SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended September 30, 1997, or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
____________________ to _______________________
Commission file number: 0-13886
Oshkosh Truck Corporation
(Exact name of registrant as specified in its charter)
Wisconsin 39-0520270
(State of other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
P. O. Box 2566, Oshkosh, WI 54903-2566
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (414) 235-9151
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X
No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
Aggregate market value of the voting stock held by non-affiliates of
the registrant as of November 15, 1997:
Class A Common Stock, $.01 par value - No Established Market Value
Common Stock, $.01 par value - $131,352,978
Number of shares outstanding of each of the registrant's classes of
common stock as of November 15, 1997:
Class A Common Stock, $.01 par value - 406,428 shares
Common Stock, $.01 par value - 7,900,931 shares
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate, by reference, portions of the Annual
Report to Shareholders for the year ended September 30, 1997.
Part III incorporates, by reference, portions of the Proxy Statement
dated December 29, 1997.
<PAGE>
OSHKOSH TRUCK CORPORATION
Index to Annual Report on Form 10-K
Year ended September 30, 1997
Page
PART I.
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . 10
EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . 10
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . 11
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . 12
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . 12
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 13
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 13
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 18
The following contains forward looking statements, including statements
that include the words "believes" and "expects," or words of similar
import with reference to the company. These statements are subject to
risks, uncertainties and other factors that could cause actual results to
differ materially from those described in any such statement.
PART I
Item 1. BUSINESS
General
Oshkosh Truck Corporation (Oshkosh or the company) engineers,
manufactures and markets a broad range of specialized trucks and
proprietary parts under the "Oshkosh" trademark, and a broad line of
specialty fire apparatus under the "Pierce" trademark. As a specialized
vehicle producer, the company holds a unique position in the industry,
having acquired the engineering, rapid product development and lean
manufacturing expertise and flexibility to profitably build specialty
vehicles in competition with companies both much larger and smaller than
itself. Mass producers design a vehicle to serve many markets. In
contrast, the company's vehicles, manufactured in low to medium production
volumes, are engineered for market niches where a unique, innovative
design will meet a purchaser's requirements for use in specific, often
adverse operating conditions. Many of the company's products are found
operating in snow, deserts and soft or rough terrain where there is a need
for high performance or high mobility. Because of the quality of its
specialized vehicles, the company believes its products perform at lower
life cycle costs than those that are mass-produced.
Markets served by the company domestically and internationally are
categorized as defense and commercial. As a result of the acquisition of
Pierce Manufacturing Inc. (Pierce) on September 18, 1996, the company's
sales into the defense market decreased to 42% of the company's fiscal
1997 sales volume, after reaching a peak of 83% in fiscal 1987.
The company primarily depends upon components made by suppliers for
its products. The company has successfully managed its supply network,
which consists of approximately 3,500 active vendors. Through its
reliance on this supply network for the purchase of certain components,
the company is able to avoid many of the preproduction and fixed costs
associated with the manufacture of those components. While the company
purchases many of the high dollar components for assembly, such as
engines, transmissions and axles, it does have significant machining and
fabricating capability for the manufacture of certain important
proprietary components. This capability is used for the manufacture of
certain axles, transfer cases, cabs, body structures, aerial ladders,
independent suspension, and many smaller parts which add uniqueness and
value to the company's products. Some of these proprietary components are
marketed to other manufacturers.
Products and Markets
The company currently manufactures seven different series of
commercial trucks, and eight specialty fire apparatus models, and during
fiscal 1997, had four active contracts with the U.S. Government related to
production of the Palletized Load System (PLS), Heavy Equipment Transport
(HET), Heavy Expanded Mobility Tactical Truck (HEMTT), Logistic Vehicle
System (LVS), and HEMTT Overhaul vehicles. Within each series there is a
varying number of models. Models are usually distinguished by differences
in engine, transmission, axle, body configuration, pump, and ladder
combinations, among others. Vehicles produced generally range in price
from $60,000 to $1 million; in horsepower from 210 to 1,025; and in gross
vehicle weight from 33,000 to 150,000 pounds. The company has designed
vehicles to operate in the environmental extremes of arctic cold or desert
heat. Most vehicles are designed with the capability to operate in both
highway and off-road conditions. The company aggressively supports its
products with an aftermarket parts and service organization.
