<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-47493
Prospectus Supplement to Prospectus dated January 27, 1999.
$200,000,000
8.75% Senior Subordinated Notes due 2009
-----------
Applied Power Inc. will pay interest on the Notes on April 1 and October 1 of
each year. The first such payment will be made on October 1, 1999. The Notes
are subordinated in right of payment to all senior debt of APW. The Notes will
be issued only in denominations of $1,000 and integral multiples of $1,000.
On or after April 1, 2004, APW has the option to redeem all or a portion of
the Notes at the redemption prices set forth in this prospectus supplement. On
or before April 1, 2002, APW has the option to redeem up to 35% of the
aggregate principal amount of the Notes with the proceeds of certain public
equity offerings at a redemption price of 108.75% of their principal amount
plus accrued interest to the redemption date. If APW experiences specific kinds
of changes of control, APW must make an offer to repurchase the Notes at 101%
of their principal amount, plus accrued interest to the date of repurchase.
See "Risk Factors" on page S-14 to read about certain factors you should
consider before buying the Notes.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Note Total
-------- -----
<S> <C> <C>
Initial public offering price............................ 100.00% $200,000,000
Underwriting discount.................................... 2.50% $ 5,000,000
Proceeds, before expenses, to Applied Power Inc.......... 97.50% $195,000,000
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Notes will accrue from April 1, 1999 and must
be paid by the purchaser if the Notes are delivered after April 1, 1999.
-----------
The underwriters expect to deliver the Notes in book-entry form only through
the facilities of The Depository Trust Company against payment in New York, New
York on April 1, 1999.
Goldman, Sachs & Co.
Credit Suisse First Boston
NationsBanc Montgomery Securities LLC
-----------
Prospectus Supplement dated March 26, 1999.
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the statements under the captions "The Company," "Risk Factors,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included or incorporated by reference in the accompanying
prospectus and elsewhere in this prospectus supplement constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements involve known and unknown risks,
uncertainties and other factors which may cause Applied Power Inc. or its
industry's actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. In addition to the assumptions and
other factors referred to specifically in connection with such statements,
factors that may cause actual results or events to differ materially from those
contemplated by such forward-looking statements include, without limitation,
general economic conditions and market conditions in the industrial production,
trucking, construction, aerospace, automotive, recreational vehicle, computer,
semiconductor, telecommunication, electronic and defense industries in North
America, Europe and, to a lesser extent, Asia, market acceptance of existing
and new products, successful integration of acquisitions, competitive pricing,
foreign currency risk, interest rate risk, environmental matters, unforeseen
costs or consequences of Year 2000 issues and other factors that may be
referred to in Applied Power Inc.'s filings with the Securities and Exchange
Commission from time to time.
S-1
<PAGE>
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S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
Company Overview
Applied Power Inc. ("APW" or the "Company") is an innovative, global,
diversified manufacturing company organized into three business segments:
.Enclosure Products and Systems
.Engineered Solutions
.Tools and Supplies
APW is a Wisconsin corporation organized in 1910. The principal executive
offices of APW are located at 13000 West Silver Spring Drive, Butler, Wisconsin
53007 and the telephone number is (414) 783-9279.
The following pie charts show the net sales and EBITDA (as defined)
contribution by each business segment:
- -------
(1) "Pro forma" reflects the inclusion of full period results for the Rubicon,
ZERO, Vero and other transactions (each as defined) as if they had occurred
on March 1, 1998.
(2) "EBITDA" is defined as income from continuing operations before interest,
taxes, depreciation and amortization, excluding restructuring and other
nonrecurring charges. APW believes that EBITDA provides useful information
regarding APW's ability to service its indebtedness, but should not be
considered in isolation or as a substitute for operating income or cash
flow from operations as an indicator of APW's operating performance or as a
measure of APW's liquidity.
(3) Excludes corporate overhead expenses of $11.5 million.
Enclosure Products and Systems
The Enclosure Products and Systems segment is a global leader in the
fragmented electronics enclosures market. Electronics enclosures are steel,
aluminum or plastic cabinets that organize and configure individual electronic
components and house, protect and insulate the entire electronics system. APW
manufactures enclosure products and systems sold to a variety of end users and
original equipment manufacturers ("OEMs") in the networking,
telecommunications, computing and electronics industries.
APW believes it offers a more comprehensive range of products and services
than its competitors in the electronics enclosures market. APW provides
enclosure products such as cases, racks, backplanes (large printed circuit
boards which interconnect the components of an electronic system), thermal
management systems (for temperature control) and power supplies. Importantly,
APW offers broad design and engineering expertise to integrate these products
into customized, cost-effective enclosure systems for its customers worldwide.
For example, APW has designed and manufactures an aluminum enclosure that
houses the electronics for a wireless base substation for a global
telecommunications customer. This weatherproof
S-3
<PAGE>
outdoor enclosure includes APW's proprietary thermal management system and both
primary and back up power supplies, all of which are integrated and tested by
APW for the customer. Another example is the enclosure system APW designed for
a global leader in the computer data storage market. APW manufactures steel
enclosures that incorporate APW's power supplies, internal mechanical racks and
thermal management systems. APW also installs the cables and wires necessary to
integrate all APW or customer supplied components into the final enclosure.
Engineered Solutions
The Engineered Solutions segment is a leading global designer and
manufacturer of customized thermal management and motion and vibration control
systems for a variety of "niche" industrial markets. APW provides customized,
engineered solutions to customers in the aerospace, automotive and recreational
vehicle ("RV") markets. In addition, APW provides thermal management systems
for the electrical and electronics markets.
For example, APW designs and manufactures the hydraulic system used to
automatically open and close convertible tops for automobiles. This system is
comprised of sensors, electronic controls, hydraulic cylinders, electric motors
and a hydraulic pump, all integrated into a complete system that is installed
into the automobile on the OEM assembly line on a just-in-time basis. Another
example of an engineered solution is APW's proprietary integrated system used
to level and stabilize RVs when parked on uneven terrain. This system includes
an electronic panel and four hydraulic cylinders installed under the vehicle
which work together as an integrated system to level the RV.
Tools and Supplies
The Tools and Supplies segment provides a wide array of branded, specialized
electrical and industrial tools and supplies to wholesale distributors,
catalogs and various retail distribution channels. APW's Tools and Supplies
segment has particular expertise in high-pressure hydraulic design and plastic
injection molding. For example, under the Enerpac brand name, APW is a leading
supplier of high-pressure hydraulic pumps and cylinders used to lift and move
heavy equipment in repair and maintenance facilities.
---------------
Through acquisitions and internal growth, APW's net sales grew to $1,713.9
million for the pro forma year ended August 31, 1998 from $527.1 million (prior
to restatement for the ZERO merger, which was accounted for as a pooling of
interests) for the fiscal year ended August 31, 1995. This represents a
compound annual growth rate of 48%. Management projects its fiscal 1999 net
sales mix will be as follows:
- -------
(1) This information is based upon market and customer data provided by APW's
business segment leaders as part of ongoing business planning.
S-4
<PAGE>
Overview of Recent Merger and Acquisitions
APW believes it is well positioned to successfully execute its diversified
growth strategy. APW's goal is both to increase penetration into high growth
end markets and expand geographically. APW's strategy includes acquiring
businesses that fit with APW's current businesses, particularly the Enclosure
Products and Systems segment.
Since September 1996, the Company has invested approximately $1.3 billion in
the following mergers and acquisitions, which APW believes have transformed the
Company into a global supplier of electronics enclosure systems:
(dollars in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date Company Purchase Price Primary Location(s) APW Business Segment
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September Rubicon $ 371 Europe Enclosure Products and Systems
1998
July 1998 ZERO 386 United States and Enclosure Products and Systems
Europe Engineered Solutions
June 1998 Vero 192 Europe Enclosure Products and Systems
October Versa/Tek 141 United States Engineered Solutions
1997 Tools and Supplies
Others (12) 200 United States and Enclosure Products and Systems
Europe Tools and Supplies
------
Total $1,290
- ----------------------------------------------------------------------------------------
</TABLE>
During this period, APW has acquired 16 businesses including the acquisition
of Vero Group plc ("Vero") in June 1998, the merger with ZERO Corporation
("ZERO") in a pooling of interests in July 1998 and the acquisition of Rubicon
Group plc ("Rubicon") in September 1998. Together, these three transactions
give APW several competitive advantages:
^^. Strengthened market presence in high growth telecommunications,
networking, computer storage, and Automated Teller Machine ("ATM") sectors
of the electronics industry.
. Increased geographic coverage to support its global customers, principally
in North America and Europe.
. Enhanced portfolio of products that can be integrated into electronics
enclosures, adding thermal management systems, power supplies and
backplanes.
Global Business Strategy
Continue to Grow and Diversify
APW seeks to create sustainable growth through new product development,
global expansion and preferential investment in high-growth end markets. APW
believes this growth strategy has significantly reduced the Company's exposure
to economic cycles. APW's growth potential is strengthened by the Company's
broad product offering and geographic and customer diversity. APW operates 97
facilities worldwide, primarily in North America and Europe. No one customer
accounts for more than 5% of APW's net sales, and only 20% of its net sales are
derived from its largest ten customers. APW believes this diversity helps
mitigate the effect of regional or industry downturns.
Expand through Acquisitions
APW plans to continue to grow through strategic acquisitions in each of its
business segments, with a particular focus on the electronics enclosure systems
market. APW prefers to invest in acquisitions which support the electronics
industry, using electronics enclosure systems as a way to participate in
growing high technology markets such as telecommunications and networking. As a
leading consolidator in the fragmented electronics enclosure systems market,
APW believes that it is well positioned to execute its acquisition strategy.
S-5
<PAGE>
Capitalize on Electronics Manufacturing Outsourcing Trends
OEMs in the electronics industry are increasingly using specialized
manufacturers for various aspects of the manufacturing process (commonly
referred to as outsourcing or contract manufacturing). APW has targeted this
trend as a significant growth opportunity for its Enclosure Products and
Systems segment.
According to industry sources, over the past five years the global demand
for contract electronics manufacturing services has grown 25% annually to an
estimated $85 to $90 billion, representing only 15% to 20% of the total
electronics manufacturing market. The contract electronics manufacturing
industry for high volume products such as printed circuit boards and personal
computers is already well developed. However, APW's strategy is focused on the
more rapidly growing, early-stage outsourcing trends in the lower volume custom
electronics enclosure systems markets.
Many electronics manufacturers recognize the strategic advantages of
outsourcing their manufacturing operations to companies such as APW.
Outsourcing affords OEMs the opportunity to:
. Focus on product development and marketing
. Speed a product to market
. Access state-of-the-art technology and process management skills
. Reduce capital requirements and total manufacturing costs
OEM customers now desire more integration and electronics assembly services
than ever before. APW is responding to this trend by expanding its enclosure
integration services to include components such as thermal management systems,
backplanes, power supplies, cables, wire harnesses and, to a lesser extent,
printed circuit boards. APW believes it will benefit from further outsourcing
and vendor consolidation due to the breadth of its product and service
offerings and its ability to deliver these products and services globally.
Continue to Build Global Scale
APW's customers increasingly demand suppliers with global capabilities in
manufacturing and distribution. APW continues to expand its worldwide
organization for electronics enclosures and system integration services to
support its global customers.
APW has significantly increased its presence in Europe, where it currently
derives approximately 42% of its net sales. APW maintains a presence in Asia,
with sales from that region approximating 2% of net sales. The Company intends
to continue to expand globally through internal opportunities and acquisitions,
as well as through relationships with large-scale customers that can support
expansion into new regions and markets.
Continue Efficiency and Productivity Improvements
APW has streamlined manufacturing processes in its business segments to
improve quality, efficiency and on-time delivery performance. These
enhancements result in better use of manufacturing floor space, lower inventory
levels and reduced working capital requirements. These programs have
contributed to a reduction of primary working capital (defined as accounts
receivable plus inventories less accounts payable) as a percentage of sales
from 28% for the fiscal year ended August 31, 1995, to 15% for the fiscal year
ended August 31, 1998.
Cultivate Performance Based Culture
APW's culture is based on the belief that people are the key ingredient in
successful execution of business strategies and the drivers of financial
performance. The Company's decentralized and entrepreneurial approach is based
on high quality, team-oriented people with a strong sense of responsibility and
accountability. This foundation enables APW to remain flexible and effective in
the integration of acquisitions and enhances its ability to respond to rapidly
changing industry dynamics.
S-6
<PAGE>
APW executives participate in a structured incentive compensation system
based on achievement of both definitive business unit performance targets and
overall APW results. Executive compensation is heavily weighted toward stock
ownership, thereby aligning management's interests with investors' interests in
achieving APW's strategic goals. Management, director and employee stock
ownership (including outstanding stock options) currently approximate 13% of
diluted shares outstanding.
Business Segment Overview
Enclosure Products and Systems
The Enclosure Products and Systems segment is a global leader in the
fragmented electronics enclosures market. Electronics enclosures are steel,
aluminum or plastic cabinets that organize and configure individual electronic
components and house, protect and insulate the entire electronics system. APW
manufactures enclosure products and systems sold to a variety of end users and
OEMs in the networking, telecommunications, computing and electronics
industries.
APW believes it offers a more comprehensive range of products and services
than its competitors in the electronics enclosures market. APW provides
enclosure products such as cases, racks, backplanes, thermal management systems
and power supplies. Importantly, APW offers broad design and engineering
expertise to integrate these products into customized, cost-effective enclosure
systems for its customers worldwide.
For example, APW has designed and manufactures an aluminum enclosure that
houses the electronics for a wireless base substation for a global
telecommunications customer. This weatherproof outdoor enclosure includes APW's
proprietary thermal management system and both primary and back up power
supplies, all of which are integrated and tested by APW for the customer.
Another example is the enclosure system APW designed for a global leader in the
computer data storage market. APW manufactures steel enclosures that
incorporate APW's power supplies, internal mechanical racks and thermal
management systems. APW also installs the cables and wires necessary to
integrate all APW or customer supplied components into the final enclosure.
APW sells electronic enclosure products and systems under the APW Enclosures
Systems, APW Electronic Solutions, Vero, ZERO, Stantron, Danica and Wright Line
brand names. The Enclosure Products and Systems segment's sales, engineering
and manufacturing activities are primarily in North America (50%) and Europe
(49%). Enclosure Products and Systems sales are diversified by customer and end
user industry and are primarily marketed through direct sales persons, with
sales representatives and distributors used in certain situations. Major
customers include IBM, NCR, EMC, Hewlett Packard, Nortel Networks, Sun, Nokia,
Applied Materials, Ericsson, Qualcomm and Lucent. No one customer accounts for
more than 10% of the Enclosure Products and Systems segment's net sales.
Enclosure Products and Systems Selected Financial Data
<TABLE>
<CAPTION>
Year ended August 31,
---------------------------------------------- Pro forma twelve
1996 1997 1998 1998 months ended
actual (1) actual (1) actual (1) pro forma (2) February 28, 1999 (2)
---------- ---------- ---------- ------------- ---------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $190.0 $296.2 $482.4 $944.8 $976.7
EBITDA (3).............. 32.2 55.8 76.5 131.9 128.1
</TABLE>
- -------
(1) Actual as restated for the ZERO pooling-of-interests transaction.
(2) Pro forma to reflect full year impact of the Vero, Rubicon and other
acquisitions as if they had occurred as of the beginning of the respective
periods.
(3) As previously defined (does not include corporate overhead expense
allocations).
S-7
<PAGE>
Engineered Solutions
The Engineered Solutions segment is a leading global designer and
manufacturer of customized thermal management and motion and vibration control
systems for a variety of "niche" industrial markets. APW provides customized,
engineered solutions to customers in the aerospace, truck, automotive and RV
markets. In addition, APW provides thermal management systems for the
electrical and electronics markets.
For example, APW designs and manufactures the hydraulic system used to
automatically open and close convertible tops for automobiles. This system is
comprised of sensors, electronic controls, hydraulic cylinders, electric motors
and a hydraulic pump, all integrated into a complete system that is installed
into the automobile on the OEM assembly line on a just-in-time basis. Another
example of an engineered solution is APW's proprietary integrated system used
to level and stabilize RVs when parked on uneven terrain. This system includes
an electronic panel and four hydraulic cylinders installed under the vehicle
which work together as an integrated system to level the RV.
APW believes it has a leading market position in the following system
applications:
Selected Engineered Solutions Products and Systems
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Product/System Examples Key End Customers
- ------ ----------------------- -----------------
<S> <C> <C>
Commercial .Engine vibration isolation Boeing, Airbus
Aerospace
.Active noise cancellation systems
Trucks . Electromechanical and hydraulic cab lift Mercedes-Benz, Volvo,
systems Navistar, Paccar
. Passive and semi-active suspension
systems
Automotive .Convertible top actuation systems Mercedes-Benz, Saab,
Jaguar, Renault, Audi
Recreational .Hydraulic leveling systems Fleetwood, Jayco
Vehicles
. Electromechanical actuated slide-out
systems
Thermal .Air flow management systems Hoffman, Lucent, Compaq
Management
.Air cooling and heating systems
</TABLE>
- --------------------------------------------------------------------------------
Principal brand names include McLean, Barry Controls, Power Gear, Power
Packer, Vlier, Mox-Med and Eder. The Engineered Solutions segment's sales,
engineering and manufacturing activities are primarily in North America (73%)
and Europe (26%). Most Engineered Solutions sales are diversified by customer
and industry and are marketed primarily through direct sales persons. No one
customer accounts for more than 5% of the Engineered Solutions segment's net
sales.
Engineered Solutions Selected Financial Data
<TABLE>
<CAPTION>
Year ended August 31,
---------------------------------------------- Pro forma twelve
1996 1997 1998 1998 months ended
actual (1) actual (1) actual (1) pro forma (2) February 28, 1999 (2)
---------- ---------- ---------- ------------- ---------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $308.9 $312.3 $432.1 $439.8 $454.9
EBITDA (3).............. 49.6 54.1 85.0 86.9 95.7
</TABLE>
- -------
(1) Actual as restated for the ZERO pooling-of-interests transaction.
(2) Pro forma to reflect full year impact of the Vero, Rubicon and other
acquisitions as if they had occurred as of the beginning of the respective
periods.
(3) As previously defined (does not include corporate overhead expense
allocations).
S-8
<PAGE>
Tools and Supplies
The Tools and Supplies segment provides a wide array of branded, specialized
electrical and industrial tools and supplies to wholesale distributors,
catalogs and various retail distribution channels. APW's Tools and Supplies
segment has particular expertise in high-pressure hydraulic design and plastic
injection molding. For example, under the Enerpac brand name, APW is a leading
supplier of high- pressure hydraulic pumps and cylinders used to lift and move
heavy equipment in repair and maintenance facilities.
Principal brand names include Enerpac, GB Gardner Bender, Ancor, Calterm and
Del City. End user markets include general industrial, construction, retail
marine, retail automotive, do-it-yourself and production automation. To provide
its customers with the service levels required, APW maintains efficient
warehouse and physical distribution capabilities in North America, Europe and
Asia. Tools and Supplies sales are derived from North America (69%), Europe
(19%), Asia (9%) and Latin America (3%). In addition to its own product line,
APW also globally sources certain complementary products to better serve its
customers. Major customers include Home Depot, Ace Hardware, Lowe's and
Grainger. No one customer accounts for more than 3% of the Tools and Supplies
segment's net sales.
Since fiscal 1996, Tools and Supplies has improved its performance by
adopting special production signalling processes (often referred to by the
Japanese term, Kanban) and manufacturing cell work units designed to reduce
work-in-process inventory, accelerate work flow and improve quality. During
this same time period, APW rationalized its product offering in this segment by
44% to approximately 10,000 of its more profitable stock-keeping units ("SKUs")
from approximately 18,000 SKUs.
Tools and Supplies Selected Financial Data
<TABLE>
<CAPTION>
Year ended August 31,
---------------------------------------------- Pro forma twelve
1996 1997 1998 1998 months ended
actual (1) actual (1) actual (1) pro forma (2) February 28, 1999 (2)
---------- ---------- ---------- ------------- ---------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $278.5 $289.3 $316.3 $329.3 $328.3
EBITDA (3).............. 43.3 37.8 48.2 51.1 57.9
</TABLE>
- -------
(1) Actual as restated for the ZERO pooling-of-interests transaction.
(2) Pro forma to reflect full year impact of the Vero, Rubicon and other
acquisitions as if they had occurred as of the beginning of the respective
periods.
(3) As previously defined (does not include corporate overhead expense
allocations).
S-9
<PAGE>
The Offering
<TABLE>
<S> <C>
Issuer.................. Applied Power Inc.
Notes Offered........... $200.0 million aggregate principal amount of 8.75% Senior
Subordinated Notes due 2009 (the "Notes").
Additional Notes........ Up to $100.0 million aggregate principal amount of
Additional Notes with the same terms as the Notes may be
issued in future offerings, subject to compliance with the
indenture governing the Notes.
Maturity Date........... April 1, 2009.
Interest Payment Dates.. April 1 and October 1 of each year, commencing October 1,
1999.
Optional Redemption..... On or after April 1, 2004, APW has the option to redeem all
or a portion of the Notes at the redemption prices set forth
in the section "Description of Notes" under the heading
"Optional Redemption."
On or before April 1, 2002, APW has the option to redeem up
to 35% of the aggregate principal amount of the Notes with
the proceeds of certain public equity offerings at a
redemption price equal to 108.75% of their principal amount
plus accrued interest to the redemption date.
Change of Control....... If APW experiences specific kinds of changes of control, APW
must make an offer to repurchase the Notes at 101% of their
principal amount, plus accrued interest to the date of
repurchase.
Ranking................. The Notes are senior subordinated obligations. The Notes
rank behind our current and future senior debt.
After APW issues the Notes and applies the proceeds as
intended, as of February 28, 1999, APW would have had
approximately $681.8 million of outstanding senior debt
(excluding $115.4 million in off-balance sheet receivables
interests sold). The Notes would have been subordinated to
the entire amount of that outstanding indebtedness.
Restrictive Covenants... The indenture governing the Notes will, among other things,
limit the ability of APW and most or all its subsidiaries
to:
.become liable for additional indebtedness;
. pay dividends on stock or repurchase stock or
subordinated indebtedness;
.make certain investments;
.sell certain assets;
.use assets to secure subordinated indebtedness;
. engage in transactions with affiliated persons or
businesses; and
.engage in mergers and consolidations.
These covenants are subject to a number of important
exceptions.
Use of Proceeds......... APW intends to apply the net proceeds from the offering of
the Notes (the "Offering") to repay a portion of its
borrowings. See "Use of Proceeds."
</TABLE>
S-10
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following table presents summary financial and other data with respect
to APW and is derived from (1) the audited consolidated financial statements of
APW as of and for the three years ended August 31, 1998, 1997 and 1996 and from
the unaudited condensed consolidated financial statements of APW as of and for
the six months ended February 28, 1999 and 1998, and (2) the unaudited pro
forma financial statements included elsewhere in this prospectus supplement
which give effect to the acquisitions of (i) Vero (acquired in June 1998),
Rubicon (acquired in September 1998), and Versa Technologies, Inc.
("Versa/Tek") (acquired in October 1997), and (ii) eight other acquisitions APW
made in fiscal 1998, primarily in its Enclosure Products and Systems segment,
as if they had all occurred as of the beginning of the periods presented. The
pro forma as adjusted information assumes that the net proceeds of the Offering
are applied to pay down existing borrowings. (See "Pro Forma Financial
Information" for a description of the terms of the Offering.) The historical
audited consolidated financial statements have been restated to reflect APW's
merger with ZERO in July 1998 which was accounted for as a pooling of
interests. The summary financial and other data for APW as of and for the six
months ended February 28, 1999 and 1998 are derived from unaudited financial
statements and, in the opinion of management, include all necessary adjustments
for the fair presentation of such information. Results of interim periods are
not necessarily indicative of the results for the full year. The information
set forth below should be read together with the other information contained in
this prospectus supplement or in the prospectus under the captions
"Capitalization," "Selected Consolidated Financial Data," "Pro Forma Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the consolidated financial statements and
the related notes thereto.
S-11
<PAGE>
Summary Financial and Other Data
<TABLE>
<CAPTION>
For the
twelve
For the six months ended months ended
For the year ended August 31, February 28, February 28,
------------------------------------------- --------------------------------- ------------
Pro forma Pro forma Pro forma
Historical as adjusted Historical as adjusted as adjusted
------------------------------ ----------- -------------------- ----------- ------------
1996 1997 1998 1998 1998 1999 1999 1999
-------- -------- ---------- ----------- -------- ---------- ----------- ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net sales............... $777,462 $897,758 $1,230,689 $1,713,907 $554,773 $ 857,615 $882,254 $1,759,910
Gross profit............ 290,471 327,207 394,973 524,419 191,803 263,912 266,792 519,906
Engineering, selling,
and administrative
expenses............... 201,333 217,522 269,227 350,388 121,552 156,654 158,356 335,739
Amortization of
intangible assets...... 5,140 8,013 20,353 34,667 5,971 14,153 14,853 34,813
Restructuring charges... -- -- 20,298 20,298 -- -- -- 20,298
Merger related
expenses............... -- -- 9,276 9,276 -- -- -- 9,276
Contract termination
costs.................. -- -- -- -- -- 7,824 7,824 7,824
-------- -------- ---------- ---------- -------- ---------- -------- ----------
Operating earnings...... 83,998 101,672 75,819 109,790 64,280 85,281 85,759 111,956
Net financing costs..... 7,892 16,158 28,531 75,482 11,363 29,388 33,979 70,401
Other expense (income).. (1,308) (3,710) (10,097) (8,402) (2,267) (972) (999) (7,621)
-------- -------- ---------- ---------- -------- ---------- -------- ----------
Earnings before income
tax expense............ 77,414 89,224 57,385 42,710 55,184 56,865 52,779 49,176
Income tax expense...... 26,735 31,299 30,698 23,201 19,532 21,178 19,848 29,656
-------- -------- ---------- ---------- -------- ---------- -------- ----------
Net earnings............ $ 50,679 $ 57,925 $ 26,687 $ 19,509 $ 35,652 $ 35,687 $ 32,931 $ 19,520
======== ======== ========== ========== ======== ========== ======== ==========
Basic earnings per share
(1).................... $ 1.26 $ 1.53 $ 0.70 $ 0.51 $ 0.93 $ 0.92 $ 0.85 $ 0.51
Diluted earnings per
share (1).............. 1.22 1.47 0.66 0.49 0.89 0.89 0.82 0.49
Other Data:
EBITDA (2).............. $112,539 $136,494 $ 195,902 $ 256,137 $ 85,455 $ 133,702 $135,481 $ 270,200
Depreciation and
amortization........... 27,233 31,112 52,632 80,591 20,617 39,625 40,899 83,736
Capital expenditures.... 31,391 33,463 56,827 89,767 21,775 37,006 38,419 93,162
Ratio of pro forma total
debt to pro forma
EBITDA................. 3.3x
Ratio of pro forma
EBITDA to pro forma
interest expense....... 3.8x
Ratio of earnings to
fixed charges (3)...... 7.4x 5.3x 2.6x 1.5x 4.4x 2.7x 2.4x 1.6x
Balance Sheet Data
(at period end):
Working capital......... $157,349 $167,972 $ 103,856 $182,556 $ 151,231 $ 151,231
Total assets............ 547,078 649,546 1,174,722 892,980 1,578,614 1,584,014
Total debt.............. 144,211 174,629 512,648 339,495 876,445 881,845
Shareholders' equity.... 253,284 305,361 341,882 348,372 380,728 380,728
</TABLE>
S-12
<PAGE>
Notes to Summary Financial and Other Data
(dollars in thousands, except per share amounts)
(1) APW recorded after-tax restructuring and other one-time charges in the
fourth quarter of fiscal 1998 of $52,637, or $1.31 per share on a diluted
basis. The pre-tax charges of $69,440 related to costs associated with the
ZERO merger, various plant consolidations (principally associated with the
Enclosure Products and Systems segment) and other cost reduction and
product rationalization efforts of APW. The charges are included in the
financial statements as follows: gross profit--$25,785; engineering,
selling and administrative expenses--$9,019; amortization of intangibles--
$5,062; restructuring charges--$20,298; and merger related expenses--
$9,276. In addition to the charges above, ZERO recognized a net after-tax
gain of $4,586, or $0.11 per share on a diluted basis, for special items
relating to a gain from life insurance and sale of property, offset by a
provision for the estimated loss on the sale of a subsidiary. APW recorded
a non-recurring, non-taxable life insurance gain of $1,709, or $0.05 per
share, in the six months ended February 28, 1998 (which was a part of the
above ZERO net after-tax gain of $4,586), and a non-recurring contract
termination charge of $7,824 pre-tax, or $0.12 per diluted share, in the
six months ended February 28, 1999. Excluding the restructuring charges,
ZERO non-recurring net gains, the non-recurring life insurance gain and the
contract termination charge, basic earnings per share and diluted earnings
per share would have been as follows for each of the periods indicated:
<TABLE>
<CAPTION>
For the
twelve
For the year ended For the six months months ended
August 31, ended February 28, February 28,
---------------------- ----------------------- ------------
Pro forma Pro forma Pro forma
Historical as adjusted Historical as adjusted as adjusted
---------- ----------- ----------- ----------- ------------
1998 1998 1998 1999 1999 1999
---------- ----------- ----- ----- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per
share.................. $1.94 $1.76 $0.89 $1.04 $0.97 $1.92
Diluted earnings per
share.................. 1.86 1.68 0.84 1.01 0.94 1.84
</TABLE>
(2) "EBITDA" is defined as income from continuing operations before interest,
taxes, depreciation and amortization, excluding restructuring and other
non-recurring items (described in Note (1) above). APW believes that EBITDA
provides useful information regarding APW's ability to service its
indebtedness, but should not be considered in isolation or as a substitute
for operating income or cash flow from operations as an indicator of APW's
operating performance or as a measure of APW's liquidity.
(3) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes, cumulative effect of
change in accounting methods, discontinued operations, extraordinary items
and fixed charges. "Fixed charges" consist of interest on indebtedness,
amortization of debt expense and one-third of rent expense which is deemed
representative of an interest factor. Excluding the non-recurring items as
described in Note (1) above, the ratio of earnings to fixed charges would
have been 4.3x, 2.2x, 2.6x and 2.5x for the year ended August 31, 1998, for
the pro forma as adjusted year ended August 31, 1998, for the pro forma as
adjusted six months ended February 28, 1999, and for the pro forma as
adjusted twelve months ended February 28, 1999, respectively.
S-13
<PAGE>
RISK FACTORS
APW Depends on Borrowings
Assuming that APW applies all of the money raised in the Offering to pay
its lenders under the Credit Agreement, about 70% of APW's capital will be from
borrowings. But, because APW intends to use the proceeds from this Offering to
restore its revolving credit borrowing capacity, the percentage of APW's
capital represented by borrowings could increase above the 70% level. The high
level of borrowing poses risks to APW, which may include:
. The inability of APW to obtain necessary funding in the future
. Increased borrowing costs if interest rates rise
. Increased vulnerability to competition, downturns in business and general
economic factors
Also, APW may not be able to further expand or replace current sources of
borrowing with ones equally or more favorable to APW.
Furthermore, outside events could affect repayment of borrowings. There are
many economic, financial, competitive, regulatory and other factors that affect
APW's ability to pay back its borrowings, but which APW does not control.
APW Relies on its Subsidiaries to Fund its Business
The operations of APW are primarily conducted through its subsidiaries,
including foreign subsidiaries, which own a significant portion of APW's
consolidated assets. Consequently, APW's operating cash flow and ability to
service indebtedness, including the Notes, partially depend upon the operating
cash flow of its subsidiaries and the payment of funds by them to APW in the
form of loans, dividends or otherwise. The subsidiaries are separate legal
entities that have no obligations to pay any amounts due pursuant to the Notes
or to make any funds available for that purpose, whether by dividends,
interest, loans, advances and other payments. In addition, their ability to pay
dividends and make loans, advances and other payments to APW depends on any
statutory or other contractual restrictions, which may include requirements to
maintain minimum levels of working capital and other assets.
The Notes will effectively be junior to all liabilities of APW's
subsidiaries. In the event of a bankruptcy, liquidation or dissolution of a
subsidiary and following payment of these liabilities, the subsidiary may not
have sufficient assets remaining to make payments to APW as a shareholder or
otherwise. The Indenture governing the Notes will permit APW and its
subsidiaries to incur additional indebtedness, including secured indebtedness.
The Notes are Subordinated to APW's Senior Debt and Secured Debt
The Notes will be subordinated to APW's current and future senior debt.
Upon any distribution to APW's creditors in a liquidation, dissolution,
bankruptcy or similar proceeding, the holders of senior debt will be entitled
to be paid in full before any payment may be made to the holders of the Notes.
In addition, all payments on the Notes will be blocked if a payment default on
senior debt occurs and may be blocked for up to 179 days if certain non-payment
defaults on senior debt occur. In any of these events, APW cannot guarantee
that it will have sufficient assets to pay the amounts due on the Notes. As a
result, holders of Notes may receive less, proportionately, than the holders of
senior debt.
If APW had issued the Notes and applied the proceeds on February 28, 1999,
its outstanding senior debt would have been $681.8 million on a pro forma basis
(excluding $115.4 million in off-balance sheet receivables interests sold). In
addition, the indenture governing the Notes and APW's Credit Agreement for its
senior debt permit APW to incur additional senior debt in the future, including
the entire amount that will be available for borrowing under the Credit
Agreement. While the indenture limits the amount of debt APW can incur, it does
not limit how much of that debt can be senior debt.
S-14
<PAGE>
In addition to the subordination provisions described above, the Notes will
not be secured by any of APW's assets. As a result, the Notes will be
effectively subordinated to APW's secured debt to the extent of the value of
the assets securing such debt. Upon any distribution to APW's creditors in a
liquidation, dissolution, bankruptcy or other similar proceeding, the holders
of APW's secured debt or the secured debt of its subsidiaries may assert rights
against the secured assets in order to receive payment in full of such debt
before such assets may be used to pay the holders of the Notes.
