
unpaid principal amount of the loans. Irrespective of the face amount of
the Notes, no Bank shall ever be obligated to advance on the Revolving
Commitment any amount in excess of its Revolving Commitment then in effect.
(b) Issuance of Additional Notes - At the Effective Date there shall
----------------------------
be outstanding five (5) Notes in the aggregate face amount of $100,000,000
payable to the order of BOK, Bank of America, N.A., Comerica Bank-Texas,
Mercantile Bank National Association and UMB Oklahoma Bank From time to
time new Notes may be issued to other Banks as such Banks become parties to
this Agreement. Upon request from Agent, the Borrower shall execute and
deliver to Agent any such new or additional Notes. From time to time as
new Notes are issued the Agent shall require that each Bank exchange their
Notes for newly issued
17
<PAGE>
Notes to better reflect the extent of each Bank's Revolving Commitment
hereunder. The Notes replaced shall be marked to indicate that they have
been replaced and/or returned to the Borrower.
(c) Interest Rates - The unpaid principal balance of the Notes shall
--------------
bear interest from time to time as set forth in Section 2.5 hereof.
(d) Payment of Interest - Interest on the Notes shall be payable on
-------------------
each Interest Payment Date.
(e) Payment of Principal - Principal of the Note or Notes shall be
--------------------
due and payable to the Agent for the ratable benefit of the Banks on the
Maturity Date unless earlier due in whole or in part as a result of an
acceleration of the amount due.
(f) Payment to Banks - Each Bank's Pro Rata Part of each payment or
----------------
prepayment of the Loans shall be directed by wire transfer to such Bank by
the Agent at the address provided to the Agent for such Bank for payments
no later than 3:00 p.m., Oklahoma City, Oklahoma, time on the Business Day
such payments or prepayments are deemed hereunder to have been received by
Agent; provided, however, in the event that any Bank shall have failed to
make an Advance as contemplated under Section 2 hereof (a "Defaulting
Bank") and the Agent or another Bank or Banks shall have made such Advance,
payment received by Agent for the account of such Defaulting Bank or Banks
shall not be distributed to such Defaulting Bank or Banks until such
Advance or Advances shall have been repaid in full to the Bank or Banks who
funded such Advance or Advances. Any payment or prepayment received by
Agent at any time after 12:00 noon, Oklahoma City, Oklahoma, time on a
Business Day shall be deemed to have been received on the next Business
Day. Interest shall cease to accrue on any principal as of the end of the
day preceding the Business Day on which any such payment or prepayment is
deemed hereunder to have been received by Agent. If Agent fails to
transfer any principal amount to any Bank as provided above, then Agent
shall promptly direct such principal amount by wire transfer to such Bank.
(g) Sharing of Payments, Etc. - If any Bank shall obtain any payment
-------------------------
(whether voluntary, involuntary, or otherwise) on account of the Loans,
(including, without limitation, any set-off) which is in excess of its Pro
Rata Part of payments on either of the Loans, as the case may be, obtained
by all Banks, such Bank shall purchase from the other Banks such
participation as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided that, if all or any
portion of such excess payment is thereafter recovered from such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to
the extent of the recovery. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section may,
to the fullest extent permitted by law, exercise all of its rights of
payment (including the right of offset) with respect to such participation
as fully as if such Bank were the direct creditor of the Borrower in the
amount of such participation.
18
<PAGE>
(h) Non-Receipt of Funds by the Agent - Unless the Agent shall have
---------------------------------
been notified by a Bank or the Borrower (the "Payor") prior to the date on
which such Bank is to make payment to the Agent of the proceeds of a Loan
to be made by it hereunder or the Borrower is to make a payment to the
Agent for the account of one or more of the Banks, as the case may be (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has
been made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended recipient
on such date and, if the Payor has not in fact made the Required Payment to
the Agent, the recipient of such payment shall, on demand, pay to the Agent
the amount made available to it together with interest thereon in respect
of the period commencing on the date such amount was made available by the
Agent until the date the Agent recovers such amount at the rate applicable
to such portion of the applicable Loan.
(i) Capital Adequacy - If either (i) the introduction or
----------------
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation or (ii) the introduction or
implementation of or the compliance with any mandatory request, directive
or guideline from any central bank or other governmental authority (whether
or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by any Bank or any
corporation controlling any Bank as a result of maintaining its Pro Rata
Part of the Revolving Commitment, then within fifteen (15) days after
demand by such Bank, the Borrower will pay to such Bank, from time to time
as specified by such Bank, such additional amount or amounts which such
Bank shall reasonably determine to be appropriate to compensate such Bank
or any corporation controlling such Bank in light of such circumstances, to
the extent that such Bank reasonably determines that the amount of any such
capital would be increased, or the rate of return on any such capital would
be reduced in whole or in part, based on the existence of the amount of the
Loans or such Bank's Revolving Commitment under this Agreement; provided,
however, that to the extent such notice is given by any such Bank more than
180 days after the occurrence of the event giving rise to the additional
costs of the type described in this Section, such Bank shall not be
entitled to compensation pursuant to this Section for any amounts incurred
or accruing prior to the date 180 days before the giving of such notice,
except to the extent such law, rule, regulation, request, directive or
guideline shall have been given retroactive effective affecting a period
beginning more than 180 days prior to such notice.
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 Net Funded Debt to
Cash Flow existing as of the date the Notice of Borrowing is received by Agent.
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.
19
<PAGE>
(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 Base
Rate in effect from day to day, or (ii) the Highest 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.
(d) Recoupment. If at any time the applicable rate of interest
----------
selected pursuant to Sections 2.5(a)(b)and (c) above shall exceed the
Maximum Rate, thereby causing the interest on the Notes to be limited to
the Maximum Rate, then any subsequent reduction in the interest rate so
selected or subsequently selected shall not reduce the rate of interest on
the Notes below the Maximum Rate until the total amount of interest accrued
on the Note equals the amount of interest which would have accrued on the
Notes if the rate or rates selected pursuant to the Sections listed above
had at all times been in effect.
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 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 Agent 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 Agent 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 Agent at least
one (1) LIBOR Business Day, in the case of a LIBOR Rate selection, prior to
the termination of such Interest Period. No advance notice is necessary to
convert to a Base Rate Loan. 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
20
<PAGE>
term), selected by Borrower with respect to such portion of the Loan. Each
Rollover Notice shall be irrevocable and effective upon notification
thereof to Agent. If the required Rollover Notice shall not have been
timely received by Agent (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 Agent 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.
2.7 Change of Circumstances.
-----------------------
(a) Unavailability of Funds or Inadequacy of Pricing. In the event
------------------------------------------------
that, in connection with any proposed LIBOR Loan, the Agent determines,
which determination shall, absent manifest error, be final, conclusive and
binding upon all parties, due to changes in circumstances since the date
hereof, adequate and fair means do not exist for determining the LIBOR Rate
or such rate will not accurately reflect the costs to the Banks of funding
LIBOR Loans for such LIBOR Interest Period, the Agent shall give notice of
such determination to the Borrowers and the Banks, whereupon, until the
Agent notifies the Borrowers and the Banks that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to
make, continue or convert Loans into LIBOR Loans shall be suspended, and
all loans to Borrowers shall be Base Rate Loans during the period of
suspension.
(b) Change in Laws. If at any time any new law or any change in
--------------
existing laws or in the interpretation of any new or existing laws shall
make it unlawful for any Bank to make or continue to maintain or fund LIBOR
Loans hereunder, then such Bank shall promptly notify Borrowers in writing
and such Bank's obligation to make, continue or convert Loans into LIBOR
Loans under this Agreement shall be suspended until it is no longer
unlawful for such Bank to make or maintain LIBOR Loans. Upon receipt of
such notice, Borrowers shall either repay the outstanding LIBOR Loans owed
to the Banks, without penalty, on the last day of the current Interest
Periods (or, if any Bank may not lawfully continue to maintain and fund
such LIBOR Loans, immediately), or Borrowers may convert such LIBOR Loans
at such appropriate time to Base Rate Loans.
(c) Increased Cost or Reduced Return.
--------------------------------
(i) If, after the date hereof, the adoption of any applicable
law, rule, or regulation, or any change in any applicable law, rule,
or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central
21
<PAGE>
bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank with any request or
directive (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency:
(A) shall subject such Bank to any tax, duty, or other
charge with respect to any LIBOR Loans, its Notes, or its
obligation to make LIBOR Loans, or change the basis of taxation
of any amounts payable to such Bank under this Agreement or its
Notes in respect of any LIBOR Loans (other than franchise taxes
and taxes imposed on the overall net income of such Bank);
(B) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than
reserve requirements, if any, taken into account in the
determination of the LIBOR Rate) relating to any extensions of
credit or other assets of, or any deposits with or other
liabilities or commitments of, such Bank, including the Revolving
Commitment of such Bank hereunder; or
(C) shall impose on such Bank or on the London interbank
market any other condition affecting this Agreement or its Notes
or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to such
Bank of making, converting into, continuing, or maintaining any LIBOR
Loans or to reduce any sum received or receivable by such Bank under
this Agreement or its Notes with respect to any LIBOR Loans, then
Borrower shall pay to such Bank on demand such amount or amounts as
will compensate such Bank for such increased cost or reduction. If
any Bank requests compensation by Borrower under this Section 2.7,
Borrower may, by notice to such Bank (with a copy to Agent), suspend
the obligation of such Bank to make or continue LIBOR Loans, or to
convert all or part of the Base Rate Loan owing to such Bank to LIBOR
Loans, until the event or condition giving rise to such request ceases
to be in effect (in which case the provisions of Section 2.7(c) shall
be applicable); provided that such suspension shall not affect the
--------
right of such Bank to receive the compensation so requested.
(ii) If, after the date hereof, any Bank shall have determined
that the adoption of any applicable law, rule, or regulation regarding
capital adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Bank or
any corporation controlling such Bank as a consequence of such Bank's
obligations hereunder to a level below that which such Bank or such
22
<PAGE>
corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with
respect to capital adequacy), then from time to time upon demand
Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction.
(iii) Each Bank shall promptly notify Borrower and Agent of any
event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section
2.7(c) will designate a separate lending office, if applicable, if
such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to it. Any Bank claiming compensation under
this Section 2.7(c) shall furnish to Borrower and Agent a statement
setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error.
In determining such amount, such Bank may use any reasonable averaging
and attribution methods.
(iv) Any Bank giving notice to the Borrower through the Agent,
pursuant to Section 2.7(c) shall give to the Borrowers a statement
signed by an officer of such Bank setting forth in reasonable detail
the basis for, and the calculation of such additional cost, reduced
payments or capital requirements, as the case may be, and the
additional amounts required to compensate such Bank therefor.
(v) Within five (5) Business Days after receipt by the
Borrower of any notice referred to in Section 2.7(c), the Borrowers
shall pay to the Agent for the account of the Bank issuing such notice
such additional amounts as are required to compensate such Bank for
the increased cost, reduce payments or increase capital requirements
identified therein, as the case may be; provided, that the Borrower
shall not be obligated to compensate such Bank for any increased
costs, reduced payments or increased capital requirements to the
extent that such Bank incurs the same prior to a date six (6) months
before such Bank gives the required notice.
(d) Discretion of Bank as to Manner of Funding. Notwithstanding any
------------------------------------------
provisions of this Agreement to the contrary, each Bank shall be entitled
to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of
this Agreement all determinations hereunder shall be made as if each Bank
had actually funded and maintained each LIBOR Loan through the purchase of
deposits having a maturity corresponding to the last day of the LIBOR
Interest Period applicable to such LIBOR Loan and bearing an interest rate
to the applicable interest rate for such LIBOR Period.
(e) Breakage Fees. Without duplication under any other provision
-------------
hereof, if any Bank incurs any loss, cost or expense (including, without
limitation, any loss of profit and loss, cost, expense or premium
reasonably incurred by reason of the liquidation or
23
<PAGE>
re-employment of deposits or other funds acquired by such Bank to fund or
maintain any LIBOR Loan or the relending or reinvesting of such deposits or
amounts paid or prepaid to the Banks) as a result of any of the following
events other than any such occurrence as a result in the change of
circumstances described in Sections 2.7(a) and 2.7(b):
(i) any payment, prepayment or conversion of a LIBOR Loan on a
date other than the last day of its LIBOR Interest Period (whether by
acceleration, prepayment or otherwise);
(ii) any failure to make a principal payment of a LIBOR Loan on
the due date thereof; or
(iii) any failure by the Borrower to borrow, continue, prepay or
convert to a LIBOR Loan on the dates specified in a notice given
pursuant to Section 2(b) or 4(c) hereof;
then the Borrower shall pay to such Bank such amount as will reimburse such
Bank for such loss, cost or expense. If any Bank makes such a claim for
compensation, it shall furnish to Borrower and Agent a statement setting
forth the amount of such loss, cost or expense in reasonable detail
(including an explanation of the basis for and the computation of such
loss, cost or expense) and the amounts shown on such statement shall be
conclusive and binding absent manifest error.