Defense
The company manufactures a broad range of wheeled vehicles for the
U.S. Department of Defense and export markets. The company has performed
major defense contracts for over 50 years, and in the year ended September
30, 1997 had defense sales of $288.6 million or 42% of its total sales.
Contracts with the Department of Defense generally are multi-year
contracts. Each contract typically provides that the government will
purchase a base quantity of vehicles with options for additional
purchases. All obligations of the government under the contracts are
subject to receipt of government funding, and it is customary to expect
purchases when Congress has funded the purchase through annual budget
appropriations and after the government has committed the funds to the
contractor.
During fiscal year 1997, the company primarily produced the PLS, the
HEMTT, the HET, the LVS, and the HEMTT Overhaul products for the U.S.
Department of Defense.
On November 21, 1996, the U.S. Army Tank Automotive and Armaments
Command awarded each of the company and one other defense contractor, $6.9
million prototype contracts for Phase I competition of the Medium Tactical
Truck Remanufacture Program (MTTR). The MTTR Program was initiated to
update and modernize the 5-Ton tactical vehicle fleet of the U.S. Marine
Corps and the U.S. Army. The goal of the U.S. Marine Corps portion of the
program is to remanufacture the current configuration to a more robust
design capable of carrying a much greater payload with substantially
increased cross-country mobility. The current fleet of approximately
10,000 U.S. Marine Corps trucks are up to 20 years old. The new U.S.
Marine Corps vehicle will have extraordinary performance and mobility
exceeding that of any comparable truck in the world. The U.S. Army
portion of the program is designed to increase the useful life and
decrease operation and support costs of a portion of the U.S. Army's
existing fleet of nearly 60,000 vehicles. It will include inserting
current technologies, making the truck capable of performing its mission
well into the next century. Phase I covers the design, development, and
production of five prototype test vehicles for the U.S. Marine Corps and
five additional prototype test vehicles for the U.S. Army. Testing of the
ten prototype test vehicles commenced August 1997 and will be concluded in
April 1998. Under Phase II of the program, up to a total of 11,500 U.S.
Marine Corps and U.S. Army units will be awarded for production at a value
of approximately $1.8 billion over several years. Competition for the
Phase II production contract will be intense between the two Phase I
contractors. Phase I testing along with the Phase II proposal will
determine the single supplier of the production contract covering both the
U.S. Marine Corps and U.S. Army vehicles.
During fiscal year 1997, the U.S. Army purchased additional trucks
under the HEMTT/LVS Family Contract that extends production into August
1998. Under the Family Contract, the U.S. Government plans to award
sufficient sales to the company to ensure a minimum production rate of 20
trucks per month for the two truck models through September 1999.
The existing U.S. Army contract for HET vehicles was modified during
fiscal 1997 to add the PLS vehicles to that contract. This contract now
becomes a family contract, very similar to the HEMTT/LVS Family Contract.
The U.S. Army has the ability to order trucks under this contract through
fiscal 2000 and plans to sustain production throughout that period.
Additionally during fiscal year 1997, Oshkosh Truck Corporation and
VSE Corporation of Alexandria, Virginia formed a joint venture. That
joint venture submitted a proposal to the government and was subsequently
awarded a contract valued at $12.3 million to produce a quantity of 130
Common Bridge Transporters (CBT). This CBT is basically a load handling
system similar to that which is mounted on the PLS. This particular load
handling system is mounted on the remanufactured M977 HEMTT chassis and is
used for the transportation of various types of combat support and
engineering bridges. Also during fiscal year 1997, the U.S. Government
awarded Oshkosh a follow-on HEMTT Overhaul contract valued at $23.5
million. This is a requirements type contract that allows the government
to send in several different HEMTT models for complete overhaul. Oshkosh
is presently producing under this contract at the rate of approximately
one unit per day.