APW's Growth Places New Demands on its Management
There are substantial risks presented by the fact that APW recently has
grown rapidly and significantly. For example, from fiscal 1997 to fiscal 1998,
APW saw an increase in net sales of about 79% and an increase in employees of
about 128%. This growth comes from APW both expanding current operations and
from acquiring other businesses. With this growth comes risks, such as from:
. Integrating new people and operations
. Making technical, operational and administrative changes
. Increasing reliance on outside sources for money
APW believes it can manage these and other such risks that it faces. But,
APW cannot be certain that it will succeed in managing them.
APW's Acquisitions May Create Transitional Challenges
APW's business strategy includes growth through strategic acquisitions,
which depends upon the availability of suitable acquisition candidates at
reasonable prices and APW's ability to quickly resolve transitional challenges.
These challenges include integration of product lines, sales forces and
manufacturing facilities and decisions regarding divestitures, inventory write-
offs and other charges. Also, these challenges involve risks of employee
turnover, disruption in product cycles and the loss of sales momentum. Since
September 1996, APW has invested approximately $1.3 billion in mergers and
acquisitions. APW believes its integration of these investments with its
existing operations will not involve unnecessary costs, delays or other
problems. Nevertheless, APW cannot be certain it will meet these transitional
challenges.
APW's International Operations Pose Political and Economic Risks
APW has recently increased the size of its international operations,
especially those in Europe. This increase has been due in large part to its
acquisitions of Vero and Rubicon. In addition to the risks associated with
rapid growth discussed above, such international operations present APW with
special risk factors, including those associated with:
. New regulatory systems or changes in foreign regulations
. Foreign currency fluctuations
. Trade or foreign currency exchange restrictions
. Political and economic instability
. Cultural differences
As APW expands its international presence, these risks may increase.
Market Demand for APW's Products May Decline
The demand for APW's products depends upon the general economic conditions
of the markets in which APW competes. Although APW has been expanding
preferentially into markets that it believes are less prone to downturns,
downward economic cycles could result in lower sales, which may reduce APW's
ability to make payments on the Notes.
S-15
<PAGE>
In particular, APW gets much of its business from original equipment
manufacturers. From time to time the business of these manufacturers may
decline. When this happens, APW's business may decline as well.
APW's Businesses are in Highly Competitive Industries
APW's business strategy contemplates continued outsourcing by its
customers. These customers could decide to manufacture in house the products
they currently purchase from APW. APW's business would drop significantly if
such a decision was made.
To compete successfully, APW's products must excel in terms of quality,
price, product line, ease of use and safety, and APW must also provide
excellent customer service. Present or future competitors may have greater
financial or technical resources, which could put APW at a competitive
disadvantage.
Environmental Laws and Regulations May Result in Costs to APW
APW has been identified by the U.S. Environmental Protection Agency as a
"Potentially Responsible Party" regarding remediation of various multi-party
sites under the Comprehensive Environmental Response, Compensation and
Liability Act. Theoretically, any responsible party could be held liable for
all cleanup costs at such a site. Based on its investigations, APW believes
that it is a de minimis (very minor) participant in most cases, and that any
liability which APW may incur as a result of its involvement with these sites,
taken together with any future expenditures for private damage claims and
environmental compliance, will not have a material effect on APW's financial
position. Nevertheless, APW cannot guarantee that additional remediation and
compliance obligations will not arise which require it to make significant
expenditures.
APW Must Contend with the Year 2000 Computer Issue
The Year 2000 issue concerns the potential exposure related to the
erroneous generation of business and financial information resulting from the
fact that certain computer systems and programs use two digits, rather than
four, to define the applicable year of business transactions. These programs do
not properly recognize a year that begins with a "20" instead of the familiar
"19." These programs may process data incorrectly or stop processing data
altogether. APW relies upon its own and vendor-supplied technology and
recognizes the potential business risk to its assets and systems associated
with the arrival of the Year 2000.
APW has undertaken a number of substantial measures to counter the Year
2000 problem, and APW expects to be Year 2000 compliant by the end of fiscal
1999. The remaining cash cost of achieving Year 2000 compliance is estimated to
range between $3 million and $5 million, which is expected to be funded with
cash flow from operations. Nevertheless, APW's customers and suppliers may not
have management information systems that are Year 2000 compliant and required
systems modifications may not be completed by the Year 2000. Failure to be Year
2000 compliant could have a material adverse effect on APW's results of
operations, business, prospects and financial conditions.
Investors May Find it Difficult to Trade the Notes
There is currently no public market for the Notes and the Company does not
intend to apply for listing of the Notes on any securities exchange. Although
the Underwriters have informed APW that they intend to make a market in the
Notes, they are under no obligation to do so and may discontinue any market-
making activities at any time without notice. The Company cannot predict
whether the Notes will trade actively. See "Underwriting."
S-16
<PAGE>
USE OF PROCEEDS
The net proceeds to APW from the Offering are estimated to be approximately
$194.6 million after deducting underwriting discounts and other offering
expenses. APW intends to use the net proceeds for the repayment of a portion of
the borrowings outstanding under the Multicurrency Credit Agreement, dated as
of October 14, 1998, among APW and Enerpac B.V., a Netherlands subsidiary of
APW, and various financial institutions (the "Credit Agreement") to restore its
borrowing capacity under the Credit Agreement, subject to the terms thereof. As
agreed by the parties to the Credit Agreement, the repayment will not reduce
APW's borrowing capacity under the Credit Agreement.
The Credit Agreement provides for an $850.0 million, five-year revolving
credit facility. At February 28, 1999, direct outstanding borrowings under the
facility were $612.6 million and commercial paper borrowings and certain loan
notes, each considered a utilization of the facility, were $152.3 million and
$32.5 million, respectively. After giving effect to the Offering and the
anticipated use of proceeds, APW would have had $247.2 million as of February
28, 1999, available for borrowings under the Credit Agreement. APW can borrow
at a floating rate of LIBOR plus 0.275% to 1.375% annually, depending on the
debt-to-EBITDA ratio. At the date of this prospectus supplement, the applicable
interest rate is based on a spread of 1.00% above 30-day LIBOR, determined by
the underlying currency of the debt which APW is borrowing (which amounted to
an interest rate of 5.938% at February 28, 1999, on borrowings denominated in
US Dollars). Borrowings under the Credit Agreement were used to finance APW's
acquisition of Rubicon and for other general corporate purposes.
S-17
<PAGE>
CAPITALIZATION
The following table sets forth as of February 28, 1999 (i) the historical
consolidated capitalization of APW and (ii) the consolidated capitalization of
APW after giving effect to the Offering and the application of the estimated
net proceeds as described in "Use of Proceeds." The table should be read in
conjunction with the consolidated financial statements, the notes thereto and
the other financial data contained elsewhere or incorporated by reference in
this prospectus supplement and the accompanying prospectus. See "Pro Forma
Financial Information" and "Selected Consolidated Financial Data."
<TABLE>
<CAPTION>
At February 28, 1999
--------------------
Pro forma
Actual as adjusted
-------- -----------
(dollars in
millions)
<S> <C> <C>
Credit Agreement........................................... $ 612.6 $ 418.0
Pound Sterling credit agreement............................ 20.2 20.2
Commercial paper........................................... 152.3 152.3
Floating unsecured loan notes due 2003..................... 32.5 32.5
Senior promissory notes due 2011........................... 50.0 50.0
Other...................................................... 8.8 8.8
Senior Subordinated Notes.................................. -- 200.0
-------- --------
Total debt............................................... 876.4 881.8
Shareholders' equity....................................... 380.7 380.7
-------- --------
Total capitalization..................................... $1,257.1 $1,262.5
======== ========
</TABLE>
PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Statements of Operations contained in this
prospectus supplement give effect to the following transactions and events as
if they had occurred at the beginning of the periods presented: (1) the
acquisitions of Vero, Rubicon, and Versa/Tek and (2) eight other acquisitions
APW made in fiscal 1998, primarily in its Enclosure Products and Systems
segment. In addition, the pro forma as adjusted data give effect to the sale
and issuance of an aggregate $200.0 million principal amount of Notes.
Historical results have already been restated to reflect APW's merger with ZERO
in July 1998 which was accounted for as a pooling of interests.
The pro forma results do not include any synergies that APW expects to
obtain as a result of the merger and acquisitions made during fiscal 1998. APW
expects to receive cost synergies by the elimination of duplicate corporate
expenses as well as other duplicate activities throughout the acquired
companies.
S-18
<PAGE>
The Unaudited Pro Forma Statements of Operations are provided for
informational purposes only and should not be construed to be indicative of
APW's consolidated financial position or results of operations had such events
been consummated on the dates assumed. APW's actual consolidated financial
position and results of operations in future periods will be affected by
various factors, many of which are beyond APW's control, including fluctuations
in APW's earnings. The pro forma statements do not, therefore, project APW's
financial position or results of operations for any future date or period.
Notwithstanding the foregoing, APW believes that the assumptions made with
respect to such events provide a reasonable basis on which to present the pro
forma results.
The unaudited pro forma financial information and accompanying notes should
be read in conjunction with APW's Consolidated Financial Statements, the notes
thereto and the other financial data contained elsewhere or incorporated by
reference in this prospectus supplement and the accompanying prospectus.
The following three tables set forth the pro forma as adjusted results of
operations for (i) the year ended August 31, 1998, (ii) the six months ended
February 28, 1999, and (iii) the twelve months ended February 28, 1999, to
reflect the results of the acquired companies for the periods not already
reflected in APW's audited historical results. The purchase price adjustments
reflect the additional interest expense that would have been incurred by APW as
well as the additional amortization of the excess of the respective purchase
prices over the fair value of the assets and liabilities assumed as if the
acquisitions had occurred as of the beginning of the periods presented. The
offering adjustments reflect the interest expense and tax impact of the
Offering.
Unaudited Pro Forma Statement of Operations
Year Ended August 31, 1998
<TABLE>
<CAPTION>
Purchase
Versa Rubicon Vero price Offering Pro forma
from from from Other adjust- Pro forma adjust- as adjusted
Year ended 9/1/97- 9/1/97- 9/1/97- acquisitions ments year ended ments year ended
8/31/98 9/30/97 8/31/98 5/31/98 to 8/31/98 (1) 8/31/98 (2) 8/31/98
---------- ------- -------- -------- ------------ -------- ---------- -------- -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales .............. $1,230,689 $8,964 $265,354 $158,146 $50,754 $ - $1,713,907 $ - $1,713,907
Gross profit ........... 394,973 3,016 46,170 69,214 11,046 - 524,419 - 524,419
Engineering, selling,
and administrative
expenses .............. 269,227 968 18,974 53,000 8,219 - 350,388 - 350,388
Amortization of
intangible assets 20,353 - 3,465 328 - 10,521 34,667 - 34,667
Restructuring charges .. 20,298 - - - - - 20,298 - 20,298
Merger related expenses
....................... 9,276 - - - - - 9,276 - 9,276
Contract termination
costs ................. - - - - - - - - -
---------- ------ -------- -------- ------- -------- ---------- ------- ----------
Operating earnings ..... 75,819 2,048 23,731 15,886 2,827 (10,521) 109,790 - 109,790
Net financing costs .... 28,531 - 720 531 - 40,497 70,279 5,203 75,482
Other expense/ (income)
....................... (10,097) - 1,695 - - - (8,402) - (8,402)
---------- ------ -------- -------- ------- -------- ---------- ------- ----------
Earnings before income
tax expense ........... 57,385 2,048 21,316 15,355 2,827 (51,018) 47,913 (5,203) 42,710
Income tax expense ..... 30,698 737 5,542 6,142 1,074 (19,067) 25,126 (1,925) 23,201
---------- ------ -------- -------- ------- -------- ---------- ------- ----------
Net earnings ........... $ 26,687 $1,311 $ 15,774 $ 9,213 $ 1,753 $(31,951) $ 22,787 $(3,278) $ 19,509
========== ====== ======== ======== ======= ======== ========== ======= ==========
Basic earnings per share
(3) ................... $ 0.70 $ 0.59 $ 0.51
Diluted earnings
per share (3) ......... 0.66 0.57 0.49
Other Data:
EBITDA (4).............. $ 195,902 $2,223 $ 32,224 $ 21,094 $ 4,694 $ - $ 256,137 $ - $ 256,137
Depreciation............ 32,279 175 6,723 4,880 1,867 - 45,924 - 45,924
Amortization............ 20,353 - 3,465 328 - 10,521 34,667 - 34,667
</TABLE>
S-19
<PAGE>
Unaudited Pro Forma Statement of Operations
Six Months Ended February 28, 1999
<TABLE>
<CAPTION>
Pro forma
Six Rubicon Pro forma as adjusted
months from six months Offering six months
ended 9/1/98- Purchase price ended adjustments ended
2/28/99 9/30/98 adjustments (1) 2/28/99 (2) 2/28/99
-------- -------- --------------- ---------- ----------- -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales............... $857,615 $24,639 $ - $882,254 $ - $882,254
Gross profit............ 263,912 2,880 - 266,792 - 266,792
Engineering, selling,
and administrative
expenses............... 156,654 1,702 - 158,356 - 158,356
Amortization of
intangible assets...... 14,153 347 353 14,853 - 14,853
Contract termination
costs.................. 7,824 - - 7,824 - 7,824
-------- ------- ------- -------- ------- --------
Operating earnings...... 85,281 831 (353) 85,759 - 85,759
Net financing costs..... 29,388 (52) 2,041 31,377 2,602 33,979
Other expense/(income).. (972) (27) - (999) - (999)
-------- ------- ------- -------- ------- --------
Earnings before income
tax expense............ 56,865 910 (2,394) 55,381 (2,602) 52,779
Income tax expense...... 21,178 364 (731) 20,811 (963) 19,848
-------- ------- ------- -------- ------- --------
Net earnings............ $ 35,687 $ 546 $(1,663) $ 34,570 $(1,639) $ 32,931
======== ======= ======= ======== ======= ========
Basic earnings per share
(3).................... $ 0.92 $ 0.89 $ 0.85
Diluted earnings per
share (3).............. 0.89 0.86 0.82
Other Data:
EBITDA (4).............. $133,702 $ 1,779 $ - $135,481 $ - $135,481
Depreciation............ 25,472 574 - 26,046 - 26,046
Amortization............ 14,153 347 353 14,853 - 14,853
</TABLE>
S-20
<PAGE>
Unaudited Pro Forma Statement of Operations
Twelve Months Ended February 28, 1999
<TABLE>
<CAPTION>
Pro forma
Pro forma as adjusted
Twelve Rubicon Vero Purchase twelve twelve
months from from Other price months Offering months
ended 3/1/98- 3/1/98- acquisitions adjust- ended adjustments ended
2/28/99 9/30/98 5/31/98 to 2/28/99 ments (1) 2/28/99 (2) 2/28/99
---------- -------- ------- ------------ --------- ---------- ----------- -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales............... $1,533,531 $161,526 $55,372 $9,481 $ - $1,759,910 $ - $1,759,910
Gross profit............ 467,082 26,648 24,546 1,630 - 519,906 - 519,906
Engineering, selling,
and administrative
expenses............... 304,329 11,573 18,749 1,088 - 335,739 - 335,739
Amortization of
intangible assets...... 28,535 2,022 119 - 4,137 34,813 - 34,813
Restructuring charges... 20,298 - - - - 20,298 - 20,298
Merger related
expenses............... 9,276 - - - - 9,276 - 9,276
Contract termination
costs.................. 7,824 - - - - 7,824 - 7,824
---------- -------- ------- ------ -------- ---------- ------- ----------
Operating earnings...... 96,820 13,053 5,678 542 (4,137) 111,956 - 111,956
Net financing costs..... 46,556 (166) 207 - 18,601 65,198 5,203 70,401
Other expense/(income).. (8,802) 1,181 - - - (7,621) - (7,621)
---------- -------- ------- ------ -------- ---------- ------- ----------
Earnings before income
tax expense............ 59,066 12,038 5,471 542 (22,738) 54,379 (5,203) 49,176
Income tax expense...... 32,344 4,963 2,189 206 (8,121) 31,581 (1,925) 29,656
---------- -------- ------- ------ -------- ---------- ------- ----------
Net earnings............ $ 26,722 $ 7,075 $ 3,282 $ 336 $(14,617) $ 22,798 $(3,278) $ 19,520
========== ======== ======= ====== ======== ========== ======= ==========
Basic earnings per share
(3).................... $ 0.69 $ 0.59 $ 0.51
Diluted earnings per
share (3).............. 0.66 0.57 0.49
Other Data:
EBITDA (4).............. $ 244,149 $ 17,835 $ 7,473 $ 743 $ - $ 270,200 $ - $ 270,200
Depreciation............ 43,105 3,941 1,676 201 - 48,923 - 48,923
Amortization............ 28,535 2,022 119 - 4,137 34,813 - 34,813
</TABLE>
S-21
<PAGE>
Notes to Unaudited Pro Forma Statements of Operations
(dollars in thousands unless otherwise indicated, except per share amounts)
(1) Adjustments include amortization of the excess of the respective
purchase prices over the net assets acquired, the incremental interest expense,
and the related tax effects that would have been incurred by APW had the pro
forma acquisitions occurred at the beginning of the periods presented.
(2) Adjustments include the following:
<TABLE>
<CAPTION>
For the
For the six twelve
For the year ended months ended months ended
8/31/98 2/28/99 2/28/99
------------------ ------------ ------------
<S> <C> <C> <C>
Elimination of interest expense
related to repayments of
borrowing under the Credit
Agreement with the net proceeds
expected from the Offering....... $(12,844) $(6,422) $(12,844)
Interest on the Notes............. 17,500 8,750 17,500
Amortization of estimated deferred
finance fees related to the
Notes............................ 547 274 547
-------- ------- --------
Net adjustment to interest
expense.......................... $ 5,203 $ 2,602 $ 5,203
======== ======= ========
</TABLE>
(3) APW recorded after-tax restructuring and other one-time charges in the
fourth quarter of fiscal 1998 of $52,637, or $1.31 per share on a diluted
basis. The pre-tax charges of $69,440 related to costs associated with the ZERO
merger, various plant consolidations (principally associated with the Enclosure
Products and Systems segment) and other cost reductions and product
rationalization efforts of APW. The charges included in the financial
statements are as follows: gross profit--$25,785; engineering, selling and
administrative expenses--$9,019; amortization of intangibles--$5,062;
restructuring charges--$20,298; and merger related expenses--$9,276. In
addition to the charges above, ZERO recognized a net after-tax gain of $4,586,
or $0.11 per share on a diluted basis, for special items relating to a gain
from life insurance and sale of property, offset by a provision for the
estimated loss on the sale of a subsidiary. APW recorded a non-recurring, non-
taxable life insurance gain of $1,709, or $0.05 per share, in the six months
ended February 28, 1998 (which was a part of the above ZERO net after-tax gain
of $4,586), and a non-recurring contract termination charge of $7,824 pre-tax,
or $0.12 per diluted share, in the six months ended February 28, 1999.
Excluding the restructuring charges, ZERO non-recurring net gains, the non-
recurring life insurance gain and the contract termination charge, basic
earnings per share and diluted earnings per share would have been as follows
for each of the periods indicated:
<TABLE>
<CAPTION>
For the
twelve
For the year ended For the six months months ended
August 31, ended February 28, February 28,
---------------------- ----------------------- ------------
Pro forma Pro forma Pro forma
Historical as adjusted Historical as adjusted as adjusted
---------- ----------- ----------- ----------- ------------
1998 1998 1998 1999 1999 1999
---------- ----------- ----- ----- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per
share.................. $1.94 $1.76 $0.89 $1.04 $0.97 $1.92
Diluted earnings per
share.................. 1.86 1.68 0.84 1.01 0.94 1.84
</TABLE>
S-22
<PAGE>
(4) "EBITDA" is defined as income from continuing operations before
interest, taxes, depreciation and amortization, excluding restructuring and
other non-recurring items (described in Note (3) above). APW believes that
EBITDA provides useful information regarding APW's ability to service its
indebtedness, but should not be considered in isolation or as a substitute for
operating income or cash flow from operations as an indicator of APW's
operating performance or as a measure of APW's liquidity.
S-23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of APW for the five fiscal years in the periods ended August 31, 1998, 1997,
1996, 1995, and 1994 and for the six-month periods ended February 28, 1999 and
1998. This selected financial information should be read in conjunction with
APW's consolidated financial statements and notes thereto incorporated by
reference in the accompanying prospectus. The selected financial data reflect
the combined results of operations and financial position of APW and ZERO
restated for all periods presented pursuant to the pooling-of-interests method
of accounting and includes the results of other acquired companies from their
respective effective dates of acquisition in accordance with the purchase
method of accounting.
<TABLE>
<CAPTION>
Six months ended
Years ended August 31, February 28,
-------------------------------------------- -----------------
1994 (1) 1995 (1) 1996 (1) 1997 (1) 1998 (1) 1998 1999
-------- -------- -------- -------- -------- -----------------
(dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $605.5 $706.8 $777.5 $897.8 $1,230.7 $ 554.8 $ 857.6
Gross profit............ 219.4 263.0 290.5 327.2 395.0 191.8 263.9
Earnings(loss)
Continuing operations.. 29.7 39.8 50.7 57.9 26.7(2)(3) 35.7 35.7(6)
Discontinued
operations............ (0.4) -- -- -- -- -- --
Extraordinary loss..... -- (4.9) -- -- -- -- --
------ ------ ------ ------ -------- ------- ---------
Net earnings........... $ 29.3 $ 34.9 $ 50.7 $ 57.9 $ 26.7 $ 35.7 $ 35.7
====== ====== ====== ====== ======== ======= =========
Basic earnings(loss) per
share
Continuing operations.. $ 0.75 $ 0.99 $ 1.26 $ 1.53 $ 0.70(2)(3) $ 0.93 $ 0.92(6)
Discontinued
operations............ (0.01) -- -- -- -- -- --
Extraordinary loss..... -- (0.12) -- -- -- -- --
------ ------ ------ ------ -------- ------- ---------
Net earnings per
share(4).............. $ 0.74 $ 0.87 $ 1.26 $ 1.53 $ 0.70 $ 0.93 $ 0.92
====== ====== ====== ====== ======== ======= =========
Diluted earnings(loss)
per share
Continuing operations.. $ 0.74 $ 0.97 $ 1.22 $ 1.47 $ 0.66(2)(3) $ 0.89 $ 0.89(6)
Discontinued
operations............ (0.01) -- -- -- -- -- --
Extraordinary loss..... -- (0.12) -- -- -- -- --
------ ------ ------ ------ -------- ------- ---------
Net earnings per share
(4)................... $ 0.73 $ 0.85 $ 1.22 $ 1.47 $ 0.66 $ 0.89 $ 0.89
====== ====== ====== ====== ======== ======= =========
Dividends per common
share................. See (5) below
<CAPTION>
August 31, February 28,
-------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............ $476.1 $504.5 $547.1 $649.5 $1,174.7 $ 893.0 $ 1,578.6
Long-term obligations... 78.0 74.2 128.1 153.2 512.6 323.9 873.4
Shareholders' equity.... 243.8 277.3 253.3 305.4 341.9 348.4 380.7
Actual shares
outstanding............ 39.8 40.4 37.6 38.0 38.6 38.4 38.9
</TABLE>
S-24
<PAGE>
Notes to Selected Consolidated Financial Data
(dollars in millions, except per share amounts)
(1) On July 31, 1998, ZERO became a wholly-owned subsidiary of APW in a merger
accounted for as a pooling of interests. Prior to the merger, ZERO had a
March 31 fiscal year end. The historical results have been combined using
an August 31 year end for ZERO for the year ended August 31, 1998. For all
prior periods, the results of operations and financial position reflect the
combination of ZERO with a March 31 fiscal year end and APW with an August
31 fiscal year end. Net sales and net income for ZERO for the period April
1, 1997, through August 31, 1997 (which results are not included in the
historical combined results), were $107.2 and $7.9, respectively.
(2) Earnings from continuing operations in fiscal 1998 include a net after-tax
gain of approximately $4.6, or $0.11 per share on a diluted basis, for
special items recognized by ZERO.
(3) Earnings from continuing operations in fiscal 1998 include charges related
to merger, restructuring and other non-recurring costs of $52.6, or $1.31
per share on a diluted basis, net of income tax benefit of $16.8. The pre-
tax charges of $69.4 related to costs associated with the merger of ZERO,
various plant consolidations and other cost reductions and product
rationalization efforts of APW.
(4) Per share amounts for all periods presented have been restated to give
effect to the ZERO merger and a two-for-one stock split effected in the
form of a 100 percent stock dividend distributed to APW's shareholders of
record as of January 22, 1998. To effect the stock split, a total of 13.9
million shares of APW's Common Stock were issued on February 3, 1998.
(5) Prior to the merger, ZERO declared quarterly dividends of $0.03 per share
in its fiscal years ended March 31, 1998 and 1997, $0.11 per share in
fiscal 1996 and the fourth quarter of fiscal 1995 and $0.10 per share in
the first three quarters of fiscal 1995 and each quarter of fiscal 1994.
APW declared quarterly dividends of $0.015 per share (as adjusted for the
stock split) in its fiscal years ended August 31, 1998, 1997, 1996, 1995
and 1994 and in the first quarter of fiscal 1999.
(6) Excluding one-time items in the first halves of fiscal 1999 and 1998,
earnings were $40.4, or $1.01 per share on a diluted basis, an increase of
20% over the $33.9, or $0.84 per share on a diluted basis, in the previous
year. The one-time items related to a non-taxable life insurance gain on
ZERO of $1.7, or $0.05 per share on a diluted basis, recorded as other
income in the first half of 1998, and an Engineered Solutions contract
termination of $7.8 before taxes, or $0.12 per share on a diluted basis,
recorded to operating expense in the first half of fiscal 1999.
S-25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion consists of selected portions of Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in APW's most recent quarterly report on Form 10-Q and annual report
on Form 10-K, which are incorporated by reference in the accompanying
prospectus. It should be read in conjunction with those incorporated reports
and with the consolidated financial statements and related notes included
therein.
For the Six Months Ended February 28, 1999 and 1998
(dollars in thousands unless otherwise indicated, except per share amounts)
Results of Operations
The Company reported record sales and earnings for its first half ended
February 28, 1999. Sales for the first half of fiscal 1999 increased 55% to
$857,615 as compared to the first half of fiscal 1998. Net earnings for the
first six months of fiscal 1999 were $35,687, or $0.89 per diluted share,
versus $35,652, or $0.89 per diluted share, in the prior year first half.
Excluding one-time items in the first half of fiscal 1999 and 1998, net
earnings were $40,381, or $1.01 per diluted share in the 1999 period, an
increase of 20% over the $33,943, or $0.84 per diluted share, reported in the
previous year period. The one-time items relate to a non-taxable life insurance
gain in ZERO of $1,709, or $0.05 per diluted share, recorded in the fiscal 1998
first half and an Engineered Solutions contract termination of $7,824 before
taxes, or $0.12 per diluted share, recorded in the current year first half. As
compared to the prior year periods, foreign currency translation reduced first
half sales growth by approximately 1%. Excluding the effect of currency
translation and acquired businesses, sales increased 5% in the six months ended
February 28, 1999, compared with the same period of the prior fiscal year.
Certain prior year amounts previously reported in Tools and Supplies have
been reclassified into Engineered Solutions to conform with the fiscal 1999
presentation.
<TABLE>
<CAPTION>
Six months ended
February 28,
------------------------
Sales by Segment 1999 1998 Change
- ---------------- -------- -------- ------
<S> <C> <C> <C>
Enclosure Products and Systems......................... $463,687 $194,242 139%
Engineered Solutions................................... 231,684 208,848 11
Tools and Supplies..................................... 162,244 151,683 7
-------- --------
Total................................................ $857,615 $554,773 55
======== ========
</TABLE>
Enclosure Products and Systems continued its impressive growth, as fiscal
1999 first half sales increased 139% over the prior year first half. In
aggregate, acquired businesses, principally AA Manufacturing, PMP, PTI,
Premier, Brown, Vero and Rubicon, contributed approximately $255,500 of the
year-to-date sales growth. Excluding the effect of foreign currency translation
and acquisitions made within the prior year, first half 1999 revenue grew 10%
over the prior year period. First half 1999 sales growth resulted from the
continued expansion of the size, territory and content of the enclosure product
line.
Engineered Solutions sales increased 11% in the six months ending February
28, 1999, as compared to the same fiscal 1998 period. During this period, the
effect of foreign currency translation impacted reported sales by less than 1%.
Excluding the effect of acquired businesses, Engineered Solutions' first half
sales, as compared to the prior year first half, increased 3%. The success of
new products and continued increases in European truck market share contributed
to the sales increase, but were largely offset by lower thermal management
product sales as these lines are refocused on the higher growth
telecommunications markets.
S-26
<PAGE>
Tools and Supplies' sales increased 7% in the six months ended February 28,
1999. Excluding the financial statement impact of foreign currency translation,
recent acquisitions and weakness in Asia (which accounts for approximately 7%
of the group's sales), Tools and Supplies' first half sales increased 3% as
compared to the fiscal 1998 first half.
<TABLE>
<CAPTION>
Six months ended
February 28,
------------------------
Gross Profit by Segment 1999 1998 Change
- ----------------------- -------- -------- ------
<S> <C> <C> <C>
Enclosure Products and Systems......................... $122,272 $ 69,469 76%
Engineered Solutions................................... 78,010 66,414 17
Tools and Supplies..................................... 63,630 55,920 14
-------- --------
Total................................................ $263,912 $191,803 38
======== ========
</TABLE>
First half gross profit dollars increased 38% over the comparable prior
year period. As a percentage of sales, gross profit declined from 34.6% in the
prior year first half to 30.8% in the current year period. As compared to the
prior year period, both the increase in gross profit dollars and the decline in
gross profit as a percent of sales were driven by rapid expansion of relatively
lower margin enclosure businesses in the Enclosure Products and Systems group.
As a result of cost control and manufacturing productivity initiatives, both
the Tools and Supplies and Engineered Solutions groups achieved substantial
increases in gross profit dollar contribution and increased gross profit as a
percentage of sales in the first half of fiscal 1999.
<TABLE>
<CAPTION>
Six months ended
February 28,
------------------------
Engineering, Selling and Administrative Expenses by
Segment 1999 1998 Change
- --------------------------------------------------- -------- -------- ------
<S> <C> <C> <C>
Enclosure Products and Systems......................... $ 78,255 $ 41,395 89 %
Engineered Solutions................................... 36,012 34,426 5
Tools and Supplies..................................... 36,344 37,920 (4)
General Corporate...................................... 6,043 7,811 (23)
-------- --------
Total................................................ $156,654 $121,552 29
======== ========
</TABLE>
Engineering, selling and administrative ("operating") expenses increased
29% on a year-to-date basis, primarily reflecting the impact of acquisitions.
As a percentage of sales, operating expenses declined 3.6% to 18.3% of sales in
the fiscal 1999 first half as compared to the same period last year. Overall,
the Company continues to reduce operating expenses as a percent of net sales by
aggressively managing spending levels and through the acquisition of enclosures
businesses within the Enclosure Products and Systems group, which typically
have a lower percentage of operating expenses to sales.
Amortization expense of $14,153 for the six months ended February 28, 1999
was higher than in the comparable prior year period due to acquisitions made
during and subsequent to the first six months of fiscal 1998, including
primarily Vero and Rubicon.
Net financing costs for the six months ended February 28, 1999 increased
over the prior year first half primarily as a result of borrowings to finance
the acquisition of Vero and Rubicon.
Liquidity and Capital Resources
Cash and cash equivalents totaled $8,097 and $6,349 at February 28, 1999
and August 31, 1998, respectively. In order to minimize net financing costs,
the Company intentionally maintains relatively low cash balances by using
available cash to reduce short-term bank borrowings.
Net cash generated from operations, after considering non-cash items and
changes in operating assets and liabilities, totaled $37,321 for the six months
ended February 28, 1999.
Net cash used in investing activities totaled $415,952 for the first six
months of fiscal 1999, of which $377,589 was used for acquisitions. In
addition, approximately $37,000 was used for capital expenditures, which was
offset by approximately $6,700 of proceeds generated primarily from the sale of
two of the Company's properties.
S-27
<PAGE>
<TABLE>
<CAPTION>
February 28, August 31,
Total Capitalization 1999 1998
- -------------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Shareholders' Equity.......................... $ 380,728 30% $341,882 39%
Total Debt.................................... 876,445 68 512,648 58
Deferred Taxes................................ 22,991 2 23,065 3
---------- --- -------- ---
Total....................................... $1,280,164 100% $877,595 100%
========== === ======== === ===
</TABLE>
Outstanding debt at February 28, 1999 totaled $876,445, an increase of
approximately $363,000 since the beginning of the year. The Company's debt to
total capitalization ratio was 68% at February 28, 1999, up from 58% at the
beginning of the year. The increase primarily reflects additional borrowings
for the Rubicon acquisition. Dividends of $1,171 were paid, while the exercise
of employee stock options generated $2,568 of cash in the six month period
ended February 28, 1999.
The Company anticipates that the funds generated from operations and
available under credit facilities or other borrowings will be adequate to meet
operating, debt service, and capital expenditure requirements for the
foreseeable future.
Year 2000 Considerations
As is the case for most companies, the Year 2000 computer issue creates a
risk for APW. If systems do not correctly recognize date information when the
year changes to 2000, there could be a material adverse impact on APW's
operations. However, the impact cannot be quantified at this time.