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 March, 2000, 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. Each 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 each Bank shall be deemed rebuttably presumptive
evidence of the principal amount owing on such Bank's 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
24
<PAGE>
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 Notes 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 Notes as provided
------------
herein, in order to compensate Banks for maintaining funds available for
Borrower, Borrower shall pay to Agent for the ratable benefit of Banks, 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
Non-Use Fee applicable hereto is set forth in the definition of Applicable
Percentage.
2.12 Letter of Credit Fees. In addition to interest on the Notes as
---------------------
provided herein, to compensate the Banks for issuing any Letters of Credit, the
Borrower shall pay to the Agent for the ratable benefit of the Banks a fee for
such issuance pursuant to the following schedule:
25
<PAGE>
(a) Standby Letters of Credit
. 1.25% of the face amount of the Letter of Credit per annum,
payable upon issuance and on each anniversary thereafter.
The minimum fee shall be $75.00 for each 90 days the Letter
of Credit is outstanding.
. $60.00 issuance fee
. $40.00 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).
(b) Commercial Letter of Credit
. 0.25% 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 ($75.00 minimum).
(c) Other Letter of Credit Fees
. $40.00 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 Commitment Fees. In addition to interest on the Notes and in
---------------
order to compensate Lender for committing to maintain additional funds available
to Borrower, on or before closing, Borrower shall pay to Agent, for the ratable
benefit of Banks, a commitment fee in the amount of $75,000.00.
2.14 Cash Collateral Account.
-----------------------
(a) Upon the occurrence of an Event of Default and demand by Agent
pursuant to Section 8.2, Borrower will promptly pay to Agent in immediately
available funds an amount equal to the Reimbursement Obligations. Any
amounts so received by Agent shall be deposited by Agent in a deposit
account maintained by Agent (the "Cash Collateral Account").
(b) As security for the payment of all Reimbursement Obligations and
for all other Obligations, Borrower hereby grants, convey, assigns,
pledges, sets over and transfer to Agent, for the ratable benefit of Banks,
and create in Agent's favor a lien and security interest in, all money,
instruments and securities at any time held in or acquired in connection
with
26
<PAGE>
the Cash Collateral Account, together with all proceeds thereof. The Cash
Collateral Account shall be under the sole dominion and control of Agent,
and Borrower shall have no right to withdraw or to cause Agent to withdraw
any funds deposited in the Cash Collateral Account. At any time and from
time to time, upon Agent's request, Borrower promptly shall execute and
deliver any and all such further instruments and documents, including UCC
financing statements, as may be necessary, appropriate or desirable in
Agent's judgment to obtain the full benefits (including perfection and
priority) of the security interest created or intended to be created by
this section and of the rights and powers herein granted. Borrower shall
not create or suffer to exist any lien on any amounts or investments held
in the Cash Collateral Account other than the lien granted under this
Section.
(c) Agent shall (i) apply any funds in the Cash Collateral Account on
account of Reimbursement Obligations when the same become due and payable
if and to the extent that Borrower shall fail directly to pay such
Reimbursement Obligations and (ii) after the date on which the Revolving
Commitment of Agent shall have terminated, all Letters of Credit shall have
expired, all Reimbursement Obligations shall have been paid in full, apply
any proceeds remaining in the Cash Collateral Account first to pay any
-----
unpaid Obligations then outstanding hereunder and then to refund any
----
remaining amount to Borrower.
(d) Borrower, no more than once in any calendar month, may direct
Agent to invest the funds held in the Cash Collateral Account (so long as
the aggregate amount of such funds exceeds any relevant minimum investment
requirement) in (i) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof and (ii) one or more other types of investments permitted by Agent,
in each case with such maturities as Borrower, with the consent of Agent,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. In the
absence of any such direction from Borrower, Agent shall invest the funds
held in the Cash Collateral Account (so long as the aggregate amount of
such funds exceeds any relevant minimum investment requirement) in one or
more types of investments with such maturities as Agent may determine,
pending application of such funds on account of Reimbursement Obligations
or on account of such other Obligations, as the case may be. All such
investments shall be made in the Agent's name for the account of Agent.
Borrower recognizes that any losses or taxes with respect to such
investments shall be borne solely by Borrower, and Borrower agrees to hold
Agent harmless from any such losses or taxes. Agent may liquidate any
investment held in the Cash Collateral Account in order to apply the
proceeds of such investment on account of the Reimbursement Obligations (or
on account of any other Obligation then due and payable as the case may be)
without regard to whether such investment has matured and without liability
for any penalty or other fee incurred (with respect to which Borrower
hereby agrees to reimburse Agent) as a result of such application.
(e) Borrower shall pay to Agent the fees customarily charged by Agent
with respect to the maintenance of accounts similar to the Cash Collateral
Account.
27
<PAGE>
2.15 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 Notes 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 any
Bank; and any such 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 such Bank or notice thereof from the
Borrower.
If the maturity of the Notes is accelerated by reason of an election of the
Banks 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 Banks as of the date of such acceleration
or prepayment and, if theretofore paid, shall be credited by the Banks on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded by the Banks to the Borrower.
All sums paid, or agreed to be paid, to the Banks 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.
ARTICLE III
-----------
3 CONDITIONS
----------
The effectiveness of this Agreement, and the obligation to make the initial
Advance subsequent to the date hereof or issue any Letter of Credit under the
Revolving Commitment shall be subject to satisfaction of the following
conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Banks 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 Agent, and the Agent shall have received,
reviewed and approved the following documents and other items, appropriately
28
<PAGE>
executed when necessary and, where applicable, acknowledged, all in form and
substance satisfactory in the good faith judgment of the Agent 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
Agent:
(a) multiple counterparts of this Agreement, as reasonably requested
by the Agent;
(b) the Notes;
(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 September 30,
1999;
(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 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., LLC.
(i) copies of the Articles of Organization , Articles of Limited
Partnership, or comparable document and all amendments thereto and the
Operating Agreement and/or Limited Partnership Agreement and all
amendments thereto of each Guarantor, accompanied by a certificate issued
by the Manager (its Responsible Officer) and/or the General Partner of
each Guarantor, to the effect that such copies are correct and complete;
29
<PAGE>
(j) Certificate of Incumbency and signatures of all officers of each
Guarantor who are authorized to execute the Guaranty Agreements on behalf
of each Guarantor, executed by the Manager (its Responsible Officer) and/or
the General Partner of each Guarantor;
(k) copies of limited liability company and/or limited partnership
consents or resolutions approving the Guaranty Agreements and authorizing
the transactions contemplated therein, duly adopted by the Members and/or
the General Partner of each Guarantor, accompanied by a certificate of the
respective Manager (its Responsible Officer) 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
Members 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 G;
(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 Agent 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 Agent 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 Banks shall not be
obligated to make any Advance unless;
(a) the Borrower shall have delivered to the Agent 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;
(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 Agent, the Borrower shall have delivered
evidence satisfactory in the good faith judgment of the Agent
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;
30
<PAGE>
(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 Agent shall have received reimbursement from the Borrower, or
legal counsel for the Agent shall have received payment from the Borrower,
for all reasonable fees and expenses of counsel to the Agent 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 Agent'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 Agent on behalf of the Banks shall not be obligated to issue a Letter of
Credit unless:
(a) the Borrower shall have delivered to the Agent 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 Agent, Borrower shall have delivered evidence
satisfactory in a good faith judgment of the Agent 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;
(f) all material matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory in a good faith
judgment of the Agent.
31
<PAGE>
ARTICLE IV
----------
4 REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Banks to enter into this Agreement and to make the Advances,
the Borrower represents and warrants to the Banks (which representations and
warranties shall survive the delivery of the Notes) 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 Notes; the repayment of the Notes and
interest and fees provided for in the Notes 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 Banks 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 September 30, 1999 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 has occurred since September
30, 1999 which would cause a Material Adverse Effect.
32
<PAGE>
4.6 Liabilities, Litigation, and Restrictions. Other than as disclosed on
-----------------------------------------
the Financial Statements of the Borrower dated September 30, 1999, 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
allocable to such vested benefits. Neither the Borrower nor any
33
<PAGE>
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.
34
<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 F attached hereto.
ARTICLE V
---------
5 AFFIRMATIVE COVENANTS
---------------------
A deviation from the provisions of this Section 5 shall not constitute a
Default or Event of Default under this Agreement if such deviation is consented
to in writing by the required percentage of the Banks prior to the date of
deviation. The Borrower will at all times comply with the covenants contained
in this Section 5 from the date hereof and for so long as the Revolving
Commitment is in existence or any amount is owed to the Agent or the Banks under
this Agreement or the other Loan Documents:
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 Agent 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 Agent's review at Borrower's offices during Borrower's customary business
hours. The Borrower shall honor the Agent'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 Agent, (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
35
<PAGE>
containing a computation of, and demonstrating compliance with, each financial
covenant set forth in Section 6 herein.
5.3 Quarterly Financial Statement. Deliver to the Agent 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 Agent on or before December 31 of each year
-------------
an annual budget for the upcoming year.
5.5 Notices of Certain Events. Deliver to the Agent, 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,
36
<PAGE>
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;
(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 Agent, promptly upon the
----------------------
reasonable request of the Agent, such additional financial or other information
concerning the assets, liabilities, operations and transactions of the Borrower
as the Agent 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 minimum funding requirements of ERISA so as not to give rise to any
material liability or Reportable Event thereunder, and (b) 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 Agent shall be notified
of such event pursuant to Section 5.5 and the Agent shall be entitled to
exercise its rights and remedies pursuant to Subsection 8.1 and Section 8.2.
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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 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 Agent, be
necessary to fulfill the terms of the Loan Documents.
5.11 Initial Fees and Expenses of Agent and/or Legal Counsel to Agent.
----------------------------------------------------------------
Promptly reimburse the Agent for all reasonable and customary out-of-pocket
expenses of the Agent (including the Agent'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 Agent (after the Borrower's receipt of the Agent's request for
reimbursement) for all amounts reasonably expended, advanced or incurred by the
Agent, together with interest thereon as provided in this Subsection 5.12 (i) in
connection with the administration (such as filing fees, attorney fees and other
customary out-of-pocket expenses) of this Agreement and the Notes, and the
negotiation, preparation, and execution of any amendments and waivers hereto;
and (ii) after the occurrence of an Event of Default, all costs and expenses
(including reasonable attorneys' fees and costs of settlement) incurred by Agent
or any Bank in enforcing any Obligations of or in collecting any payments due
from any Person hereunder or under the Notes by reason of such Event of Default
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceeding; provided, however, if an uncured Event
of Default does not exist, the Agent 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 Agent until the date
that it is repaid to the Agent, 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,
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such Properties in a good and workmanlike manner; and permit any authorized
representative or representatives of the Agent 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 Agent, and, on the Closing Date or upon any renewal of any
such insurance and at other times upon the reasonable request by the Agent,
furnish to the Agent evidence, satisfactory in the good faith judgment of the
Agent of the maintenance of such insurance.
5.15 Payment of Note and Performance of Obligations. Pay the Notes
----------------------------------------------
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.
5.16 Primary Depository. Maintain all operating and depository
------------------
accounts with Agent. Agent shall provide depository services at competitive
market prices.
5.17 Agreement to Pledge Collateral. Pledge, mortgage or grant a
------------------------------
security interest, at the option of Majority Banks, in Borrower's accounts
receivable, inventory, machinery, equipment, and other fixed assets as requested
by Majority Banks in the event, and at any time and from time to time during the
term hereof (even after Agent's release of any such assets) Borrower's Net
Funded Debt to Cash Flow ratio exceeds 3.50 to 1.00 as of June 30, 2000 or at
any time thereafter. The security interest or lien of Banks shall remain on any
such assets until such point in time that the Borrower demonstrates that its Net
Funded Debt to Cash Flow ratio does not exceed 3.50to1.00 for two consecutive
quarters. Upon such a demonstration, Agent shall release the Banks' security
interest or lien; however, Borrower shall continue to be governed by the
negative pledge set forth at Section 7.2 below. Borrower's pledging of any
collateral at the request of Majority Banks shall not excuse the occurrence of
any Event of Default.
ARTICLE VI
----------
6 FINANCIAL COVENANTS.
--------------------
A deviation from the provisions of this Section 6 shall not constitute a
Default or Event of Default under this Agreement if such deviation is consented
to in writing by the required percentage of the Banks prior to the date of
deviation. The Borrower will at all times comply with the covenants contained
in this Section 6 from the date hereof and for so long as the Revolving
Commitment is in existence or any amount is owed to the Agent or the Banks under
this Agreement or the other Loan Documents:
6.1 Tangible Net Worth. Maintain at the end of each calendar quarter
------------------
Tangible Net Worth of no less than $70,000,000.00 as determined by Borrower's
Financial Statements. The minimum Tangible Net Worth shall increase each
quarter hereafter 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
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completes an acquisition with the use of its stock, Majority Banks reserve the
right to negotiate with Borrower an increase to the required Tangible Net Worth.