Commercial
The company manufactures a wide variety of heavy-duty specialized
trucks for vocational, airport, and municipal markets. Products are
uniquely engineered for specific severe-duty requirements where innovative
design provides superior performance.
The fire apparatus business is conducted through the company's Pierce
subsidiary headquartered in Appleton, Wisconsin. Pierce primarily serves
municipal markets but also serves airports, universities and large
industrial companies. The Pierce product line includes pumpers, aerials
and heavy duty rescue vehicles on five different models of custom chassis
and two models of commercial chassis.
The company serves airport markets with products that include
Aircraft Rescue and Firefighting (ARFF) and snow removal vehicles. ARFF
vehicles are offered from 1,000 to 3,000 gallon capacities. Oshkosh also
offers the innovative Snozzle/R/, an extendable turret with an integrated
video camera and automated remote controls that can pierce into an
aircraft interior and position the agent flow precisely at the location of
the fire. Suppressant application is faster and uses up to 50% less agent
than conventional mass application techniques. The all-wheel drive H-
series snowblower keeps runways open by casting 4,000 tons of snow per
hour. The H-series snowblower provides multi-purpose use with an
interchangeable blower, blade plows and brooms. The all-wheel drive P-
series with its heavy-duty frame has an unsurpassed reputation for
durability.
The construction business focuses on forward and rear discharge
concrete carriers. The forward placement S-series design allows the
driver to oversee faster, more accurate placement of concrete, with fewer
support personnel. This leads to greater efficiency and superior customer
service. A traditional rear discharge F-series is also offered as an
integrated package allowing for one stop service and sales. The F-series
is also sold in the utility and heavy haul transport markets. In
addition, the company produces the J-series for desert oil field and
extreme heavy hauling applications.
The refuse business consists of two low entry, dual drive models, the
NK and NL. The NK and NL feature eighteen inch step-in heights.
Municipalities as well as commercial contractors look to the improved
visibility and safety features a low entry, cab forward vehicle provides.
Backlog
The company's backlog at September 30, 1997 was $361 million,
compared to $433 million at September 30, 1996. The backlog at fiscal
year-end 1997 includes $205 million with respect to U.S. Government
contracts, $120 million related to Pierce, and the remainder relates to
other commercial products. The $72 million decrease in the backlog from
year-end 1996 to year-end 1997 is primarily due to a $67 million decrease
in the backlog related to U.S. Government contracts. Approximately 99% of
the company's backlog pertains to fiscal 1998 business. Virtually all the
company's revenues are derived from customer orders prior to commencing
production.
Government Contracts
A significant portion of the company's sales are made to the U.S.
Government under long-term contracts and programs in which there are
significant risks, including the uncertainty of economic conditions and
defense policy. The company's defense business is substantially dependent
upon periodic awards of new contracts and the purchase of base vehicle
quantities and the exercise of options under existing contracts. The
company's existing contracts with the U.S. Government may be terminated at
any time for the convenience of the government. Upon such termination,
the company would be entitled to reimbursement of its incurred costs and,
in general, to payment of a reasonable profit for work actually performed.
There can be no assurance that the U.S. Government will continue to
purchase the company's products at comparable levels. The termination of
any of the company's significant contracts, failure of the government to
purchase quantities under existing contracts or failure of the company to
receive awards of new contracts could have a material adverse effect on
the business operations of the company. The company expects fiscal 1998
sales to the U.S. Government to decrease $20 to $30 million from fiscal
1997 levels although actual sales could vary based on changes in the
federal budget, international sales and other factors. Accordingly, it
will be necessary for the company to reduce its fixed costs to maintain
the profitability of its defense business at fiscal 1997 levels.