APW is taking actions intended to ensure that its computer systems are
capable of processing periods for the Year 2000 and beyond. APW has developed
and has clearly articulated a written policy that Year 2000 readiness is an
important responsibility for all its business leaders. In addition, APW is
aggressively pursuing a comprehensive set of programs intended to reduce the
risk of disruptions due to the Year 2000 problem. Issues addressed in the
context of these efforts include, but are not limited to, creating management
awareness regarding the Year 2000 problem and the need to become Year 2000
ready, mitigating known Year 2000 readiness problems, communicating APW's Year
2000 readiness commitment to its customers, conducting a company-wide Year 2000
readiness check, the official designation of Year 2000 readiness contacts
within each business unit, comprehensive testing and compliance certification
for all of APW's mission-critical business and manufacturing control systems,
proactive Year 2000 compliance certification of key suppliers, and the
development of contingency plans to deal with emergent Year 2000 situations.
APW expects to complete the majority of its efforts in this area by the end of
fiscal 1999. This should leave adequate time to perform additional testing and
make any further modifications that are deemed necessary.
APW is continuing an ongoing process of assessing potential Year 2000 risks
and uncertainties. However, it is currently premature to define the most
reasonably likely worst case scenarios related to the Year 2000 problem. APW's
Year 2000 readiness initiatives are intended to address its critical business
functions, and APW currently expects to successfully mitigate its controllable
internal Year 2000 issues. However, APW also relies upon third parties whose
failure to identify and remediate their Year 2000 problems could have a
material impact on APW's operations and financial condition. APW's Year 2000
readiness efforts include attempting to identify, assess and mitigate third
party risks where possible. To date, no third party has communicated to APW
Year 2000 problems that reasonably could be expected to have a material impact
on APW's operations. However, it is impossible for APW to identify the
potential impact and all related costs and consequences of third parties,
particularly those that have not responded to inquiries by APW as to Year 2000
readiness.
Based on the current status of APW's compliance and readiness efforts, the
costs associated with identified Year 2000 issues are not expected to have a
material effect on the results of operations or financial condition of APW.
Most of APW's business units have installed or are in the process of installing
S-28
<PAGE>
new business management systems which go beyond just Year 2000 compliance. The
costs of purchased software are capitalized. Some businesses have chosen to
upgrade existing systems to be compliant. These costs are being expensed as
incurred. Additionally, APW is developing a contingency plan to deal with any
issues that are not resolved on a timely basis. APW historically has not
quantified the costs of Year 2000 compliance and remediation, but believes
costs incurred to date were immaterial. APW estimates remaining costs,
including internal costs such as payroll expenses incurred for the Year 2000
project, to range between $3.0 million and $5.0 million, which is expected to
be funded with cash flow from operations.
At this time, APW does not expect the reasonably foreseeable consequences
of the Year 2000 problem to have material adverse effects on APW's business,
operations or financial condition. However, APW cannot be certain that it will
not suffer business interruptions, either due to its own Year 2000 problems or
those of its customers or suppliers whose Year 2000 problems may make it
difficult or impossible to fulfill their commitments to APW. Furthermore, the
Year 2000 problem has many elements and potential consequences, some of which
may not be reasonably foreseeable, and there can be no assurances that every
material Year 2000 problem will be identified and addressed or that unforeseen
consequences will not arise and possibly have a material adverse effect on APW.
Unanticipated factors while implementing the changes necessary to mitigate Year
2000 problems, including, but not limited to, the ability to locate and correct
all relevant codes in computer and imbedded systems, or the failure of critical
third parties to communicate and mitigate their Year 2000 problems could result
in unanticipated adverse impacts on the business activities or operations of
APW.
For the Three Years Ended August 31, 1998
(dollars in millions unless otherwise indicated, except for per share amounts)
Business Combination
On July 31, 1998, APW completed its merger with ZERO, a leading
manufacturer of electrical and electronic system enclosure products and thermal
management products. The merger was accounted for as a pooling of interests.
APW issued approximately 10.6 million shares of Common Stock in exchange for
all outstanding common stock of ZERO and assumed outstanding options to
purchase ZERO common stock that were converted into options to purchase
approximately 0.6 million shares of APW's Common Stock pursuant to the terms of
the merger.
All financial data of APW presented or incorporated by reference in this
prospectus supplement or the accompanying Prospectus have been restated to
include the historical financial information of ZERO in accordance with
generally accepted accounting principles and pursuant to Regulation S-X. Prior
to the merger, ZERO had a March 31 fiscal year end. The historical results have
been combined using an August 31 year end for ZERO for the year ended August
31, 1998. For all preceding years, the results of operations and financial
position reflect the combination of ZERO with a March 31 fiscal year end and
APW with an August 31 fiscal year end. Net sales and net income for ZERO for
the period April 1, 1997, through August 31, 1997 (which results are not
included in the historical combined results) were $107.2 and $7.9,
respectively.
<TABLE>
<CAPTION>
Percentage of net
Years ended August 31, sales
---------------------- --------------------
Results of Operations 1998 1997 1996 1998 1997 1996
- --------------------- -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net sales ........................ $1,230.7 $897.8 $777.5 100.0% 100.0% 100.0%
Gross profit ..................... 395.0 327.2 290.5 32.1 36.4 37.4
Operating expenses ............... 319.2 225.5 206.5 25.9 25.1 26.6
-------- ------ ------ ------ ------ ------
Operating earnings ............... 75.8 101.7 84.0 6.2 11.3 10.8
Other expenses ................... 18.4 12.5 6.6 1.5 1.4 0.8
-------- ------ ------ ------ ------ ------
Earnings before income tax expense
................................. 57.4 89.2 77.4 4.7 9.9 10.0
Income tax expense ............... 30.7 31.3 26.7 2.5 3.5 3.4
-------- ------ ------ ------ ------ ------
Net earnings ..................... $ 26.7 $ 57.9 $ 50.7 2.2% 6.4% 6.6%
======== ====== ====== ====== ====== ======
</TABLE>
S-29
<PAGE>
Mergers, Restructuring and Other Non-recurring Items
APW recorded restructuring and other one-time charges in the fourth quarter
of fiscal 1998 of $52.6, or $1.31 per share on a diluted basis. The pre-tax
charges of $69.4 relate to costs associated with the ZERO merger, various plant
consolidations principally associated with the enclosure businesses, and other
cost reductions and product rationalization efforts of APW. The pre-tax charges
of $69.4 include $13.6 for severance payments for a reduction of approximately
400 employees, of which a negligible amount was paid in 1998 and $9.3 in ZERO
merger costs. In addition to the charges above, ZERO recognized a net gain of
$4.6, or $0.11 per share on a diluted basis, for special items relating to a
gain from life insurance and sale of property offset by a provision for the
estimated loss on the sale of a subsidiary. The following table reconciles
reported results to results of operations on an ongoing basis:
<TABLE>
<CAPTION>
Year ended August 31, 1998
------------------------------------------------------
Fourth APW
ZERO non- quarter excluding Percentage
Comparative Statement of APW as recurring one-time one-time of
Earnings reported items charges items net sales
- ------------------------ ---------- --------- -------- ---------- ----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales............... $1,230,689 $ -- $ -- $1,230,689 100.0%
Cost of products sold... 835,716 -- (25,785) 809,931 65.8
---------- ------- -------- ---------- -----
Gross profit........ 394,973 25,785 420,758 34.2
Engineering, selling and
administrative
expense................ 269,227 -- (9,019) 260,208 21.1
Amortization of
intangible assets...... 20,353 -- (5,062) 15,291 1.3
Restructuring charges... 20,298 -- (20,298) -- --
Merger related
expenses............... 9,276 -- (9,276) -- --
---------- ------- -------- ---------- -----
Operating earnings.. 75,819 -- 69,440 145,259 11.8
Other expense (income):
Net financing costs... 28,531 -- -- 28,531 2.3
Other--net............ (10,097) 7,024 -- (3,073) (0.2)
---------- ------- -------- ---------- -----
Earnings before income
tax expense............ 57,385 (7,024) 69,440 119,801 9.7
Income tax expense...... 30,698 (2,438) 16,803 45,063 3.7
---------- ------- -------- ---------- -----
Net earnings............ $ 26,687 $(4,586) $ 52,637 $ 74,738 6.0%
========== ======= ======== ========== =====
Basic earnings per
share.................. $ 0.70 $ (0.12) $ 1.36 $ 1.94
Weighted average
common shares
outstanding (000's).. 38,380 38,380 38,380 38,380
Diluted earnings per
share.................. $ 0.66 $ (0.11) $ 1.31 $ 1.86
Weighted average
common and equivalent
shares outstanding
(000's).............. 40,174 40,174 40,174 40,174
</TABLE>
Reclassifications
Certain prior year amounts have been reclassified to conform to the fiscal
1998 presentation, including, but not limited to, the reclassification of
financial data previously reported in Tools and Supplies into Engineered
Solutions.
S-30
<PAGE>
Net Sales
Net sales increased 37% during fiscal 1998 to $1,230.7 from $897.8 in
fiscal 1997. The incremental effect of acquisitions was approximately $256.0 in
fiscal 1998. Price changes have not had a significant impact on the
comparability of net sales during the last three years. Excluding the
unfavorable impact on translated sales from the stronger US Dollar, sales
increased approximately 39% over 1997.
<TABLE>
<CAPTION>
Percentage
change
from prior
Sales year
---------------------- --------------
Segment Sales 1998 1997 1996 1998 1997 1996
- ------------- -------- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Enclosure Products and Systems .......... $ 482.4 $296.2 $190.1 63% 56% 25%
Engineered Solutions .................... 432.0 312.3 308.9 38 1 4
Tools and Supplies ...................... 316.3 289.3 278.5 9 4 9
-------- ------ ------
Totals ................................ $1,230.7 $897.8 $777.5 37 15 10
======== ====== ======
</TABLE>
Enclosure Products and Systems increased sales 63% over 1997. The
acquisitions of Vero, Brown Manufacturing Company, Premier Industries, Product
Technology Inc., AA Manufacturing, Inc., and Performance Manufactured Products
Inc. and a related entity in 1998 as well as Everest Electronic Equipment,
Inc., C Fab Group Limited, and Hormann Security Systems Limited in 1997
resulted in additional sales of $133.5. The continued expansion of end user
markets in the United States and Europe also contributed to the growth.
Excluding acquisitions net of the negative impact of the stronger US Dollar,
Enclosure Products and Systems sales in 1998 grew 22%. In 1997, sales grew 56%
due to the effect of acquisitions, continued demand for its products, the
expansion of its direct sales force and geographic expansion in Europe and
Asia.
Sales for the Engineered Solutions segment improved 38% compared to 1997.
The increase was the result of the acquisition of Versa/Tek in October 1997,
which contributed $91.1, along with growth primarily in European truck and
automotive markets. The strengthening US Dollar negatively impacted sales by 2%
in 1998. Sales increased 1% in 1997 over 1996, primarily the result of
increased sales in the thermal management market.
Sales in the Tools and Supplies segment increased 9% in 1998 to $316.3 from
$289.3 in 1997. The increase was primarily the result of $31.4 of increased
sales from acquisitions offset by declining Asian sales and the effect of the
strengthening US Dollar. The impact of the stronger US Dollar negatively
impacted reported sales by approximately 3% for the year. In 1997, sales for
Tools and Supplies increased 4% over 1996. The increase for 1997 was attributed
to approximately $11.7 from acquisitions net of product line dispositions. The
impact of the stronger US Dollar in 1997 over 1996 negatively impacted sales by
approximately 5%.
<TABLE>
<CAPTION>
Percentage
change
from prior
Sales year
---------------------- --------------
Geographic Sales 1998 1997 1996 1998 1997 1996
- ---------------- -------- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
North America ............................ $ 895.3 $653.3 $547.6 37% 20% 12%
Europe ................................... 284.2 181.0 163.2 57 9 9
Japan and Asia Pacific ................... 37.6 52.0 56.8 (28) (8) 3
Latin America ............................ 13.6 11.5 9.9 18 16 (18)
-------- ------ ------
Totals ................................. $1,230.7 $897.8 $777.5 37 15 10
======== ====== ======
</TABLE>
APW does business in many different geographic regions and is subject to
various economic conditions. The improved economic environment in North America
and the effect of acquisitions combined to increase sales 37% in this region
over 1997. Sales increased 20% in 1997 over 1996 primarily due to the improving
US economy and the acquisitions made in the third quarter of 1996 and the first
quarter of 1997.
S-31
<PAGE>
Sales in Europe grew 57% in 1998 compared to 1997. The combination of the
Vero acquisition, which contributed $53.9, along with strong internal growth
accounted for the 1998 growth. Sales grew 9% in 1997 compared to 1996,
primarily the result of two acquisitions. Sales in Japan and Asia Pacific fell
28% in 1998 due to the general economic down-turn in this region. In 1997,
sales decreased 8% in Japan and Asia Pacific, 6% of which was attributable to
foreign currency fluctuations. The remaining decrease was caused by weakening
economic conditions. The sales growth generated in Latin America during 1998
and 1997 was the result of geographic expansion in this region. As APW's recent
acquisition strategy has focused on North America and Europe, sales from Japan,
Asia Pacific and Latin America are expected to become a smaller percentage of
APW's total sales in 1999.
Gross Profit
Gross profit increased 21% in 1998 to $395.0 compared to $327.2 in 1997 and
$290.5 in 1996. The increases in gross profit resulted primarily from increased
sales in 1998 and 1997.
<TABLE>
<CAPTION>
Gross Profit Percentages By Segment 1998 1997 1996
- ----------------------------------- ---- ---- ----
<S> <C> <C> <C>
Enclosure Products and Systems ............................... 32.1% 39.4% 42.4%
Engineered Solutions ......................................... 31.8 32.5 31.4
Tools and Supplies ........................................... 32.5 37.6 40.5
Totals ..................................................... 32.1 36.4 37.4
</TABLE>
The one-time charges that were recorded in the fourth quarter of fiscal
1998 negatively impacted gross profit by $25.8. These charges primarily relate
to a decision to discontinue certain product lines and SKUs, principally within
Tools and Supplies. To a lesser extent, charges were incurred to conform ZERO
inventory valuation methods to APW's. Excluding the impact of these charges,
the gross profit percentages by segment would have been:
<TABLE>
<CAPTION>
Gross Profit Percentages By Segment 1998 1997 1996
- ----------------------------------- ---- ---- ----
<S> <C> <C> <C>
Enclosure Products and Systems ............................... 33.8% 39.4% 42.4%
Engineered Solutions ......................................... 32.5 32.5 31.4
Tools and Supplies ........................................... 37.1 37.6 40.5
Totals ..................................................... 34.2 36.4 37.4
</TABLE>
The following discussion addresses the gross profit percentages by segment
excluding the effect of the one-time charges discussed above. The overall gross
profit percentage for APW is primarily influenced by the relative sales mix
between Enclosure Products and Systems, Engineered Solutions and Tools and
Supplies. Engineered Solutions gross profit percentages are lower than either
Enclosure Products and Systems or Tools and Supplies because a much higher
proportion of its sales are made to OEM customers, which typically generate
lower margins than non-OEM customers. The gross profit percentage in Engineered
Solutions increased in 1997 versus 1996 as a result of efforts to reduce costs
associated with manufacturing. Tools and Supplies gross profit percentage
remained relatively flat in 1998 compared to 1997. However, the decline in 1997
compared to 1996 was primarily due to $2.1 of non-recurring charges recorded in
1997 and competitive pricing pressures. Since 1996, gross profit percentages in
Enclosure Products and Systems have been declining. This is the result of the
effect of the enclosure related acquisitions that took place during 1998 and
1997. These enclosures are sold primarily to OEM customers and carry a lower
gross profit margin. With the recent acquisition of Rubicon and APW's continued
focus on OEM customers, the gross profit percentage within Enclosure Products
and Systems is expected to moderately decline in the future. However, as
discussed below, these enclosure businesses operate with lower selling,
administrative and engineering expenses. The overall gross profit margin of APW
will vary depending on the levels of OEM sales within Engineered Solutions and
Enclosure Products and Systems.
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<PAGE>
Operating Expenses
Operating expenses increased $93.6 in 1998, of which the fourth quarter
one-time charges represented $43.7. These one-time charges related to costs
associated with the ZERO merger, goodwill impairment on two APW business units,
and restructuring and downsizing efforts in all three business segments. To a
lesser extent, charges were incurred to conform ZERO's accounting policies with
APW's.
Excluding the one-time charges, operating expenses increased 22% and 9% in
1998 and 1997, respectively. During the corresponding periods, sales increased
37% and 15%, respectively. The majority of the increase since 1996 relates to
variable selling expenses and increased amortization of goodwill associated
with recent acquisitions.
In addition to variable selling expenses, total operating costs have
increased as a result of acquisitions, product development programs and
expenditures for geographic expansion into emerging markets. Approximately
$40.8 of the increase in fiscal 1998 was attributable to businesses acquired
since 1997.
Overall, the lower corporate expenses as a percent of sales are attributed
to the effects of the lower operating cost enclosure businesses and the
Company's goal to continually identify ways to be more cost efficient and have
allowed the Company to reduce operating costs as a percent of sales. Excluding
1998 restructuring and other one-time items, operating costs as a percent of
sales were 22%, 25%, and 27% in 1998, 1997 and 1996, respectively.
Other Expense (Income)
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
Net financing costs......................................... $28.5 $16.2 $7.9
Other--net.................................................. (10.1) (3.7) (1.3)
</TABLE>
The trend of increased net financing costs over the last three years is the
result of increased debt levels following APW's acquisitions during this
period.
"Other--net" includes foreign exchange gains and losses as well as
miscellaneous other income and expenses. APW recognized gains on the sale of
two properties in 1998 totaling $11.6 and life insurance proceeds of $1.7.
Offsetting these gains was a $4.5 write-down recorded to reduce a European
subsidiary to its estimated realizable value. Additionally, in 1998 and 1997,
the US Dollar strengthened against most other major currencies and APW realized
foreign exchange gains due to transactions denominated in currencies outside of
the functional currencies of certain of its foreign units.
Income Tax Expense
APW's effective income tax rate was 53.5%, 35.1% and 34.5% in 1998, 1997
and 1996, respectively. The rate for 1998 is largely impacted by the current
non-deductibility of the one-time charges recorded in the fourth quarter.
Excluding the one-time items, the 1998 effective income tax rate was 37.6%. The
non-deductibility of goodwill on many of APW's acquisitions over the last three
years has led to the gradual increase in APW's effective tax rate. With the
Rubicon acquisition subsequent to year end this trend is expected to continue
in 1999.
S-33
<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent different replaces, the description of the general terms and
provisions of the Debt Securities in the accompanying prospectus under the
caption "Description of Debt Securities." Certain capitalized terms are defined
in the prospectus or below under "Certain Definitions."
The Notes are to be issued as a separate series of Debt Securities pursuant
to a securities resolution (the "Securities Resolution") under an indenture, to
be dated as of April 1, 1999 (as amended by the Securities Resolution, the
"Indenture"), between APW and The First National Bank of Chicago, as trustee
(the "Trustee"). The statements under this caption relating to the Notes and
the Indenture are qualified in their entirety by reference to all the
provisions of the Indenture, including the definitions of certain terms
therein. A copy of the Indenture is filed as an exhibit to the registration
statement of which this prospectus supplement and the accompanying prospectus
forms a part. Where reference is made to particular provisions of the Indenture
or to defined terms not otherwise defined herein, such provisions or defined
terms are incorporated herein by reference.
General
APW will sell $200.0 million in aggregate principal amount of the Notes
which will be unsecured obligations of APW and will mature on April 1, 2009.
The Securities Resolution will authorize APW to issue up to $100.0 million
aggregate principal amount of additional Notes under the Indenture with the
same terms (including interest rate, maturity and redemption terms) as the
Notes being initially offered by this prospectus supplement (the "Additional
Notes") except that no Additional Notes may be issued at a price that would
cause such Additional Notes to have "original issue discount" within the
meaning of Section 1273 of the Internal Revenue Code and provided such issuance
complies with the provisions described under "Limitation on Consolidated Debt."
The Notes will bear interest at the rate per annum shown on the front cover
of this prospectus supplement from April 1, 1999 or from the most recent
interest payment date to which interest has been paid or provided for, payable
semi-annually on April 1 and October 1 of each year, commencing October 1,
1999, to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the preceding March 15 or September 15,
as the case may be. Settlement for the Notes will be made in immediately
available funds and payments by APW in respect of the Notes (including
principal, premium, it any, and interest) will be made in immediately available
funds. Interest on the Notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Principal of and premium, if any, and interest on the Notes will be
payable, and the Notes may be presented for registration of transfer and
exchange, at the office or agency of APW maintained for that purpose in the
Borough of Manhattan, The City of New York.
Notes will be issued only in fully registered form, without interest
coupons, in denominations of $1,000 and integral multiples thereof. No service
charge will be made for any registration of transfer or exchange of Notes, but
APW may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Optional Redemption
The Notes will be subject to redemption, at the option of APW, in whole or
in part, at any time on or after April 1, 2004 and prior to maturity, upon not
less than 30 nor more than 60 days' notice mailed to each Holder of Notes to be
redeemed at such Holder's address appearing in the Note register, in amounts of
$1,000 or an integral multiple of $1,000, at the following redemption prices
(expressed as percentages of the principal amount) plus accrued interest to but
excluding the redemption date (subject to the right of
S-34
<PAGE>
Holders of record on the relevant regular record date to receive interest due
on an interest payment date that is on or prior to the redemption date), if
redeemed during the 12-month period beginning April 1 of the years indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004........................................................... 104.375%
2005........................................................... 102.916%
2006........................................................... 101.458%
2007 and thereafter............................................ 100.000%
</TABLE>
In addition, if on or before April 1, 2002, APW receives net proceeds from
the sale of its Common Stock in one or more Public Equity Offerings, APW may,
at its option, use all or a portion of any such net proceeds to redeem Notes in
an aggregate principal amount of up to 35% of the sum of (i) the aggregate
principal amount of the Notes issued in this offering and (ii) the aggregate
principal amount of any Additional Notes issued hereafter, provided, however,
that at least 65% of the sum of (i) the aggregate principal amount of Notes
originally issued and (ii) the aggregate amount of any Additional Notes issued
hereafter remains outstanding after such redemption. Such redemption must occur
on a redemption date within 75 days of such sale and upon not less than 30 nor
more than 60 days' notice mailed to each Holder of Notes (and Additional Notes,
if any) to be redeemed at such Holder's address appearing in the Note register
or Additional Note register, as the case may be, in amounts of $1,000 or an
integral multiple of $1,000, at a redemption price of 108.75% of the principal
amount of the Notes (and Additional Notes, if any) plus accrued interest to but
excluding the redemption date (subject to the right of Holders of record on the
relevant regular record date to receive interest due on an interest payment
date that is on or prior to the redemption date).
If less than all the Notes are to be redeemed, the Trustee shall select, in
such manner as it shall deem fair and appropriate, the particular Notes to be
redeemed or any portion thereof that is an integral multiple of $1,000.
The Notes will not have the benefit of any sinking fund.
Subordination
The indebtedness evidenced by the Notes will, to the extent set forth in
the Indenture, be subordinate in right of payment to the prior payment in full
of all Senior Debt.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshaling of assets of APW, whether voluntary or
involuntary, or any bankruptcy, insolvency, receivership or similar proceedings
of APW, the holders of all Senior Debt will first be entitled to receive
payment in full of such Senior Debt, or provision made for such payment, before
the Holders of the Notes will be entitled to receive any payment in respect of
the principal of or premium, if any, or interest on, or any obligation to
repurchase, the Notes. In the event that notwithstanding the foregoing, the
Trustee or the Holder of any Note receives any payment or distribution of
assets of APW of any kind or character (including any such payment or
distribution which may be payable or deliverable by the reason of the payment
of any other indebtedness of APW being subordinated to the payment of the
Notes) before all the Senior Debt is so paid in full, then such payment or
distribution will be required to be paid over or delivered forthwith to the
trustee in bankruptcy or other person making payment or distribution of assets
of APW for application to the payment of all Senior Debt remaining unpaid, to
the extent necessary to pay the Senior Debt in full. However, notwithstanding
the foregoing, Holders of the Notes may receive shares of stock of APW or
securities of APW which are subordinate in right of payment to all Senior Debt
of APW to substantially the same extent as, or greater than, the Notes are so
subordinated ("subordinated consideration").
S-35
<PAGE>
No payments on account of principal of, premium, if any, or interest on, or
in respect of the purchase or other acquisition of, the Notes (except for
subordinated consideration), and no defeasance of the Notes, may be made if
there shall have occurred and be continuing a Senior Payment Default.
"Senior Payment Default" means any default in the payment of any principal
of or premium, if any, or interest on Senior Debt when due, whether at the
stated maturity of any such payment or by declaration of acceleration, call for
redemption or otherwise.
Upon the occurrence of a Senior Nonmonetary Default and receipt of written
notice by APW and the Trustee of the occurrence of such Senior Nonmonetary
Default from any holder of Senior Debt (or any trustee, agent or other
representative for such holder) which is the subject of such Senior Nonmonetary
Default, no payments on account of principal of, premium, if any, or interest
on, or in respect of the purchase or other acquisition of, the Notes (except
for subordinated consideration), and no defeasance of the Notes, may be made
for a period (the "Payment Blockage Period") commencing on the date of the
receipt of such notice and ending the earlier of:
(1) the date on which such Senior Nonmonetary Default shall have been
cured or waived or ceased to exist or all Senior Debt the subject of such
Senior Nonmonetary Default shall have been discharged, and
(2) the 179th day after the date of the receipt of such notice;
provided that in no event may more than one Payment Blockage Period be
commenced during any 360-day period and there shall be a period of at least 181
days during each 360-day period when no Payment Blockage Period is in effect.
In addition, no Senior Nonmonetary Default that existed or was continuing on
the date of the commencement of a Payment Blockage Period may be made the basis
of the commencement of a subsequent Payment Blockage Period whether or not
within a period of 360 consecutive days, unless such Senior Nonmonetary Default
shall have been cured for a period of not less than 90 consecutive days.
"Senior Nonmonetary Default" means the occurrence or existence and
continuance of an event of default with respect to Senior Debt, other than a
Senior Payment Default, permitting the holders of the Senior Debt (or a trustee
or other agent on behalf of the holders thereof) then to declare such Senior
Debt due and payable prior to the date on which it would otherwise become due
and payable.
The failure to make any payment on the Notes by reason of the provisions of
the Indenture described under this caption "Subordination" will not be
construed as preventing the occurrence of an Event of Default with respect to
the Notes arising from any such failure to make payment. Upon termination of
any period of payment blockage APW shall resume making any and all required
payments in respect of the Notes, including any missed payments.
By reason of such subordination, in the event of any liquidation,
insolvency or similar proceeding, Holders of the Notes may recover less,
ratably, than holders of Senior Debt of APW and creditors of APW who are not
holders of Senior Debt of APW or Holders of the Notes may recover less,
ratably, than holders of Senior Debt of APW and more, ratably, than Holders of
the Notes.
The subordination provisions described above will not be applicable to
payments in respect of the Notes from a defeasance trust established in
connection with any defeasance or covenant defeasance of the Notes as described
under "Defeasance."
After giving effect to the Notes and the application of the net proceeds
therefrom, as of February 28, 1999, APW would have had approximately $681.8
million of outstanding Senior Debt (excluding $115.4 million in off-balance
sheet receivables interests sold).
S-36
<PAGE>
Covenants
The Indenture will contain, among others, the following covenants:
Limitation on Consolidated Debt
APW may not, and may not permit any of its Restricted Subsidiaries to,
Incur any Debt (including Acquired Debt) unless immediately after giving pro
forma effect to the Incurrence of such Debt (and Acquired Debt) and the receipt
and application of the proceeds thereof, the Consolidated Cash Flow Coverage
Ratio of APW would be greater than 2.0 to 1.
Notwithstanding the foregoing limitation, APW may, and may permit any
Restricted Subsidiary of APW to, incur the following Debt:
(1) Debt under the Senior Bank Facility in an aggregate principal
amount at any one time not to exceed $850 million, less any amounts by
which any revolving credit facility commitments under the Senior Bank
Facility are permanently reduced pursuant to the provisions of the
Indenture described under "Limitation on Asset Dispositions" below (so long
as and to the extent that any required payments in connection therewith are
actually made), and any renewal, extension, refinancing or refunding
thereof in an amount which, together with any amount remaining outstanding
or available under the Senior Bank Facility, does not exceed the amount
permitted under this clause (1);
(2) Debt owed by APW to any Wholly Owned Restricted Subsidiary of APW
for which fair value has been received or Debt owed by a Subsidiary of APW
to APW or a Wholly Owned Restricted Subsidiary of APW; provided, however,
that:
(a) any such Debt owing by APW to a Wholly Owned Restricted
Subsidiary of APW shall be Subordinated Debt evidenced by an
intercompany promissory note, and
(b) upon either:
(i) the transfer or other disposition by such Wholly Owned
Restricted Subsidiary or APW of any Debt so permitted to a Person
other than APW or another Wholly Owned Restricted Subsidiary of
APW, or
(ii) the issuance (other than directors' qualifying shares),
sale, lease, transfer or other disposition of shares of Capital
Stock (including by consolidation or merger) of such Wholly Owned
Restricted Subsidiary to a Person other than APW or another such
Wholly Owned Restricted Subsidiary,
the provisions of this clause (2) shall no longer be applicable to such
Debt and such Debt shall be deemed to have been Incurred at the time of
such transfer or other disposition;
(3) Debt consisting of the Notes;
(4) Debt consisting of Permitted Interest Rate or Currency Price
Agreements;
(5) Debt which is exchanged for or the proceeds of which are used to
refinance or refund, or any extension or renewal of (each of the foregoing,
a "refinancing"):
(a) the Notes,
(b) any Debt that is not described in any other clause hereof that
was outstanding on the date of original issuance of the Notes,
(c) outstanding Debt Incurred pursuant to the provisions of the
Indenture described under the first paragraph of this "Limitation on
Consolidated Debt," or
(d) any Debt Incurred under this clause (5) or clause (6) below,
S-37
<PAGE>
in each case in an aggregate principal amount not to exceed the principal
amount of the Debt so refinanced plus the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of the
Debt so refinanced or the amount of any premium reasonably determined by
APW as necessary to accomplish such refinancing by means of a tender offer
or privately negotiated repurchase, plus the expenses of APW or the
Restricted Subsidiary of APW, as the case may be, incurred in connection
with such refinancing; provided, however, that:
(i) Debt the proceeds of which are used to refinance the Notes or
Debt which is pari passu with or subordinate in right of payment to the
Notes shall only be permitted if (x) in the case of any refinancing of
the Notes or Debt which is pari passu to the Notes, the refinancing
Debt is made pari passu to the Notes or subordinated to the Notes, and
(y) in the case of any refinancing of Debt which is subordinated to the
Notes, the refinancing Debt constitutes Subordinated Debt; and
(ii) in the case of any refinancing of Debt Incurred by APW, the
refinancing Debt may be Incurred only by APW, and in the case of any
refinancing of Debt Incurred by a Restricted Subsidiary of APW, the
refinancing Debt may be Incurred only by such Restricted Subsidiary;
and provided, further, that Debt Incurred pursuant to this clause (5) may
not be Incurred more than 45 days prior to the application of the proceeds
to repay the Debt to be refinanced; and
(6) Debt not otherwise permitted to be Incurred pursuant to clauses (1)
through (5) above, which, together with any other outstanding Debt Incurred
pursuant to this clause (6), has an aggregate principal amount not in
excess of $50 million at any time outstanding.
For purposes of determining compliance with this "Limitation on
Consolidated Debt" covenant in the event that an item of proposed Debt meets
the criteria of more than one of the categories of Debt described in clauses
(1) through (6) above, or is entitled to be Incurred pursuant to the first
paragraph of this covenant, APW will be permitted to classify such item of Debt
in any manner that complies with this covenant.
Limitation on Senior Subordinated Debt
APW may not Incur any Debt which by its terms is (1) subordinated in right
of payment to any Senior Debt and (2) senior in right of payment to the Notes.
Limitation on Issuance of Guarantees of Subordinated Debt
APW may not permit any Restricted Subsidiary of APW, directly or
indirectly, to assume, Guarantee or in any other manner become liable with
respect to any Debt of APW that by its terms is subordinate or junior in right
of payment to the Notes.
Limitation on Liens Securing Subordinated Debt
APW may not, and may not permit any of its Restricted Subsidiaries to,
create, incur, assume or suffer to exist any Lien on or with respect to any
property or assets of APW or any Restricted Subsidiary of APW now owned or
hereafter acquired to secure any Debt of APW or any Restricted Subsidiary of
APW that is expressly by its terms subordinate or junior in right of payment to
any other Debt of APW or such Restricted Subsidiary, without making, or causing
such Restricted Subsidiary to make, effective provision for securing the Notes
(1) equally and ratably with such Debt as to such property or assets for so
long as such Debt will be so secured or (2) if such Debt is subordinate in
right of payment to the Notes, prior to such Debt as to such property or assets
for so long as such Debt will be so secured.