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 2.0 to 1.0 for each quarter of the calendar
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.
6.5 Net Funded Debt to Cash Flow Ratio. Maintain as of last day of each
----------------------------------
calendar quarter throughout the term hereof, a ratio of Net Funded Debt to Cash
Flow which shall not exceed 3.75:1.00 for quarter ending March 31, 2000;
3.50:1.00 for quarter ending June 30, 2000; and 3.00:1.00 for each quarter
thereafter.
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ARTICLE VII
-----------
7 NEGATIVE COVENANTS
------------------
A deviation from the provisions of this Section 7 shall not constitute a
Default or Event of Default under this Agreement if such deviation is consented
to in writing by the required percentage of the Banks prior to the date of
deviation (which such consent shall not be unreasonably withheld). The Borrower
will at all times comply with the covenants contained in this Section 7 from the
date hereof and for so long as the Revolving Commitment is in existence or any
amount is owed to the Agent or the Banks under this Agreement or the other Loan
Documents:
7.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness or Contingent Obligation, other than as represented on the
September 30, 1999 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; (d) amounts payable and accrued liabilities
arising in the ordinary course of Borrower's business; and (e) other
indebtedness owed to Affiliates of Borrower which is expressly made subordinate
to the Indebtedness owed hereunder and under the Notes, which subordination is
approved in advance by Majority Banks, which approval will not be unreasonably
withheld.
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 without the Majority Bank's prior written consent,
which such consent shall not be unreasonably withheld .
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 Majority 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); 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
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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 date hereof, if any such
organization or acquisition would have a Material Adverse Effect without
Majority 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..
7.8 Line of Business. Change its existing primary line of business or
----------------
enter into any new line of business without the Majority Bank's prior written
consent, which such consent shall not be unreasonably withheld or unless it
should otherwise not have a Material Adverse Effect.
7.9 Executive Management. Change or alter its current Responsible
--------------------
Officers without the Majority Bank's prior written consent, which such consent
shall not be unreasonably withheld or unless it should otherwise not have a
Material Adverse Effect.
7.10 Repurchase of Treasury Stock. Repurchase in excess of
----------------------------
$5,000,000.00 worth of Treasury stock without the Majority Bank's prior written
consent, which such consent shall not be unreasonably withheld or unless it
should otherwise not have a Material Adverse Effect.
7.11 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 without the
Majority Bank's prior written consent, which such consent shall not be
unreasonably withheld or unless it should otherwise not have a Material Adverse
Effect.
42
<PAGE>
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 Notes 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 Notice of Borrowing,
proves to have been untrue in any material respect or any representation,
statement (including Financial Statements), certificate or data furnished
or made to the Banks 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 in any Insolvency
Proceeding;
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<PAGE>
(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.
--------
44
<PAGE>
(a) Upon the occurrence of an Event of Default specified in
Subsections 8.1(g), (h), (l) 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 Majority Banks in writing, and in such
event, the Banks are 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 such 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 Banks 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 Majority Banks in writing, and in such event,
the Banks are 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 Banks, and any and all other indebtedness at any time owing by
the Banks 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), (l) 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 Banks 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
45
<PAGE>
Borrower, and the Commitment shall immediately cease and terminate unless
and until reinstated by the Majority Banks in writing, and in such event,
the Banks are 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 Banks, and any and all other indebtedness at any time owing by
the Banks 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 Banks 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 THE AGENT AND THE BANKS
-----------------------
9.1 Appointment and Authorization. Each Bank hereby appoints Agent as its
-----------------------------
nominee and agent, in its name and on its behalf: (i) to act as nominee for and
on behalf of such Bank in and under all Loan Documents; (ii) to arrange the
means whereby the funds of Banks are to be made available to the Borrower under
the Loan Documents; (iii) to take such action as may be requested by any Bank
under the Loan Documents (when such Bank is entitled to make such request under
the Loan Documents); (iv) to receive all documents and items to be furnished to
Banks under the Loan Documents; (v) to be the secured party, mortgagee,
beneficiary, and similar party in respect of, and to receive, as the case may
be, any collateral for the benefit of Banks; (vi) to promptly distribute to each
Bank all material information, requests, documents and items received from the
Borrower under the Loan Documents; (vii) to promptly distribute to each Bank
such Bank's Pro Rata Part of each payment or prepayment (whether voluntary, as
proceeds of insurance thereon, or otherwise) in accordance with the terms of the
Loan Documents and (viii) to deliver to the appropriate Persons requests,
demands, approvals and consents received from Banks. Each Bank hereby
authorizes Agent to take all actions and to exercise such powers under the Loan
Documents as are specifically delegated to Agent by the terms hereof or thereof,
together with all other powers reasonably incidental thereto. With respect to
its commitments hereunder and the Notes issued to it, Agent and any successor
Agent shall have the same rights under the Loan Documents as any other Bank and
may exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Agent and any
successor Agent in its capacity as a Bank. Agent and any successor Agent and
its Affiliates may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with the Borrower,
and any person which may do business with the Borrower, all as if Agent and any
successor Agent was not Agent hereunder and without any duty to account therefor
to the Banks; provided that, if any payments in respect of any property (or the
proceeds thereof) now or hereafter in the possession or control of Agent which
may be or become security for the obligations of the Borrower arising under the
Loan Documents by reason of the general description of indebtedness secured or
of property contained in any other agreements, documents or instruments related
to any such other business shall be applied to reduction of the obligations of
the Borrowers arising under the Loan Documents, then each Bank shall be entitled
to
46
<PAGE>
share in such application according to its pro rata part thereof. Each Bank,
upon request of any other Bank, shall disclose to all other Banks all
indebtedness and liabilities, direct and contingent, of the Borrowers to such
Bank as of the time of such request.
9.2 Note Holders. From time to time as other Banks become a party to this
------------
Agreement, Agent shall obtain execution by the Borrower of additional Notes in
amounts representing the Commitment of each such new Bank, up to an aggregate
face amount of all Notes not exceeding $100,000,000. The obligation of such
Bank shall be governed by the provisions of this Agreement, including but not
limited to, the obligations specified in Section 2 hereof. From time to time,
Agent may require that the Banks exchange their Notes for newly issued Notes to
better reflect the Commitments of the Banks. Agent may treat the payee of any
Note as the holder thereof until written notice of transfer has been filed with
it, signed by such payee and in form satisfactory to Agent.
9.3 Consultation with Counsel. Banks agree that Agent may consult with
-------------------------
legal counsel selected by Agent and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
9.4 Documents. Agent shall not be under a duty to examine or pass upon
---------
the validity, effectiveness, enforceability, genuineness or value of any of the
Loan Documents or any other instrument or document furnished pursuant thereto or
in connection therewith, and Agent shall be entitled to assume that the same are
valid, effective, enforceable and genuine and what they purport to be.
9.5 Resignation or Removal of Agent. Subject to the appointment and
-------------------------------
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving written notice thereof to Banks and the Borrowers, and Agent may be
removed at any time with or without cause by all Banks. If no successor Agent
has been so appointed by all Banks (and approved by the Borrowers) and has
accepted such appointment within 30 days after the retiring Agent's giving of
notice of resignation or removal of the retiring Agent, then the retiring Agent
may, on behalf of Banks, appoint a successor Agent. Any successor Agent must be
approved by Borrowers, which approval will not be unreasonably withheld. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent, shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 9
shall continue in effect for its benefit in respect to any actions taken or
omitted to be taken by it while it was acting as Agent. To be eligible to be an
Agent hereunder the party serving, or to serve, in such capacity must own a Pro
Rata Part of the Commitments equal to the level of Commitment required to be
held by any Bank pursuant to Section 10.1 hereof.
9.6 Responsibility of Agent. It is expressly understood and agreed that
-----------------------
the obligations of Agent under the Loan Documents are only those expressly set
forth in the Loan Documents as to each and that Agent, shall be entitled to
assume that no Default or Event of Default has occurred and is continuing,
unless Agent has actual knowledge of such fact or has received notice from a
Bank or the Borrower that such Bank or the Borrower considers that a Default or
an Event of Default has occurred and is continuing and specifying the nature
thereof. Neither Agent nor any of its directors, officers,
47
<PAGE>
attorneys or employees shall be liable for any action taken or omitted to be
taken by them under or in connection with the Loan Documents, except for its or
their own gross negligence or willful misconduct. Agent shall not incur
liability under or in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper party or parties, or
with respect to anything which it may do or refrain from doing in the reasonable
exercise of its judgment, or which may seem to it to be necessary or desirable.
Agent shall not be responsible to Banks for any of the Borrower's recitals,
statements, representations or warranties contained in any of the Loan
Documents, or in any certificate or other document referred to or provided for
in, or received by any Bank under, the Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of or any of
the Loan Documents or for any failure by the Borrower to perform any of its
obligations hereunder or thereunder. Agent may employ agents and attorneys-in-
fact and shall not be answerable, except as to money or securities received by
it or its authorized agents, for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care.
The relationship between Agent and each Bank is only that of agent and
principal and has no fiduciary aspects. Nothing in the Loan Documents or
elsewhere shall be construed to impose on Agent any duties or responsibilities
other than those for which express provision is therein made. In performing its
duties and functions hereunder, Agent does not assume and shall not be deemed to
have assumed, and hereby expressly disclaims, any obligation or responsibility
toward or any relationship of agency or trust with or for the Borrower or any of
its beneficiaries or other creditors. As to any matters not expressly provided
for by the Loan Documents, Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of all Banks and such instructions shall be binding upon
all Banks and all holders of the Notes; provided, however, that Agent shall not
be required to take any action which is contrary to the Loan Documents or
applicable law.
Agent shall have the right to exercise or refrain from exercising, without
notice or liability to the Banks, any and all rights afforded to Agent by the
Loan Documents or which Agent may have as a matter of law; provided, however,
Agent shall not, without the consent of Majority Banks, take any other action
with regard to amending the Loan Documents, waiving any default under the Loan
Documents or taking any other action with respect to the Loan Documents which
requires consent of all Banks. Provided further, however, that no amendment,
waiver, or other action shall be effected pursuant to the preceding clause
without the consent of all Banks which: (i) would reduce any fees hereunder, or
the principal of, or the interest on, any Bank's Note or Notes, (ii) would
postpone any date fixed for any payment of any fees hereunder, or any principal
or interest of any Bank's Note or Notes, (iii) would materially increase any
Bank's obligations hereunder or would materially alter Agent's obligations to
any Bank hereunder, (iv) would release Borrower from its obligation to pay any
Bank's Note or Notes, (v) would change the definition of Banks or Majority
Banks, (vi) would amend, modify or change any provision of this Agreement
requiring the consent of all the Banks, (vii) would waive any of the conditions
precedent to the Effective Date or the making of any Loan or issuance of any
Letter of Credit or (viii) would extend the Maturity Date or (ix) would amend
this sentence or the previous sentence, (x) waive Section 7.2 of this Agreement
unless such waiver is necessary in order for Majority Banks to compel a positive
pledge
48
<PAGE>
under Section 5.17 of this Agreement. Agent shall not have liability to Banks
for failure or delay in exercising any right or power possessed by Agent
pursuant to the Loan Documents or otherwise unless such failure or delay is
caused by the gross negligence of the Agent, in which case only the Agent
responsible for such gross negligence shall have liability therefor to the
Banks.
9.7 Independent Investigation. Each Bank severally represents and
-------------------------
warrants to Agent that it has made its own independent investigation and
assessment of the financial condition and affairs of the Borrower in connection
with the making and continuation of its participation hereunder and has not
relied exclusively on any information provided to such Bank by Agent in
connection herewith, and each Bank represents, warrants and undertakes to Agent
that it shall continue to make its own independent appraisal of the credit
worthiness of the Borrower while the Notes are outstanding or its commitments
hereunder are in force. Agent shall not be required to keep itself informed as
to the performance or observance by the Borrower of this Agreement or any other
document referred to or provided for herein or to inspect the properties or
books of the Borrower. Other than as provided in this Agreement, Agent shall
not have any duty, responsibility or liability to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Borrowers which may come into the possession of Agent.
9.8 Indemnification. Banks agree to indemnify Agent, ratably according to
---------------
their respective Commitments on a Pro Rata basis, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any proper and reasonable kind or nature
whatsoever which may be imposed on, incurred by or asserted against Agent in any
way relating to or arising out of the Loan Documents or any action taken or
omitted by Agent under the Loan Documents, provided that no Bank shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence or willful misconduct. Each Bank shall be entitled to
be reimbursed by the Agent for any amount such Bank paid to Agent under this
Section 9(h) to the extent the Agent has been reimbursed for such payments by
the Borrower or any other Person. The parties intend for the provisions of this
Section to apply to and protect the Agent from the consequences of any liability
including strict liability imposed or threatened to be imposed on Agent as well
as from the consequences of its own negligence, whether or not that negligence
is the sole, contributing or concurring cause of any such liability.