Under firm fixed-price contracts with the government, the price paid
the company is not subject to adjustment to reflect the company's actual
costs, except costs incurred as a result of contract changes ordered by
the government or for economic price adjustment clauses contained in
certain contracts. The company generally attempts to negotiate with the
government the amount of increased compensation to which the company is
entitled for government-ordered changes which result in higher costs. In
the event that the company is unable to negotiate a satisfactory agreement
to provide such increased compensation, the company may file an appeal
with the Armed Services Board of Contract Appeals or the U.S. Claims
Court. The company has no such appeals pending.
Marketing and Distribution
All domestic defense products are sold direct and the company
maintains a liaison office in Washington, D.C. The company also sells
defense products to foreign governments direct, through representatives,
or under the United States Foreign Military Sales program. The company's
commercial vehicles and aftermarket parts are sold either direct to
customers, or through dealers or distributors, depending upon geographic
area and product line. Fire apparatus products are sold almost
exclusively through a distributor network. Supplemental information
relative to export shipments is incorporated by reference to Note 11 of
the financial statements included in the company's Annual Report to
Shareholders for the fiscal year ended September 30, 1997.
Alliance
On May 2, 1997, the company and Freightliner Corporation
(Freightliner) formally terminated a strategic alliance formed on June 2,
1995. The company repurchased from Freightliner 350,000 shares of its
Common Stock and 1,250,000 warrants for the purchase of additional shares
of Common Stock for a total of $6.8 million. The company and Freightliner
will continue to supply each other with parts and components.
Competition
In all the company's markets, the competitors include smaller,
specialized manufacturers as well as the larger, mass producers. The
company believes that its technical strength and production capability
enable it to effectively compete with other specialized manufacturers.
The company also believes that its manufacturing flexibility, engineering,
product development and lean manufacturing expertise in the low to middle
production volumes allow it to compete effectively in its markets against
mass producers.
The company's principal competitors for U.S. Department of Defense
contracts include AM General Corporation and Stewart & Stevenson Services,
Inc. Pierce's principal fire apparatus competitors include Emergency One,
Inc. (a subsidiary of Federal Signal Corporation), FWD Corporation (a
subsidiary of Corsta Corporation), Kovatch Mobile Equipment Corp.,
American La France (a subsidiary of Freightliner Corporation), and over 75
other manufacturers. The company's principal competitors in other
commercial markets include Advance Mixer Inc., Crane Carrier Co., London
Machinery Inc., Mack Trucks Inc., Maxim Truck Company Inc., McNeilus
Companies, Inc., Monroe Truck Equipment Inc., Rexworks Inc., Stewart &
Stevenson Services, Inc., and T.L. Smith Machine Co. Inc.
The principal method of competition for the company in the defense
and municipal markets, where there is intense competition, is generally
on the basis of lowest qualified bid. In the non-governmental markets,
the company competes on the basis of price, innovation, quality and
product performance capabilities.
Engineering, Test and Development
For fiscal years 1997, 1996, and 1995, the company incurred
engineering, research and development expenditures of $7.8 million, $6.3
million, and $5.4 million, respectively, portions of which were
recoverable from customers, principally the U.S. Government.
Intellectual Property
The company holds 15 patents. Patents for all-wheel steer and
independent suspension systems, which have remaining lives of 9 to 19
years, provide the company with a competitive advantage in the fire
apparatus business and the sale of ARFF and snow vehicles. The
independent suspension system was also added to the U.S. Marine Corps
portion of the MTTR program which the company believes should be a
competitive advantage in the competition for the Phase II production
contract. None of the other patents individually are significant to the
business.
The company holds trademarks for "Oshkosh" and "Pierce". Both
trademarks are considered to be important to the future success of the
business.
Employees
As of September 30, 1997, the company had approximately 2,750
employees of which approximately 1,300 and 1,250 employees are located at
its principal facilities in Oshkosh and Appleton, Wisconsin, respectively.
Production workers totaling approximately 800 employees at the company's
principal facilities in Oshkosh, Wisconsin are represented by the United
Auto Workers union. The company's five-year contract with the United Auto
Workers extends through September 30, 2001. The company believes its
relationship with employees is satisfactory.