S-38
<PAGE>
Limitation on Restricted Payments
APW:
(1) may not, directly or indirectly, declare or pay any dividend or
make any distribution (including any payment in connection with any merger
or consolidation derived from assets of APW or any Restricted Subsidiary of
APW) in respect of its Capital Stock or to the holders thereof, excluding
any dividends or distributions by APW payable solely in shares of its
Capital Stock (other than Redeemable Stock) or in options, warrants or
other rights to acquire its Capital Stock (other than Redeemable Stock),
(2) may not, and may not permit any Restricted Subsidiary of APW to,
purchase, redeem, or otherwise acquire or retire for value:
(a) any Capital Stock of APW or any Restricted Subsidiary of APW,
or
(b) any options, warrants or other rights to acquire shares of
Capital Stock of APW or any Restricted Subsidiary of APW or any
securities convertible or exchangeable into shares of Capital Stock of
APW or any Restricted Subsidiary of APW,
(3) may not make, or permit any Restricted Subsidiary of APW to make,
any Investment other than a Permitted Investment, and
(4) may not, and may not permit any Restricted Subsidiary of APW to,
redeem, repurchase, defease or otherwise acquire or retire for value prior
to any scheduled maturity, repayment or sinking fund payment Debt of APW
which is subordinate or junior in right of payment to the Notes;
(each of clauses (1) through (4) being a "Restricted Payment") unless:
(a) no Event of Default, or an event that with the passing of time
or the giving of notice, or both, would constitute an Event of Default,
shall have occurred and is continuing or would result from such
Restricted Payment,
(b) after giving pro forma effect to such Restricted Payment as if
such Restricted Payment had been made at the beginning of the
applicable four-fiscal-quarter period, APW could Incur at least $1.00
of additional Debt pursuant to the terms of the Indenture described in
the first paragraph of "Limitation on Consolidated Debt" above, and
(c) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments from the date of issuance of the Notes does not
exceed the sum of:
(i) 50% of cumulative Consolidated Net Income (or, in case
Consolidated Net Income is negative, less 100% of such deficit) of
APW since March 1, 1999 through the last day of the last full
fiscal quarter ending immediately preceding the date of such
Restricted Payment for which quarterly or annual financial
statements are available (taken as a single accounting period),
plus
(ii) 100% of the aggregate net proceeds received by APW after
the date of original issuance of the Notes, including the fair
market value of property other than cash (determined in good faith
by the Board as evidenced by a resolution of the Board filed with
the Trustee), from contributions of capital or the issuance and
sale (other than to a Restricted Subsidiary) of Capital Stock
(other than Redeemable Stock) of APW, options, warrants or other
rights to acquire Capital Stock (other than Redeemable Stock) of
APW and Debt of APW that has been converted into or exchanged for
Capital Stock (other than Redeemable Stock and other than by or
from a Restricted Subsidiary) of APW after the date of original
issuance of the Notes, provided that any such net proceeds received
by APW from an employee stock ownership plan financed by loans from
APW or a Restricted Subsidiary of APW shall be included only to the
extent such loans have been repaid with cash on or prior to the
date of determination, plus
S-39
<PAGE>
(iii) an amount equal to the net reduction in Investments by
APW and its Restricted Subsidiaries, subsequent to the date of
issuance of the Notes, in any Person subject to clause (3) above
upon the disposition, liquidation or repayment (including by way of
dividends) thereof or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries, but in each such case only
to the extent such amounts are not included in Consolidated Net
Income of APW and not to exceed in the case of any one Person the
amount of Investments previously made by APW and its Restricted
Subsidiaries in such Person.
Prior to the making of any Restricted Payment, APW shall deliver to the Trustee
an Officers' Certificate setting forth the computations by which the
determinations required by clauses (b) and (c) above were made and stating that
no Event of Default, or event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default, has occurred and is
continuing or will result from such Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default, or event
that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or would
result therefrom:
(1) APW may pay any dividend on Capital Stock of any class within 60
days after the declaration thereof if, on the date when the dividend was
declared, APW could have paid such dividend in accordance with the
foregoing provisions,
(2) APW may refinance any Debt otherwise permitted by the provision of
the Indenture described in clause (5) of the second paragraph under
"Limitation on Consolidated Debt" above or redeem, repurchase or otherwise
acquire and retire for value any Debt solely in exchange for or out of the
net proceeds of the substantially concurrent sale (other than from or to a
Restricted Subsidiary of APW or from or to an employee stock ownership plan
financed by loans from APW or a Restricted Subsidiary of APW) of shares of
Capital Stock (other than Redeemable Stock) of APW, provided that the
amount of net proceeds from such exchange or sale shall be excluded from
the calculation of the amount available for Restricted Payments pursuant to
the preceding paragraph,
(3) APW may purchase, redeem, acquire or retire any shares of Capital
Stock of APW solely in exchange for or out of the net proceeds of the
substantially concurrent sale (other than from or to a Restricted
Subsidiary of APW or from or to an employee stock ownership plan financed
by loans from APW or a Restricted Subsidiary of APW) of shares of Capital
Stock (other than Redeemable Stock) of APW,
(4) APW or a Restricted Subsidiary of APW may purchase or redeem any
Senior Debt from Net Available Proceeds to the extent permitted under
"Limitation on Asset Dispositions,"
(5) APW may pay dividends or distributions pro rata to its shareholders
of shares of Capital Stock in any of its Subsidiaries (a "Spin-off"),
provided that (i) immediately after giving effect to such Spin-off, APW
could Incur at least $1.00 of additional Debt pursuant to the first
paragraph under "Limitation on Consolidated Debt", (ii) the greater of the
aggregate fair market value and aggregate book value of all such shares
dividended or distributed (measured at the time of such dividend or
distribution) shall not exceed 5% of the Consolidated Net Worth of APW
before giving effect to any such Spin-off and (iii) the Consolidated Cash
Flow Available for Fixed Charges of APW shall not decrease by more than 5%
after giving effect to any such Spin-off,
(6) APW may acquire shares of Capital Stock to be contributed by APW on
behalf of its employees to employee benefit programs; provided that in each
such case the amount to be purchased shall not exceed 5% of the
compensation of such employee in any fiscal year, and
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<PAGE>
(7) APW or any Restricted Subsidiary of APW may make Restricted
Payments, in addition to Restricted Payments permitted by clause (1)
through (6) above, not in excess of $20 million in the aggregate after the
date of the Indenture.
Any payment made pursuant to clauses (1), (3) or (5) of this paragraph shall be
a Restricted Payment for purposes of calculating aggregate Restricted Payments
pursuant to the preceding paragraph.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
APW may not, and may not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of APW:
(1) to pay dividends (in cash or otherwise) or make any other
distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to APW or any other Restricted Subsidiary of APW,
(2) to make loans or advances to APW or any other Restricted Subsidiary
of APW, or
(3) to transfer any of its property or assets to APW or any other
Restricted Subsidiary of APW.
Notwithstanding the foregoing, APW may, and may permit any Restricted
Subsidiary of APW to, suffer to exist any such encumbrance or restriction:
(a) pursuant to any agreement in effect on the date of original
issuance of the Notes, including the Senior Bank Facility, as described in
a schedule to the Indenture,
(b) pursuant to an agreement relating to any Debt Incurred by a Person
(other than a Restricted Subsidiary of APW existing on the date of original
issuance of the Notes or any Restricted Subsidiary carrying on any of the
businesses of any such Restricted Subsidiary) prior to the date on which
such Person became a Restricted Subsidiary of APW and outstanding on such
date and not Incurred in anticipation of becoming a Restricted Subsidiary
of APW, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person so
acquired,
(c) pursuant to an agreement effecting a renewal, refunding or
extension of Debt Incurred pursuant to an agreement referred to in clause
(a) or (b) above, provided, however, that the provisions contained in such
renewal, refunding or extension agreement relating to such encumbrance or
restriction are no more restrictive in any material respect than the
provisions contained in the agreement the subject thereof, as determined in
good faith by the Board and evidenced by a resolution of the Board filed
with the Trustee,
(d) in the case of clause (3) above, restrictions contained in any
security agreement (including a capital lease) securing Debt of a
Restricted Subsidiary otherwise permitted under the Indenture, but only to
the extent such restrictions restrict the transfer of the property subject
to such security agreement,
(e) in the case of clause (3) above, customary nonassignment provisions
entered into in the ordinary course of business consistent with past
practices in leases and other contracts to the extent such provisions
restrict the transfer or subletting of any such lease or the assignment of
rights under any such contract,
(f) any restriction with respect to a Restricted Subsidiary of APW
imposed pursuant to an agreement for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided that such restriction terminates if such sale or
disposition is closed or abandoned, or
(g) such encumbrance or restriction is the result of applicable
corporate law or regulation relating to the payment of dividends or
distributions.
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Limitation on Asset Dispositions
APW may not, and may not permit any of its Restricted Subsidiaries to, make
any Asset Disposition in one or more related transactions unless:
(1) APW or the Restricted Subsidiary, as the case may be, receives
consideration for such disposition at least equal to the fair market value
for the assets sold or disposed of as determined by the Board in good faith
and evidenced by a resolution of the Board filed with the Trustee,
(2) at least 75% of the consideration for such disposition consists of
cash or readily marketable cash equivalents or the assumption of Debt
(other than Debt that is subordinated to the Notes) relating to such assets
and release from all liability on the Debt assumed, and
(3) all Net Available Proceeds, less any amounts invested within 360
days of such disposition in assets related to the business of APW, are
applied within 360 days of such disposition:
(a) first, to the permanent repayment or reduction of Senior Debt
then outstanding under any agreements or instruments which would
require such application or prohibit payments pursuant to clause (b)
following,
(b) second, to the extent of remaining Net Available Proceeds, to
make an Offer to Purchase outstanding Notes at 100% of their principal
amount plus accrued interest to the date of purchase and, to the extent
required by the terms thereof, any other Debt of APW that is pari passu
with the Notes at a price no greater than 100% of the principal amount
thereof plus accrued interest to the date of purchase, and
(c) third, to the extent of any remaining Net Available Proceeds,
to any other use as determined by APW which is not otherwise prohibited
by the Indenture.
Pending final application of the Net Available Proceeds, APW may use the
proceeds in any manner not prohibited by the Indenture and may temporarily
reduce Senior Debt then outstanding, provided that this temporary use will not
affect its obligations hereunder.
Notwithstanding the foregoing, APW shall not be required to make an Offer
to Purchase pursuant to clause 3(b) above if the remaining Net Available
Proceeds after giving effect to the application required by clause 3(a) are
less than $10 million.
Limitation on Sale and Leaseback Transactions
APW may not, and may not permit any of its Restricted Subsidiaries to,
enter into any Sale and Leaseback Transaction unless the Sale and Leaseback
Transaction is treated as an Asset Disposition and all of the conditions of the
Indenture described under "Limitation on Asset Dispositions" (including the
provisions concerning the application of Net Available Proceeds) are satisfied
with respect to such Sale and Leaseback Transaction, treating all of the
consideration received in such Sale and Leaseback Transaction as Net Available
Proceeds for purposes of such covenant.
Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries
APW may not, and may not permit any of its Restricted Subsidiaries to,
directly or indirectly, issue, transfer, convey, sell, lease or otherwise
dispose of any shares of Capital Stock (including options, warrants or other
rights to purchase shares of such Capital Stock) of such or any other
Restricted Subsidiary of APW (other than to APW or a Wholly Owned Restricted
Subsidiary of APW or in respect of any director's qualifying shares or the
ownership by foreign nationals of such Capital Stock to the extent mandated by
applicable law) to any Person unless:
(A) such issuance, transfer, conveyance, sale, lease or other disposition,
including the application of the Net Available Proceeds therefrom, is made in
accordance with the provisions described under "Limitation on Asset
Dispositions" or the provisions of clause (5) of the second paragraph of
"Limitation on Restricted Payments," and
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(B) immediately after giving effect to such issuance, transfer, conveyance,
sale, lease or other disposition, (i) such Subsidiary would no longer
constitute a Restricted Subsidiary of APW, and (ii) APW could make a
Restricted Payment in an amount equal to the greater of the fair market value
and book value of APW's remaining ownership interests in such Subsidiary
pursuant to the provisions described under "Limitation on Restricted Payments"
and such amount is thereafter treated as a Restricted Payment for the purpose
of calculating the aggregate amount available for Restricted Payments
thereunder.
Transactions with Affiliates
APW may not, and may not permit any of its Restricted Subsidiaries to,
enter into any transaction (or series of related transactions) with an
Affiliate of APW (other than APW or a Wholly Owned Restricted Subsidiary of
APW), including any Investment, either directly or indirectly, unless such
transaction is on terms no less favorable to APW or such Restricted Subsidiary
than those that could be obtained in a comparable arm's-length transaction
with an entity that is not an Affiliate and is in the best interests of APW or
such Restricted Subsidiary.
For any transaction that involves:
(1) in excess of $2 million a majority of the disinterested members of
the Board shall determine that the transaction satisfies the above criteria
and shall evidence such a determination by a resolution of the Board filed
with the Trustee, or
(2) in excess of $10 million APW shall also obtain an opinion from a
nationally recognized expert with experience in appraising the terms and
conditions of the type of transaction (or series of related transactions)
for which the opinion is required stating that such transaction (or series
of related transactions) is on terms no less favorable to APW or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate of APW,
which opinion shall be filed with the Trustee.
The foregoing requirements shall not apply to:
(1) Any employment agreement or employee benefit arrangement with any
officer or director entered into in the ordinary course of business and
consistent with past practice;
(2) Payment of reasonable directors' fees to directors who are not
employees of APW;
(3) Reasonable and customary indemnification of officers and directors
of APW or any Restricted Subsidiary pursuant to bylaws, statutory
provisions or indemnification agreements;
(4) any Restricted Payment that is permitted to be paid under the
provisions of the Indenture described under "Limitation on Restricted
Payments";
(5) Purchases and sales of goods and services in the ordinary course of
business on terms customary in the industry;
(6) Any transaction pursuant to agreements in effect on the date of
issuance of the Notes; and
(7) Written agreements entered into or assumed in connection with
acquisitions of other businesses with persons who were not Affiliates prior
to such transactions.
Change of Control
Within 30 days of the occurrence of a Change of Control, APW will be
required to make an Offer to Purchase all outstanding Notes at a purchase
price equal to 101% of their principal amount plus accrued interest to the
date of purchase. A "Change of Control" will be deemed to have occurred at
such time as:
(1) any Person or any Persons acting together that would constitute a
"group" (a "Group") for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange
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Act"), or any successor provision thereto, together with any Affiliates
thereof, shall beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act or any successor provision thereto), directly or indirectly,
at least 50% of the aggregate voting power of all classes of Voting Stock
of APW (for the purposes of this clause (1) a Person shall be deemed to
beneficially own the Voting Stock of a corporation that is beneficially
owned (as defined above) by another corporation (a "parent corporation") if
such Person beneficially owns (as defined above) at least 50% of the
aggregate voting power of all classes of Voting Stock of such parent
corporation), or
(2) any Person or Group, together with any Affiliates thereof, shall
succeed in having a sufficient number of its nominees elected to the Board
such that such nominees, when added to any existing director remaining on
the Board after such election who was a nominee of or is an Affiliate of
such Person or Group, will constitute a majority of the Board, or
(3) APW shall, directly or indirectly, transfer, sell, lease or
otherwise dispose of all or substantially all of its assets, or
(4) there shall be adopted a plan of liquidation or dissolution of APW.
Notwithstanding the foregoing, a transaction effected to create a holding
company of APW shall not be deemed to involve a "Change of Control" if (1)
pursuant to such transaction APW becomes a wholly owned Subsidiary of such
holding company and (2) as a result of such transaction the holders of Capital
Stock of such holding company are substantially the same as the holders of
Capital Stock of APW immediately prior to such transaction; provided that
following any such holding company transaction, this covenant shall apply to
both APW and such holding company, and references in this definition of "Change
of Control" to APW shall thereafter be treated as references to either APW or
such holding company, as applicable.
In the event that APW makes an Offer to Purchase the Notes, APW shall
comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act.
Payments for Consent
APW may not, and may not permit any of its Restricted Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the Indenture
or the Notes unless such consideration is offered to be paid or is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation document relating to such consent, waiver or
agreement.
Provision of Financial Information
For so long as any of the Notes are outstanding, APW shall file with the
Commission the annual reports, quarterly reports and other documents which a
reporting company is required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act or any successor provisions thereto.
Unrestricted Subsidiaries
APW may designate any of its Subsidiaries to be an "Unrestricted
Subsidiary" as provided below in which event such Subsidiary and each other
Person that is then or thereafter becomes a Subsidiary of such Subsidiary will
be deemed to be an Unrestricted Subsidiary.
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An "Unrestricted Subsidiary" means:
(1) any Subsidiary designated as such by the Board as set forth below
where:
(a) neither APW nor any of its other Subsidiaries (other than
another Unrestricted Subsidiary):
(i) provides credit support for, or any Guarantee of, any Debt
of such Subsidiary or any Subsidiary of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Debt), or
(ii) is directly or indirectly liable for any Debt of such
Subsidiary or any Subsidiary of such Subsidiary, and
(b) no default with respect to any Debt of such Subsidiary or any
Subsidiary of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any
other Debt of APW and its Subsidiaries (other than another Unrestricted
Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final
scheduled maturity, and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board may designate any Subsidiary to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, any other Subsidiary of APW which is not a Subsidiary of the
Subsidiary to be so designated or otherwise an Unrestricted Subsidiary,
provided that either (1) the Subsidiary to be so designated has total assets of
$1,000 or less or (2) immediately after giving effect to such designation, APW
could Incur at least $1.00 of additional Debt pursuant to the first paragraph
under "Limitation on Consolidated Debt" and provided, further, that APW could
make a Restricted Payment in an amount equal to the greater of the fair market
value and book value of such Subsidiary pursuant to the "Limitation on
Restricted Payments" and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the aggregate amount available for
Restricted Payments thereunder.
Mergers, Consolidations and Certain Sales of Assets
APW may not, in a single transaction or a series of related transactions,
consolidate with or merge into any other Person or permit any other Person to
consolidate with or merge into APW or directly or indirectly, transfer, sell,
lease or otherwise dispose of all or substantially all of its assets unless:
(1) in a transaction in which APW does not survive or in which APW
sells, leases or otherwise disposes of all or substantially all of its
assets, the successor entity to APW is organized under the laws of the
United States of America or any State thereof or the District of Columbia
and shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee in form satisfactory to the Trustee, all of APW's
obligations under the Indenture,
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes an obligation of APW or a Restricted
Subsidiary as a result of such transaction as having been Incurred by APW
or such Restricted Subsidiary at the time of the transaction, no Event of
Default or event that with the passing of time or the giving of notice, or
both, would constitute an Event of Default shall have occurred and be
continuing,
(3) immediately after giving effect to such transaction, the
Consolidated Net Worth of APW (or other successor entity to APW) is equal
to or greater than that of APW immediately prior to the transaction,
(4) immediately after giving effect to such transaction and treating
any Debt which becomes an obligation of APW or a Restricted Subsidiary as a
result of such transaction as having been Incurred by APW or such
Restricted Subsidiary at the time of the transaction, APW (including any
successor
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entity to APW) could Incur at least $1.00 of additional Debt pursuant to
the provisions of the Indenture described in the first paragraph under
"Limitation on Consolidated Debt" above, and
(5) certain other conditions are met.
Events of Default
The following will be Events of Default under the Indenture:
(1) failure to pay principal of (or premium, if any, on) any Note when
due,
(2) failure to pay any interest on any Note when due, continued for 30
days,
(3) default in the payment of principal and interest on Notes required
to be purchased pursuant to an Offer to Purchase as described under "Change
of Control" or "Limitation on Certain Asset Dispositions" when due and
payable,
(4) failure to perform or comply with the provisions described under
"Merger, Consolidation and Certain Sales of Assets,"
(5) failure to perform any other covenant or agreement of APW under the
Indenture or the Notes continued for 60 days after written notice to APW by
the Trustee or Holders of at least 25% in aggregate principal amount of
outstanding Notes,
(6) default under the terms of any instrument evidencing or securing
Debt for money borrowed by APW or any Restricted Subsidiary having an
outstanding principal amount of $20 million individually or in the
aggregate which default results in the acceleration of the payment of such
indebtedness or constitutes the failure to pay such indebtedness when due,
(7) the rendering of a final judgment or judgments (not subject to
appeal) against APW or any Restricted Subsidiary in an amount in excess of
$20 million which remains undischarged or unstayed for a period of 60 days
after the date on which the right to appeal has expired, and
(8) certain events of bankruptcy, insolvency or reorganization
affecting APW or any Restricted Subsidiary.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
If an Event of Default (other than an Event of Default described in clause
(8) above) shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Notes may
accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal, have been
cured or waived as provided in the Indenture. If an Event of Default specified
in Clause (8) above occurs, the outstanding Notes will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. For information as to waiver of defaults, see
"Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of
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a continuing Event of Default and unless also the Holders of at least 25% in
aggregate principal amount of the outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in aggregate principal amount of the outstanding Notes a
direction inconsistent with such request and the Trustee shall have failed to
institute such proceeding within 60 days after such request. However, such
limitations do not apply to a suit instituted by a Holder of a Note for
enforcement of payment of the principal of or premium, if any, or interest on
such Note on or after the respective due dates expressed in such Note.
APW will be required to furnish to the Trustee quarterly a statement as to
the performance by APW of certain of its obligations under the Indenture and as
to any default in such performance.
Satisfaction and Discharge of the Indenture
The Indenture will cease to be of further effect as to all outstanding
Notes, if:
(1) APW will have paid or caused to be paid the principal of and
interest on the Notes as and when the same will have become due and
payable, or
(2) all outstanding Notes (except lost, stolen or destroyed Notes which
have been replaced or paid) have been delivered to the Trustee for
cancellation;
provided, that notwithstanding the foregoing the Indenture shall remain in
effect with respect to:
(a) rights of registration of transfer and exchange and APW's right of
optional redemption,
(b) substitution of apparently mutilated, defaced, destroyed, lost or
stolen Notes,
(c) rights of Holders to receive payment of principal of and interest
on the Notes,
(d) rights, obligations and immunities of the Trustee under the
Indenture, and
(e) rights of the Holders of the Notes as beneficiaries of the
Indenture with respect to any property deposited with the Trustee payable
to all or any of them.
Defeasance
The Indenture will provide that, at the option of APW, (1) if applicable,
APW will be discharged from any and all obligations in respect of the
outstanding Notes ("Legal Defeasance") or (2) if applicable, APW may omit to
comply with certain restrictive covenants, and that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes ("Covenant
Defeasance"), in either case upon irrevocable deposit with the Trustee, in
trust, of money and/or U.S. government obligations which will provide money in
an amount sufficient in the opinion of a nationally recognized firm of
independent certified public accountants to pay the principal of and premium,
if any, and each installment of interest, if any, on the outstanding Notes. In
the case of Covenant Defeasance, the obligations under the Indenture other than
with respect to such covenants and the Events of Default other than the Events
of Default relating to such covenants shall remain in full force and effect.
Such trust may only be established if, among other things:
(1) (a) in the case of Legal Defeasance, APW has received from, or
there has been published by, the Internal Revenue Service a ruling or there
has been a change in law, which in the Opinion of Counsel provides that
Holders of the Notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such deposit, defeasance
and discharge had not occurred, or
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(b) in the case of Covenant Defeasance, APW has delivered to the Trustee
an Opinion of Counsel to the effect that the Holders of the Notes will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit and defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred;
(2) no Event of Default or event that with the passing of time or the
giving of notice, or both, shall constitute an Event of Default shall have
occurred or be continuing;
(3) APW has delivered to the Trustee an Opinion of Counsel to the effect
that such deposit shall not cause the Trustee or the trust so created to be
subject to the Investment Company Act of 1940; and
(4) certain other customary conditions precedent are satisfied.
Modification and Waiver
Modifications and amendments of the Indenture may be made by APW and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the outstanding Notes; provided, however, that no such modification
or amendment may, without the consent of the Holder of each outstanding Note
affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Note,
(2) reduce the principal amount of, or the premium or interest on, any
Note,
(3) change the place or currency of payment of principal of or premium
or interest on any Note,
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note,
(5) reduce the above-stated percentage of outstanding Notes necessary to
modify or amend the Indenture,
(6) reduce the percentage of aggregate principal amount of outstanding
Notes necessary for waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults,
(7) modify any provisions of the Indenture relating to the modification
and amendment of the Indenture or the waiver of past defaults or covenants,
except as otherwise specified,
(8) modify any of the provisions of the Indenture relating to the
subordination of the Notes in a manner adverse to the Holders, or
(9) following the mailing of any Offer to Purchase, modify any Offer to
Purchase for the Notes required under the "Limitation on Asset
Dispositions" or the "Change of Control" covenants contained in the
Indenture in a manner materially adverse to the Holders thereof.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by APW with
certain restrictive provisions of the Indenture. Subject to certain rights of
the Trustee, as provided in the Indenture, the Holders of a majority in
aggregate principal amount of the outstanding Notes, on behalf of all Holders
of Notes, may waive any past default under the Indenture, except a default in
the payment of principal, premium or interest or a default arising from
failure to purchase any Note tendered pursuant to an Offer to Purchase.
Governing Law
The Indenture and the Notes will be governed by the laws of the State of
Wisconsin.
The Trustee
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of
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Default, the Trustee will exercise such rights and powers vested in it under
the Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of APW, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with APW or any Affiliate; provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign.
Book-Entry System
The Notes will be issued in the form of one or more fully registered global
notes (collectively, the "Global Note"), which will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York (the "Depositary")
and registered in the name of the Depositary's nominee. Except as set forth
below, the Global Note may be transferred, in whole and not in part, only to
the Depositary or another nominee of the Depositary.
The Depositary has advised APW as follows: The Depositary is a limited-
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The Depositary was
created to hold securities of institutions that have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others such
as banks, brokers, dealers, and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly. The
Depositary agrees with and represents to its participants that it will
administer its book-entry system in accordance with its rules and bylaws and
requirements of law.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Notes represented by the Global Note to the accounts of participants.
The accounts to be credited shall be designated by the Underwriters. Ownership
of beneficial interest in the Global Note will be limited to participants or
persons that may hold interests through participants. Ownership of interests in
the Global Note will be shown on, and the transfer of those ownership Interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) and such participants (with respect to the
owners of beneficial interest in the Global Note through such participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to transfer beneficial interests in the
Global Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Note, the Depositary or such nominee, as the case may be,
will be considered the sole owner and the holder thereof for all purposes of
such Notes and under the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have the Notes
represented by the Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Notes in definitive
form and will not be considered to be the owners or holders of any Notes under
the Indenture. Accordingly, each person owning a beneficial interest in the
Global Note must rely on the procedures of the Depositary and, if such person
is not a participant, on the procedures of the participant
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through which such person owns its interest, to exercise any rights of a holder
of Notes under the Indenture or the Global Note. APW understands that under
existing industry practice, in the event APW requests any action that the
Depositary, as the holder of the Global Note, is entitled to take, the
Depositary would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and premium, if any, and interest on Notes
represented by the Global Note will be made to the Depositary or its nominee as
the registered owner and holder of the Global Note.
APW expects that the Depositary, upon receipt of any payment of principal
(and premium, if any) or interest in respect of the Global Note, will credit
immediately participants' accounts with payment in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Note as shown on the records of the Depositary. APW also expects that payments
by participants to owners of beneficial interests in the Global Note held
through such participants will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants. None of APW, the Trustee, any agent of APW
or the Trustee or the Underwriters will have any responsibility or liability
for any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between the Depositary
and its participants or the relationship between such participants and the
owners of beneficial interests in the Global Note owning through such
participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary.
The Notes represented by a Global Note are exchangeable for certificated
Notes in definitive registered form in denominations of $1,000 and in any
greater amount that is an integral multiple thereof if (1) the Depositary
notifies APW that it is unwilling or unable to continue as Depositary for the
Global Note or if at any time the Depositary ceases to be a clearing agency
registered under the Exchange Act, (2) APW in its discretion at any time
determines not to have all of the Notes represented by the Global Note and
notifies the Trustee thereof or (3) an Event of Default with respect to the
Notes has occurred and is continuing. Any Notes that are exchangeable pursuant
to the preceding sentence are exchangeable for certificated Notes issuable in
authorized denominations and registered in such names as the Depositary shall
direct. Subject to the foregoing, the Global Note is not exchangeable except
for a Global Note or Global Notes of the same aggregate denominations to be
registered in the name of the Depositary or its nominee.
Certain Definitions
"Acquired Debt" of any particular Person means Debt of any other Person
existing at the time such other Person merged with or into or became a
Subsidiary of such particular Person or assumed by such particular Person in
connection with the acquisition of assets from any other Person, and not
incurred by such other Person in connection with, or in contemplation of, such
other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing; provided, that
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direct or indirect beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted Subsidiaries
(including any issuance or sale by a Restricted Subsidiary of Capital Stock of
such Restricted Subsidiary and including a consolidation or merger or other
sale of any such Restricted Subsidiary with, into or to another Person in a
transaction in which such Restricted Subsidiary ceases to be a Restricted
Subsidiary, but excluding a disposition by a Restricted Subsidiary of such
Person to such Person or a Wholly Owned Restricted Subsidiary of such Person or
by such Person to a Wholly Owned Restricted Subsidiary of such Person) of:
(1) shares of Capital Stock (other than directors' qualifying shares)
or other ownership interests of a Restricted Subsidiary of such Person,
(2) substantially all of the assets of such Person or any of its
Restricted Subsidiaries representing a division or line of business, or
(3) other assets or rights of such Person or any of its Restricted
Subsidiaries outside of the ordinary course of business;
provided in each case that the aggregate consideration for such transfer,
conveyance, sale, lease or other disposition is equal to $5 million or more.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face
of a balance sheet of such Person in accordance with generally accepted
accounting principles. The stated maturity of such obligation shall be the date
of the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty. The principal amount of such obligation shall be the
capitalized amount thereof that would appear on the face of a balance sheet of
such Person in accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general
or limited, of such Person.
"Cash Equivalents" means:
(1) direct obligations of the United States of America or any agency
thereof having maturities of not more than one year from the date of
acquisition,
(2) time deposits and certificates of deposit of any domestic
commercial bank of recognized standing having capital and surplus in excess
of $500 million, with maturities of not more than one year from the date of
acquisition,
(3) repurchase obligations issued by any bank described in clause (2)
above with a term not to exceed 30 days,
(4) commercial paper rated at least A-1 or the equivalent thereof by
S&P or at least P-1 or the equivalent thereof by Moody's, in each case
maturing within one year after the date of acquisition, and
(5) shares of any money market mutual fund, or similar fund, in each
case having assets in excess of $500 million, which invests predominantly
in investments of the types describes in clauses (1) through (4) above.
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"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow Available for Fixed Charges" for any period means
the Consolidated Net Income of APW and its Restricted Subsidiaries for such
period increased by the sum of:
(1) Consolidated Interest Expense of APW and its Restricted
Subsidiaries for such period,
(2) Consolidated Income Tax Expense of APW and its Restricted
Subsidiaries for such period,
(3) the consolidated depreciation and amortization expense included in
the income statement of APW and its Restricted Subsidiaries for such
period, and
(4) all other non-cash items reducing Consolidated Net Income of APW
and its Restricted Subsidiaries, less all non-cash items increasing
Consolidated Net Income of APW and its Restricted Subsidiaries;
provided, however, that there shall be excluded therefrom the Consolidated Cash
Flow Available for Fixed Charges (if positive) of any Restricted Subsidiary of
APW (calculated separately for such Restricted Subsidiary in the same manner as
provided above for APW) that is subject to a restriction which prevents
the payment of dividends or the making of distributions to APW or another
Restricted Subsidiary of APW to the extent of such restriction.
"Consolidated Cash Flow Coverage Ratio" as of any date of determination
means the ratio of:
(1) Consolidated Cash Flow Available for Fixed Charges of APW and its
Restricted Subsidiaries for the period of the most recently completed four
consecutive fiscal quarters for which quarterly or annual financial
statements are available, to
(2) Consolidated Fixed Charges of APW and its Restricted Subsidiaries
for such period;
provided, however, that Consolidated Fixed Charges shall be adjusted to give
effect on a pro forma basis to any Debt that has been Incurred by APW or any
Restricted Subsidiary since the beginning of such period that remains
outstanding and to any Debt that is proposed to be Incurred by APW or any
Restricted Subsidiary as if in each case such Debt had been incurred on the
first day of such period and as if any Debt that (1) is or will no longer be
outstanding as the result of the Incurrence of any such Debt or (2) had been
repaid or retired during such period had not been outstanding as of the first
day of such period; provided further, however, that in making such computation,
the Consolidated Interest Expense of APW and its Restricted Subsidiaries
attributable to interest on any proposed Debt bearing a floating interest rate
shall be computed on a pro forma basis as if the rate in effect on the date of
computation had been the applicable rate for the entire period; and provided
further that, in the event APW or any of its Restricted Subsidiaries has made
Asset Dispositions or acquisitions of assets not in the ordinary course of
business (including acquisitions of other Persons by merger, consolidation or
purchase of Capital Stock) during or after such period, the computation of the
Consolidated Cash Flow Coverage Ratio shall be made on a pro forma basis in
accordance with Regulation S-X promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), as if the Asset Dispositions or acquisitions
had taken place on the first day of such period.
"Consolidated Fixed Charges" for any period means the sum of:
(1) Consolidated Interest Expense, and
(2) the consolidated amount of interest capitalized by APW and its
Restricted Subsidiaries during such period calculated in accordance with
generally accepted accounting principles.