9.9 Benefit of Section 9. The agreements contained in this Section 9 are
--------------------
solely for the benefit of Agent and the Banks and are not for the benefit of, or
to be relied upon by, the Borrower, any affiliate of the Borrower or any other
person.
9.10 Pro Rata Treatment. Subject to the provisions of this Agreement,
------------------
each payment (including each prepayment) by the Borrower and collection by Banks
(including offsets) on account of the principal of and interest on the Notes and
fees provided for in this Agreement, payable by the Borrower shall be made Pro
Rata; provided, however, in the event that any Defaulting Bank shall have failed
to make an Advance as contemplated under Section 2 hereof and Agent or another
Bank or Banks shall have made such Advance, payment received by Agent for the
account of such Defaulting Bank or Banks shall not be distributed to such
Defaulting Bank or Banks until such Advance or Advances shall have been repaid
in full to the Bank or Banks who funded such Advance or Advances. In the event,
collateral is pledged
49
<PAGE>
to secure the Obligations pursuant to Section 5.17 or otherwise, Agent shall
hold such collateral, and any proceeds resulting from the sale thereof, for the
Pro Rata benefit of all Banks.
9.11 Assumption as to Payments. Except as specifically provided
-------------------------
herein, unless Agent shall have received notice from the Borrower prior to the
date on which any payment is due to Banks hereunder that the Borrower will not
make such payment in full, Agent may, but shall not be required to, assume that
the Borrower has made such payment in full to Agent on such date and Agent may,
in reliance upon such assumption, cause to be distributed to each Bank on such
due date an amount equal to the amount then due such Bank. If and to the extent
the Borrower shall not have so made such payment in full to Agent, each Bank
shall repay to Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to Agent,
at the interest rate applicable to such portion of the Loan.
9.12 Other Financings. Without limiting the rights to which any Bank
----------------
otherwise is or may become entitled, such Bank shall have no interest, by virtue
of this Agreement or the Loan Documents, in (a) any present or future loans
from, letters of credit issued by, or leasing or other financial transactions
by, any other Bank to, on behalf of, or with the Borrower (collectively referred
to herein as "Other Financings") other than the obligations hereunder; (b) any
present or future guarantees by or for the account of the Borrower which are not
contemplated by the Loan Documents; (c) any present or future property taken as
security for any such Other Financings; or (d) any property now or hereafter in
the possession or control of any other Bank which may be or become security for
the obligations of the Borrower arising under any loan document by reason of the
general description of indebtedness secured or property contained in any other
agreements, documents or instruments relating to any such Other Financings.
9.13 Interests of Banks. Nothing in this Agreement shall be construed
------------------
to create a partnership or joint venture between Banks for any purpose. Agent,
Banks and the Borrower recognize that the respective obligations of Banks under
the Revolving Commitment shall be several and not joint and that neither Agent
nor any of Banks shall be responsible or liable to perform any of the
obligations of the other under this Agreement. Each Bank is deemed to be the
owner of an undivided interest in and to all rights, titles, benefits and
interests belonging and accruing to Agent under the Security Instruments,
including, without limitation, liens and security interests in any collateral,
fees and payments of principal and interest by the Borrowers under the Revolving
Commitment on a Pro Rata basis. Each Bank shall perform all duties and
obligations of Banks under this Agreement in the same proportion as its
ownership interest in the Loans outstanding at the date of determination
thereof.
9.14 Investments. Whenever Agent in good faith determines that it is
-----------
uncertain about how to distribute to Banks any funds which it has received, or
whenever Agent in good faith determines that there is any dispute among the
Banks about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.
If Agent in good faith believes that the uncertainty or dispute will not be
promptly resolved, or if Agent is otherwise required to invest funds pending
distribution to the Banks, Agent may invest such funds pending distribution (at
the risk of the Borrower). All interest on any such investment shall be
distributed upon the distribution
50
<PAGE>
of such investment and in the same proportions and to the same Persons as such
investment. All monies received by Agent for distribution to the Banks (other
than to the Person who is Agent in its separate capacity as a Bank) shall be
held by the Agent pending such distribution solely as Agent for such Banks, and
Agent shall have no equitable title to any portion thereof.
ARTICLE X
---------
10 MISCELLANEOUS
-------------
10.1 Transfers and Participations.
----------------------------
(a) Each Bank shall have the right to sell, assign or transfer all or
any part of its Note or Notes, its Commitments and its rights and
obligations hereunder to one or more Affiliates, Banks, financial
institutions, pension plans, insurance companies, investment funds, or
similar Persons who are Eligible Assignees or to a Federal Reserve Bank;
provided, that in connection with each sale, assignment or transfer (other
--------
than to an Affiliate, a Bank or a Federal Reserve Bank), the applicable
Bank will consider the opinion and recommendation of Borrower, which
opinion and recommendation shall in no way be binding upon such Bank, and
each such sale, assignment, or transfer (other than to an Affiliate, a Bank
or a Federal Reserve Bank), shall require the consent of Agent, which
consent will not be unreasonably withheld, and the assignee, transferee or
recipient shall have, to the extent of such sale, assignment, or transfer,
the same rights, benefits and obligations as it would if it were such Bank
and a holder of such Note, Commitments and rights and obligations,
including, without limitation, the right to vote on decisions requiring
consent or approval of all Banks or Majority Banks and the obligation to
fund its Commitments; provided, further, that (1) each such sale,
assignment, or transfer (other than to an Affiliate, a Bank or a Federal
Reserve Bank) shall be in an aggregate principal amount not less than
$5,000,000, (2) each remaining Bank shall at all times maintain Commitments
then outstanding in an aggregate principal amount at least equal to
$5,000,000; (3) each such sale, assignment or transfer shall be of a Pro
Rata portion of such Bank's Revolving Commitment, (4) no Bank may offer to
sell its Note or Notes, Commitments, rights and obligations or interests
therein in violation of any securities laws; and (5) no such assignments
(other than to a Federal Reserve Bank) shall become effective until the
assigning Bank and its assignee delivers to Agent and Borrower an
Assignment and Acceptance and the Note or Notes subject to such assignment
and other documents evidencing any such assignment. An assignment fee in
the amount of $5,000 for each such assignment (other than to an Affiliate,
a Bank or the Federal Reserve Bank) will be payable to Agent by assignor or
assignee. Within five (5) Business Days after its receipt of copies of the
Assignment and Acceptance and the other documents relating thereto and the
Note or Notes, the Borrower shall execute and deliver to Agent (for
delivery to the relevant assignee) a new Note or Notes evidencing such
assignee's assigned Commitments and if the assignor Bank has retained a
portion of its Commitments, a replacement Note in the principal amount of
the Commitments retained by the assignor (except as provided in the last
sentence of this paragraph (a) such Note or Notes to be in exchange for,
but not in payment of, the Note or Notes held by such Bank). On and after
the effective date of an assignment hereunder, the
51
<PAGE>
assignee shall for all purposes be a Bank, party to this Agreement and any
other Loan Document executed by the Banks and shall have all the rights and
obligations of a Bank under the Loan Documents, to the same extent as if it
were an original party thereto, and no further consent or action by
Borrower, Banks or the Agent shall be required to release the transferor
Bank with respect to its Commitments assigned to such assignee and the
transferor Bank shall henceforth be so released.
(b) Each Bank shall have the right to grant participations in all or
any part of such Bank's Notes and Commitments hereunder to financial
institutions, provided, that:
(c) each Bank granting a participation shall retain the right to vote
hereunder, and no participant shall be entitled to vote hereunder on
decisions requiring consent or approval of Bank or Majority Banks (except
as set forth in (iii) below);
(d) in the event any Bank grants a participation hereunder, such
Bank's obligations under the Loan Documents shall remain unchanged, such
Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Bank shall remain the holder of any
such Note or Notes for all purposes under the Loan Documents, and Agent,
each Bank and Borrower shall be entitled to deal with the Bank granting a
participation in the same manner as if no participation had been granted;
and
(e) no participant shall ever have any right by reason of its
participation to exercise any of the rights of Banks hereunder, except that
any Bank may agree with any participant that such Bank will not, without
the consent of such participant (which consent may not be unreasonably
withheld) consent to any amendment or waiver requiring approval of all
Banks.
(f) It is understood and agreed that any Bank may provide to assignees
and participants and prospective assignees and participants financial
information and reports and data concerning Borrower's properties and
operations which was provided to such Bank pursuant to this Agreement.
(g) Upon the reasonable request of either Agent or Borrower, each Bank
will identify those to whom it has assigned or participated any part of its
Notes and Commitment, and provide the amounts so assigned or participated.
(h) Agent may not participate or sell an amount of its Revolving
Commitment which shall reduce its Revolving Commitment Percentage to less
than fifteen percent (15%).
10.2 Indemnity. The Borrower agrees to indemnify and hold harmless
---------
the Banks and their respective officers, employees, agents, attorneys and
representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Banks, including all local counsel hired by such counsel) ("Claim") incurred
by the Banks in investigating or preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of
52
<PAGE>
any commenced or threatened litigation, administrative proceeding or
investigation under any federal securities law, federal or state environmental
law, or any other statute of any jurisdiction, or any regulation, or at common
law or otherwise, which is alleged to arise out of or is based upon any acts,
practices or omissions or alleged acts, practices or omissions of the Borrower
or its agents or arises in connection with the duties, obligations or
performance of the Indemnified Parties in negotiating, preparing, executing,
accepting, keeping, completing, countersigning, issuing, selling, delivering,
releasing, assigning, handling, certifying, processing or receiving or taking
any other action with respect to the Loan Documents and all documents, items and
materials contemplated thereby even if any of the foregoing arises out of an
Indemnified Party's ordinary negligence. The indemnity set forth herein shall be
in addition to any other obligations or liabilities of the Borrower to the Banks
hereunder or at common law or otherwise, and shall survive any termination of
this Agreement, the expiration of the Loans and the payment of all indebtedness
of the Borrower to the Banks hereunder and under the Notes, provided that the
Borrower shall have no obligation under this Section to the Bank with respect to
any of the foregoing arising out of the gross negligence or willful misconduct
of the Bank. If any Claim is asserted against any Indemnified Party, the
Indemnified Party shall endeavor to notify the Borrower of such Claim (but
failure to do so shall not affect the indemnification herein made except to the
extent of the actual harm caused by such failure). The Indemnified Party shall
have the right to employ, at the Borrower's expense, counsel of the Indemnified
Parties' choosing and to control the defense of the Claim. The Borrower may at
its own expense also participate in the defense of any Claim. Each Indemnified
Party may employ separate counsel in connection with any Claim to the extent
such Indemnified Party believes it reasonably prudent to protect such
Indemnified Party. The parties intend for the provisions of this Section to
apply to and protect each Indemnified Party from the consequences of any
liability including strict liability imposed or threatened to be imposed on
Agent as well as from the consequences of its own negligence, whether or not
that negligence is the sole, contributing, or concurring cause of any Claim.
10.3 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 Notes and shall
remain in force and effect so long as any Obligation is outstanding or any
Commitment exists.
10.4 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 Agent, to:
BANK OF OKLAHOMA, N.A.
Street Address:
201 Robert S. Kerr Avenue
53
<PAGE>
Oklahoma City, Oklahoma 73102
Mail Address:
P.O. Box 24128
Oklahoma City, Oklahoma 73124
Attention: John D. Higginbotham, Senior Vice President
(b) if to the Borrower, to:
CMI CORPORATION
Street Address:
I-40 and Morgan Road
Oklahoma City, Oklahoma 73128
Mail Address:
P.O. Box 1985
Oklahoma City, Oklahoma 73101-1985
Attention: Jim D. Holland, Senior Vice President
and 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.
10.5 Parties in Interest. Subject to applicable restrictions
-------------------
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrower or the Banks shall be binding upon and inure to the benefit of
the Borrower or the Banks, as the case may be, and their respective legal
representatives, successors and assigns.
10.6 Rights of Third Parties. All provisions herein are imposed
-----------------------
solely and exclusively for the benefit of the Banks 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.
10.7 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.
10.8 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
54
<PAGE>
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.
10.9 Renewals and Extensions. All provisions of this Agreement
-----------------------
relating to the Notes 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 Notes, or any other Loan Document.
10.10 No Waiver: Rights Cumulative. No course of dealing on the part
----------------------------
of the Agent, 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 constitutes an Event of Default under the terms of this
Agreement as hereinabove provided.
10.11 Incorporation of Exhibits. The Exhibits attached to this
-------------------------
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
10.12 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.
10.13 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 Banks and the Borrower.
10.14 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.