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"Consolidated Income Tax Expense" for any period means the consolidated
provision for income taxes of APW and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
Interest expense included in a consolidated income statement (without deduction
of interest income) of APW and its Restricted Subsidiaries for such period
calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of):
(1) the amortization of Debt discounts,
(2) the amortization of any payments or fees with respect to letters of
credit, bankers' acceptances or similar facilities,
(3) the amortization of fees with respect to interest rate swap or
similar agreements or foreign currency hedge, exchange or similar
agreements,
(4) Preferred Stock dividends of APW or Restricted Subsidiaries of APW
(other than such dividends (a) in respect of Redeemable Stock or (b)
payable in Capital Stock other than Redeemable Stock) declared and paid or
payable,
(5) accrued dividends on Redeemable Stock of APW or its Restricted
Subsidiaries (other than such dividends payable solely in Capital Stock
other than Redeemable Stock), whether or not declared or paid,
(6) interest on Debt Guaranteed by APW and its Restricted Subsidiaries,
and
(7) the portion of any rental obligation allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net income
(or loss) of APW and its Restricted Subsidiaries for such period determined on
a consolidated basis in accordance with generally accepted accounting
principles; provided that there shall be excluded therefrom:
(1) the net income (or loss) of any Person acquired by of APW or a
Restricted Subsidiary of APW in a pooling-of-interests transaction for any
period prior to the date of such transaction,
(2) the net income (or loss) of any Person that is not a Subsidiary of
APW except to the extent of the amount of dividends or other distributions
actually paid to APW or a Subsidiary of APW by such Person during such
period,
(3) gains or losses on Asset Dispositions by APW or its Restricted
Subsidiaries,
(4) all extraordinary gains and extraordinary losses,
(5) the cumulative effect of changes in accounting principles, and
(6) the tax effect of any of the items described in clauses (1) through
(5) above;
provided, further, that for purposes of any determination pursuant to the
provisions of the Indenture described under "Limitation on Restricted
Payments," there shall further be excluded therefrom the net income (but not
net loss) of any Restricted Subsidiary of APW that is subject to a restriction
which prevents the payment of dividends or the making of distributions to APW
or another Restricted Subsidiary of APW to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; provided that, with respect to APW,
adjustments following the date of the Indenture to the accounting books and
records of APW in
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accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or
successor opinions thereto) or otherwise resulting from the acquisition of
control of APW by another Person shall not be given effect to.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent:
(1) every obligation of such Person for money borrowed,
(2) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations Incurred in
connection with the acquisition of property, assets or businesses,
(3) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
(4) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business which are not overdue or which
are being contested in good faith),
(5) every Capital Lease Obligation of such Person,
(6) all Receivables Sales of such Person, together with any obligation
of such Person to pay any discount, interest, fees, indemnities, penalties,
recourse, expenses or other amounts in connection therewith,
(7) all Redeemable Stock issued by such Person,
(8) Preferred Stock of Restricted Subsidiaries of such Person held by
Persons other than such Person or one of its Wholly Owned Restricted
Subsidiaries,
(9) every obligation under Interest Rate or Currency Agreements of such
Person, and
(10) every obligation of the type referred to in clauses (1) through
(9) of another Person and all dividends of another Person the payment of
which, in either case, such Person has Guaranteed or is responsible or
liable for, directly or indirectly, as obligor, Guarantor or otherwise.
Debt shall not include any obligation to pay contingent purchase price
payments, earn-outs, indemnification obligations or similar items to the buyer
or seller of any business or assets acquired or sold by APW or a Restricted
Subsidiary to the extent such obligations are not required to be reflected on
the balance sheet of APW or such Restricted Subsidiary in accordance with
generally accepted accounting principles (footnote disclosure of such
obligations shall not be deemed to be reflected on the balance sheet for this
purpose).
The "amount" or "principal amount" of Debt at any time of determination as
used herein represented by (1) any Receivables Sale, shall be the amount of the
unrecovered capital or principal investment of the purchaser (other than APW or
a Wholly Owned Restricted Subsidiary of APW) thereof (excluding amounts
representative of yield or interest earned on such investment with respect to
which such purchaser has recourse to the seller and (2) any Redeemable Stock,
shall be the maximum fixed redemption or repurchase price in respect thereof.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing, or having the economic effect of guaranteeing, any
Debt of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt,
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(2) to purchase property, securities or services for the purpose of
assuring the holder of such Debt of the payment of such Debt, or
(3) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Debt (and "Guaranteed," "Guaranteeing" and
"Guarantor" shall have meanings correlative to the foregoing);
provided, however, that the Guarantee by any Person shall not include
endorsements by such Person for collection or deposit, in either case, in the
ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Debt shall
not be deemed an Incurrence of such Debt.
"Interest Rate or Currency Agreement" of any Person means any forward
contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements) relating to, or the value of which is dependent upon, interest
rates or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of Debt
issued by, any other Person, including any payment on a Guarantee of any
obligation of such other Person.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Moody's" means Moody's Investors Services, Inc.
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquired of Debt or other obligations relating to such properties or assets)
therefrom by such Person, net of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses Incurred and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability as a consequence of such
Asset Disposition,
(2) all payments made by such Person or its Restricted Subsidiaries on
any Debt which is secured by such assets in accordance with the terms of
any Lien upon or with respect to such assets or which must by the terms of
such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such
Asset Disposition,
(3) all distributions and other payments made to minority interest
holders in Restricted Subsidiaries of such Person or joint ventures as a
result of such Asset Disposition, and
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(4) appropriate amounts to be provided by such Person or any Restricted
Subsidiary thereof, as the case may be, as a reserve in accordance with
generally accepted accounting principles against any liabilities associated
with such assets and retained by such Person or any Restricted Subsidiary
thereof, as the case may be, after such Asset Disposition, including,
without limitation, liabilities under any indemnification obligations and
severance and other employee termination costs associated with such Asset
Disposition, in each case as determined by the Board, in its reasonable
good faith judgment evidenced by a resolution of the Board filed with the
Trustee; provided, however, that any reduction in such reserve following
the consummation of such Asset Disposition will be treated for all purposes
of the Indenture and the Notes as a new Asset Disposition at the time of
such reduction with Net Available Proceeds equal to the amount of such
reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by APW by
first class mail, postage prepaid, to each Holder at his address appearing in
the Note Register on the date of the Offer describing the transaction or
transactions necessitating the Offer and offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the "Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Notes within five Business Days after the Expiration
Date. The Offer shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Offer to Purchase.
"Permitted Interest Rate or Currency Agreement" of any Person means any
Interest Rate or Currency Agreement entered into with one or more financial
institutions in the ordinary course of business that is designed to protect
such Person against fluctuations in interest rates or currency exchange rates
with respect to Debt Incurred and which shall have a notional amount no greater
than the payments due with respect to the Debt being hedged thereby, or in the
case of currency protection agreements, against currency exchange rate
fluctuations in the ordinary course of business relating to then existing
financial obligations or then existing or sold production and not for purposes
of speculation.
"Permitted Investments" means:
(1) an Investment in APW or a Wholly Owned Restricted Subsidiary of
APW,
(2) an Investment in a Person, if such Person or a Subsidiary of such
Person will, as a result of the making of such Investment and all other
contemporaneous related transactions, become a Wholly Owned Restricted
Subsidiary of APW or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to APW or a Wholly Owned
Restricted Subsidiary of APW,
(3) a Temporary Cash Investment,
(4) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with generally accepted accounting principles,
(5) stock, obligations or securities received in settlement of debts
owing to APW or a Restricted Subsidiary of APW as a result of bankruptcy or
insolvency proceedings or upon the foreclosure, perfection, enforcement or
agreement in lieu of foreclosure of any Lien in favor of APW or a
Restricted Subsidiary of APW,
(6) any consolidation or merger of a Wholly Owned Restricted Subsidiary
of APW to the extent otherwise permitted under the Indenture or the Notes,
(7) trade accounts arising in the ordinary course of business and any
commercially reasonable refinancing or restructuring thereof undertaken in
good faith,
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(8) any Investment made as a result of the receipt of non-cash
consideration from an Asset Disposition that was made pursuant to and in
compliance with the covenant described under "Limitation on Asset
Dispositions,"
(9) any acquisition of assets solely in exchange for the issuance of
Capital Stock (other than Redeemable Stock) of APW,
(10) Investments in Permitted Interest Rate or Currency Agreements,
(11) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (11) since the date of the
Indenture, not to exceed $25 million.
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares
of Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of APW pursuant to an effective registration statement under the
Securities Act.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person
relating thereto or a disposition of defaulted Receivables for purpose of
collection and not as a financing arrangement.
"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon the
occurrence of an event) matures or is required to be redeemed (pursuant to any
sinking fund obligation or otherwise) or is convertible into or exchangeable
for Debt or is redeemable at the option of the holder thereof, in whole or in
part, at any time prior to the final Stated Maturity of the Notes.
"Restricted Subsidiary" means any Subsidiary, whether existing on or after
the date of the Indenture, unless such Subsidiary is an Unrestricted
Subsidiary.
"S&P" means Standard & Poor's Ratings Services a division of The McGraw-
Hill Companies, Inc.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such
Person which has been or is being sold or transferred by such Person more than
365 days after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any person
to whom funds have been or are to be advanced by such lender or investor on
the security of such property or asset. The stated maturity of such
arrangement shall be the date of the last payment of rent or any other amount
due under such arrangement prior to the first date on which such arrangement
may be terminated by the lessee without payment of a penalty.
"Senior Bank Facility" means our Multicurrency Credit Agreement, dated as
of October 14, 1998, as it may be amended or restated from time to time.
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"Senior Debt" with respect to any Person, means:
(1) the principal of (and premium, if any) and interest (including
interest accruing on or after the filing of any petition in bankruptcy or
for reorganization relating to such Person whether or not such claim for
post-petition interest is allowed in such proceeding) on, and penalties and
any obligation of such Person for reimbursement, indemnities and fees
relating to, the Senior Bank Facility,
(2) the principal of (and premium, if any) and interest on Debt of such
Person for money borrowed, whether Incurred on or prior to the date of
original issuance of the Notes or thereafter, and any amendments, renewals,
extensions, modifications, refinancings and refundings of any such Debt,
(3) any reimbursement obligation of such Person with respect to letters
of credit, bankers' acceptances or similar facilities issued for the
account of such Person, and
(4) Permitted Interest Rate or Currency Agreements entered into with
respect to Debt described in clauses (1), (2) and (3) above.
Notwithstanding the foregoing, none of the following shall constitute Senior
Debt of any Person:
(a) any Debt as to which the terms of the instrument creating or
evidencing the same provide that such Debt is on a parity with, or not
superior in right of payment to, the Notes,
(b) any Debt which is subordinated in right of payment in any respect
to any other Debt of such Person,
(c) Debt evidenced by the Notes,
(d) any Debt owed to APW or to a Person when such Person is a
Subsidiary of APW,
(e) any obligation of such Person arising from Redeemable Stock of such
Person,
(f) that portion of any Debt which is Incurred in violation of the
Indenture, and
(g) Debt which, when Incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to
such Person.
"Subordinated Debt" means Debt of APW as to which the payment of principal
of (and premium, if any) and interest and other payment obligations in respect
of such Debt shall be subordinate to the prior payment in full of the Notes to
at least the following extent:
(1) no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be permitted for so long as any
default in the payment of principal of (or premium, if any) or interest on
the Notes exists,
(2) in the event that any other default that with the passing of time
or the giving of notice, or both, would constitute an Event of Default
exists with respect to the Notes, upon notice by 25% or more in principal
amount of the Notes to the Trustee, the Trustee shall have the right to
give notice to APW and the holders of such Debt (or trustees or agents
therefor) of a payment blockage, and thereafter no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such
Debt may be made for a period of 179 days from the date of such notice, and
(3) such Debt may not:
(a) provide for payments of principal of such Debt at the stated
maturity thereof or by way of a sinking fund applicable thereto or by
way of any mandatory redemption, defeasance, retirement or repurchase
thereof by APW (including any redemption, retirement or repurchase
which is contingent upon events or circumstances, but excluding any
retirement required by virtue of acceleration of such Debt upon an
event of default thereunder), in each case prior to the final Stated
Maturity of the Notes, or
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(b) permit redemption or other retirement (including pursuant to an
offer to purchase made by APW) of such other Debt at the option of the
holder thereof prior to the final Stated Maturity of the Notes, other
than a redemption or other retirement at the option of the holder of
such Debt (including Pursuant to an offer to purchase made by APW)
which is conditioned upon a change of control of APW pursuant to
provisions substantially similar to those described under "Change of
Control" (and which shall provide that such Debt will not be
repurchased pursuant to such provisions prior to APW's repurchase of
the Notes required to be repurchased by APW pursuant to the provisions
described under "Change of Control").
"Subsidiary" of any Person means (1) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (2) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Temporary Cash Investments" means any Investment in the following kinds of
instruments:
(1) readily marketable obligations issued or unconditionally Guaranteed
as to principal and interest by the United States of America or by any
agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America if, on the date of purchase
or other acquisition of any such instrument by APW or any Restricted
Subsidiary of APW, the remaining term to maturity or interest rate
adjustment is not more than two years;
(2) obligations (including, but not limited to, demand or time
deposits, bankers' acceptances and certificates of deposit) issued or
Guaranteed by a depository institution or trust company incorporated under
the laws of the United States of America, any state thereof or the District
of Columbia, provided that:
(a) such instrument has a final maturity nor more than one year
from the date of purchase thereof by APW or any Restricted Subsidiary
of APW, and
(b) such depository institution or trust company has at the time of
APW's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment:
(i) capital, surplus and undivided profits (as of the date such
institution's most recently published financial statements) in
excess of $100 million, and
(ii) the long-term unsecured debt obligations (other than such
obligations rated on the basis of the credit of a Person other than
such institution) of such institution, at the time of APW's or such
Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, are rated in the highest
rating category of both S&P and Moody's;
(3) commercial paper issued by any corporation, if such commercial
paper has, at the time of APW's or any Restricted Subsidiary of APW's
Investment therein or contractual commitment providing for such Investment
credit ratings of at least A-1 by S&P and P-1 by Moody's;
(4) money market mutual or similar funds having assets in excess of
$100 million;
(5) readily marketable debt obligations issued by any corporation, if
at the time of APW's or any Restricted Subsidiary of APW's Investment
therein or contractual commitment providing for such Investment:
(a) the remaining term to maturity is not more than two years, and
(b) such debt obligations are rated in one of the two highest
rating categories of both S&P and Moody's;
S-59
<PAGE>
(6) demand or time deposit accounts used in the ordinary course of
business with commercial banks the balances in which are at all times fully
Insured as to principal and interest by the Federal Deposit Insurance
Corporation or any successor thereto; and
(7) to the extent not otherwise included herein, Cash Equivalents. In
the event that either S&P or Moody's ceases to publish ratings of the type
provided herein, a replacement rating agency shall be selected by APW with
the consent of the Trustee, and in each case the rating of such replacement
rating agency most nearly equivalent to the corresponding S&P or Moody's
rating, as the case may be, shall be used for purposes hereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
S-60
<PAGE>
UNDERWRITING
APW and the underwriters for the offering (the "Underwriters") named below
have entered into an underwriting agreement with respect to the Notes. Subject
to certain conditions, each Underwriter has severally agreed to purchase the
principal amount of Notes indicated in the following table.
<TABLE>
<CAPTION>
Principal
Amount of
Underwriters Notes
------------ ------------
<S> <C>
Goldman, Sachs & Co............................................ $120,000,000
Credit Suisse First Boston Corporation......................... 50,000,000
NationsBanc Montgomery Securities LLC.......................... 30,000,000
------------
Total...................................................... $200,000,000
============
</TABLE>
----------------
Notes sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. If all the Notes are not sold at the initial public offering price,
the Underwriters may change the offering price and the other selling terms.
The Notes are a new issue of securities with no established trading market.
APW has been advised by the Underwriters that the Underwriters intend to make a
market in the Notes, but they are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
In connection with the offering, the Underwriters may purchase and sell
Notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater aggregate
principal amount of Notes than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Notes
while the offering is in progress.
The Underwriters may also impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the Underwriters have repurchased Notes sold by
or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Notes. As a result, the price of the Notes may
be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the Underwriters at
any time. These transactions may be effected in the over-the-counter market or
otherwise.
APW estimates that its share of the total expenses of the Offering,
excluding underwriting discounts and commissions, will be approximately
$400,000.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged, and may in the future engage, in investment
banking transactions with APW or its affiliates. APW intends to use more than
10% of the net proceeds from the offering of the Notes to repay indebtedness
owed by it to each of Credit Suisse First Boston, New York branch, an affiliate
of Credit Suisse First Boston Corporation, and Bank of America National Trust
and Savings Association, an affiliate of NationsBanc Montgomery Securities LLC.
Accordingly, this offering is being made in compliance with the requirements of
Rule 2710(c)(8) of the National Association of Securities Dealers, Inc.
("NASD"). That rule provides generally that if more than 10% of the net
proceeds from the sale of securities, not including underwriting compensation,
is paid to the underwriters or their affiliates, the price (in the case of an
equity security) or the yield (in the case of a debt security) may not be
higher than that established by a
S-61
<PAGE>
"qualified independent underwriter" as defined by the NASD. Goldman, Sachs &
Co. has agreed to serve in that capacity and performed due diligence
investigations and reviewed and participated in the preparation of the
registration statement of which this prospectus supplement forms a part.
Goldman, Sachs & Co. will receive $10,000 from APW as compensation for such
role.
APW has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-62
<PAGE>
PROSPECTUS
$600,000,000
APPLIED POWER INC.
Debt Securities, Cumulative Preferred Stock,
Class A Common Stock, Warrants,
Stock Purchase Contracts and Stock Purchase Units
----------------
APPLIED POWER CAPITAL TRUST I
APPLIED POWER CAPITAL TRUST II
Preferred Securities Fully and Unconditionally Guaranteed,
As Described Herein, By Applied Power Inc.
Applied Power Inc., a Wisconsin corporation (the "Company"), may offer and
sell from time to time, together or separately, (i) its unsecured debt
securities ("Debt Securities"), which may be senior (the "Senior Debt
Securities"), subordinated (the "Subordinated Debt Securities"), or junior
subordinated (the "Junior Subordinated Debt Securities") in priority of
payment, (ii) shares of its Cumulative Preferred Stock, par value $1.00 per
share, which may be represented by depositary shares as described herein (the
"Preferred Stock"), (iii) shares of its Class A Common Stock, par value $.20
per share (the "Class A Common Stock"), (iv) warrants (the "Warrants") to
purchase any of the foregoing Debt Securities, Preferred Stock or Class A
Common Stock, (v) stock purchase contracts ("Stock Purchase Contracts") to
purchase shares of Class A Common Stock or (vi) stock purchase units ("Stock
Purchase Units"), each representing ownership of a Stock Purchase Contract and
any of (x) Debt Securities, (y) debt obligations of third parties, including
U.S. Treasury Securities, or (z) Preferred Securities (as defined below) of an
Applied Power Trust (as defined below), securing the holder's obligation to
purchase Class A Common Stock under the Stock Purchase Contract. The Debt
Securities, the Preferred Stock, the Class A Common Stock, the Warrants, the
Stock Purchase Contracts and the Stock Purchase Units, together with the
Preferred Securities and the related Guarantees (as defined below), are
collectively referred to herein as the "Securities." The Securities may be
offered in one or more separate classes or series, in amounts, at prices and on
terms to be determined at the time of the offering thereof and to be set forth
in a supplement or supplements to this Prospectus (each, a "Prospectus
Supplement"). The Securities may be sold for U.S. dollars, foreign currencies
or foreign currency units, and the Securities may be payable in U.S. dollars,
foreign currencies or foreign currency units.
Applied Power Capital Trust I and Applied Power Capital Trust II, each a
statutory business trust created under the laws of the State of Delaware (each,
an "Applied Power Trust," and collectively, the "Applied Power Trusts"), may
severally offer preferred securities (the "Preferred Securities") representing
undivided beneficial ownership interests in the assets of such Applied Power
Trust. The Company will be the owner of the common securities (the "Common
Securities," and, together with the Preferred Securities, the "Trust
Securities") of each Applied Power Trust. The payment of periodic cash
distributions ("Distributions") with respect to Preferred Securities of each of
the Applied Power Trusts out of monies held by the Property Trustee (as defined
herein) of such Applied Power Trust, and payments on liquidation of such
Applied Power Trust and on redemption of Preferred Securities of such Applied
Power Trust, will be guaranteed by the Company as and to the extent described
herein (each, a "Guarantee"). See "Description of Guarantees." The Company's
obligation under each Guarantee is an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all senior indebtedness
and subordinated indebtedness of the Company. Except as otherwise provided in
the applicable Prospectus Supplement, (i) concurrently with the issuance by an
Applied Power Trust of its Preferred Securities, such Applied Power Trust will
invest the proceeds thereof and any contributions made in respect of the Common
Securities in a corresponding series of the Company's Junior Subordinated Debt
Securities (the "Corresponding Junior Subordinated Debt Securities") with terms
directly corresponding to the terms of that Applied Power Trust's Preferred
Securities, (ii) the Corresponding Junior Subordinated Debt Securities will be
the sole assets of that Applied Power Trust and (iii) payments under the
Corresponding Junior Subordinated Debt Securities will be the only revenue of
each Applied Power Trust. Unless otherwise specified in an applicable
Prospectus Supplement, the Company may redeem the Corresponding Junior
Subordinated Debt Securities (and cause the redemption of Trust Securities) or
may dissolve each Applied Power Trust and, after satisfaction of creditors of
such Applied Power Trusts as provided by applicable law, cause the
Corresponding Junior Subordinated Debt Securities to be distributed to the
holders of Preferred Securities in liquidation of their interests in the
applicable Applied Power Trust. See "Description of Preferred Securities--
Liquidation Distribution upon Dissolution."
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
----------------
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
----------------
The date of this Prospectus is January 27, 1999.
<PAGE>
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the accompanying Prospectus Supplement or
Supplements, together with the terms of the offering of any such Securities,
the initial price thereof, the net proceeds from the sale thereof and the
intended use or uses of such proceeds. The Prospectus Supplement will also set
forth with respect to the particular Securities offered, certain terms thereof,
including, where applicable, (i) in the case of Debt Securities, the
designation, aggregate principal amount, authorized denominations and priority
thereof, the currency, currencies or currency units for which the Debt
Securities may be purchased and the currency, currencies or currency units in
which the principal of and any interest on such Debt Securities may be payable,
the date on which such Debt Securities will mature, the rate per annum at which
such Debt Securities will bear interest, if any, or the method of determination
of such rate, the dates on which such interest, if any, will be payable, the
deferral of payment of any interest, any conversion or exchange provisions, any
redemption or sinking fund provisions and any additional or other rights,
preferences, privileges, limitations and restrictions relating to such Debt
Securities, (ii) in the case of Preferred Stock, the specific designation,
number of shares or fractional interests therein and any dividend, liquidation,
redemption, exchange, voting, conversion and other rights, preferences and
privileges, (iii) in the case of Class A Common Stock, the aggregate number of
shares offered and market price and dividend information, (iv) in the case of
the Warrants, the Debt Securities, the Preferred Stock or Class A Common Stock,
respectively, for which each such Warrant is exercisable and the exercise
price, duration, detachability and other terms of the Warrants, (v) in the case
of Stock Purchase Contracts, the designation and number of shares of Class A
Common Stock issuable thereunder, the purchase price of the Class A Common
Stock, the date or dates on which the Class A Common Stock is required to be
purchased by the holders of the Stock Purchase Contracts and any periodic
payments required to be made by the Company to the holders of the Stock
Purchase Contracts or vice versa, (vi) in the case of Stock Purchase Units, the
specific terms of the Stock Purchase Contracts and any Debt Securities or debt
obligations of third parties or Preferred Securities of an Applied Power Trust
securing the holders' obligation to purchase the Class A Common Stock under the
Stock Purchase Contracts, the ability of a holder of such Stock Purchase Units
to settle early the underlying Stock Purchase Contract by delivering cash in
exchange for the underlying collateral and, if applicable, whether the Company
will issue to such holder a Prepaid Security (as defined herein) as a result of
such early settlement and the specific terms of the Prepaid Security and (vii)
in the case of Preferred Securities of an Applied Power Trust, the specific
designation, number of securities, liquidation amount per security, any listing
on a securities exchange, distribution rate (or method of calculation thereof),
dates on which distributions shall be payable and dates from which
distributions shall accrue, voting rights, if any, terms for any conversion or
exchange into other securities, any redemption or sinking fund provisions, any
other rights, preferences, privileges, limitations or restrictions relating to
the Preferred Securities and the terms upon which the proceeds of the sale of
the Preferred Securities shall be used to purchase a specific series of
Corresponding Junior Subordinated Debt Securities of the Company. The
Prospectus Supplement will also contain information, where applicable, about
certain United States Federal income tax considerations relating to the
Securities described in the Prospectus Supplement. All or a portion of the
Securities may be issued in permanent or temporary global form (each a "Global
Security").
The aggregate initial offering price of all Securities shall not exceed
$600,000,000 (or, if any Securities are issued (i) with any initial offering
price denominated in a foreign currency or currency unit, such amount as shall
result in aggregate gross proceeds equivalent to $600,000,000 at the time of
initial offering or (ii) at an original issue discount, such greater amount as
shall result in aggregate gross proceeds of $600,000,000).
The Securities may be sold through underwriters or dealers or may be sold by
the Company and/or each Applied Power Trust directly or through agents
designated from time to time. The names of any underwriters or agents involved
in the sale of the Securities in respect to which this Prospectus is being
delivered and their compensation will be set forth in the Prospectus
Supplement.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR
2
<PAGE>
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR IN THE ACCOMPANYING
PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF
OR THEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy or information statements and other information
with the Securities and Exchange Commission (the "Commission"), all of which
may be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Chicago Regional Office, Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661; and New York Regional Office,
7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained at the prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and accessed electronically at the web site maintained
by the Commission (http://www.sec.gov). Such material can also be inspected at
the offices of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New
York, New York 10005, where the Class A Common Stock is listed (symbol "APW").
This Prospectus constitutes part of a Registration Statement on Form S-3
filed by the Company and the Applied Power Trusts with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the Securities. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each instance,
where a copy of such document has been filed as an exhibit to the Registration
Statement or otherwise has been filed with the Commission, reference is made to
the copy of the applicable document so filed. Each such statement is qualified
in its entirety by such reference.
No separate financial statements of the Applied Power Trusts have been
included herein. The Company and the Applied Power Trusts do not consider that
such financial statements would be material to holders of the Preferred
Securities because (i) all of the voting securities of the Applied Power Trusts
will be owned, directly or indirectly, by the Company, a reporting company
under the Exchange Act, (ii) each Applied Power Trust is a newly formed special
purpose entity, has no operating history or independent operations and is not
engaged in and does not propose to engage in any activity other than holding as
trust assets the Corresponding Junior Subordinated Debt Securities of the
Company and issuing the Trust Securities and (iii) the Company's obligations
described herein and in any accompanying Prospectus Supplement, through the
applicable Guarantee Agreement (as defined herein), the applicable Trust
Agreement (as defined herein), the Corresponding Junior Subordinated Debt
Securities and the applicable Securities Resolution under the Indenture (as
defined herein), taken together, constitute a full, irrevocable and
unconditional guarantee by the
3
<PAGE>
Company of payments due on the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Applied Power Trust's obligations under the
Preferred Securities. See "The Applied Power Trusts," "Description of Preferred
Securities," "Description of Debt Securities--Certain Provisions Relating to
Corresponding Junior Subordinated Debt Securities" and "Description of
Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company (Commission File No.
1-11288) with the Commission pursuant to the Exchange Act are incorporated
herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1998;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1998;
(c) The Company's Current Report on Form 8-K dated September 29, 1998 and
Amendment No. 1 thereto on Form 8-K/A filed December 11, 1998; and
(d) The description of the Class A Common Stock contained in the
Company's Current Report on Form 8-K dated August 12, 1998 filed for the
purpose of updating and superseding the description of the Class A Common
Stock contained in the Company's Registration Statement on Form 8-A filed
on August 11, 1987, as previously updated by the Company's Current Report
on Form 8-K dated January 28, 1991.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Securities made hereby
shall be deemed to be incorporated by reference into this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, including any beneficial owner of Securities, upon the
written or oral request of any such person, a copy of any and all of the
documents that have been or may be incorporated by reference herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Such requests should be directed to Investor
Relations, Applied Power Inc., 13000 West Silver Spring Drive, Butler,
Wisconsin 53007 (telephone: (414) 783-9279).
----------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$", "dollars" or
"U.S.$").
FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS
This Prospectus and any Prospectus Supplement (including the documents
incorporated herein or therein by reference) may contain statements that
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements to
differ
4
<PAGE>
materially from the future results, performance or achievements expressed or
implied in such forward-looking statements. The words "anticipate," "believe,"
"estimate," "expect," "project," "objective" and similar expressions are
intended to identify forward-looking statements. In addition to the assumptions
and other factors referred to specifically in connection with such statements,
factors that could cause the Company's actual results to differ materially from
those contemplated in the forward-looking statements include factors described
under the caption "Risk Factors That May Affect Future Results" or similar
cautionary captions in the documents incorporated herein by reference.
THE COMPANY
The Company, a Wisconsin corporation incorporated in 1910, is a diversified
global company engaged in the business of providing tools, equipment, systems
and supply items to a variety of end-users and original equipment manufacturers
("OEMs") in the manufacturing, computer, semiconductor, telecommunication,
datacom, construction, electrical, transportation, recreational vehicle,
natural resources, aerospace, defense, and other industries.
The Company's operations are divided into three business segments:
. Enclosure Products and Systems
Electronic enclosure products, systems and technical environment solutions
sold into the telecommunications, computer networking, semiconductor
equipment, medical, electronic and manufacturing environments.
. Engineered Solutions
Motion, vibration control and magnetic applications and systems primarily
for OEM customers.
. Tools and Supplies
Industrial and electrical tools and supplies sold primarily through
distributors and mass merchandisers.
Enclosure Products and Systems
Enclosure Products and Systems ("EPS"), formerly known as Technical
Environments and Enclosures, provides users and manufacturers of electronic
equipment with technical furniture and electronic enclosure products and
systems. Technical furniture, sold primarily under the Wright Line brand name,
is used to configure the environment in which computers reside, including
computer room, manufacturing or technical office environments. Electronic
enclosure products are cabinets, racks and subracks that are sold under the
Stantron and VERO brand names. Other products include backplanes, power
supplies and cases sold under the VERO, Danica and ZERO Halliburton(R) brand
names, respectively. In addition to providing standard products, EPS sells
customized electronic enclosure systems allowing the Company to provide
completely integrated and tested products to a wide array of customers
including the telecommunication, computer networking, semiconductor
manufacturing equipment and automated teller machines markets. The systems
business is driven by the desire of many producers of electronic components to
outsource manufacturing and it relies heavily on EPS' skills in new product
development, supply chain management, assembly and testing. EPS also has a
global drop ship capability. EPS products are primarily sold direct, with
specific standard products going through distribution in selected markets. EPS
sales and manufacturing locations are mainly in Europe and North America.
Engineered Solutions
Engineered Solutions ("ES") is a technology based business providing
customized solutions to OEM customers in the truck, aerospace, automotive,
recreational vehicle, electrical/electronic enclosures and other general
industrial markets. ES possesses particular competence in hydraulic,
electromechanical, rubber/elastomer molding, magnetic, thermal systems and
electronic control techniques. Principal brand names
5
<PAGE>
that ES trades under include McLean, Barry Controls, Power Gear, Power Packer,
Vlier, Mox-Med and Eder. The segment's sales, engineering and manufacturing
activities are primarily in Europe and North America. As an OEM supplier, ES
operates as a just-in-time supplier and maintains numerous quality
certifications including ISO 9001 and ISO 9000. Most ES sales are diversified
by customer and end user industry and are primarily sold through direct sales
persons, with sales representatives and distributors used in certain
situations.
Tools and Supplies
Tools and Supplies ("TS") provides a wide array of electrical and industrial
tools and supplies to wholesale distributors, catalogs and various retail
channels of distribution. TS provides over 10,000 stock keeping units ("SKUs"),
most of which are designed and manufactured by the Company in North America. TS
has particular expertise in hydraulic design and plastic injection molding. The
Company maintains a sophisticated sourcing operation to supply additional
products to supplement its own products and meet its customers' needs.
Principal brand names used by the Company include Enerpac, GB Gardner Bender,
Ancor, Calterm and Del City. End user markets include general industrial,
construction, retail marine, retail automotive, do-it-yourself and production
automation. To provide its customers with the service levels required, TS
maintains a sophisticated warehouse and physical distribution capability in
North America, Europe and Asia. Certain products are sold on an OEM basis.
* * * * *
The Company has had an active acquisition program and regularly reviews
acquisition opportunities in the ordinary course of its business, some of which
may be material. Such opportunities may be under investigation, discussion, or
negotiation at any particular time or from time to time.
The Company's principal executive offices are located at 13000 West Silver
Spring Drive, Butler, Wisconsin 53007, and its telephone number is (414) 783-
9279.
USE OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities (other
than the Trust Securities) to refinance, in part, existing indebtedness and/or
for general corporate purposes. Funds not required immediately for such
purposes may be invested temporarily in short-term marketable securities. The
Company expects from time to time to continue to incur short-term and long-term
debt and to effect other financings, the amounts of which cannot now be
determined. Each Applied Power Trust will use all proceeds received from the
sale of its Trust Securities to purchase the applicable Corresponding Junior
Subordinated Debt Securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the Company for the periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended
November 30, Years Ended August 31,
------------ ---------------------------
1998(1)(2) 1998(3) 1997 1996 1995 1994
---------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (4)
(5).................................. 2.6 2.6 5.3 7.4 5.5 4.0
</TABLE>
- --------
(1) The Company's business has historically experienced the effects of
seasonality where the second half of the fiscal year generally produces
better results than the first half. The results for the first quarter ended
November 30, 1998, are not necessarily indicative of full year results.
(2) Net earnings for the three month period ended November 30, 1998, include a
one-time pre-tax contract termination charge of $7,824,000. Excluding this
charge and the related tax benefit, the ratio of earnings to fixed charges
would have been 3.1.
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(3) 1998 net earnings include a non-recurring restructuring charge of
$52,637,000 which related to merger costs, various plant consolidations,
and other cost reductions and product rationalization efforts of the
Company. Excluding this charge and the related tax benefit, the ratio of
earnings to fixed charges would have been 4.6.
(4) The ratios reflect the combined results of operations and financial
position of the Company and ZERO Corporation, acquired by merger on July
31, 1998, restated for all periods presented pursuant to the pooling-of-
interests method of accounting, and reflect the results of other acquired
companies from their respective effective dates of acquisition in
accordance with the purchase method of accounting.
(5) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes, cumulative effect of
change in accounting methods, discontinued operations, extraordinary items
and fixed charges. "Fixed charges" consist of interest on indebtedness,
amortization of debt expenses and one-third of rent expense which is deemed
representative of an interest factor.
THE APPLIED POWER TRUSTS
Each Applied Power Trust is a statutory business trust created under Delaware
law pursuant to (i) a trust agreement executed by the Company, as depositor of
such Applied Power Trust, and the Issuer Trustees (as defined herein) of such
Applied Power Trust and (ii) a certificate of trust filed with the Delaware
Secretary of State. Each trust agreement will be amended and restated in its
entirety (each as so amended and restated, a "Trust Agreement") substantially
in the form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each Trust Agreement will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
Each Applied Power Trust exists for the exclusive purposes of (i) issuing and
selling its Trust Securities, (ii) using the proceeds from the sale of such
Trust Securities to acquire a series of Corresponding Junior Subordinated Debt
Securities issued by the Company and (iii) engaging in only those other
activities necessary, convenient or incidental thereto. Each of the Applied
Power Trusts is a separate legal entity, and the assets of one will not be
available to satisfy the obligations of any other similar trust which may be
created.
All of the Common Securities of each Applied Power Trust will be owned by the
Company. The Common Securities of an Applied Power Trust will rank pari passu,
and payments will be made thereon pro rata, with the Preferred Securities of
such Applied Power Trust, except that upon the occurrence and continuance of a
Trust Event of Default (as defined herein) resulting from an Event of Default
with respect to Corresponding Junior Subordinated Debt Securities, the rights
of the Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities of such
Applied Power Trust. See "Description of Preferred Securities--Subordination of
Common Securities." The Company will acquire Common Securities in an aggregate
liquidation amount equal to not less than 3% of the total capital of each
Applied Power Trust.
Unless otherwise specified in the applicable Prospectus Supplement, each
Applied Power Trust has a term of approximately 50 years, but may dissolve
earlier as provided in the applicable Trust Agreement. Each Applied Power
Trust's business and affairs are conducted by its trustees, each appointed by
the Company as holder of the Common Securities. Unless otherwise specified in
the applicable Prospectus Supplement, the trustees for each Applied Power Trust
will be The First National Bank of Chicago, as the Property Trustee (the
"Property Trustee"), First Chicago Delaware Inc., as the Delaware Trustee (the
"Delaware Trustee"), and two individual trustees (the "Administrative
Trustees") who are employees or officers of or affiliated with the Company
(collectively, the "Issuer Trustees"). The First National Bank of Chicago, as
Property Trustee, will act as sole indenture trustee under each Trust Agreement
for purposes of compliance with the Trust Indenture Act. Unless otherwise
specified in the applicable Prospectus Supplement, The First National Bank of
Chicago will act as trustee under the Guarantee Agreement (as defined herein).
See "Description of Guarantees" and "Description of Debt Securities--Certain
Provisions Relating to Corresponding Junior Subordinated Debt Securities." The
holder of the Common Securities of an Applied Power Trust, or the holders of a
majority in
7
<PAGE>
liquidation amount of the outstanding related Preferred Securities if a Trust
Event of Default resulting from an Event of Default with respect to
Corresponding Junior Subordinated Debt Securities for such Applied Power Trust
has occurred and is continuing, will be entitled to appoint, remove or replace
the Property Trustee and/or the Delaware Trustee for such Applied Power Trust.
In no event will the holders of the Preferred Securities have the right to vote
to appoint, remove or replace the Administrative Trustees; such voting rights
are vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the applicable Trust
Agreement. Pursuant to the Indenture, the Company, as borrower, will pay all
fees and expenses related to each Applied Power Trust and the offering of the
Preferred Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of each Applied Power Trust.
The principal executive office of each Applied Power Trust is c/o Applied
Power Inc., 13000 West Silver Spring Drive, Butler, Wisconsin 53007, and its
telephone number is (414) 783-9279.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an Indenture
(the "Indenture") between the Company and The First National Bank of Chicago,
as trustee (the "Trustee"), the form of which is filed as an exhibit to the
Registration Statement. The Indenture will be subject to, and governed by, the
Trust Indenture Act. The following summary of certain provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
express reference to the Indenture and the Securities Resolution (which may be
in the form of a resolution or a supplemental indenture) authorizing a series
(copies of which have been or will be filed with the Commission). All article
and section references herein are to the articles and sections of the
Indenture, and all capitalized terms used in this section without definition
have the meanings given such terms in the Indenture.
The Debt Securities will constitute senior, subordinated or junior
subordinated debt of the Company. The Debt Securities will be issued under one
or more separate Securities Resolutions for Senior Debt Securities,
Subordinated Debt Securities or Junior Subordinated Debt Securities. The
particular terms of the Debt Securities offered by a Prospectus Supplement will
be described in such Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the Indenture. Accordingly, for a description of the
terms of any series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
General
The Indenture does not limit the amount of Debt Securities that can be issued
thereunder and provides that the Debt Securities may be issued from time to
time in one or more series pursuant to the terms of one or more Securities
Resolutions creating such series. The Indenture does not restrict the amount of
debt that may be incurred by the Company or any subsidiary. The Indenture does
not contain any covenant or other provision that is specifically intended to
afford any Holder special protection in the event of highly leveraged
transactions or any other transactions resulting in a decline in the ratings or
credit quality of the Company. As of the date of this Prospectus, there were no
Debt Securities outstanding under the Indenture. The ranking of a series of
Debt Securities with respect to all indebtedness of the Company will be
established by the Securities Resolution creating such series. As of November
30, 1998, approximately $872 million of existing indebtedness of the Company
would have ranked pari passu with the Senior Debt Securities and senior to the
Subordinated Debt Securities and the Junior Subordinated Debt Securities and
there was no existing indebtedness of the Company that would have ranked pari
passu with the Subordinated Debt Securities and senior to the Junior
Subordinated Debt Securities. Although the Indenture provides for the possible
issuance of Debt Securities in other forms or currencies, the only Debt
Securities covered by this Prospectus will be Debt Securities denominated in
U.S. dollars in registered form without coupons unless otherwise indicated in
the applicable Prospectus Supplement.
8
<PAGE>
Terms
Reference is made to the Prospectus Supplement for the following terms, if
applicable, of the Debt Securities offered thereby: (1) the designation,
aggregate principal amount, currency or composite currency and denominations;
(2) the price at which such Debt Securities will be issued and, if an index,
formula or other method is used, the method for determining amounts of
principal or interest; (3) the maturity date and other dates, if any, on which
principal will be payable; (4) the interest rate or rates, if any, or method of
calculating the interest rate or rates; (5) the date or dates from which
interest will accrue and on which interest will be payable, and the record
dates for the payment of interest; (6) the manner of paying principal and
interest; (7) the place or places where principal and interest will be payable;
(8) the terms of any mandatory or optional redemption by the Company including
any sinking fund; (9) the terms of any conversion or exchange right; (10) the
terms of any redemption at the option of Holders; (11) any tax indemnity
provisions; (12) if the Debt Securities provide that payments of principal or
interest may be made in a currency other than that in which Debt Securities are
denominated, the manner for determining such payments; (13) the portion of
principal payable upon acceleration of a Discounted Debt Security (as defined
below); (14) whether and upon what terms Debt Securities may be defeased; (15)
whether any events of default or covenants in addition to or in lieu of those
set forth in the Indenture apply; (16) provisions for electronic issuance of
Debt Securities or for Debt Securities in uncertificated form; (17) the ranking
of the Debt Securities, including the relative degree, if any, to which the
Debt Securities of such series shall be subordinated to one or more other
series of Debt Securities in right of payment, whether outstanding or not; (18)
any provisions relating to extending or shortening the date on which the
principal and premium, if any, of the Debt Securities of such series is
payable; (19) any provisions relating to the deferral of payment of any
interest; (20) if such Debt Securities are to be issued to an Applied Power
Trust, the forms of the related trust agreement and guarantee agreement
relating thereto; (21) the additions or changes, if any, to the Indenture with
respect to the Debt Securities of such series as shall be necessary to permit
or facilitate the issuance of such Debt Securities to an Applied Power Trust;
and (22) any other terms not inconsistent with the provisions of the Indenture,
including any covenants or other terms that may be required or advisable under
United States or other applicable laws or regulations, or advisable in
connection with the marketing of the Debt Securities. (Section 2.01)
Debt Securities of any series may be issued as registered Debt Securities,
bearer Debt Securities or uncertificated Debt Securities, and in such
denominations as specified in the terms of the series. (Section 2.01)
In connection with its original issuance, no bearer Debt Security will be
offered, sold or delivered to any location in the United States, and a bearer
Debt Security in definitive form may be delivered in connection with its
original issuance only upon presentation of a certificate in a form prescribed
by the Company to comply with United States laws and regulations. (Section
2.04)
Registration of transfer of registered Debt Securities may be requested upon
surrender thereof at any agency of the Company maintained for that purpose and
upon fulfillment of all other requirements of the agent. (Sections 2.03 and
2.07)
Debt Securities may be issued under the Indenture as Discounted Debt
Securities to be offered and sold at a substantial discount from the principal
amount thereof. Special United States federal income tax and other
considerations applicable thereto will be described in the Prospectus
Supplement relating to such Discounted Debt Securities. "Discounted Debt
Security" means a Debt Security where the amount of principal due upon
acceleration is less than the stated principal amount. (Sections 1.01 and 2.10)
Conversion and Exchange
The terms, if any, on which Debt Securities of any series will be convertible
into or exchangeable for Class A Common Stock, Preferred Stock, Preferred
Securities or other securities, property, cash or obligations or a combination
of any of the foregoing, will be summarized in the Prospectus Supplement
relating to such series. Such terms may include provisions for conversion or
exchange, either on a mandatory basis, at the option of the Holder or at the
option of the Company.
9
<PAGE>
Certain Covenants
Any restrictive covenants which may apply to a particular series of Debt
Securities will be described in the Prospectus Supplement relating thereto.
Ranking of Debt Securities
Unless stated otherwise in a Prospectus Supplement, the Debt Securities will
be unsecured and will rank equally and ratably with other unsecured and
unsubordinated debt of the Company. The Debt Securities will not be secured by
any properties or assets and will represent unsecured debt of the Company. The
Indenture does not limit the ability of any of the Company's subsidiaries to
issue debt, and the Debt Securities will be effectively subordinated to all
existing and future indebtedness and other liabilities and commitments of the
Company's subsidiaries.
Successor Obligor
The Indenture provides that, unless otherwise specified in the Securities
Resolution establishing a series of Debt Securities, the Company shall not
consolidate with or merge into, or transfer all or substantially all of its
assets to, any person in any transaction in which the Company is not the
survivor, unless: (1) the person is organized under the laws of the United
States or a State thereof; (2) the person assumes by supplemental indenture all
the obligations of the Company under the Indenture, the Debt Securities and any
coupons; (3) all required approvals of any regulatory body having jurisdiction
over the transaction shall have been obtained; and (4) immediately after the
transaction no Default (as defined below) exists. The successor shall be
substituted for the Company, and thereafter all obligations of the Company
under the Indenture, the Debt Securities and any coupons shall terminate.
(Section 5.01)
Exchange of Debt Securities
Registered Debt Securities may be exchanged for an equal aggregate principal
amount of registered Debt Securities of the same series and date of maturity in
such authorized denominations as may be requested upon surrender of the
registered Debt Securities at an agency of the Company maintained for such
purpose and upon fulfillment of all other requirements of such agent. (Section
2.07)
Defaults and Remedies
Unless the Securities Resolution establishing the series otherwise provides
(in which event the Prospectus Supplement will so state), an "Event of Default"
with respect to a series of Debt Securities will occur if:
(1) the Company defaults in any payment of interest on any Debt
Securities of such series when the same becomes due and payable and the
Default continues for a period of 30 days;
(2) the Company defaults in the payment of the principal and premium, if
any, of any Debt Securities of the series when the same becomes due and
payable at maturity or upon redemption, acceleration or otherwise;
(3) the Company defaults in the payment or satisfaction of any sinking
fund obligation with respect to any Debt Securities of the series as
required by the Securities Resolution establishing such series;
(4) the Company defaults in the performance of any of its other
agreements applicable to the series and the Default continues for 60 days
after the notice specified below;
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian for it or for all or
substantially all of its property, or
10
<PAGE>
(D) makes a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian for the Company or for all or substantially
all of its property, or
(C) orders the liquidation of the Company, and the order or decree
remains unstayed and in effect for 60 days; or
(7) there occurs any other Event of Default provided for in such series.
(Section 6.01)
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or a similar official under any Bankruptcy Law.
(Section 6.01)
"Default" means any event which is, or after notice or passage of time would
be, an Event of Default. A Default under subparagraph (4) above is not an Event
of Default until the Trustee or the Holders of at least 25% in principal amount
of the series notify the Company of the Default and the Company does not cure
the Default within the time specified after receipt of the notice. (Section
6.01) If an Event of Default occurs and is continuing on a series, the Trustee
by notice to the Company, or the Holders of at least 25% in principal amount of
the series (or, in the case of a series issued to an Applied Power Trust, so
long as any of the related Preferred Securities of such Applied Power Trust
remain outstanding, if, upon such Event of Default, the Trustee or the Holders
of not less than 25% in aggregate principal amount of such series fail to
declare the principal of all the Debt Securities of such series to be so
immediately due and payable, the holders of 25% in aggregate liquidation amount
of such Preferred Securities then outstanding shall have such right) by notice
to the Company and the Trustee, may declare the principal of and accrued
interest on all the Debt Securities of the series to be due and payable
immediately. Discounted Debt Securities may provide that the amount of
principal due upon acceleration is less than the stated principal amount. The
Holders of a majority in principal amount of the series, by notice to the
Trustee, may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default on the series have been cured or waived except nonpayment of principal
or interest that has become due solely because of the acceleration; provided,
that in the case of a series issued to an Applied Power Trust, so long as any
of the related Preferred Securities of such Applied Power Trust remain
outstanding, the holders of a majority in aggregate liquidation amount of such
Preferred Securities then outstanding shall also have such right to rescission
of acceleration and its consequences with respect to such series, subject to
the same conditions set forth above. (Section 6.02) If an Event of Default
occurs and is continuing on a series, the Trustee may pursue any available
remedy to collect principal or interest then due on the series, to enforce the
performance of any provision applicable to the series, or otherwise to protect
the rights of the Trustee and Holders of the series. (Section 6.03)
In the case of a series issued to an Applied Power Trust, any holder of the
related Preferred Securities of such Applied Power Trust shall have the right,
upon the occurrence and continuance of an Event of Default described in clauses
(1) and (2) of the first paragraph of this subsection with respect to such
series, to institute a suit directly against the Company to enforce payment to
such holder of the principal of, and premium, if any, and interest on, the Debt
Securities having a principal amount equal to the aggregate liquidation amount
of such Preferred Securities held by such holder. (Section 6.06)
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Debt Securities of the series. (Section 7.01) Subject to
certain limitations, Holders of a majority in principal amount of the Debt
Securities of the series may direct the Trustee in its exercise of any trust or
power with respect to such series. (Section 6.05) Except in the case of Default
in payment on a series, the Trustee may withhold from Holders of such series
notice of any continuing Default if it determines that withholding the notice
is in the interest of Holders of the series. (Section 7.04) The Company is
required to furnish the Trustee annually a brief certificate as to the
Company's compliance with all conditions and covenants under the Indenture.
(Section 4.04)
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The Indenture does not have a cross-default provision. Thus, a default by the
Company on any other debt, including any other series of Debt Securities, would
not constitute an Event of Default. A Securities Resolution may provide for a
cross-default provision, in which case the Prospectus Supplement will describe
the terms thereof.
Amendments and Waivers
The Indenture and the Debt Securities or any coupons of the series may be
amended, and any default may be waived as follows: Unless the Securities
Resolution otherwise provides (in which event the Prospectus Supplement will so
state), the Company and the Trustee may amend the Debt Securities, the
Indenture and any coupons with the written consent of the Holders of a majority
in principal amount of the Debt Securities of all series affected voting as one
class; provided that, in the case of a series issued to an Applied Power Trust,
so long as any of the related Preferred Securities of such Applied Power Trust
remain outstanding, no such amendment shall be made that adversely affects the
holders of such Preferred Securities in any material respect, and no
termination of the Indenture shall occur, without the prior consent of the
holders of not less than a majority in aggregate liquidation amount of such
Preferred Securities then outstanding unless and until the principal (and
premium, if any) of the Debt Securities of such series and all accrued and
unpaid interest thereon have been paid in full; and provided further that, in
the case of a series issued to an Applied Power Trust, so long as any of the
related Preferred Securities of such Applied Power Trust remain outstanding, no
amendment shall be made to the provisions of the Indenture described in the
fourth paragraph under "Defaults and Remedies" above without the prior consent
of the holders of each such Preferred Security then outstanding unless and
until the principal (and premium, if any) of the Debt Securities of such series
and all accrued and unpaid interest thereon have been paid in full. (Section
10.02) Unless the Securities Resolution otherwise provides (in which event the
Prospectus Supplement will so state), a Default on a particular series may be
waived with the consent of the Holders of a majority in principal amount of the
Debt Securities of the series (or, in the case of a series issued to an Applied
Power Trust, so long as any of the related Preferred Securities of such Applied
Power Trust remain outstanding, the holders of a majority in aggregate
liquidation amount of such Preferred Securities then outstanding). (Section
6.04) However, without the consent of each Debt Security holder affected, no
amendment or waiver may (1) reduce the amount of Debt Securities whose Holders
must consent to an amendment or waiver, (2) reduce the interest on or change
the time for payment of interest on any Debt Security, (3) change the fixed
maturity of any Debt Security, (4) reduce the principal of any non-Discounted
Debt Security or reduce the amount of the principal of any Discounted Debt
Security that would be due on acceleration thereof, (5) change the currency in
which the principal or interest on a Debt Security is payable, (6) make any
change that materially adversely affects the right to convert or exchange any
Debt Security, or (7) waive any Default in payment of interest on or principal
of a Debt Security. (Sections 6.04 and 10.02) Without the consent of any Debt
Security holder, the Company and the Trustee may amend the Indenture, the Debt
Securities or any coupons to cure any ambiguity, omission, defect, or
inconsistency; to provide for assumption of Company obligations to Debt
Securityholders in the event of a merger or consolidation requiring such
assumption; to provide that specific provisions of the Indenture shall not
apply to a series of Debt Securities not previously issued; to create a series
and establish its terms; to provide for a separate Trustee for one or more
series; or to make any change that does not materially adversely affect the
rights of any Debt Security holder. (Section 10.01)
Legal Defeasance and Covenant Defeasance
Debt Securities of a series may be defeased in accordance with their terms
and, unless the Securities Resolution establishing the terms of the series
otherwise provides, as set forth in the Indenture and described briefly below.
The Company at any time may terminate as to a series all of its obligations
(except for certain obligations, including obligations with respect to the
defeasance trust and obligations to register the transfer or exchange of a Debt
Security, to replace destroyed, lost or stolen Debt Securities and coupons, and
to maintain paying agencies in respect of the Debt Securities) with respect to
the Debt Securities of the series and any
12
<PAGE>
related coupons and the Indenture ("legal defeasance"). The Company at any time
may terminate as to a series its obligations, if any, with respect to the Debt
Securities and coupons of the series under any restrictive covenants which may
be applicable to a particular series ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, a series may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, a series may
not be accelerated by reference to any restrictive covenants which may be
applicable to a particular series. (Section 8.01)
To exercise either defeasance option as to a series, the Company must (i)
irrevocably deposit in trust (the "defeasance trust") with the Trustee or
another trustee money or U.S. Government Obligations, (ii) deliver a
certificate from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest when due
on the deposited U.S. Government Obligations, without reinvestment, plus any
deposited money without investment will provide cash at such times and in such
amounts as will be sufficient to pay the principal and interest when due on all
Debt Securities of such series to maturity or redemption, as the case may be,
and (iii) comply with certain other conditions. In particular, the Company must
obtain an opinion of tax counsel that the defeasance will not result in
recognition of any gain or loss to Holders for federal income tax purposes.
"U.S. Government Obligations" means direct obligations of the United States or
an agency or instrumentality of the United States, the payment of which is
unconditionally guaranteed by the United States, which, in either case, have
the full faith and credit of the United States of America pledged for payment
and which are not callable at the issuer's option, or certificates representing
an ownership interest in such obligations. (Section 8.02)
Certain Provisions Relating to Corresponding Junior Subordinated Debt
Securities
General. The Corresponding Junior Subordinated Debt Securities may be issued
in one or more series of Junior Subordinated Debt Securities under the
Indenture with terms corresponding to the terms of a series of related
Preferred Securities. Concurrently with the issuance of each Applied Power
Trust's Preferred Securities, such Applied Power Trust will invest the proceeds
thereof and the consideration paid by the Company for the Common Securities in
a series of Corresponding Junior Subordinated Debt Securities issued by the
Company to such Applied Power Trust. Each series of Corresponding Junior
Subordinated Debt Securities will be in the principal amount equal to the
aggregate stated Liquidation Amount of the related Preferred Securities and the
Common Securities of such Applied Power Trust and will rank pari passu with all
other series of Junior Subordinated Debt Securities. Holders of the related
Preferred Securities for a series of Corresponding Junior Subordinated Debt
Securities will have the rights in connection with modifications to the
Indenture or upon occurrence of a Trust Event of Default (as defined under
"Description of Preferred Securities--Events of Default; Notice") relating to
Corresponding Junior Subordinated Debt Securities described under "--Amendments
and Waivers," "--Defaults and Remedies," and "--Enforcement of Certain Rights
by Holders of Preferred Securities," unless provided otherwise in the
Prospectus Supplement for such related Preferred Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will covenant, as to each series of Corresponding Junior Subordinated
Debt Securities, (i) to maintain, directly or indirectly, 100% ownership of the
Common Securities of the Applied Power Trust to which Corresponding Junior
Subordinated Debt Securities have been issued, provided that certain successors
which are permitted pursuant to the Indenture may succeed to the Company's
ownership of the Common Securities, (ii) not to voluntarily dissolve, wind-up
or liquidate any Applied Power Trust, except (a) in connection with a
distribution of Corresponding Junior Subordinated Debt Securities to the
holders of the Preferred Securities in liquidation of such Applied Power Trust
or (b) in connection with certain mergers, consolidations or amalgamations
permitted by the related Trust Agreement and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the related Trust
Agreement, to cause such Applied Power Trust to remain classified as a grantor
trust and not as
13
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an association taxable as a corporation for United States Federal income tax
purposes. For additional covenants relating to payment of certain expenses of
the Applied Power Trusts, see "Description of Preferred Securities--Payment of
Expenses."
Option to Extend Interest Payment Date. If provided in the applicable
Prospectus Supplement, the Company shall have the right at any time and from
time to time during the term of any series of Corresponding Junior Subordinated
Debt Securities to defer payment of interest for such number of consecutive
interest payment periods as may be specified in the applicable Prospectus
Supplement (each, an "Extension Period"), subject to the terms, conditions and
covenants, if any, specified in such Prospectus Supplement, provided that such
Extension Period may not extend beyond the maturity date of such series of
Corresponding Junior Subordinated Debt Securities. Certain United States
Federal income tax consequences and special considerations applicable to any
such Corresponding Junior Subordinated Debt Securities will be described in the
applicable Prospectus Supplement.
Redemption. Unless otherwise indicated in the applicable Prospectus
Supplement, the Company may, at its option, redeem the Corresponding Junior
Subordinated Debt Securities of any series in whole at any time or in part from
time to time. Corresponding Junior Subordinated Debt Securities may be redeemed
in the denominations as set forth in the applicable Prospectus Supplement.
Except as otherwise specified in the applicable Prospectus Supplement, the
redemption price for any Corresponding Junior Subordinated Debt Security so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus the principal amount thereof. Unless otherwise specified in the
applicable Prospectus Supplement, the Company may not redeem a series of
Corresponding Junior Subordinated Debt Securities in part unless all accrued
and unpaid interest has been paid in full on all outstanding Corresponding
Junior Subordinated Debt Securities of such series for all interest periods
terminating on or prior to the redemption date.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Junior Subordinated Debt Security Tax Event (as defined below) or an Investment
Company Event (as defined below) in respect of an Applied Power Trust shall
occur and be continuing, the Company may, at its option, redeem the
Corresponding Junior Subordinated Debt Securities held by such Applied Power
Trust at any time within 90 days of the occurrence of such Junior Subordinated
Debt Security Tax Event or Investment Company Event, in whole but not in part,
subject to the provisions of the applicable Securities Resolution. The
redemption price for any such Corresponding Junior Subordinated Debt Securities
shall be equal to 100% of the principal amount of such Corresponding Junior
Subordinated Debt Securities then outstanding plus accrued and unpaid interest
to the date fixed for redemption. For so long as the applicable Applied Power
Trust is the holder of all such outstanding Corresponding Junior Subordinated
Debt Securities, the proceeds of any such redemption will be used by the
Applied Power Trust to redeem the corresponding Trust Securities in accordance
with their terms.
"Junior Subordinated Debt Security Tax Event" means the receipt by the
applicable Applied Power Trust of an opinion of counsel experienced in such
matters to the effect that, as a result of any amendment to, or change
(including any announced proposed change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
written decision, pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which proposed change, pronouncement, action or decision is announced on or
after the date of issuance of the applicable series of Corresponding Junior
Subordinated Debt Securities pursuant to the applicable Securities Resolution,
there is more than an insubstantial risk that (i) the applicable Applied Power
Trust is, or will be within 90 days of the date of such opinion, subject to
United States Federal income tax with respect to income received or accrued on
the corresponding series of Corresponding Junior Subordinated Debt Securities,
(ii) interest payable by the Company on such series of Corresponding Junior
Subordinated Debt Securities is not, or within 90 days of the date of such
opinion, will not be, deductible by the Company, in whole or in part, for
United States Federal income tax purposes or (iii) the applicable Applied Power
Trust is, or will be within 90 days of the date of such opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
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"Investment Company Event" means the receipt by the applicable Applied Power
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in the Investment
Company Act"), the applicable Applied Power Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which Change in
the Investment Company Act becomes effective on or after the date of original
issuance of the series of Preferred Securities issued by the Applied Power
Trust.
Restrictions on Certain Payments. The Company will, unless otherwise provided
in the applicable Prospectus Supplement, covenant, as to each series of
Corresponding Junior Subordinated Debt Securities, that it will not, and will
not permit any subsidiary of the Company to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Company's capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including other Corresponding Junior
Subordinated Debt Securities) that rank pari passu with or junior in interest
to the Corresponding Junior Subordinated Debt Securities or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Corresponding Junior Subordinated Debt Securities (other than
(a) dividends or distributions in common stock of the Company, (b) redemptions
or purchases of any rights pursuant to the Company's shareholder rights plan
("Rights Agreement"), if any, or any successor to such Rights Agreement, and
the declaration of a dividend of such rights or the issuance of stock under a
Rights Agreement in the future, (c) payments under any Guarantee and (d)
purchases of common stock related to the issuance of common stock under any of
the Company's benefit plans for its directors, officers or employees) if at
such time (A) there shall have occurred any event of which the Company has
actual knowledge (a) that with the giving of notice or the lapse of time, or
both, would constitute an Event of Default under the Indenture with respect to
the Corresponding Junior Subordinated Debt Securities of such series and (b) in
respect of which the Company shall not have taken reasonable steps to cure, (B)
if such Corresponding Junior Subordinated Debt Securities are held by an
Applied Power Trust which is the issuer of a series of related Preferred
Securities, the Company shall be in default with respect to its payment of any
obligations under the Guarantee relating to such related Preferred Securities
or (C) the Company shall have given notice of its selection of an Extension
Period as provided pursuant to the Securities Resolution with respect to the
Corresponding Junior Subordinated Debt Securities of such series and shall not
have rescinded such notice, or such Extension Period, or any extension thereof,
shall be continuing.
Enforcement of Certain Rights by Holders of Preferred Securities. If an Event
of Default with respect to a series of Corresponding Junior Subordinated Debt
Securities has occurred and is continuing and such event is attributable to the
failure of the Company to pay principal of or premium, if any, or interest, if
any, on such series of Corresponding Junior Subordinated Debt Securities on the
date such interest, premium or principal is otherwise payable, a holder of
related Preferred Securities may institute a legal proceeding directly against
the Company for enforcement of payment to such holder of the principal of or
premium, if any, or interest, if any, on such Corresponding Junior Subordinated
Debt Securities having a principal amount equal to the aggregate Liquidation
Amount of the related Preferred Securities of such holder (a "Direct Action").
The Company may not amend the Indenture to remove the foregoing right to bring
a Direct Action without the prior written consent of the holders of all of the
Preferred Securities. If the right to bring a Direct Action is removed, the
applicable Applied Power Trust may become subject to the reporting obligations
under the Exchange Act. The Company shall have the right pursuant to the
Indenture to set-off any payment made to such holder of Preferred Securities by
the Company in connection with a Direct Action. Unless otherwise specified in
the applicable Prospectus Supplement, the holders of the related Preferred
Securities will not be able to exercise directly any remedies other than those
set forth in this paragraph available to the holders of the Corresponding
Junior Subordinated Debt Securities.
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Regarding the Trustee
The First National Bank of Chicago will act as Trustee and Registrar for Debt
Securities issued under the Indenture and, unless otherwise indicated in a
Prospectus Supplement, the Trustee will also act as Transfer Agent and Paying
Agent with respect to the Debt Securities. (Section 2.03) The Company may
remove the Trustee with or without cause if the Company so notifies the Trustee
three months in advance and if no Default occurs during the three-month period.
(Section 7.07) The Trustee, in its individual or any other capacity, may make
loans to, accept deposits from, and perform services for the Company or its
affiliates, and may otherwise deal with the Company or its affiliates, as if it
were not Trustee.
DESCRIPTION OF WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to Warrants to purchase Debt Securities
(the "Debt Warrants") are summaries of, and subject to, the detailed provisions
of a Debt Warrant Agreement (the "Debt Warrant Agreement") to be entered into
by the Company and a warrant agent to be selected at the time of issue (the
"Debt Warrant Agent"), a form of which will be filed with the Commission.
General
The Debt Warrants, evidenced by Debt Warrant certificates (the "Debt Warrant
Certificates"), may be issued under the Debt Warrant Agreement independently or
together with any Securities offered by any Prospectus Supplement and may be
attached to or separate from such Securities. If Debt Warrants are offered, the
Prospectus Supplement will describe the terms of the Debt Warrants, including
the following: (i) the offering price, if any; (ii) the designation, aggregate
principal amount, and terms of the Debt Securities purchasable upon exercise of
the Debt Warrants; (iii) if applicable, the designation and terms of the
Securities with which the Debt Warrants are issued and the number of Debt
Warrants issued with each such Security; (iv) if applicable, the date on and
after which the Debt Warrants and the related Securities will be separately
transferable; (v) the principal amount of Debt Securities purchasable upon
exercise of one Debt Warrant and the price at which such principal amount of
Debt Securities may be purchased upon such exercise; (vi) the date on which the
right to exercise the Debt Warrants shall commence and the date on which such
right shall expire; (vii) Federal income tax consequences; (viii) whether the
Debt Warrants represented by the Debt Warrant Certificates will be issued in
registered or bearer form; and (ix) any other terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates
of different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Debt Warrant
Agent or any Co-Debt Warrant Agent, which will be identified in the Prospectus
Supplement, or at such other office as may be set forth therein. Holders of
Debt Warrants do not have any of the rights of Holders of Debt Securities
(except to the extent that the consent of holders of Debt Warrants may be
required for certain modifications of the terms of the Indenture and the series
of Debt Securities issuable upon exercise of the Debt Warrants) and are not
entitled to payments of principal of and interest, if any, on such Debt
Securities.
Exercise of Warrants to Purchase Debt Securities
Debt Warrants may be exercised by surrendering the Debt Warrant Certificate
at the corporate trust office of the Debt Warrant Agent or at the corporate
trust office of the Co-Debt Warrant Agent, if any, with the form of election to
purchase on the reverse side of the Debt Warrant Certificate properly completed
and executed, and by payment in full of the exercise price, as set forth in the
Prospectus Supplement. Upon the exercise of Debt Warrants, the Debt Warrant
Agent or Co-Debt Warrant Agent, if any, will, as soon as practicable, deliver
the Debt Securities in authorized denominations in accordance with the
instructions of the holder exercising the Debt Warrant and at the sole cost and
risk of such holder. If less than all of the Debt Warrants evidenced by the
Debt Warrant Certificate are exercised, a new Debt Warrant Certificate will be
issued for the remaining amount of Debt Warrants.
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DESCRIPTION OF PREFERRED STOCK AND COMMON STOCK
The following summary does not purport to be a complete description of the
applicable provisions of the Company's Restated Articles of Incorporation (the
"Articles") and Amended and Restated Bylaws (the "Bylaws"), as amended from
time to time, copies of which have been or will be filed with the Commission,
or of applicable statutory or other law, and is qualified in its entirety by
reference thereto.
The authorized capital stock of the Company as of November 30, 1998,
consisted of 80,000,000 shares of Class A Common Stock, $.20 par value ("Class
A Common Stock"), of which 38,674,551 shares were issued and outstanding;
7,500,000 shares of Class B Common Stock, $.20 par value ("Class B Common
Stock"), none of which were issued and outstanding; and 800,000 shares of
Cumulative Preferred Stock, $1.00 par value ("Preferred Stock"), none of which
have been issued. Class A Common Stock and Class B Common Stock are
collectively referred to herein as "Common Stock."
Preferred Stock
The Preferred Stock may be issued in one or more series providing for such
dividend rates, voting, liquidation, redemption, and conversion rights, and
such other terms and conditions as the Board of Directors of the Company may
determine, without further approval by holders of Common Stock. If any shares
of Class B Common Stock were outstanding, any voting rights conferred on
holders of Preferred Stock would be limited, with respect to the election of
directors, to the power to vote together with holders of Class A Common Stock
in electing a "maximum minority" of the Board of Directors, as described under
"Common Stock" below.