10.15 Choice of Forum: Consent to Service of Process and Jurisdiction.
---------------------------------------------------------------
The obligations of Borrower under the loan documents are performable in Oklahoma
County, Oklahoma. Any suit, action or proceeding against the borrower with
respect to the loan documents or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of Oklahoma, County of
Oklahoma, or in the United States courts located in Oklahoma County, Oklahoma
and the Borrower hereby submits to the non-exclusive jurisdiction of such courts
for the purpose of any such suit, action or proceeding. The Borrower hereby
irrevocably consents to service of process in any suit, action or proceeding in
said court by the mailing thereof by agent by registered or certified mail,
postage prepaid, to the Borrower, as applicable, at the address for notices as
provided in section 10.3. The Borrower hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any suit, action or
55
<PAGE>
proceeding arising out of or relating to any loan document brought in the courts
located in the State of Oklahoma, County of Oklahoma, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
10.16 Waiver of Jury Trial. The Borrowers, the Agent and the Banks (by
--------------------
their acceptance hereof) hereby voluntarily, knowingly, irrevocably and
unconditionally waive any right to have a jury participate in resolving any
dispute (whether based upon contract, tort or otherwise) between or among the
Borrowers, the Agent and the Banks, arising out of or in any way related to this
document, any other related document, or any relationship between the Agent, the
Banks and the Borrowers. This provision is a material inducement to the Agent
and the Banks to provide the financing described herein.
10.17 Entire Agreement. THIS WRITTEN CREDIT AGREEMENT REPRESENTS THE
----------------
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10.18 Counterparts. This Agreement may be executed in a number of
------------
identical separate counterparts, each of which for all purposes is to be deemed
an original, but all of which shall constitute, collectively, one agreement. No
party to this Agreement shall be bound hereby until a counterpart of this
Agreement has been executed by all parties hereto.
THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK.
56
<PAGE>
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the date
first above written.
BORROWER: CMI CORPORATION
-------------------------------------
By: Jim D. Holland
Title: Senior Vice President
and Chief Financial Officer
Notice Address:
P.O. Box 1985
Oklahoma City, Oklahoma 73101-1985
Fax: 405/787-6020
57
<PAGE>
BANKS: BANK OF OKLAHOMA, N.A.
------------------------------------
By: John D. Higginbotham
Title: Senior Vice President
Notice Address:
P.O. Box 24128
Oklahoma City, Oklahoma 73124
Fax: 405/272-2588
58
<PAGE>
BANK OF AMERICA, N.A.
------------------------------------
By: Dan Condley
Title: Vice President
Notice Address:
P.O. Box 25189
Oklahoma City, Oklahoma 73125-0189
Phone: 405/230-4059
Fax: 405/230-5230
ABA Routing Number: 103000017
59
<PAGE>
COMERCIA BANK - TEXAS
------------------------------------
By: John L. Flowers
Title: Senior Vice President
Notice Address:
P.O. Box 650282
Dallas, Texas 75265-0282
Phone: 214/969-6429
Fax: 214/969-6534
ABA Routing Number: 111000753
60
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION
------------------------------------
By: Katherine K. Miller
Title: Vice President
Notice Address:
721 Locust Tram 12-3
St. Louis, Missouri 63101
Phone: 314/418-8648
Fax: 314/418-3859
ABA Routing Number: 081000210
61
<PAGE>
UMB OKLAHOMA BANK
-----------------------------------
By: Richard J. Lehrter
Title: Executive Vice President
Notice Address:
P.O. Box 82427
Oklahoma City, Oklahoma 73148-0427
Phone: 405/239-5800
Fax: 405/236-1971
ABA Routing Number: 101000695
62
<PAGE>
AGENT: BANK OF OKLAHOMA, N.A.
-----------------------------------
By: John D. Higginbotham
Title: Senior Vice President
Notice Address:
P.O. Box 24128
Oklahoma City, Oklahoma 73124
Fax: 405/272-2588
63
<PAGE>
EXHIBIT 4.2
RESTATED
CREDIT AGREEMENT
Between
CMI CORPORATION
And
BANK OF OKLAHOMA, N.A.
February 3, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I................................................................... 1
- ---------
1 DEFINITIONS....................................................... 1
-----------
1.1 Terms Defined Above......................................... 1
-------------------
1.2 Additional Defined Terms.................................... 1
------------------------
1.3 Undefined Financial Accounting Terms........................ 14
------------------------------------
1.4 References.................................................. 14
----------
ARTICLE II.................................................................. 15
- ----------
2 AMOUNT AND TERMS OF FACILITY...................................... 15
----------------------------
2.1 Revolving Line of Credit.................................... 15
------------------------
2.2 Letter of Credit............................................ 15
----------------
2.3 Manner of Borrowing......................................... 16
-------------------
2.4 Notes Evidencing Loans...................................... 17
----------------------
2.5 Interest Rates.............................................. 20
--------------
2.6 Interest Rate Options....................................... 20
---------------------
2.7 Change of Circumstances..................................... 21
-----------------------
2.8 Repayment of Advances and Interest Thereon.................. 25
------------------------------------------
2.9 Advances and Payments on Note............................... 25
-----------------------------
2.10 Voluntary Prepayments....................................... 25
---------------------
2.11 Non-Use Fees................................................ 25
------------
2.12 Letter of Credit Fees....................................... 25
---------------------
2.13 Commitment Fees............................................. 26
---------------
2.14 Cash Collateral Account..................................... 26
-----------------------
2.15 General Provisions Relating to Interest..................... 28
---------------------------------------
ARTICLE III................................................................ 28
- ------------
3 CONDITIONS........................................................ 28
----------
3.1 Receipt of Loan Documents and Other Items................... 29
-----------------------------------------
3.2 Each Advance................................................ 30
------------
3.3 Each Issuance of a Letter of Credit......................... 31
-----------------------------------
ARTICLE IV.................................................................. 32
- ----------
4 REPRESENTATIONS AND WARRANTIES.................................... 32
------------------------------
4.1 Due Authorization and Corporate Existence................... 32
-----------------------------------------
4.2 Consents, Conflicts and Creation of Liens................... 32
-----------------------------------------
4.3 Valid and Binding Obligations............................... 32
-----------------------------
4.4 Title to Assets............................................. 33
---------------
4.5 Scope and Accuracy of Financial Statements.................. 33
------------------------------------------
4.6 Liabilities, Litigation, and Restrictions................... 33
-----------------------------------------
4.7 Authorizations and Consents................................. 33
---------------------------
4.8 Compliance with Laws........................................ 33
--------------------
4.9 Proper Filing of Tax Returns and Payment of Taxes Due....... 33
-----------------------------------------------------
i
<PAGE>
4.10 ERISA....................................................... 33
-----
4.11 Environmental Laws.......................................... 34
------------------
4.12 Investment Company Act Compliance........................... 35
---------------------------------
4.13 Public Utility Holding Company Act Compliance............... 35
---------------------------------------------
4.14 No Material Misstatements................................... 35
-------------------------
4.15 Casualties or Taking of Property............................ 35
--------------------------------
4.16 Locations of Business, Offices, and Property................ 35
--------------------------------------------
4.17 Subsidiaries................................................ 35
------------
ARTICLE V................................................................... 35
- ---------
5 AFFIRMATIVE COVENANTS............................................. 35
---------------------
5.1 Maintenance and Access to Records........................... 36
---------------------------------
5.2 Annual Financial Statements................................. 36
---------------------------
5.3 Quarterly Financial Statement............................... 36
-----------------------------
5.4 Annual Budget............................................... 36
-------------
5.5 Notices of Certain Events................................... 36
-------------------------
5.6 Additional Information...................................... 37
----------------------
5.7 Compliance with Laws........................................ 37
--------------------
5.8 Payment of Assessments and Charges.......................... 38
----------------------------------
5.9 Maintenance of Corporate Existence and Good Standing........ 38
----------------------------------------------------
5.10 Further Assurances.......................................... 38
------------------
5.11 Initial Fees and Expenses of Agent and/or Legal Counsel
-------------------------------------------------------
to Agent.................................................... 38
--------
5.12 Subsequent Fees and Expenses................................ 38
----------------------------
5.13 Maintenance and Inspection of Tangible Properties........... 39
-------------------------------------------------
5.14 Maintenance of Insurance and Evidence Thereof............... 39
---------------------------------------------
5.15 Payment of Note and Performance of Obligations.............. 39
----------------------------------------------
5.16 Primary Depository.......................................... 39
------------------
5.17 Agreement to Pledge Collateral.............................. 39
------------------------------
ARTICLE VI.................................................................. 40
- ----------
6 FINANCIAL COVENANTS............................................... 40
-------------------
6.1 Tangible Net Worth.......................................... 40
------------------
6.2 Debt Service Coverage Ratio................................. 40
---------------------------
6.3 Liabilities to Net Worth.................................... 40
------------------------
6.4 Inventory Turnover Ratio.................................... 40
------------------------
6.5 Net Funded Debt to Cash Flow Ratio.......................... 40
----------------------------------
ARTICLE VII................................................................. 41
- -----------
7 NEGATIVE COVENANTS................................................ 41
------------------
7.1 Indebtedness................................................ 41
------------
7.2 Negative Pledge............................................. 41
---------------
7.3 Sales of Assets............................................. 41
---------------
7.4 Cancellation of Insurance................................... 41
-------------------------
7.5 Changes in Corporate Structure.............................. 41
------------------------------
ii
<PAGE>
7.6 Transactions with Affiliates................................ 42
----------------------------
7.7 Organization or Acquisition of Subsidiaries................. 42
-------------------------------------------
7.8 Line of Business............................................ 42
----------------
7.9 Executive Management........................................ 42
--------------------
7.10 Repurchase of Treasury Stock................................ 42
----------------------------
7.11 Dividends and Distributions................................. 42
---------------------------
ARTICLE VIII................................................................ 43
- ------------
8 EVENTS OF DEFAULT................................................. 43
-----------------
8.1 Enumeration of Events of Default............................ 43
--------------------------------
8.2 Remedies.................................................... 45
--------
ARTICLE IX.................................................................. 46
- ----------
9 THE AGENT AND THE BANKS........................................... 46
-----------------------
9.1 Appointment and Authorization............................... 46
-----------------------------
9.2 Note Holders................................................ 47
------------
9.3 Consultation with Counsel................................... 47
-------------------------
9.4 Documents................................................... 47
---------
9.5 Resignation or Removal of Agent............................. 47
-------------------------------
9.6 Responsibility of Agent..................................... 48
-----------------------
9.7 Independent Investigation................................... 49
-------------------------
9.8 Indemnification............................................. 49
---------------
9.9 Benefit of Section 9........................................ 50
--------------------
9.10 Pro Rata Treatment.......................................... 50
------------------
9.11 Assumption as to Payments................................... 50
-------------------------
9.12 Other Financings............................................ 50
----------------
9.13 Interests of Banks.......................................... 51
------------------
9.14 Investments................................................. 51
-----------
ARTICLE X................................................................... 51
- ---------
10 MISCELLANEOUS..................................................... 51
-------------
10.1 Transfers and Participations................................ 51
----------------------------
10.2 Indemnity................................................... 53
---------
10.3 Survival of Representations. Warranties and Covenants....... 54
-----------------------------------------------------
10.4 Notices and Other Communications............................ 54
--------------------------------
10.5 Parties in Interest......................................... 55
-------------------
10.6 Rights of Third Parties..................................... 55
-----------------------
10.7 Articles and Sections....................................... 55
---------------------
10.8 Number and Gender........................................... 55
-----------------
10.9 Renewals and Extensions..................................... 55
-----------------------
10.10 No Waiver: Rights Cumulative................................ 55
----------------------------
10.11 Incorporation of Exhibits................................... 56
-------------------------
10.12 Survival Upon Unenforceability.............................. 56
------------------------------
10.13 Amendments or Modifications................................. 56
---------------------------
iii
<PAGE>
10.14 Controlling Provision Upon Conflict......................... 56
-----------------------------------
10.15 Choice of Forum: Consent to Service of Process and
--------------------------------------------------
Jurisdiction................................................ 56
------------
10.16 Waiver of Jury Trial........................................ 56
--------------------
10.17 Entire Agreement............................................ 56
----------------
10.18 Counterparts................................................ 57
------------
iv
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
This Notice of Borrowing, executed and delivered this ____ day of
__________, 2000, by CMI Corporation, an Oklahoma corporation ("Borrower"),
pursuant to Section 2.3 of that certain Restated Credit Agreement (the "Credit
Agreement") dated September ____, 1996, between Borrower and Bank of Oklahoma,
N.A. and the financial institutions party thereto (the "Banks"). All terms not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
1. Outstanding principal amount of the Loan $___________
2. Net availability of credit under the Credit
Agreement (the Commitment Amount minus
Item 1) $___________
3. Base Rate Loan requested $___________
4. LIBOR Loan requested:
(a) Amount $___________
(b) Length of initial Interest Period ____________
5. Total Borrowing requested:
(Sum of Items 3 and 4) $___________
6. Requested date of Borrowing ______________
In connection with the foregoing Borrowing and pursuant to the terms and
provisions of the Credit Agreement, the undersigned hereby certifies that:
(i) The undersigned is the duly elected, qualified and acting __________
of Borrower and as such officer is authorized to make and deliver this
Certificate.