If the Company issues any shares of Preferred Stock, the Company would be
permitted to pay dividends or make other distributions upon the Common Stock
(except for distributions payable in shares of Common Stock) only after paying
or setting apart funds for payment of current dividends and any accrued but
unpaid dividends upon the outstanding Preferred Stock, at the rate or rates
designated for each series of outstanding Preferred Stock, and making provision
for any mandatory sinking fund payments. In the event of voluntary or
involuntary liquidation of the Company, the holders of any outstanding
Preferred Stock would be entitled to receive all accrued dividends on the
Preferred Stock and the liquidation amount specified for each series of
Preferred Stock before any amount may be distributed to holders of the Common
Stock.
Each series of Preferred Stock will have such designation, preferences,
limitations and relative rights as shall be stated in the resolution or
resolutions providing for the designation and issue of such series adopted by
the Board of Directors (or any duly authorized committee thereof). The
amendment to the Articles setting forth the terms of each series will be filed
with the Commission in connection with the offering of such series of Preferred
Stock. The Prospectus Supplement relating to an offering of Preferred Stock (or
securities convertible into Preferred Stock) will describe terms relevant
thereto including the number of shares offered, the initial offering price and
the relative rights and preferences of the shares of such series.
Under the Articles, all shares of Preferred Stock shall be identical except
as to the following relative rights and preferences, as to which the Board of
Directors may establish variations between different series not inconsistent
with other provisions in the Articles: (a) the dividend rate; (b) the price at
and terms and conditions on which shares may be redeemed; (c) the amount
payable upon shares in the event of voluntary or involuntary liquidation; (d)
sinking fund provisions for the redemption or purchase of shares; (e) the terms
and conditions on which shares may be converted into Common Stock, if the
shares of any series are issued with the privilege of conversion; and (f)
voting rights, if any, subject to the provisions regarding voting rights
described herein.
As described under "Description of Depositary Shares," the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts"), each representing an interest (to
be specified in the Prospectus Supplement relating to the particular series of
the Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Preferred Stock Depositary (as defined below).
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The holders of Preferred Stock will have no preemptive rights. Under the
Articles, each series of Preferred Stock will, with respect to dividend rights
and rights on liquidation, dissolution and winding up of the Company, rank
prior to the Common Stock and on a parity with each other series of Preferred
Stock.
Common Stock
The rights and preferences of shares of Class A Common Stock and Class B
Common Stock are identical, except as to voting power with respect to the
election of directors and conversion rights.
On all matters other than the election of directors, the holders of Class A
Common Stock and Class B Common Stock possess equal voting power of one vote
per share, voting as a single class of stock (unless otherwise required by the
Wisconsin Business Corporation Law--the "WBCL"). In the election of the Board
of Directors, the holders of Class A Common Stock, voting together as a single
class with the holders of any Preferred Stock which has voting power, are
entitled to elect a "maximum minority" of the number of directors to be
elected. As a result of the "maximum minority" provision, the holders of the
Class B Common Stock, voting as a separate class, are entitled to elect the
balance of the directors, constituting a "minimum majority" of the number of
directors to be elected. If an even number of directors is to be elected, the
holders of Class B Common Stock will be entitled to elect two more directors
than the holders of Class A Common Stock and any Preferred Stock having voting
power; if the number of directors to be elected is an odd number, the holders
of Class B Common Stock will be entitled to elect one more director than the
holders of Class A Common Stock and any Preferred Stock having voting power. In
the event there are no shares of Class B Common Stock outstanding, holders of
Class A Common Stock, together with holders of any Preferred Stock having
voting power, shall elect all of the directors to be elected. A director, once
elected and duly qualified, may be removed only by the requisite affirmative
vote of the holders of that class of stock by which such director was elected.
Holders of both classes of Common Stock are equally entitled to such
dividends as the Company's Board of Directors may declare out of funds legally
available therefor. If the Company were to issue any of its authorized
Preferred Stock, no dividends could be paid or set apart for payment on shares
of Common Stock, unless paid in Common Stock, until dividends on all of the
issued and outstanding shares of Preferred Stock had been paid or set apart for
payment and provision had been made for any mandatory sinking fund payments.
Certain covenants contained in the Company's debt agreements, or in the
provisions of the Articles for the benefit of any Preferred Stock that may be
issued, from time to time could have the direct or indirect effect of limiting
the payment of dividends or other distributions on (including redemptions and
purchases of) the Company's capital stock. Stock dividends on Class A Common
Stock may be paid only in shares of Class A Common Stock and stock dividends on
Class B Common Stock may be paid only in shares of Class B Common Stock.
The Articles contain provisions which provided for the conversion of Class B
Common Stock into shares of Class A Common Stock on a share-for-share basis at
the option of the holder, and for the automatic conversion of all outstanding
shares of Class B Common Stock to Class A Common Stock on a share-for-share
basis when the number of outstanding shares of Class B Common Stock was reduced
below a certain threshold. All of the shares of Class B Common Stock that had
been outstanding were converted into Class A Common Stock pursuant to these
conversion provisions. Holders of Class A Common Stock do not have any
conversion rights.
In the event of dissolution or liquidation of the Company, the holders of
both classes of Common Stock are entitled to share ratably all assets of the
Company remaining after payment of the Company's liabilities and satisfaction
of the rights of any series of Preferred Stock which may be outstanding. There
are no redemption or sinking fund provisions with respect to the Common Stock.
The Class A Common Stock is listed on the NYSE. Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, serves as the transfer agent for the Class A Common
Stock.
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General
The Articles provide that the affirmative vote of two-thirds of all shares
entitled to vote thereon is required in order to constitute shareholder
approval of a merger, consolidation, or liquidation of the Company, sale or
other disposition of all or substantially all of its assets, amendment of the
Articles or the Bylaws, or removal of a director.
Directors of the Company are currently elected to serve one-year terms. The
Articles provide that the Bylaws (which may be amended by the Board of
Directors or by the shareholders) may provide for the division of the Board of
Directors into two or three classes, serving staggered two or three-year terms.
When the Company has received the consideration for which the Board of
Directors authorized the issuance of shares, the shares issued for that
consideration are fully paid and nonassessable. Shareholders are subject to
personal liability under Section 180.0622(2)(b) of the WBCL, as judicially
interpreted, for debts owing to employees of the Company for services performed
for the Company, but not exceeding six months' service in any one case.
Holders of capital stock of the Company do not have preemptive or other
subscription rights to purchase or subscribe for unissued stock or other
securities of the Company.
Certain Statutory Provisions
Under Section 180.1150(2) of the WBCL, the voting power of shares of a
"resident domestic corporation," such as the Company (as long as it continues
to meet the statutory definition), which are held by any person (including two
or more persons acting in concert) in excess of 20% of the voting power in the
election of directors shall be limited (in voting on any matter) to 10% of the
full voting power of the shares in excess of 20%, unless full voting rights
have been restored at a special meeting of the shareholders called for that
purpose. Shares held or acquired under certain circumstances are excluded from
the application of Section 180.1150(2), including (among others) shares
acquired directly from the Company, shares acquired before April 22, 1986, and
shares acquired in a merger or share exchange to which the Company is a party.
Sections 180.1130 to 180.1134 of the WBCL provide generally that, in addition
to the vote otherwise required by law or the articles of incorporation of a
"resident domestic corporation," such as the Company (as long as it continues
to meet the statutory definition), certain business combinations not meeting
certain fair price standards specified in the statute must be approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by the
outstanding voting shares of the corporation and (b) two-thirds of the votes
entitled to be cast by the holders of voting shares other than voting shares
beneficially owned by a "significant shareholder" or an affiliate or associate
thereof who is a party to the transaction. The term "business combination" is
defined to include, subject to certain exceptions, a merger or share exchange
of the resident domestic corporation (or any subsidiary thereof) with, or the
sale or other disposition of all or substantially all of the property and
assets of the resident domestic corporation to, any significant shareholder or
affiliate thereof. "Significant shareholder" is defined generally to mean a
person that is the beneficial owner of 10% or more of the voting power of the
outstanding voting shares of the resident domestic corporation. The statute
also restricts the repurchase of shares and the sale of corporate assets by a
resident domestic corporation in response to a take-over offer.
Sections 180.1140 to 180.1144 of the WBCL prohibit certain "business
combinations" between a "resident domestic corporation," such as the Company
(as long as it continues to meet the statutory definition), and a person
beneficially owning 10% or more of the voting power of the outstanding voting
stock of such corporation (an "interested stockholder") within three years
after the date such person became a 10% beneficial owner, unless the business
combination or the acquisition of such stock has been approved before the stock
acquisition date by the corporation's board of directors. Business combinations
after the three-year period following the stock acquisition date are permitted
only if (i) the board of directors approved the acquisition of the stock prior
to the acquisition date, (ii) the business combination is approved by a
majority of the outstanding voting stock not beneficially owned by the
interested stockholder, or (iii) the consideration to be received by
shareholders meets certain fair price requirements of the statute with respect
to form and amount.
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Under the WBCL, as amended in 1997, a "resident domestic corporation" is
defined to mean a Wisconsin corporation that has a class of voting stock that
is registered or traded on a national securities exchange or that is registered
under Section 12(g) of the Exchange Act and that, as of the relevant date,
satisfies any of the following: (i) its principal offices are located in
Wisconsin; (ii) it has significant business operations located in Wisconsin;
(iii) more than 10% of the holders of record of its shares are residents of
Wisconsin; or (iv) more than 10% of its shares are held of record by residents
of Wisconsin. The Company is a "resident domestic corporation" for purposes of
the above described provisions. A Wisconsin corporation that is otherwise
subject to certain of such statutes may preclude their applicability by an
election to that effect in its articles of incorporation. The Company's
Articles do not contain any such election.
These provisions of the WBCL, the ability to issue additional shares of
Common Stock and Preferred Stock without further shareholder approval (except
as required under NYSE corporate governance standards), and certain other
provisions of the Company's Articles (discussed above) could have the effect,
among others, of discouraging take-over proposals for the Company, delaying or
preventing a change in control of the Company, or impeding a business
combination between the Company and a major shareholder of the Company.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts summarizes the material terms of the Deposit
Agreement and of the Depositary Shares and Depositary Receipts, and is
qualified in its entirety by reference to the form of Deposit Agreement and
form of Depositary Receipts relating to each series of the Preferred Stock.
General
The Company may, at its option, elect to have shares of Preferred Stock
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Preferred Stock Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Preferred Stock Depositary. Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled,
proportionately, to all the rights, preferences and privileges of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
A holder of Depositary Shares will be entitled to receive the shares of
Preferred Stock (but only in whole shares of Preferred Stock) underlying such
Depositary Shares. If the Depositary Receipts delivered by the holder evidence
a number of Depositary Shares in excess of the whole number of shares of
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
Dividends and Other Distributions
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions in respect to the Preferred Stock to the record holders of
Depositary Receipts in proportion, insofar as possible, to the number of
Depositary Shares owned by such holders.
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In the event of a distribution other than in cash in respect to the Preferred
Stock, the Preferred Stock Depositary will distribute property received by it
to the record holders of Depositary Receipts in proportion, insofar as
possible, to the number of Depositary Shares owned by such holders, unless the
Preferred Stock Depositary determines that it is not feasible to make such
distribution, in which case the Preferred Stock Depositary may, with the
approval of the Company, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including sale of
such property and distribution of the net proceeds from such sale to such
holders.
The amount so distributed in any of the foregoing cases will be reduced by
any amount required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes.
Conversion and Exchange
If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the
Prospectus Supplement relating thereto, each record holder of Depositary Shares
will have the right or obligation to convert or exchange such Depositary Shares
pursuant to the terms thereof.
Redemption of Depositary Shares
If Preferred Stock underlying the Depositary Shares is subject to redemption,
the Depositary Shares will be redeemed from the proceeds received by the
Preferred Stock Depositary resulting from the redemption, in whole or in part,
of the Preferred Stock held by the Preferred Stock Depositary. The redemption
price per Depositary Share will be equal to the aggregate redemption price
payable with respect to the number of shares of Preferred Stock underlying the
Depositary Shares. Whenever the Company redeems Preferred Stock from the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of
the same redemption date a proportionate number of Depositary Shares
representing the shares of Preferred Stock that were redeemed. If less than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected by lot or pro rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
Voting
Upon receipt of notice of any meeting at which the holders of any shares of
Preferred Stock underlying the Depositary Shares are entitled to vote, the
Preferred Stock Depositary will mail the information contained in such notice
to the record holders of the Depositary Receipts. Each record holder of such
Depositary Receipts on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Preferred
Stock Depositary as to the exercise of the voting rights pertaining to the
number of shares of Preferred Stock underlying such holder's Depositary Shares.
The Preferred Stock Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the Preferred Stock to the
extent it does not receive specific written instructions from holders of
Depositary Receipts representing such Preferred Stock.
Record Date
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Preferred Stock,
or (ii) the Preferred Stock Depositary shall receive notice of any meeting at
which holders of Preferred
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Stock are entitled to vote or of which holders of Preferred Stock are entitled
to notice, or of the mandatory conversion of or any election on the part of the
Company to call for the redemption of any Preferred Stock, the Preferred Stock
Depositary shall in each such instance fix a record date (which shall be the
same as the record date for the Preferred Stock) for the determination of the
holders of Depositary Receipts (x) who shall be entitled to receive such
dividend, distribution, rights, preferences or privileges or the net proceeds
of the sale thereof or (y) who shall be entitled to give instructions for the
exercise of voting rights at any such meeting or to receive notice of such
meeting or of such redemption or conversion, subject to the provisions of the
Deposit Agreement.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and the Preferred Stock
Depositary. However, any amendment which imposes or increases any fees, taxes
or other charges payable by the holders of Depositary Receipts (other than
taxes and other governmental charges, fees and other expenses payable by such
holders as stated under "Charges of Preferred Stock Depositary"), or which
otherwise prejudices any substantial existing right of holders of Depositary
Receipts, will not take effect as to outstanding Depositary Receipts until the
expiration of 90 days after notice of such amendment has been mailed to the
record holders of outstanding Depositary Receipts.
Whenever so directed by the Company, the Preferred Stock Depositary will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred
Stock Depositary may likewise terminate the Deposit Agreement if at any time 45
days shall have expired after the Preferred Stock Depositary shall have
delivered to the Company a written notice of its election to resign and a
successor depositary shall not have been appointed and accepted its
appointment. If any Depositary Receipts remain outstanding after the date of
termination, the Preferred Stock Depositary thereafter will discontinue the
transfer of Depositary Receipts, will suspend the distribution of dividends to
the holders thereof, and will not give any further notices (other than notice
of such termination) or perform any further acts under the Deposit Agreement
except as provided below and except that the Preferred Stock Depositary will
continue (i) to collect dividends on the Preferred Stock and any other
distributions with respect thereto and (ii) to deliver the Preferred Stock
together with such dividends and distributions and the net proceeds of any
sales of rights, preferences, privileges or other property, without liability
for interest thereon, in exchange for Depositary Receipts surrendered. At any
time after the expiration of two years from the date of termination, the
Preferred Stock Depositary may sell the Preferred Stock then held by it at
public or private sales, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered.
Charges of Preferred Stock Depositary
The Company will pay all charges of the Preferred Stock Depositary including
charges in connection with the initial deposit of the Preferred Stock, the
initial issuance of the Depositary Receipts, the distribution of information to
the holders of Depositary Receipts with respect to matters on which Preferred
Stock is entitled to vote, withdrawals of the Preferred Stock by the holders of
Depositary Receipts or redemption or conversion of the Preferred Stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
the expense of holders of Depositary Receipts or persons depositing Preferred
Stock.
Miscellaneous
The Preferred Stock Depositary will make available for inspection by holders
of Depositary Receipts at its corporate office and its New York office, all
reports and communications from the Company which are delivered to the
Preferred Stock Depositary as the holder of Preferred Stock.
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Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Preferred Stock Depositary under the Deposit Agreement are limited to
performing its duties thereunder without negligence or bad faith. The
obligations of the Company under the Deposit Agreement are limited to
performing its duties thereunder in good faith. Neither the Company nor the
Preferred Stock Depositary is obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Preferred Stock
Depositary are entitled to rely upon advice of or information from counsel,
accountants or other persons believed to be competent and on documents believed
to be genuine.
The Preferred Stock Depositary may resign at any time or be removed by the
Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been appointed
or accepted such appointment within 45 days after the Preferred Stock
Depositary has delivered a notice of election to resign to the Company, the
Preferred Stock Depositary may terminate the Deposit Agreement. See "--
Amendment and Termination of the Deposit Agreement" above.
DESCRIPTION OF WARRANTS TO PURCHASE CLASS A
COMMON STOCK OR PREFERRED STOCK
The following statements with respect to the Warrants to purchase Class A
Common Stock or Preferred Stock (the "Stock Warrants") are summaries of, and
subject to, the detailed provisions of a Stock Warrant Agreement (the "Stock
Warrant Agreement") to be entered into by the Company and a warrant agent to be
selected at the time of issue (the "Stock Warrant Agent"), a form of which will
be filed with the Commission.
General
The Stock Warrants, evidenced by Stock Warrant certificates (the "Stock
Warrant Certificates"), may be issued under the Stock Warrant Agreement
independently or together with any Securities offered by any Prospectus
Supplement and may be attached to or separate from such Securities. If Stock
Warrants are offered, the Prospectus Supplement will describe the terms of the
Stock Warrants, including the following: (i) the offering price, if any; (ii)
the number of shares of Preferred Stock or Class A Common Stock purchasable
upon exercise of each Stock Warrant and the initial price at which such shares
may be purchased upon exercise; (iii) if applicable, the designation and terms
of the Securities with which the Stock Warrants are issued and the number of
Stock Warrants issued with each such Security; (iv) if applicable, the date on
and after which the Stock Warrants and the related Preferred Stock or Class A
Common Stock will be separately transferable; (v) the date on which the right
to exercise the Stock Warrants shall commence and the date on which such right
shall expire; (vi) federal income tax consequences; (vii) call provisions of
such Stock Warrants, if any; (viii) whether the Stock Warrants represented by
the Stock Warrant Certificates will be issued in registered or bearer form; and
(ix) any additional or other rights, preferences, privileges, limitations and
restrictions relating to the Stock Warrants. The shares of Preferred Stock or
Class A Common Stock issuable upon the exercise of the Stock Warrants will,
when issued in accordance with the Stock Warrant Agreement, be fully paid and
nonassessable.
Stock Warrant Certificates may be exchanged for new Stock Warrant
Certificates of different denominations and may (if in registered form) be
presented for registration of transfer at the corporate trust office of the
Stock Warrant Agent or any Co-Stock Warrant Agent, which will be identified in
the Prospectus Supplement, or at such other office as may be set forth therein.
Holders of Stock Warrants do not have any of the rights of holders of Class A
Common Stock or Preferred Stock (except to the extent that the consent of
holders of Stock Warrant may be required for certain modifications of the terms
of the Class A Common Stock or Preferred Stock issuable upon exercise of the
Stock Warrants) and are not entitled to dividend payments on the Class A Common
Stock or Preferred Stock purchasable upon such exercise.
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Exercise of Stock Warrants
Stock Warrants may be exercised by surrendering the Stock Warrant Certificate
at the corporate trust office of the Stock Warrant Agent or at the corporate
trust office of the Co-Stock Warrant Agent, if any, with the form of election
to purchase on the reverse side of the Stock Warrant Certificate properly
completed and executed, and by payment in full of the exercise price, as set
forth in the Prospectus Supplement. Upon the exercise of Stock Warrants, the
Stock Warrant Agent or Co-Stock Warrant Agent, if any, will, as soon as
practicable, forward a certificate representing the number of shares of
Preferred Stock or Class A Common Stock purchasable upon such exercise in
accordance with the instructions of the holder exercising the Stock Warrant and
at the sole cost and risk of such holder. If less than all of the Stock
Warrants evidenced by the Stock Warrant Certificate are exercised, a new Stock
Warrant Certificate will be issued for the remaining amount of Stock Warrants.
Anti-Dilution Provisions
Unless otherwise specified in the applicable Prospectus Supplement, the
exercise price payable and the number of shares purchasable upon the exercise
of each Stock Warrant will be subject to adjustment in certain events,
including (i) the issuance of a stock dividend to holders of Preferred Stock or
Class A Common Stock or a combination, subdivision or reclassification of the
Preferred Stock or Class A Common Stock; (ii) the issuance of rights, warrants
or options to all holders of Preferred Stock or Class A Common Stock entitling
the holders thereof to subscribe for or purchase Preferred Stock or Class A
Common Stock for an aggregate consideration per share less than the current
market price per share of the Preferred Stock or Class A Common Stock; or (iii)
any distribution by the Company to the holders of its Preferred Stock or Class
A Common Stock of evidences of indebtedness of the Company or of assets
(excluding cash dividends or distributions payable out of capital surplus and
dividends and distributions referred to in (i) above). No fractional shares
will be issued upon exercise of Stock Warrants, but the Company will pay the
cash value of any fractional shares otherwise issuable.
DESCRIPTION OF PREFERRED SECURITIES
The following description sets forth certain general terms and provisions of
the Preferred Securities to which any Prospectus Supplement may relate. The
particular terms of the Preferred Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply
to the Preferred Securities so offered will be described in the Prospectus
Supplement relating to such Preferred Securities.
Pursuant to the terms of the Trust Agreement for each Applied Power Trust,
the Administrative Trustees, on behalf of such Applied Power Trust, are
authorized to issue the Preferred Securities and the Common Securities. The
Preferred Securities of a particular issue will represent beneficial ownership
interests in the assets of such Applied Power Trust, and the holders thereof
will be entitled to a preference in certain circumstances with respect to
Distributions and amounts payable on redemption or liquidation over the Common
Securities of such Applied Power Trust, as well as other benefits as described
in the corresponding Trust Agreement. This summary of certain provisions of the
Preferred Securities and each Trust Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of each Trust Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. Wherever particular defined terms
of a Trust Agreement (as amended or supplemented from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each of the Applied Power Trusts is a legally separate
entity, and the assets of one are not available to satisfy the obligations of
the other.
General
The Preferred Securities of an Applied Power Trust will rank pari passu, and
payments will be made thereon pro rata, with the Common Securities of that
Applied Power Trust except as described under
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"--Subordination of Common Securities." Legal title to the Corresponding Junior
Subordinated Debt Securities will be held by the Property Trustee in trust for
the benefit of the holders of the related Preferred Securities and Common
Securities. Each Guarantee Agreement executed by the Company for the benefit of
the holders of an Applied Power Trust's Preferred Securities (each, a
"Guarantee Agreement") will be a guarantee on a junior subordinated basis with
respect to the related Preferred Securities but will not guarantee payment of
Distributions or amounts payable on redemption or liquidation of such Preferred
Securities when the related Applied Power Trust does not have funds on hand
available to make such payments. See "Description of Guarantees."
Distributions
Distributions on the Preferred Securities will be cumulative, will accumulate
from the date of original issuance and will be payable on such dates as
specified in the applicable Prospectus Supplement. Except as specified in the
applicable Prospectus Supplement, in the event that any date on which
Distributions are payable on the Preferred Securities is not a Business Day (as
defined below), payment of the Distribution payable on such date will be made
on the next succeeding day that is a Business Day (and without any interest or
other payment in respect to any such delay), with the same force and effect as
if made on such date (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). Except as specified in
the applicable Prospectus Supplement, a "Business Day" shall mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in The City
of New York are authorized or required by law to remain closed or a day on
which the corporate trust office of the Property Trustee or the Trustee under
the Indenture is closed for business.
An Applied Power Trust's Preferred Securities represent beneficial ownership
interests in the assets of such Applied Power Trust, and the Distributions on
each Preferred Security will be payable at a rate specified in the Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the applicable Prospectus Supplement.
Distributions to which holders of Preferred Securities are entitled will
accumulate additional Distributions at the rate per annum if and as specified
in the applicable Prospectus Supplement. The term "Distributions" as used
herein includes any such additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Company shall have
the right at any time and from time to time during the term of any series of
Corresponding Junior Subordinated Debt Securities to defer payment of interest
for such number of consecutive interest payment periods as may be specified in
the applicable Prospectus Supplement (each, an "Extension Period"), subject to
the terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the
maturity date of such series of Corresponding Junior Subordinated Debt
Securities. Certain United States Federal income tax consequences and special
considerations applicable to any such Corresponding Junior Subordinated Debt
Securities will be described in the applicable Prospectus Supplement. As a
consequence of any such extension, Distributions on the related Preferred
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Preferred Securities) by the Applied Power Trust which
issued such Preferred Securities during any such Extension Period.
If the Company shall have given notice of its selection of an Extension
Period as provided pursuant to the Indenture with respect to the Corresponding
Junior Subordinated Debt Securities of a series and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing, the Company may not, and may not permit any subsidiary of the
Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company (including other Corresponding Junior Subordinated
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Debt Securities) that rank pari passu with or junior in interest to the
Corresponding Junior Subordinated Debt Securities of such series or make any
guarantee payments with respect to any guarantee by the Company of debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
or junior in interest to the Corresponding Junior Subordinated Debt Securities
of such series (other than (a) dividends or distributions in common stock of
the Company, (b) redemptions or purchases of any rights pursuant to the
Company's Rights Agreement, if any, or any successor to such Rights Agreement,
and the declaration of a dividend of such rights or the issuance of stock under
such plans in the future, (c) payments under any Guarantee and (d) purchases of
common stock related to the issuance of common stock under any of the Company's
benefit plans for its directors, officers or employees). For additional
circumstances in which the Company is restricted in making such payments, see
"Description of Debt Securities--Certain Provisions Relating to Corresponding
Junior Subordinated Debt Securities--Restrictions on Certain Payments."
The revenue of each Applied Power Trust available for distribution to holders
of its Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debt Securities in which the Applied Power Trust will
invest the proceeds from the issuance and sale of its Trust Securities. See
"Description of Debt Securities--Certain Provisions Relating to Corresponding
Junior Subordinated Debt Securities." If the Company does not make interest
payments on such Corresponding Junior Subordinated Debt Securities, the
Property Trustee will not have funds available to pay Distributions of the
related Preferred Securities. The payment of Distributions (if and to the
extent the Applied Power Trust has funds legally available for the payment of
such Distributions and cash sufficient to make such payments) is guaranteed by
the Company on a limited basis as set forth herein under "Description of
Guarantees."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Applied Power Trust on the
relevant record dates, which, as long as the Preferred Securities remain in
book-entry form, will be one Business Day prior to the relevant Distribution
Date. Subject to any applicable laws and regulations and the provisions of the
applicable Trust Agreement, each such payment will be made as described under
"Book Entry Issuance." In the event any Preferred Securities are not in book-
entry form, the relevant record date for such Preferred Securities shall be the
date at least 15 days prior to the relevant Distribution Date, as specified in
the applicable Prospectus Supplement.
Payment of Expenses
Pursuant to the Indenture, the Company, as borrower, has agreed to pay all
debts and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Applied Power Trusts (including, but not limited to,
all costs and expenses relating to the organization of the Applied Power
Trusts, the fees and expenses of the Property Trustee, the Delaware Trustee and
the Administrative Trustees and all costs and expenses relating to the
operation of the Applied Power Trusts (other than with respect to the Trust
Securities)) and to pay any and all taxes, duties, assessments or other
governmental charges of whatever nature (other than United States withholding
taxes) imposed by the United States or any other taxing authority, so that the
net amounts received and retained by the applicable Applied Power Trust after
paying such fees, expenses, debts and obligations will be equal to the amounts
the applicable Applied Power Trust would have received and retained had no such
fees, expenses, debts and obligations been incurred by or imposed on the
applicable Applied Power Trust. The foregoing obligations of the Company are
for the benefit of, and shall be enforceable by, any person to whom such fees,
expenses, debts and obligations are owed (each, a "Creditor"), whether or not
such Creditor has received notice thereof. Any such Creditor may enforce such
obligations of the Company directly against the Company, and the Company has
agreed to irrevocably waive any right or remedy to require that any such
Creditor take any action against the applicable Applied Power Trust or any
other person before proceeding against the Company. The Company shall execute
such additional agreements as may be necessary to give full effect to the
foregoing.
Redemption or Exchange
Upon the repayment or redemption, in whole or in part, of any Corresponding
Junior Subordinated Debt Securities, whether at maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such
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<PAGE>
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Company upon the concurrent redemption of such Corresponding Junior
Subordinated Debt Securities. See "Description of Debt Securities--Certain
Provisions Relating to Corresponding Junior Subordinated Debt Securities--
Redemption." If less than all of any series of Corresponding Junior
Subordinated Debt Securities are to be repaid or redeemed on a Redemption Date,
then the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the related Trust Securities. The amount of premium, if
any, paid by the Company upon the redemption of all or any part of any series
of any Corresponding Junior Subordinated Debt Securities to be repaid or
redeemed on a Redemption Date shall be allocated to the redemption pro rata of
the related Trust Securities.
The Company will have the right to redeem any series of Corresponding Junior
Subordinated Debt Securities (i) subject to the conditions described under
"Description of Debt Securities--Certain Provisions Relating to Corresponding
Junior Subordinated Debt Securities--Redemption" or (ii) as may be otherwise
specified in the applicable Prospectus Supplement.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to that portion of the principal amount of Corresponding
Junior Subordinated Debt Securities to be contemporaneously redeemed in
accordance with the Indenture, allocated to the Common Securities and to the
Preferred Securities based upon the relative Liquidation Amounts of such
classes and the proceeds of which will be used to pay the Redemption Price of
such Trust Securities, and (ii) with respect to a distribution of Corresponding
Junior Subordinated Debt Securities to holders of any series of Trust
Securities in connection with a dissolution or liquidation of the related
Applied Power Trust, Corresponding Junior Subordinated Debt Securities having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Corresponding Junior Subordinated Debt Securities are
distributed. Unless otherwise specified in the applicable Prospectus
Supplement, "Liquidation Amount" means the stated amount per Trust Security
specified in the applicable Prospectus Supplement.
At any time, the Company has the right to dissolve an Applied Power Trust
and, after satisfaction of the liabilities of creditors of such Applied Power
Trust as provided by applicable law, cause the Corresponding Junior
Subordinated Debt Securities owned by such Applied Power Trust to be
distributed to the holders of the related Preferred Securities and Common
Securities in liquidation of the Applied Power Trust.
If provided in the applicable Prospectus Supplement, the Company shall have
the right to extend or shorten the maturity of any series of Corresponding
Junior Subordinated Debt Securities at the time that the Company exercises its
right to elect to dissolve the related Applied Power Trust and cause such
Corresponding Junior Subordinated Debt Securities to be distributed to the
holders of such related Preferred Securities and Common Securities in
liquidation of the Applied Power Trust, provided that it can extend the
maturity only if certain conditions specified in the applicable Prospectus
Supplement are met at the time such election is made and at the time of such
extension.
After the liquidation date fixed for any distribution of Corresponding Junior
Subordinated Debt Securities for any series of Preferred Securities (i) such
series of Preferred Securities will no longer be deemed to be outstanding, (ii)
The Depository Trust Company ("DTC") or its nominee, as the record holder of
such series of Preferred Securities, will receive a registered global
certificate or certificates representing the Corresponding Junior Subordinated
Debt Securities to be delivered upon such distribution and (iii) any
certificates representing such series of Preferred Securities not held by DTC
or its nominee will be deemed to represent the Corresponding Junior
Subordinated Debt Securities having a principal amount equal to the stated
Liquidation Amount of such series of Preferred Securities, and bearing accrued
and unpaid interest in an amount equal to the accrued and unpaid Distributions
on such series of Preferred Securities until such certificates are presented to
the Administrative Trustees or their agent for transfer or reissuance.
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There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debt Securities that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of an Applied Power Trust were to occur. Accordingly, the Preferred
Securities that an investor may purchase, or the Corresponding Junior
Subordinated Debt Securities that an investor may receive on dissolution and
liquidation of an Applied Power Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities.
Redemption and Exchange Procedures
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debt Securities.
Redemptions of the Preferred Securities shall be made and the Redemption Price
shall be payable on each Redemption Date only to the extent that the related
Applied Power Trust has funds on hand available for the payment of such
Redemption Price. See "--Subordination of Common Securities."
If an Applied Power Trust gives a notice of redemption in respect of its
Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, to the extent funds are available, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price and will give DTC irrevocable instructions and authority to pay the
Redemption Price to the holders of such Preferred Securities. See "Book-Entry
Issuance." If such Preferred Securities are no longer in book-entry form, the
Property Trustee, to the extent funds are available, will irrevocably deposit
with the paying agent for such Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Preferred Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record
dates for the related Distribution Dates. If notice of redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of the holders of such Preferred Securities so called for redemption
will cease, except the right of the holders of such Preferred Securities to
receive the Redemption Price, but without interest on such Redemption Price,
and such Preferred Securities will cease to be outstanding. Except as specified
in the applicable Prospectus Supplement, in the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay). In the event that payment of the Redemption Price in
respect of Preferred Securities called for redemption is improperly withheld or
refused and not paid either by the Applied Power Trust or by the Company
pursuant to the Guarantee as described under "Description of Guarantees,"
Distributions on such Preferred Securities will continue to accrue at the then
applicable rate, from the Redemption Date originally established by the Applied
Power Trust for such Preferred Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
Federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debt Securities to holders of
Preferred Securities shall be made to the applicable record holders thereof as
they appear on the register for such Preferred Securities on the relevant
record date, which shall be one Business Day prior to the relevant Redemption
Date or liquidation date, as applicable; provided, however, that in the event
that any Preferred Securities are not in book-entry form, the relevant record
date for such Preferred Securities shall be a date at least 15 days prior to
the Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
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If less than all of the Preferred Securities and Common Securities issued by
an Applied Power Trust are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of such Preferred Securities and Common Securities
to be redeemed shall be allocated pro rata to the Preferred Securities and the
Common Securities based upon the relative Liquidation Amounts of such classes.