(ii) The representations and warranties contained in Article IV of the
Credit Agreement and in each of the Loan Documents are true and correct in all
material respects on and as of the date hereof with the same force and effect as
though made on and as of the date hereof.
(iii) No event has occurred and is continuing, or would result from the
Borrowing requested hereby, which constitutes a Default or an Event of Default.
(iv) The Loan will not, after giving effect to the Borrowing requested
hereby, exceed the amount permitted by Article II of the Credit Agreement.
1
<PAGE>
(v) The information contained herein is true and correct.
EXECUTED and delivered this ____ day of __________, 2000.
-----------------------------------
By:________________________________
Name:______________________________
Title:_____________________________
2
<PAGE>
EXHIBIT B
REVOLVING NOTE
$_______________.00 Oklahoma City, Oklahoma
______________, 2000
FOR VALUE RECEIVED, the undersigned CMI CORPORATION, an Oklahoma
corporation (hereinafter referred to as the "Borrower") hereby unconditionally,
jointly and severally, promises to pay to the order of _________________ (the
"Bank") at the offices of BANK OF OKLAHOMA, N.A. (the "Agent") in Oklahoma City,
Oklahoma, the principal sum of _________________________ AND NO/100 DOLLARS
($___________.00) or so much thereof as shall be advanced under the provisions
of the Restated Credit Agreement (as defined herein), in lawful money of the
United States of America together with interest from the date hereof until paid
at the rates specified in the Restated Credit Agreement. All payments of
principal and interest due hereunder are payable at the offices of Agent at 201
Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102, or at such other address
as Bank shall designate in writing to Borrowers.
The principal and all accrued interest on this Note shall be due and
payable in accordance with the terms and provisions of the Restated Credit
Agreement.
This Note is executed pursuant to that certain Restated Credit Agreement
dated of even date herewith between Borrower and the Banks signatory thereto
(the "Credit Agreement"), and is one of the Notes referred to therein.
Reference is made to the Credit Agreement and the Loan Documents (as that term
is defined in the Credit Agreement) for a statement of prepayment, rights and
obligations of Borrower, for a statement of the terms and conditions under which
the due date of this Note may be accelerated and for statements regarding other
matters affecting this Note (including without limitation the obligations of the
holder hereof to advance funds hereunder, principal and interest payment due
dates, voluntary and mandatory prepayments, exercise of rights and remedies,
payment of attorneys' fees, court costs and other costs of collection and
certain waivers by Borrower and others now or hereafter obligated for payment of
any sums due hereunder). Upon the occurrence of an Event of Default, as that
term is defined in the Credit Agreement and Loan Documents, the holder hereof
(i) may declare forthwith to be entirely and immediately due and payable the
principal balance hereof and the interest accrued hereon, and (ii) shall have
all rights and remedies of the Bank under the Credit Agreement and Loan
Documents. This Note may be prepaid in accordance with the terms and provisions
of the Credit Agreement.
Regardless of any provision contained in this Note, the holder hereof shall
never be entitled to receive, collect or apply, as interest on this Note, any
amount in excess of the Maximum Rate (as such term is defined in the Credit
Agreement), and, if the holder hereof ever receives, collects, or applies as
interest, any such amount which would be excessive interest, it shall be deemed
a partial prepayment of principal and treated hereunder as such; and, if the
indebtedness evidenced hereby is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Maximum Rate, Borrower
and the holder hereof
1
<PAGE>
shall, to the maximum extent permitted under applicable law (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) spread the
total amount of interest throughout the entire contemplated term of the
obligations evidenced by this Note and/or referred to in the Credit Agreement so
that the interest rate is uniform throughout the entire term of this Note;
provided that, if this Note is paid and performed in full prior to the end of
the full contemplated term thereof; and if the interest received for the actual
period of existence thereof exceeds the Maximum Rate, the holder hereof shall
refund to Borrower the amount of such excess or credit the amount of such excess
against the indebtedness evidenced hereby, and, in such event, the holder hereof
shall not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of the Maximum Rate.
If any payment of principal or interest on this Note shall become due on a
day other than a Business Day (as such term is defined in the Credit
Agreement), such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in computing interest in
connection with such payment.
If this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceeding at law or in equity or in bankruptcy,
receivership or other court proceedings, Borrower agrees to pay all costs of
collection, including, but not limited to, court costs and reasonable attorneys'
fees.
Borrower and each surety, endorser, guarantor and other party ever liable
for payment of any sums of money payable on this Note, jointly and severally
waive presentment and demand for payment, notice of intention to accelerate the
maturity, protest, notice of protest and nonpayment, as to this Note and as to
each and all installments hereof, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, or by any release or change in any security for the
payment of this Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes.
This Note shall be governed by and construed in accordance with the
applicable laws of the United States of America and the laws of the State of
Oklahoma.
THIS WRITTEN NOTE, THE RESTATED CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
This Note is one of a series of notes given in renewal, extension and
increase of (but not in extinguishment of) that certain Promissory Note dated as
of October 29, 1999, in the face amount of $70,000,000.00 executed by Borrower
and payable to the order of Bank of Oklahoma, N.A.
2
<PAGE>
EXECUTED as of the date and year first above written.
BORROWER:
CMI CORPORATION,
an Oklahoma corporation
-----------------------------------
By:
Title:
3
<PAGE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
_________________, 19__
BANK OF OKLAHOMA, N.A.
201 Robert S. Kerr
Oklahoma City, Oklahoma 73102
Attn: John D. Higginbotham
Re: Restated Credit Agreement dated as of ______________________, 2000, by
and among CMI Corporation and Bank of Oklahoma, N.A. as "Agent" for
itself and the Banks signatory thereto (the "Credit Agreement")
----------------
Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
[1. No Default or Event of Default exists as of the date hereof or has
occurred since the date of our previous certification to you, if any.]
[1. The following Defaults or Events of Default exist as of the date
hereof or have occurred since the date of our previous certification to you, if
any, and the actions set forth below are being taken to remedy such
circumstances:]
2. The compliance of the Borrower with the covenants of the Credit
Agreement, as of the close of business on ___________________________________,
is evidenced by the following:
(a) Section 6.1: Tangible Net Worth
------------------
Required Actual
-------- ------
Not less than $70,000,000.00 $_______________________
(b) Section 6.2: Debt Service Coverage Ratio
---------------------------
Required Actual
-------- ------
1.50:1.00 1.____:1.____
1
<PAGE>
(c) Section 6.3: Liabilities to Tangible Net Worth
---------------------------------
Required Actual
-------- ------
2.00:1.00 ____:____
(d) Section 6.4: Inventory Turnover Ratio [Annual Computation]
------------------------
Required Actual
-------- ------
1.25:1.00 ____:____
(e) Section 6.5: Net Funded Debt to Cash Flow Ratio [Quarter
----------------------------------
Computation]
Required Actual
-------- ------
3.75:1.00 [as of 3/31/00] ____:____
3.50:1.00 [as of 6/30/00] ____:____
3.00:1.00 [thereafter] ____:____
3. For calculation of the Applicable Percentage for the current quarter,
the ratio of Funded Debt to Cash Flow Ratio is _____________.
4. No Material Adverse Effect has occurred since the date of the
Financial Statements dated as of _______________.
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
CMI CORPORATION
-----------------------------------
By:
--------------------------
Title:
-----------------
2
<PAGE>
EXHIBIT H
RESTATED GUARANTY AGREEMENT
<TABLE>
<S> <C>
========================================================================================
DATE OF AGREEMENT:
______________, 2000
------------------------------------------------
DEBTOR NAME AND ADDRESS: BANK NAME AND ADDRESS:
CMI Corporation, an Oklahoma corporation Bank of Oklahoma, N.A. for itself and as
P.O. Box 1985 "Agent" on behalf of all Banks which are
Oklahoma City, Oklahoma 73101-1985 signatory parties to the Restated Credit
Agreement
201 Robert S. Kerr
P.O. Box 24128
Oklahoma City, Oklahoma 73124
- ---------------------------------------
GUARANTOR:
=======================================================================================
</TABLE>
RECITALS
A. Simultaneously herewith, Debtor entered into that certain Restated
Credit Agreement (the "Credit Agreement"), whereby the lending institution
signatories hereto, as Banks, agreed to extend credit to Debtor (the "Loan"), in
the maximum aggregate principal amount at any time outstanding not to exceed the
sum of One Hundred Million Dollars ($100,000,000.00). Capitalized terms used
and not otherwise defined in this Restated Credit Agreement shall have the
meanings given to them in the Credit Agreement.
B. In connection with the Loan, Borrower has executed and delivered to
the Banks the Notes in favor of each of such Banks aggregating the original
principal amount of the Loan.
FOR VALUE RECEIVED, and in consideration of any loan and in consideration
of the matters described in the foregoing Recitals, which Recitals are
incorporated herein and made a part hereof and for other financial
accommodations made or given to Debtor by Lender, ________________________
("Guarantor") hereby guarantees absolutely and unconditionally the full and
prompt payment when due, whether at maturity, by acceleration or otherwise, and
at any and all times thereafter, of all indebtedness, liabilities and
obligations evidenced by those certain 100 promissory notes in the aggregate
amount of $100,000,000.00 executed by Debtor in favor of each Bank which is a
party to the Credit Agreement, plus all accrued and unpaid interest thereon and
all costs and expenses, including, but not limited to attorneys' fees, court
costs and other legal expenses, paid or incurred by lender in collecting or
endeavoring to
1
<PAGE>
collect such indebtedness or any part thereof and in enforcing this guaranty
(all such indebtedness, liabilities and obligations including the debt evidenced
by such promissory note, together with all extensions, renewals, replacements,
rearrangements, changes in form and modifications thereof, being hereinafter
collectively called the "Indebtedness"). Guarantor's obligation hereunder is an
absolute, unconditional and continuing guaranty of payment of the Indebtedness.
1. Amount. This guaranty is unlimited in amount. It is expressly agreed and
------
understood that all amounts recovered from Guarantor shall be over, above and in
addition to any amounts recovered from any other source and applied to the
Indebtedness.
2. Statement of Consideration. Guarantor stipulates that Guarantor will
--------------------------
receive substantial and valuable and direct consideration and benefits from the
extension of credit by the Banks to Debtor and that it is in the Guarantor's
best interest to enter into this guaranty.
3. Banks' Remedies. In the event of (i) a default with respect to any portion
---------------
of the Indebtedness or under any promissory note executed by Debtor, or (ii) a
breach of any of the covenants or agreements of Guarantor contained herein, or
(iii) a default or events of default under any loan agreement, credit agreement,
pledge agreement, guaranty, mortgage or security agreement between or among the
Debtor, the Guarantor and/or any Bank, or (iv) the sale, exchange or transfer of
any of the interest of Guarantor in the Debtor, or (v) the business failure of
Debtor or Guarantor or (vi) the appointment of a receiver, trustee, custodian or
liquidator of any part of the property or assets of Debtor or Guarantor or (vii)
the commencement of any proceedings under any bankruptcy or insolvency laws by
or against Debtor or Guarantor if not dismissed within 90 days, and even if such
event shall occur at a time when any of the Indebtedness may not be due and
payable, Guarantor agrees to pay the Banks forthwith the full amount which would
be payable hereunder by Guarantor if all of the Indebtedness were then due and
payable.
4. Continuing Nature of Guaranty. Guarantor further agrees that this guaranty
-----------------------------
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of the Indebtedness to the Banks is rescinded
or must otherwise be returned by any Bank upon the insolvency, bankruptcy or
reorganization of the Debtor or otherwise, all as though such payment to such
Bank had not been made.
5. Guarantor's Authorization to Lender. All Banks may at any time and from
-----------------------------------
time to time, without notice to Guarantor, take any or all of the following
actions without affecting or impairing the liability of Guarantor on this
guaranty: (i) renew, extend, restructure, modify, rearrange or change the form
of the Indebtedness or the time of payment of all or any portion of the
Indebtedness, (ii) sell, exchange, accept, substitute, impair ,release,
surrender or realize upon or otherwise deal in any manner and in any order with
any security or collateral for the Indebtedness, (iii) accept other guarantors
or endorsers, (iv) release, compromise or settle with any person primarily or
secondarily liable on the Indebtedness (including any maker, co-maker, endorser
or guarantor), and (v) change, whether decrease or increase, the rate of
interest due on the Indebtedness or the manner or place of payment. The
liability of Guarantor under this guaranty shall in no way be affected or
impaired by any failure, delay or omission in enforcing payment of the
Indebtedness or this guaranty or any security to either the Indebtedness or for
this guaranty. In order to hold Guarantor liable hereunder, there shall be no
obligation on the part of the Banks, at any
2
<PAGE>
time, to resort for payment to the Debtor or any other guarantor, to seek or
obtain a deficiency judgment against Debtor or to proceed against any security
or collateral for the Indebtedness or this guaranty, and the Banks shall have
the absolute, unconditional and continuing right to enforce this guaranty
irrespective of whether or not other proceedings or steps are being taken
against any property securing the Indebtedness or any other guarantor or any
other party primarily or secondarily liable on any of the Indebtedness.