The particular Preferred Securities to be redeemed shall be selected on a pro
rata basis not more than 60 days prior to the Redemption Date by the Property
Trustee from the outstanding Preferred Securities not previously called for
redemption. The Property Trustee shall promptly notify the trust registrar in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation
Amount thereof to be redeemed. For all purposes of each Trust Agreement, unless
the context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the aggregate
Liquidation Amount of Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Corresponding Junior Subordinated Debt Securities,
on and after the Redemption Date interest ceases to accrue on such Junior
Subordinated Debt Securities or portions thereof (and distributions cease to
accrue on the related Preferred Securities or portions thereof) called for
redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, each Applied Power
Trust's Preferred Securities and Common Securities, as applicable, shall be
made pro rata based on the Liquidation Amount of such Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date an Event of Default with respect to any Junior Subordinated
Debt Security shall have occurred and be continuing, no payment of any
Distribution on, or Redemption Price of, any of the Applied Power Trust's
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the Applied Power Trust's outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all of the
Applied Power Trust's outstanding Preferred Securities then called for
redemption, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions on, or Redemption Price of, the Applied Power Trust's
Preferred Securities then due and payable.
In the case of any Event of Default with respect to any Junior Subordinated
Debt Security, the Company as holder of such Applied Power Trust's Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default under the applicable Trust Agreement until the effect of
all such Events of Default with respect to such Preferred Securities has been
cured, waived or otherwise eliminated. Until any such Events of Default under
the applicable Trust Agreement with respect to the Preferred Securities have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of such Preferred Securities and not on behalf
of the Company as holder of the Applied Power Trust's Common Securities, and
only the holders of such Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
Pursuant to each Trust Agreement, each Applied Power Trust shall
automatically dissolve upon expiration of its term and shall dissolve on the
first to occur of: (i) certain events of bankruptcy, dissolution or liquidation
of the Company; (ii) the written direction to the Property Trustee from the
Company, as Depositor, to dissolve such Applied Power Trust and distribute the
Corresponding Junior Subordinated Debt Securities to the holders
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of the Preferred Securities in exchange for the Preferred Securities (which
direction is optional and wholly within the discretion of the Company, as
Depositor); (iii) the redemption of all of the Applied Power Trust's Trust
Securities; and (iv) the entry of an order for the dissolution of such Applied
Power Trust by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or (iv)
above, the Applied Power Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of such Applied Power Trust as
provided by applicable law, to the holders of such Trust Securities a Like
Amount of the Corresponding Junior Subordinated Debt Securities, unless such
distribution is determined by the Property Trustee not to be practical, in
which event such holders will be entitled to receive out of the assets of the
Applied Power Trust available for distribution to holders, after satisfaction
of liabilities to creditors of such Applied Power Trust as provided by
applicable law, an amount equal to, in the case of holders of Preferred
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because such Applied Power Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by such Applied Power Trust on its Preferred Securities shall be paid
on a pro rata basis. The holder(s) of such Applied Power Trust's Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of its Preferred Securities, except that if a Junior
Subordinated Debt Security Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities.
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement (a "Trust Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Trust Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) the occurrence of an Event of Default with respect to a Corresponding
Junior Subordinated Debt Security under the Indenture (see "Description of
Debt Securities--Defaults and Remedies"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25% in aggregate liquidation
preference of the outstanding Preferred Securities of the applicable
Applied Power Trust, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within 90 days after the occurrence of any Trust Event of Default actually
known to the Property Trustee, the Property Trustee shall transmit notice of
such Trust Event of Default to the holders of such Applied Power Trust's
Preferred Securities, the Administrative Trustees and the Company, as
Depositor, unless such Trust Event of Default shall have been cured or waived.
The Company, as Depositor, and the Administrative Trustees are required to file
annually with the Property Trustee a certificate as to whether or not they are
in compliance with all the conditions and covenants applicable to them under
each Trust Agreement.
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If an Event of Default with respect to a Corresponding Junior Subordinated
Debt Security has occurred and is continuing, the Preferred Securities shall
have a preference over the Common Securities upon termination of each Applied
Power Trust as described above. See "--Liquidation Distribution upon
Dissolution." The existence of a Trust Event of Default does not entitle the
holders of Preferred Securities to cause the redemption of the Preferred
Securities.
Removal of Issuer Trustees
Unless an Event of Default with respect to a Corresponding Junior
Subordinated Debt Security shall have occurred and be continuing, any Issuer
Trustee may be removed at any time by the holder of the Common Securities. If a
Trust Event of Default resulting from an Event of Default with respect to a
Corresponding Junior Subordinated Debt Security has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and no appointment
of a successor trustee shall be effective until the acceptance of appointment
by the successor trustee in accordance with the provisions of the applicable
Trust Agreement.
Co-Trustees and Separate Property Trustee
Unless a Trust Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property
may at the time be located, the Company, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. In case an Event
of Default with respect to a Corresponding Junior Subordinated Debt Security
has occurred and is continuing, the Property Trustee alone shall have power to
make such appointment.
Merger or Consolidation of Issuer Trustees
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under each
Trust Agreement, provided such corporation shall be otherwise qualified and
eligible.
Mergers, Consolidations, Conversions, Amalgamations or Replacements of the
Applied Power Trusts
An Applied Power Trust may not merge with or into, consolidate, convert into,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other Person, except
as described below, as described in "--Liquidation Distribution upon
Dissolution" or as described in the Prospectus Supplement with respect to the
Preferred Securities. An Applied Power Trust may, at the request of the
Company, with the consent of the Administrative Trustees and without the
consent of the holders of the Preferred Securities, merge with or into,
consolidate, convert into, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of such
Applied Power Trust with respect to the Preferred Securities or (b) substitutes
for the Preferred Securities other securities having substantially the same
terms as the Preferred Securities (the
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"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Corresponding Junior
Subordinated Debt Securities, (iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, if any, (iv) such merger, consolidation,
conversion, amalgamation, replacement, conveyance, transfer or lease does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, conversion, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect, (vi) such successor entity has a purpose
substantially similar to that of the Applied Power Trust, (vii) prior to such
merger, consolidation, conversion, amalgamation, replacement, conveyance,
transfer or lease, the Company has received an opinion from independent counsel
to the Applied Power Trust experienced in such matters to the effect that (a)
such merger, consolidation, conversion, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including any Successor
Securities) in any material respect, and (b) following such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease, neither the Applied Power Trust nor such successor entity will be
required to register as an investment company under the Investment Company Act
and (viii) the Company or any permitted successor or assignee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, an Applied Power
Trust shall not, except with the consent of holders of 100% in Liquidation
Amount of the Preferred Securities, merge with or into, consolidate, convert
into, amalgamate, or be replaced by or convey, transfer or lease its properties
and assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
merger, consolidation, conversion, amalgamation, replacement, conveyance,
transfer or lease would cause the Applied Power Trust or the successor entity
to be classified as other than a grantor trust for United States Federal income
tax purposes.
Voting Rights; Amendment of Each Trust Agreement
Except as provided below and under "Description of Guarantees--Amendments and
Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under such Trust Agreement, which shall not be inconsistent
with the other provisions of such Trust Agreement or (ii) to modify, eliminate
or add to any provisions of such Trust Agreement to such extent as shall be
necessary to ensure that the Applied Power Trust will be classified for United
States Federal income tax purposes as a grantor trust at all times that any
Trust Securities are outstanding or to ensure that the Applied Power Trust will
not be required to register as an "investment company" under the Investment
Company Act; provided, however, that in the case of clause (i), such action
shall not adversely affect in any material respect the interests of any holder
of Trust Securities, and any such amendments of such Trust Agreement shall
become effective when notice thereof is given to the holders of Trust
Securities. Each Trust Agreement may be amended by the Issuer Trustees and the
Company with (i) the consent of holders representing not less than a majority
(based upon Liquidation Amounts) of the outstanding Trust Securities and (ii)
receipt by the Issuer Trustees of an opinion of counsel experienced in such
matters to the effect that such amendment or the exercise of any power granted
to the Issuer Trustees in accordance with such amendment will not affect the
Applied Power Trust's status as a grantor trust for United States Federal
income tax purposes or the Applied Power Trust's exemption from status
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as an "investment company" under the Investment Company Act, provided that
without the consent of each holder of Trust Securities, such Trust Agreement
may not be amended to (i) change the amount or timing of any Distribution on
the Trust Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debt Securities are held by
the Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
under the Indenture, or executing any trust or power conferred on the Property
Trustee with respect to such Corresponding Junior Subordinated Debt Securities,
(ii) waive any past default that is waivable under Section 6.04 of the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Corresponding Junior Subordinated Debt Securities shall be
due and payable or (iv) consent to any amendment, modification or termination
of the Indenture, the applicable Securities Resolution or such Corresponding
Junior Subordinated Debt Securities, where such consent shall be required,
without, in each case, obtaining the prior approval of the holders of a
majority in aggregate Liquidation Amount of all outstanding Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Corresponding Junior Subordinated Debt
Securities affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the related Preferred
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities
except by subsequent vote of the holders of the Preferred Securities. The
Property Trustee shall notify each holder of Preferred Securities of any notice
of default with respect to the Corresponding Junior Subordinated Debt
Securities. In addition to obtaining the foregoing approvals of the holders of
the Preferred Securities, prior to taking any of the foregoing actions, the
Issuer Trustees shall obtain an opinion of counsel to the effect that the
Applied Power Trust will not be classified as a corporation for United States
Federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote to be
given to each holder of record of Preferred Securities in the manner set forth
in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Applied Power Trust to redeem and cancel its Preferred Securities in
accordance with the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company, the Issuer Trustees or any affiliate
of the Company or any Issuer Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
Payment and Paying Agency
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Applied Power Trust's Preferred
Securities are not held by the Depositary, such payments shall be made by check
mailed to the address of the holder entitled thereto as such address shall
appear on the Register. Unless otherwise specified in the applicable Prospectus
Supplement, the paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Company. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to
the Property Trustee and the Company. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint
a successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Company) to act as Paying Agent.
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Registrar and Transfer Agent
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Applied Power Trust, but upon payment of any tax
or other governmental charges that may be imposed in connection with any
transfer or exchange. The Applied Power Trusts will not be required to register
or cause to be registered the transfer of their Preferred Securities after such
Preferred Securities have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of a
Trust Event of Default, undertakes to perform only such duties as are
specifically set forth in each Trust Agreement and, after such Trust Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the applicable Trust Agreement at the request of any
holder of Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby. If
no Trust Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative causes of action, construe
ambiguous provisions in the applicable Trust Agreement or is unsure of the
application of any provision of the applicable Trust Agreement, and the matter
is not one on which holders of Preferred Securities are entitled under such
Trust Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Applied Power Trusts in such a way that no
Applied Power Trust will be deemed to be an "investment company" required to be
registered under the Investment Company Act or classified as an association
taxable as a corporation for United States Federal income tax purposes and so
that the Corresponding Junior Subordinated Debt Securities will be treated as
indebtedness of the Company for United States Federal income tax purposes. In
this connection, the Company and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
of each Applied Power Trust or each Trust Agreement, that the Company and the
Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the related Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Applied Power Trust may borrow money or issue debt or mortgage or pledge
any of its assets.
DESCRIPTION OF GUARANTEES
A Guarantee Agreement will be executed and delivered by the Company
concurrently with the issuance by each Applied Power Trust of its Preferred
Securities for the benefit of the holders from time to time of such Preferred
Securities. The First National Bank of Chicago will act as indenture trustee
("Guarantee Trustee") under each Guarantee for the purposes of compliance with
the Trust Indenture Act, and each Guarantee will be qualified as an indenture
under the Trust Indenture Act. This summary of certain provisions of the
Guarantees does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of each Guarantee
Agreement, including the definitions therein of certain terms, and the Trust
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Indenture Act. The form of the Guarantee has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Reference in this
summary to Preferred Securities means that Applied Power Trust's Preferred
Securities to which a Guarantee relates. The Guarantee Trustee will hold each
Guarantee for the benefit of the holders of the related Applied Power Trust's
Preferred Securities.
General
The Company will irrevocably agree to pay in full on a junior subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Preferred Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that such Applied Power Trust
may have or assert other than the defense of payment. The following payments
with respect to the Preferred Securities, to the extent not paid by or on
behalf of the related Applied Power Trust (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accumulated and unpaid Distributions required
to be paid on such Preferred Securities, to the extent that such Applied Power
Trust has funds on hand available therefor at such time, (ii) the Redemption
Price with respect to any Preferred Securities called for redemption to the
extent that such Applied Power Trust has funds on hand available therefor at
such time or (iii) upon a voluntary or involuntary dissolution, winding up or
liquidation of such Applied Power Trust (unless the Corresponding Junior
Subordinated Debt Securities are distributed to holders of such Preferred
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of such Applied Power Trust remaining available for distribution to
holders of Preferred Securities. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of the applicable Preferred Securities or by causing the
Applied Power Trust to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a junior subordinated
basis of the related Applied Power Trust's obligations under the Preferred
Securities, but will apply only to the extent that such related Applied Power
Trust has funds sufficient to make such payments, and is not a guarantee of
collection.
If the Company does not make interest payments on the Corresponding Junior
Subordinated Debt Securities held by the Applied Power Trust, the Applied Power
Trust will not be able to pay Distributions on the Preferred Securities and
will not have funds legally available therefor. Each Guarantee will rank
subordinate and junior in right of payment to all senior indebtedness and
subordinated indebtedness of the Company. See "--Status of the Guarantees." The
majority of the operating assets of the Company and its consolidated
subsidiaries are owned by such subsidiaries. The Company relies primarily on
funds obtained from such subsidiaries to meet its obligations for payment of
principal and interest on its outstanding debt obligations and corporate
expenses. Accordingly, the Company's obligations under the Guarantees will be
effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, and claimants should look only to the assets of the
Company for payments thereunder. See "Description of Debt Securities--General"
and "--Ranking of Debt Securities." Except as otherwise provided in the
applicable Prospectus Supplement, the Guarantees do not limit the incurrence or
issuance of other secured or unsecured debt of the Company, whether under the
Indenture, any other indenture that the Company may enter into in the future or
otherwise. See the Prospectus Supplement relating to any offering of Preferred
Securities.
The Company has also agreed to irrevocably and unconditionally guarantee the
obligations of the Applied Power Trusts with respect to the Common Securities
to the same extent as the Preferred Securities Guarantee, except that upon an
Event of Default with respect to a Corresponding Junior Subordinated Debt
Security, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
The Company's obligations described herein and in any accompanying Prospectus
Supplement, through the applicable Guarantee Agreement, the applicable Trust
Agreement, the Corresponding Junior Subordinated Debt Securities, and the
applicable Securities Resolution under the Indenture, taken together,
constitute a full, irrevocable and unconditional guarantee by the Company of
payments due on the Preferred Securities. No
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single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Applied Power Trust's
obligations under the Preferred Securities. See "The Applied Power Trusts,"
"Description of Preferred Securities," and "Description of Debt Securities--
Certain Provisions Relating to Corresponding Junior Subordinated Debt
Securities."
Status of the Guarantees
Each Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all senior indebtedness
and subordinated indebtedness.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Company relating to Preferred Securities. Each Guarantee will constitute a
guarantee of payment and not of collection (i.e., the guaranteed party may
institute a legal proceeding directly against the Guarantor to enforce its
rights under the Guarantee without first instituting a legal proceeding against
any other person or entity). Each Guarantee will be held for the benefit of the
holders of the related Preferred Securities. Each Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent
not paid by the Applied Power Trust or upon distribution to the holders of the
Preferred Securities of the Corresponding Junior Subordinated Debt Securities.
None of the Guarantees places a limitation on the amount of additional senior
indebtedness or subordinated indebtedness that may be incurred by the Company.
The Company expects from time to time to incur additional indebtedness
constituting senior indebtedness or subordinated indebtedness.
Amendments and Assignment
Except with respect to any changes which do not adversely affect the rights
of holders of the related Preferred Securities in any material respect (in
which case no vote will be required), no Guarantee may be amended without the
prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of the related outstanding Preferred Securities. The manner
of obtaining any such approval will be as set forth under "Description of
Preferred Securities--Voting Rights; Amendment of Each Trust Agreement." All
guarantees and agreements contained in each Guarantee Agreement shall bind the
successors, assigns, receivers, trustees and representatives of the Company and
shall inure to the benefit of the holders of the related Preferred Securities
then outstanding.
Events of Default
An event of default under each Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the related Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of such Guarantee Agreement or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under such
Guarantee Agreement.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under such Guarantee
Agreement without first instituting a legal proceeding against the Applied
Power Trust, the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee
Agreement.
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Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in performance of any Guarantee, undertakes to perform
only such duties as are specifically set forth in each Guarantee Agreement and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by any Guarantee
Agreement at the request of any holder of any Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
Termination of the Guarantees
Each Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of the related Preferred Securities, upon full
payment of the amounts payable upon liquidation of the related Applied Power
Trust or upon distribution of Corresponding Junior Subordinated Debt Securities
to the holders of the related Preferred Securities. Each will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the related Preferred Securities must restore payment of any sums paid under
such Preferred Securities or such Guarantee.
Governing Law
Each Guarantee Agreement will be governed by and construed in accordance with
the laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBT SECURITIES
AND THE GUARANTEES
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the applicable Applied Power Trust has funds available for the
payment of such Distributions) are irrevocably guaranteed by the Company as and
to the extent set forth under "Description of Guarantees." Taken together, the
Company's obligations under each series of Corresponding Junior Subordinated
Debt Securities, the related Securities Resolution, the Indenture, the related
Trust Agreement and the related Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and other
amounts due on the related series of Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Applied Power Trust's obligations under the
Preferred Securities. If and to the extent that the Company does not make
payments on any series of Corresponding Junior Subordinated Debt Securities,
such Applied Power Trust will not pay Distributions or other amounts due on its
Preferred Securities. The Guarantees do not cover payment of Distributions when
the related Applied Power Trust does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of a series of Preferred
Securities is to institute a legal proceeding directly against the Company for
enforcement of payment of such Distributions to such holder. The obligations of
the Company under each Guarantee are subordinate and junior in right of payment
to all senior indebtedness and subordinated indebtedness of the Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debt Securities, such payments will
be sufficient to cover Distributions and other payments due on the related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of
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Corresponding Junior Subordinated Debt Securities will be equal to the sum of
the aggregate stated Liquidation Amount of the related Preferred Securities and
related Common Securities; (ii) the interest rate and interest and other
payment dates on each series of Corresponding Junior Subordinated Debt
Securities will match the Distribution rate and Distribution and other payment
dates for the related Preferred Securities; (iii) the Company, as borrower,
shall pay for all and any costs, expenses and liabilities of such Applied Power
Trust except the Applied Power Trust's obligations to holders of its Preferred
Securities under such Preferred Securities; and (iv) each Trust Agreement
further provides that the Applied Power Trust will not engage in any activity
that is not consistent with the limited purposes of such Applied Power Trust.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder if
and to the extent the Company has theretofore made, or is concurrently on the
date of such payment making, a payment under the related Guarantee Agreement.
Enforcement Rights of Holders of Preferred Securities
A holder of any Preferred Security may institute a legal proceeding directly
against the Company to enforce its rights under the related Guarantee Agreement
without first instituting a legal proceeding against the Guarantee Trustee, the
related Applied Power Trust or any other person or entity.
A default or event of default under any senior or subordinated indebtedness
of the Company would not necessarily constitute a Trust Event of Default.
However, in the event of payment defaults under, or acceleration of, senior or
subordinated indebtedness of the Company, the subordination provisions of the
applicable Securities Resolution will, unless the applicable Securities
Resolution states otherwise, provide that no payments may be made in respect of
the Corresponding Junior Subordinated Debt Securities until such senior or
subordinated indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debt Securities would constitute a
Trust Event of Default.
Limited Purpose of Applied Power Trusts
Each Applied Power Trust's Preferred Securities evidence undivided beneficial
ownership interests in the assets of such Applied Power Trust, and each Applied
Power Trust exists for the sole purposes of issuing its Preferred Securities
and Common Securities, investing the proceeds thereof in Corresponding Junior
Subordinated Debt Securities and engaging in only those other activities
necessary, convenient or incidental thereto. A principal difference between the
rights of a holder of a Preferred Security and a holder of a Corresponding
Junior Subordinated Debt Security is that a holder of a Corresponding Junior
Subordinated Debt Security is entitled to receive from the Company the
principal amount of and interest accrued on Corresponding Junior Subordinated
Debt Securities held, while a holder of Preferred Securities is entitled to
receive Distributions from such Applied Power Trust (or from the Company under
the applicable Guarantee Agreement) if and to the extent such Applied Power
Trust has funds available for the payment of such Distributions.
Rights upon Dissolution
Upon any voluntary or involuntary dissolution of any Applied Power Trust
involving the liquidation of the Corresponding Junior Subordinated Debt
Securities, the holders of the related Preferred Securities will be entitled to
receive, out of assets held by such Applied Power Trust and, after satisfaction
of creditors of such Applied Power Trust as provided by applicable law, the
Liquidation Distribution in cash. See "Description of Preferred Securities--
Liquidation Distribution upon Dissolution." Upon any voluntary or involuntary
liquidation or bankruptcy of the Company, the Property Trustee, as holder of
the Corresponding Junior Subordinated Debt Securities, would be a junior
subordinated creditor of the Company, subordinated in right of payment to all
senior indebtedness and subordinated indebtedness, but entitled to receive
payment in full of
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principal and interest, before any stockholders of the Company receive payments
or distributions. Since the Company is the guarantor under each Guarantee
Agreement and pursuant to the Indenture, as borrower, has agreed to pay for all
costs, expenses and liabilities of each Applied Power Trust (other than the
Applied Power Trust's obligations to the holders of its Preferred Securities),
the positions of a holder of such Preferred Securities and a holder of such
Corresponding Junior Subordinated Debt Securities relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company are expected to be substantially the same.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Class A Common Stock at a future date
or dates. The price per share of Class A Common Stock may be fixed at the time
the Stock Purchase Contracts are issued or may be determined by reference to a
specific formula set forth in the Stock Purchase Contracts. Stock Purchase
Contracts may be issued separately or as a part of units ("Stock Purchase
Units") consisting of a Stock Purchase Contract and either (x) Senior Debt
Securities, Subordinated Debt Securities or Junior Subordinated Debt
Securities, (y) debt obligations of third parties, including U.S. Treasury
securities, or (z) Preferred Securities of an Applied Power Trust, securing the
holder's obligations to purchase the Class A Common Stock under the Stock
Purchase Contracts. The Stock Purchase Contracts may require the Company to
make periodic payments to the holders of the Stock Purchase Units or vice
versa, and such payments may be unsecured or prefunded on some basis. The Stock
Purchase Contracts may require holders to secure their obligations thereunder
in a specified manner and in certain circumstances the Company may deliver
newly issued prepaid stock purchase contracts ("Prepaid Securities") upon
release to a holder of any collateral securing such holder's obligations under
the original Stock Purchase Contract.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units and, if applicable, Prepaid
Securities. The description in the Prospectus Supplement will not purport to be
complete and will be qualified in its entirety by reference to the Stock
Purchase Contracts, the collateral arrangements and depositary arrangements, if
applicable, relating to such Stock Purchase Contracts or Stock Purchase Units
and, if applicable, the Prepaid Securities and the document pursuant to which
such Prepaid Securities will be issued. Certain material United States Federal
income tax considerations applicable to the Stock Purchase Units and Stock
Purchase Contracts will be set forth in the Prospectus Supplement relating
thereto.
BOOK-ENTRY ISSUANCE
The Debt Securities, Preferred Securities and Corresponding Junior
Subordinated Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities that will be deposited with, or on
behalf of, the Depositary identified in the Prospectus Supplement relating to
such series ("Book-Entry Securities"). Unless otherwise indicated in the
applicable Prospectus Supplement for such series, the Depositary will be DTC.
Book-Entry Securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual Book-Entry Securities represented thereby, a Book-Entry
Security may not be transferred except as a whole by the Depositary for such
Book-Entry Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
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Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its
Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Book-Entry Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Book-Entry
Securities on DTC's records. The ownership interest of each actual purchaser of
each Book-Entry Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased Book-
Entry Securities. Transfers of ownership interests in the Book-Entry Securities
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Book-Entry Securities, except in the
event that use of the book-entry system is discontinued. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Security.
To facilitate subsequent transfers, all Book-Entry Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Book-Entry Securities with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Book-Entry Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Book-Entry Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
The Company and the Applied Power Trusts expect that conveyance of notices
and other communications by DTC to Direct Participants, by Direct Participants
to Indirect Participants, and by Direct Participants and Indirect Participants
to Beneficial Owners and the voting rights of Direct Participants, Indirect
Participants and Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Book-Entry Securities.
Although voting with respect to the Book-Entry Securities is limited to the
holders of record of the Book-Entry Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Book-Entry Securities. Under its usual procedures, DTC would mail an
omnibus proxy ("Omnibus Proxy") to the relevant Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts such Book-Entry
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
As long as the Book-Entry Securities are held by DTC or its nominee and DTC
continues to make its same-day funds settlement system available to the
Company, all payments on the Book-Entry Securities (other than Preferred
Securities or Corresponding Junior Subordinated Debt Securities) will be made
by the Company in immediately available funds to DTC. Distribution payments on
the Preferred Securities or the Junior
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Subordinated Debt Securities will be made by the relevant Trustee to DTC. The
Company and the Applied Power Trusts have been advised that DTC's practice is
to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Applied Power Trust (as
applicable) or the Company, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment on Book-Entry Securities to DTC
is the responsibility of the Company or the relevant Trustee (as applicable),
disbursement of such payments to Direct Participants is the responsibility of
DTC and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Company within 90 days, the Company will issue individual
Preferred Securities of such series in exchange for the Global Security
representing such series of Preferred Securities. In addition, the Company may
at any time and in its sole discretion, subject to any limitations described in
the Prospectus Supplement relating to such Preferred Securities, determine not
to have any Preferred Securities of such series represented by one or more
Global Securities and, in such event, will issue individual Preferred
Securities of such series in exchange for the Global Security or the Securities
representing such series of Preferred Securities. Further, if the Company so
specifies with respect to Preferred Securities of a series, an owner of a
beneficial interest in a Global Security representing Preferred Securities of
such series may, on terms acceptable to the Company, the Property Trustee and
the Depositary for such Global Security, receive individual Preferred
Securities of such series in exchange for such beneficial interests, subject to
any limitations described in the Prospectus Supplement relating to such
Preferred Securities. In any such instance, a Beneficial Owner in such Global
Security will be entitled to physical delivery of individual Preferred
Securities of the series represented by such Global Security equal in principal
amount to such beneficial interest and to have such Preferred Securities
registered in its name. Individual Preferred Securities of such series so
issued will be issued in such denominations as set forth in the accompanying
Prospectus Supplement.
DTC may discontinue providing its services as securities depositary with
respect to Debt Securities at any time by giving reasonable notice to the
Company or the Indenture Trustee. Under such circumstances, if a successor
depositary is not appointed by the Company within 90 days, the Company will
issue individual definitive Debt Securities in exchange for all the Global
Securities representing such Debt Securities. In addition, the Company may at
any time and in its sole discretion determine not to have the Debt Securities
represented by Global Securities and, in such event, will issue individual
definitive Debt Securities in exchange for all the Global Securities
representing the Debt Securities. Individual definitive Debt Securities so
issued will be issued in denominations of $1,000 and any larger amount that is
an integral multiple of $1,000 and registered in such names as DTC shall
direct.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Applied Power Trusts and the Company
believe to be accurate, but the Applied Power Trusts and the Company assume no
responsibility for the accuracy thereof. Neither the Applied Power Trusts nor
the Company has any responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
PLAN OF DISTRIBUTION
The Company and/or any Applied Power Trust may sell the Securities in any one
or more of the following ways from time to time: (i) to or through underwriters
or dealers; (ii) directly to one or more purchasers; or (iii) through agents.
Prospectus Supplement with respect to the Securities being offered thereby sets
forth the terms of the offering of such Securities, including the name or names
of any underwriters, the purchase price of such Securities and the proceeds to
the Company and/or an Applied Power Trust from such sale, any underwriting
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<PAGE>
discounts and other items constituting underwriters' compensation, any initial
public offering price, any discounts or concessions allowed or reallowed or
paid to dealers, and any securities exchange on which such Securities may be
listed. Only underwriters so named in the Prospectus Supplement are deemed to
be underwriters in connection with the Securities offered thereby.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase such Securities will be subject to
certain conditions precedent, and the underwriters will be obligated to
purchase all the Securities of the series offered by the Company's and/or the
applicable Applied Power Trust's Prospectus Supplement if any of such
Securities are purchased. Any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for the Company and/or an applicable Applied Power Trust. Any remarketing firm
will be identified and the terms of its agreement, if any, with the Company and
its compensation will be described in the Prospectus Supplement. Remarketing
firms may be deemed to be underwriters in connection with the Securities
remarketed thereby.
Securities may also be sold directly by the Company and/or an Applied Power
Trust or through agents designated by the Company from time to time. Any agent
involved in the offering and sale of the Securities in respect of which this
Prospectus is delivered is named, and any commissions payable by the Company
and/or an Applied Power Trust to such agent are set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent is acting on a best efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company and/or an Applied
Power Trust will authorize agents, underwriters or dealers to solicit offers by
certain institutional investors to purchase Securities providing for payment
and delivery on a future date specified in the Prospectus Supplement. There may
be limitations on the minimum amount which may be purchased by any such
institutional investor or on the portion of the aggregate principal amount of
the particular Securities which may be sold pursuant to such arrangements.
Institutional investors to which such offers may be made, when authorized,
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and such other
institutions as may be approved by the Company and/or an Applied Power Trust.
The obligations of any such purchasers pursuant to such delayed delivery and
payment arrangements will not be subject to any conditions except (i) the
purchase by an institution of the particular Securities shall not at the time
of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the particular
Securities are being sold to underwriters, the Company and/or an Applied Power
Trust shall have sold to such underwriters all of such Securities other than
the Securities covered by such arrangements. Underwriters will not have any
responsibility in respect of the validity of such arrangements or the
performance of the Company or such institutional investors thereunder.
If any underwriter or any selling group member intends to engage in
stabilizing, syndicate short covering transactions, penalty bids or any other
transaction in connection with the offering of Securities that may stabilize,
maintain, or otherwise affect the price of such Securities, such intention and
a description of such transactions will be described in the Prospectus
Supplement.
Agents and underwriters may be entitled under agreements entered into with
the Company and/or the applicable Applied Power Trust to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribution with respect to payments which the
agents or underwriters may be required to make in respect thereof. Agents and
underwriters may engage in transactions with, or perform services for, the
Company and its subsidiaries in the ordinary course of business.
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CERTAIN LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplements, certain
legal matters in connection with the Securities will be passed upon (i) for the
Company by Quarles & Brady LLP, Milwaukee, Wisconsin, counsel to the Company,
(ii) for the Applied Power Trusts (with respect to the validity of the
Preferred Securities under Delaware law) by Morris, Nichols, Arsht & Tunnell,
Wilmington, Delaware, special Delaware counsel to the Applied Power Trusts and
the Company, and (iii) for any underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York. Anthony
W. Asmuth III, the Corporate Secretary of the Company, is a partner in Quarles
& Brady LLP. As of December 31, 1998, Mr. Asmuth owned 38,420 shares of the
Company's Class A Common Stock and served as trustee or co-trustee with sole or
shared voting and dispositive powers over trusts that held an aggregate of
270,402 shares of Class A Common Stock.
EXPERTS
The consolidated financial statements of the Company as of and for the year
ended August 31, 1998, and the combination of the consolidated balance sheet as
of August 31, 1997, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the two years in the period
then ended, after restatement for the 1998 pooling of interests, incorporated
by reference in this Prospectus, have been incorporated herein in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of the Company for the years ended
August 31, 1997 and 1996, prior to restatement for pooling of interests, and
the separate financial statements of ZERO Corporation included in the 1997 and
1996 restated consolidated financial statements, for the years ended March 31,
1997 and 1996, incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Rubicon Group plc for the year ended May 31,
1998, incorporated by reference in this Prospectus, have been incorporated
herein in reliance on the report of PricewaterhouseCoopers, chartered
accountants and registered auditors, given on the authority of that firm as
experts in accounting and auditing.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the Notes offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-Looking Statements............................................... S-1
Prospectus Supplement Summary............................................ S-3
Summary Financial and Other Data......................................... S-11
Risk Factors............................................................. S-14
Use of Proceeds.......................................................... S-17
Capitalization........................................................... S-18
Pro Forma Financial Information.......................................... S-18
Selected Consolidated Financial Data..................................... S-24
Management's Discussion and Analysis of Financial Condition and Results
of Operations .......................................................... S-26
Description of Notes..................................................... S-34
Underwriting............................................................. S-61
Prospectus
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
Forward-Looking Statements and Cautionary Factors........................ 4
The Company.............................................................. 5
Use of Proceeds.......................................................... 6
Ratio of Earnings to Fixed Charges....................................... 6
The Applied Power Trusts................................................. 7
Description of Debt Securities........................................... 8
Description of Warrants to Purchase Debt Securities...................... 16
Description of Preferred Stock and Common Stock.......................... 17
Description of Depositary Shares......................................... 20
Description of Warrants to Purchase Class A Common Stock or Preferred
Stock................................................................... 23
Description of Preferred Securities...................................... 24
Description of Guarantees................................................ 34
Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debt Securities and the Guarantees......................... 37
Description of Stock Purchase Contracts and Stock Purchase Units......... 39
Book-Entry Issuance...................................................... 39
Plan of Distribution..................................................... 41
Certain Legal Matters.................................................... 43
Experts.................................................................. 43
</TABLE>
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$200,000,000
8.75% Senior Subordinated Notes
due 2009
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PROSPECTUS SUPPLEMENT
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Goldman, Sachs & Co.
Credit Suisse First Boston
NationsBanc Montgomery
Securities LLC
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