Guarantor waives and relinquishes any right to set off or offset the fair market
value of any collateral or security for the Indebtedness against Guarantor's
liability hereunder should the Banks exercise their right to proceed directly
against the Guarantor prior to proceeding against such collateral or security.
6. Relinquishment of Right of Offset. If the Banks elect to foreclose any
---------------------------------
lien in their favor, (i) the Banks are authorized to purchase all or any portion
of collateral covered by such lien, and (ii) the amount of the sale proceeds
received by the Banks to be applied against the Indebtedness shall be the actual
net proceeds received from sale of any such collateral.
7. Application of Payments on Indebtedness. Any and all payments upon the
---------------------------------------
Indebtedness made by the Debtor, or by Guarantor, or by any other person, and
the proceeds of any and all security for any of the Indebtedness may be applied
by the Banks upon such of the items of the Indebtedness, and in such order, as
the Banks may determine.
8. Guarantor Waivers. Until the Indebtedness is paid in full, Guarantor
-----------------
waives notice of acceptance hereof by the Banks and further waives presentment,
protest, demand, notice of dishonor or default, notice of acceptance of this
guaranty, notice of any loans made, extensions or renewals granted or other
action taken in reliance hereon and all demands and notices of any kind in
connection with this guaranty or the Indebtedness. GUARANTOR FURTHER WAIVES AND
RELINQUISHES ANY RIGHT OF REIMBURSEMENT, SUBROGATION, INDEMNIFICATION OR OTHER
RECOURSE OR CLAIM, WHETHER CONTINGENT OR MATURED, WHICH GUARANTOR MAY HAVE
AGAINST THE DEBTOR. IT IS THE EXPRESS INTENT OF GUARANTOR AND LENDER TO
ELIMINATE ANY DEBTOR/CREDITOR RELATIONSHIP BETWEEN THE DEBTOR AND GUARANTOR.
UNTIL THE INDEBTEDNESS IS PAID IN FULL, GUARANTOR HEREBY EXPRESSLY RELEASES AND
WAIVES ANY AND ALL PRESENT AND FUTURE RIGHTS AS A CREDITOR OF DEBTOR IN ALL
RESPECTS.
9. Guarantor's Representations and Warranties. This guaranty shall bind the
------------------------------------------
heirs, successors and assigns of Guarantor and inure to the benefit of the Banks
and their successors and assigns. This guaranty is deemed executed and
delivered in the State of Oklahoma and shall be governed by and construed in
accordance with the laws of the State of Oklahoma. It is agreed that this
guaranty was contracted for in the city set forth above as part of Agent's
address, and this guaranty is hereby deemed to have been given when received and
accepted by the Agent in such city. Guarantor hereby waives all objections to
venue and consents and submits to the jurisdiction of any state or federal court
sitting in such city or the county in which such city is located, or in any
state or county in which real property securing any promissory note executed by
Debtor is located in connection with any action instituted by the Banks by
reason of or arising out of the execution, delivery or performance of any
promissory note executed by Debtor or the collection of any of the Indebtedness
or this guaranty. Wherever possible each provision of this guaranty
3
<PAGE>
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this guaranty. If Guarantor is a
corporation, this guaranty has been duly authorized to be executed, delivered
and performed by the undersigned corporate officers pursuant to all necessary
corporate action of the board of directors of the Guarantor.
10. Waivers and Settlements. All rights of the Banks are cumulative and not
-----------------------
alternative to other rights and may be selectively and successively enforced by
the Banks as they may elect or determine in the sole discretion of the Banks and
such action(s) shall not be deemed a waiver or relinquishment of any other right
or remedy held by the Banks. The Banks may settle with any one or more of the
other parties for such sum or sums as it may see fit and release any of such
other parties from all further liability to the Banks for such Indebtedness
without impairing the right of the Banks to demand and collect the balance of
such Indebtedness from others not so expressly released.
11. Further Representations. Guarantor expressly represents and warrants to
-----------------------
the Banks that at the time of the execution and delivery hereof to the Banks
nothing exists to impair the effectiveness and the immediate taking effect of
this guaranty as the sole and only agreement between Guarantor and the Banks
with respect to guaranteeing payment of the Indebtedness.
12. Entire Agreement. THE WHOLE OF THIS GUARANTY IS FULLY SET FORTH HEREIN AND
----------------
CONSTITUTES THE ENTIRE AGREEMENT OF THE GUARANTOR AND LENDER WITH RESPECT TO
THIS GUARANTY, ALL DISCUSSIONS AND NEGOTIATIONS ARE MERGED INTO THIS AGREEMENT.
BANK HAS NOT MADE ANY ORAL AGREEMENTS, PROMISES, OR "SIDE DEALS". This guaranty
may only be modified by a written agreement by Bank and Guarantor. No officer,
agent or employee of Bank has authority to modify this guaranty orally or to
waive the provisions of this paragraph.
13. Successors and Assigns. This guaranty shall inure to the benefit of the
----------------------
Bank's successors and assigns and shall be binding upon the personal
representatives, heirs, successors and assigns of Guarantor. This guaranty is
effective immediately upon execution. Guarantor hereby waives and irrevocably
releases any claim that the delivery or effectiveness of this guaranty is
conditional in any manner whatsoever.
14. Headings. The headings of the sections of this Guaranty Agreement are
--------
inserted for convenience only and shall not be deemed to constitute a part
hereof.
15. Date. This guaranty is made and entered into effective as of the date
----
first set forth above.
GUARANTOR SIGNATURE
- ---------------------------
4
<PAGE>
- ---------------------------
By:
------------------------
Title:
---------------------
5
<PAGE>
EXHIBIT I
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance")
-------------------------
dated as of ____________, 200__, is made between ______________(the "Assignor")
--------
and ______________________ (the "Assignee").
--------
RECITALS
--------
WHEREAS, the Assignor is party to that certain Restated Credit Agreement
dated as of _______, 2000 (as extended, renewed, amended or restated from time
to time, the "Credit ') by and among CMI CORPORATION, an Oklahoma corporation
(hereinafter referred to as the "Company"), the Banks signatory thereto (the
-------
"Banks"), Bank of Oklahoma, N.A., as Agent (in such capacity, the "Agent")
-----
(unless otherwise defined herein, capitalized terms used herein have the
respective meanings assigned to them in the Credit Agreement);
WHEREAS, as provided under the Credit Agreement, the Assignor has committed
to make Loans (the "Committed Loans") to the Company in aggregate amounts not to
---------------
exceed $ ________ on the Loan (the "Revolving Commitment"), such Revolving
--------------------
Commitment being evidenced by a Note in the face amount of $ ____________(the
"Note"); the Revolving Commitment is hereinafter referred to as (the
"Commitment");
WHEREAS, the Assignor has made Committed Loans to the Company in the
aggregate principal amount of $ __________ on the Revolving Commitment [no
Committed Loans are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part] [all] of the
rights and obligations of the Assignor under the Credit Agreement in respect of
its Commitment, in an amount
equal to $ __________on the Revolving Commitment for a total of $ __________for
the total Commitment (the "Assigned Amount") on the terms and subject to the
---------------
conditions set forth herein and the Assignee wishes to accept assignment of such
rights and assume such obligations from the Assignor on such terms and subject
to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
-------------------------
(a) Subject to the terms and conditions of this Assignment and
Acceptance , (i) the Assignor hereby sells transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Agreement and Acceptance) ____% (the "Assignee's Percentage
---------------------
Share") of
- ------
1
<PAGE>
(A) the Commitment [and the Committed Loans] of the Assignor, (B) the Notes, and
(c) all related rights, benefits, obligations, liabilities and indemnities of
the Assignor under and in connection with the Credit Agreement and the Loan
Documents.
[If appropriate, add paragraph specifying payment to Assignor by Assignee
of outstanding principal of, accrued interest on, and fees with respect to,
Committed Loans assigned.]
(b) With effect on and after the Effective Date (as defined in Section 5
hereof), the Assignee shall be a party to the Credit Agreement and succeed to
all of the rights and be obligated to perform all of the obligations of a Bank
under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance with their term all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee.
(c) After giving effect to the assignment and assumption set forth herein,
on the Effective Date the Assignees Commitment will be $ __________________.
(d) After giving effect to the assignment and assumption set forth herein,
on the Effective Date the Assignor's Commitment will be $ __________________.
2. Payments.
--------
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to
$__________, representing the Assignee's Pro Rata Share of the principal
amount of all Committed Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 10.1 of the Credit
Agreement.
3. Reallocation of Payments. Any interest, fees and other payments
------------------------
accrued to the Effective Date with respect to the Commitment, the Committed
Loans and the Notes shall be for the account of the Assignor. Any interest, fees
and other payments accrued on and after the Effective Date with respect to the
Assigned Amount shall be for the account of the Assignee. Each of the Assignor
and the Assignee agrees that it will hold in trust for the other party any
interest, fees and other amounts which it may receive to which the other party
is entitled pursuant to the preceding sentence and pay to the other party any
such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision. The Assignee (a) acknowledges that it has
---------------------------
received a copy of the Credit Agreement and the Schedules and Exhibits thereto,
together with copies of the most recent
2
<PAGE>
financial statements referred to in Section 4.5 of the Credit Agreement, and
such other documents and information as it has deemed appropriate to make its
own credit and legal analysis and decision to enter into this Assignment and
Acceptance; and (b) agrees that it will, independently and without reliance upon
the Assignor, the Agent or any other Bank and based on such documents and
information as it shall dean appropriate at the time, continue to make its own
credit and legal decisions in taking or not taking action under the Credit
Agreement.
5. Effective Date; Notices.
-----------------------
(a) As between the Assignor and the Assignee, the effective date for
this Assignment and Acceptance shall be ____________, 200__ (the "Effective
---------
Date"); provided that the following conditions precedent have been
---- --------
satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee, together with the Notes;
(ii) the consent of the Agent required for an effective
assignment of the Assigned Amount by the Assignor to the Assignee under Section
10.1 of the Credit Agreement shall have been duly obtained and shall be in full
force and effective as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to
the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section 2(b) hereof and
in Section 10 of the Credit Agreement shall have been paid to the Agent; and
(v) the Assignor shall have assigned and the Assignee shall
have assumed a percentage equal to the Assignee's Percentage Share of the rights
and obligations of the Assignor under the Credit Agreement (if such agreement
exists).
(b) Promptly following the execution of this Assignment and Acceptance,
the Assignor shall deliver to the Agent for acknowledgment by the Agent, a copy
of this Assignment and Acceptance.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
-----
(a) The Assignee hereby appoints and authorizes the Assignor to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the Banks pursuant to the term of the
Credit Agreement.
(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement.]
7. Withholding Tax. The Assignee (a) represents and warrants to the
---------------
Bank, the Agent and the Company that under applicable law and treaties no tax
will be required to be withheld by the Bank
3
<PAGE>
with respect to any payments to be made to the Assignee hereunder, (b) agrees to
furnish (if it is organized under the laws of any jurisdiction other than the
United States or any State thereof) to the Agent and the Company prior to the
tune that the Agent or Company is required to make any payment of principal,
interest or fees hereunder, duplicate executed originals of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 101 (wherein the
Assignee claims entitlement to the benefits of a tax treaty that provides for a
complete exemption from U.S. federal income withholding tax on all payments
hereunder) and agrees to provide new Forms 4224 or 1001 upon the expiration of
any previously delivered form or comparable statements in accordance with
applicable U. S. law and regulations and amendments thereto, duly executed and
completed by the Assignee, and (c) agrees to comply with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
8. Representations and Warranties.
------------------------------
(a) The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any Lien or other adverse claim; (ii) it is duly
organized and existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder, (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company, or the performance or observance by the Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of any Person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance; and apart from any
agreements or undertakings or filings required by the Credit Agreement, no
further
4
<PAGE>
action by, or notice to, or filing with, any Person is required of it for such
execution, delivery or performance, (iii) this Assignment and Acceptance has
been duly executed and delivered by it and constitutes the legal, valid and
binding obligation of the Assignee, enforceable against the Assignee in
accordance with the terms hereof subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is an Eligible Assignee.
9. Further Assurances. The Assignor and the Assignee each hereby agree to
------------------
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to the Company or the Agent, which may
be required in connection with the assignment and assumption contemplated
hereby.
10. Miscellaneous.
-------------
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF OKLAHOMA. The Assignor and the Assignee
each irrevocably submits to the non-exclusive jurisdiction of any State or
Federal court sitting in Oklahoma over any suit, action or proceeding arising
out of or relating to this Assignment and Acceptance and irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such Oklahoma State or Federal court. Each party to this Assignment and
Acceptance hereby irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT
5
<PAGE>
AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE
OF DEALING OR STATEMENTS (WHETHER ORAL OR WRITTEN).
(g) Assignee hereby provides the administrative detail on Addendum 1
hereto.
[Other provisions to be added as may be negotiated between he Assignor and
the Assignee, provided that such provisions are not inconsistent with the Credit
Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
------------------------------
-------------------------------
[ASSIGNEE]
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
------------------------------
-------------------------------
6
<PAGE>
(If required by Section 10.1 of the Credit Agreement)
ACKNOWLEDGED AND CONSENTED TO:
BANK OF OKLAHOMA, N.A., as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
7
<PAGE>
ADDENDUM 1 TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
The following administrative details apply to the Assignee:
(A) Notice Address:
---------------------------------------------
---------------------------------------------
Assignee name:
---------------------------------------------
Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Attention:
---------------------------------------------
Telephone: ( )
--------------------------------
Telecopier: ( )
--------------------------------
Telex (Answerback):
---------------------------------------------
(B) Payment Instructions:
Account No.:
---------------------------------------------
At:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Reference:
---------------------------------------------
Attention:
---------------------------------------------
8
<PAGE>
EXHIBIT 10.5
AMENDMENT NO. 1 TO INVESTMENT AGREEMENT
This Amendment No. 1 to Investment Agreement (the "Amendment No. 1") is
made and entered into effective as of the 6th day of November, 1998, between
Recovery Equity Investors, L.P., a Delaware limited partnership (the
"Investor"), and CMI Corporation, an Oklahoma corporation (the "Company").
WHEREAS, effective as of August 19, 1991, the Investor and the Company
entered into that certain Investment Agreement (the "Investment Agreement")
pursuant to which, among other things, the Investor purchased from the Company
6,666,667 shares of the Company's Common Stock;
WHEREAS, the parties desire to amend the Investment Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined herein shall
have their respective meanings as set forth in the Investment Agreement.
2. Section 4.1 of the Investment Agreement is hereby amended to read in
its entirety as follows:
"SECTION 4.1. Board Representation. From and after November 6, 1998,
--------------------
the Investor shall be entitled to designate for election to the
Company's Board of Directors one-half (1/2) of the total number of
directors then constituting the entire Board, as such number of
directors shall be fixed from time to time pursuant to resolution
adopted by the Company's Board of Directors; provided, however, that
-------- -------
if, after the date hereof, the Investor, its affiliates, limited
partners and associates cease to beneficially own an aggregate of at
least 1,700,000 shares of Voting Class A Common Stock, par value $0.10
per share ("Class A Common Stock"), of the Company, the Investor
thereafter shall be entitled to designate for election to the
Company's Board of Directors only one-third (1/3) of the total number
of directors then constituting the entire Board; and, provided,
--------
further, that if the Investor, its affiliates, limited partners and
-------
associates cease to beneficially own an aggregate of at least
1,000,000 shares of Class A Common Stock, the Investor thereafter
shall be entitled to designate only one (1) person for election to the
Company's Board of Directors (it being understood that such
entitlement to designate one director shall terminate at such time as
the Investor, its affiliates, limited partners and associates cease to
beneficially own any shares of Class A Common Stock). Any person
designated by the Investor for election to the Company's Board of
Directors in accordance with the provisions of this Section 4.1 shall
be included in the slate of nominees
1
<PAGE>
recommended by such Board of Directors to the Company's
shareholders for election as directors at each applicable annual
meeting of the shareholders of the Company, and the Company shall
use its best efforts to cause the election of each such person
designated by the Investor. In the event that any designee of the
Investor for election to the Company's Board of Directors
pursuant to the foregoing provisions shall cease to serve as a
director for any reason, the vacancy resulting therefrom shall be
filled as soon as practicable with a person designated by the
Investor. Provided that he continues to beneficially own (with
his wife, children and grandchildren) at least 1,500,000 shares
of Class A Common Stock, Bill Swisher shall be entitled to
designate himself for election to the Company's Board of
Directors. If so designated, Mr. Swisher shall be included in the
slate of nominees recommended by the Board of Directors to the
Company's shareholders for election as directors at each
applicable annual meeting of the shareholders of the Company, and
the Company shall use its best efforts to cause the election of
Mr. Swisher. Mr. Swisher is specifically made a third party
beneficiary of the two sentences immediately preceding this
sentence. In the event that (i) at any time the designee(s) of
the Investor are not elected to the Company's Board of Directors
as provided herein, or (ii) the Department of Labor through
formal or informal rules, regulations, or interpretations
provides, or it is otherwise provided through governmental or
court action, that such Board representation does not constitute
the exercise of management rights of the kind necessary to allow
the Investor to continue to qualify as a venture capital
operating company under Department of Labor Regulation 2510.3-101
promulgated under ERISA, then the Investor and the Company shall
use their best efforts, upon the advice of counsel to the
Investor, to ensure that the Investor has and is permitted to
exercise the minimum amount of such management rights to continue
to qualify as a venture capital operating company; provided,
--------
however, that in no event shall the Investor be entitled under
-------
this Section 4.1 to designate for election to the Board of
Directors a number of persons greater than that set forth in the
first sentence of this Section 4.1. The number and type of
securities which the Investor, its affiliates, limited partners
and associates (or Bill Swisher, his wife, children and
grandchildren, as the case may be) are required to beneficially
own to be afforded the right to designate persons for election to
the Company's Board of Directors shall be appropriately adjusted
to reflect any stock split, reverse stock split, stock dividend,
recapitalization or similar action. The parties acknowledge and
agree that, for purposes of determining the number of shares of
Class A Common Stock or other securities of the Company
beneficially owned by the Investor's limited partners, only those
shares distributed by the Investor to the limited partners shall
be considered."
2
<PAGE>
3. The parties acknowledge and agree that, for purposes of Section 4.1,
Tom Engelsman shall be deemed to be a designee of the Investor.
4. Except as specifically provided herein, the terms and provisions of
the Investment Agreement shall remain unchanged and in full force and effect.
This Amendment No. 1 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument. This
Amendment No. 1 shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to the principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed below.
RECOVERY EQUITY INVESTORS, L.P., a
Delaware limited partnership
By: Recovery Equity Partners, L.P., its
General Partner
By: /s/ Joseph J. Finn-Egan
-------------------------------------
Joseph J. Finn-Egan, General Partner
By: /s/ Jeffrey A. Lipkin
-------------------------------------
Jeffrey A. Lipkin, General Partner
CMI CORPORATION, an Oklahoma corporati
By: /s/ Bill Swisher
-------------------------------------
Bill Swisher, Chairman of the
3
<PAGE>
EXHIBIT 10.7
AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT
------------------------------------------------
This Amendment No. 1 to Registration Rights Agreement, dated as of August
19, 1991, by and between CMI CORPORATION, an Oklahoma corporation (the
"Company"), and RECOVERY EQUITY INVESTORS, L.P., a Delaware limited partnership
(the "Investor"), is made this 15th day of January, 1993.
WHEREAS, the parties hereto are parties to that certain Registration Rights
Agreement, dated as of August 19, 1991 (the "Registration Rights Agreement");
WHEREAS, as of the date hereof, the Company is issuing a warrant
certificate dated the date hereof to the Investor (the "Warrant Certificate");
and
WHEREAS, the parties hereto desire to amend the Registration Rights
Agreement to redefine the term "Registrable Securities" as used in Section 1
thereof to include equity securities and equity security equivalents issued
pursuant to the Warrant Certificate;
NOW, THEREFORE, the parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined herein shall
have their respective meanings as set forth in the Registration Rights
Agreement.
2. The definition of the term "Registrable Securities" contained in
Section 1 of the Registration Rights Agreement is hereby amended to read in its
entirety as follows:
"Registrable Securities" means New Shares and any other Equity
Securities or Equity Security Equivalents acquired by the
Investor pursuant to the provisions of the Investment Agreement
(including, without limitation, any securities acquired pursuant
to any exercise by the Investor of its rights under Section 4.2
of the Investment Agreement and Section 3 of the Shareholders
Agreement) and any other Equity Securities or Equity Security
Equivalents acquired pursuant to any exercise by the Investor (or
any of its permitted assignees) of its rights under that certain
Warrant Certificate, dated January 15, 1993, granting the
Investor the right to purchase up to 450,000 shares of Voting
Class A Common Stock, $0.10 par value, of the Company. As to any
particular Registrable Securities, once issued, such securities
shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have
become effective under the Securities Act (as defined below) and
such securities shall have been disposed of in accordance with
such registration statement, (b) they shall have been sold as
permitted by, and in compliance with, the Securities Act, (c)
they shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfers shall
have been delivered by the Company and subsequent public
distribution of them shall not require registration of them under
the Securities Act, or (d) they shall have ceased to be
outstanding."
<PAGE>
3. Notwithstanding anything to the contrary in the Registration Rights
Agreement including, without limitation, Sections 2.1(b), 2.1(f) and 2.2(b), or
the Warrant Certificate issued to Larry D. Hartzog ("Hartzog") by the Company on
the date hereof (the "Hartzog Warrant") including, without limitation, Sections
10.3 and 10.5 thereof, the Investor and the Company hereby agree that in
connection with any registration of securities pursuant to Section 2.1 or
Section 2.2 of the Registration Rights Agreement, Hartzog (and/or any
assignee(s) or transferee(s) of Hartzog) shall be entitled to exercise the
registration rights granted to Hartzog pursuant to the Hartzog Warrant to
register Holder Shares (as such term is defined in the Hartzog Warrant) such
that the ratio of the number of Holder Shares to be registered in such
registration by Hartzog (and/or any assignee(s) or transferee(s) of Hartzog) to
the number of shares of Stock (as such term is defined in the Warrant
Certificate issued to the Investor by the Company on January 15, 1993) to be
registered by the Investor in such registration is equal to 1:20. Hartzog and
his assignee(s) and transferee(s) are specifically made third party
beneficiaries of the immediately preceding sentence.
4. Except as specifically provided herein, the terms and provisions of the
Registration Rights Agreement shall remain unchanged and in full force and
effect. This Amendment No. 1 may be executed in any number of counterparts, all
of which taken together shall constitute one and the same amendatory instrument,
and any of the parties hereto may execute this Amendment No. 1 by signing any
such counterpart. This Amendment No. 1 shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
[The remainder of this page left blank intentionally]
2
<PAGE>
CMI CORPORATION, an Oklahoma
corporation
By: /s/ Jim D. Holland
---------------------------------------
Title: /s/ Vice President and Treasurer
-------------------------------
RECOVERY EQUITY INVESTORS, L.P., a
Delaware limited partnership
By: Recovery Equity Partners, L.P., its
general partner
By: /s/ Joseph J. Finn-Egan
------------------------------------
Joseph J. Finn-Egan, General Partner
By: /s/ Jeffrey A. Lipkin
------------------------------------
Jeffrey A. Lipkin, General Partner
3
<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 March 8, 2000, except
as to the last paragraph of note 3 and the first paragraph of note 14 which are
as of March 30, 2000, relating to the consolidated balance sheets of CMI
Corporation and subsidiaries as of December 31, 1999 and 1998, 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,
1999, which report appears in the December 31, 1999, annual report on Form 10-K
of CMI Corporation.
/s/ KPMG LLP
KPMG LLP
Oklahoma City, Oklahoma
April 12, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,681
<SECURITIES> 1,417
<RECEIVABLES> 31,257
<ALLOWANCES> 0
<INVENTORY> 121,902
<CURRENT-ASSETS> 174,132
<PP&E> 69,983
<DEPRECIATION> 38,815
<TOTAL-ASSETS> 215,475
<CURRENT-LIABILITIES> 42,869
<BONDS> 94,497
0
0
<COMMON> 2,164
<OTHER-SE> 75,945
<TOTAL-LIABILITY-AND-EQUITY> 215,475
<SALES> 214,525
<TOTAL-REVENUES> 214,525
<CGS> 159,264
<TOTAL-COSTS> 204,949
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,573
<INCOME-PRETAX> 4,001
<INCOME-TAX> 1,512
<INCOME-CONTINUING> 2,489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,489
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.11
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,131
<SECURITIES> 0
<RECEIVABLES> 35,944
<ALLOWANCES> 0
<INVENTORY> 105,717
<CURRENT-ASSETS> 160,975
<PP&E> 69,926
<DEPRECIATION> 40,681
<TOTAL-ASSETS> 197,660
<CURRENT-LIABILITIES> 33,005
<BONDS> 86,984
0
0
<COMMON> 2,155
<OTHER-SE> 75,516
<TOTAL-LIABILITY-AND-EQUITY> 197,660
<SALES> 52,577
<TOTAL-REVENUES> 52,577
<CGS> 40,579
<TOTAL-COSTS> 50,836
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,534
<INCOME-PRETAX> 309
<INCOME-TAX> 137
<INCOME-CONTINUING> 172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
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