Subsequent Event
On December 8, 1997, the company announced that it had agreed to
acquire McNeilus Companies, Inc. (McNeilus), a $300 million manufacturer
and marketer of refuse and recycling truck bodies, rear discharge concrete
mixers, and ready-mix batch plants. The total purchase cost for all
McNeilus stock and related non-compete and ancillary agreements is $250
million in cash. The transaction is subject to the approval of the
appropriate governmental authorities and is expected to close in the first
quarter of calendar 1998.
Under certain conditions, if the acquisition is not consummated, the
company may be required to pay McNeilus a fee of $10 million and
conversely McNeilus may be required to pay a $10 million fee to the
company.
Item 2. PROPERTIES.
The company's principal offices and manufacturing facilities are
located in Oshkosh, WI. Space occupied encompasses 688,000 square feet,
52,000 of which is leased and the remainder is owned. One-half of the
space owned by the company has been constructed since 1970. The company
owns approximately 50 acres of vacant land adjacent to its existing
facilities. The company's Pierce subsidiary, located in Appleton, WI,
occupies 608,000 square feet of office and manufacturing space, of which
19,000 square feet are leased and the remainder is owned. Additionally,
the company owns a 28,000 square foot manufacturing facility located in
Weyauwega, WI, and a 287,000 square foot manufacturing facility located
in Bradenton, FL. In addition, the company has leased parts and service
facilities in Hartford, CT and Salt Lake City, UT, and owns similar
facilities in Oshkosh, WI and Houston, TX.
The company's equipment and buildings are modern, well maintained and
adequate for its present and anticipated needs.
Item 3. LEGAL PROCEEDINGS.
The company is engaged in litigation against Super Steel Products
Corporation (SSPC), the company's former supplier of mixer systems for
front discharge concrete mixer trucks under a long-term supply contract .
SSPC sued the company in state court claiming the company breached the
contract. The company counterclaimed for repudiation of contract. On July
26, 1996, a jury returned a verdict for SSPC awarding damages totaling
$4.5 million. On October 10, 1996, the state court judge overturned the
verdict against the company, granted judgment for the company on its
counterclaim, and ordered a new trial for damages on the company's
counterclaim. Both SSPC and the company have appealed the state court
judge's decision. The Wisconsin Court of Appeals has agreed to hear the
case and both the company and SSPC have filed briefs in this matter.
The company currently is engaged in the arbitration of certain
disputes between the Oshkosh Florida Division and O.V. Containers, Inc.,
which arose out of the performance of a contract to deliver 690 skeletal
container chassis. The arbitration is being conducted before a three-
member panel under the commercial dispute rules of the American
Arbitration Association, and is not expected to conclude before April
1998. The company is vigorously contesting warranty and other claims made
against it, and has asserted substantial claims against O.V. Containers,
Inc. The outcome of these matters cannot be predicted at the present
time.
As part of its routine business operations, the company disposes of
and recycles or reclaims certain industrial waste materials, chemicals and
solvents at third party disposal and recycling facilities which are
licensed by appropriate governmental agencies. In some instances, these
facilities have been and may be designated by the United States
Environmental Protection Agency (EPA) or a state environmental agency for
remediation. Under the Comprehensive Environmental Response,
Compensation, and Liability Act (the Superfund law) and similar state
laws, each potentially responsible party (PRP) that contributed hazardous
substances may be jointly and severally liable for the costs associated
with cleaning up the site. Typically, PRPs negotiate a resolution with
the EPA and/or the state environmental agencies. PRPs also negotiate with
each other regarding allocation of the cleanup cost.
As to one such Superfund site, Pierce is one of 414 PRPs
participating in the costs of addressing the site and has been assigned an
allocation share of approximately 0.04%. Currently a remedial
investigation/feasibility study is being completed, and as such, an
estimate for the total cost of the remediation of this site has not been
made to date. However, based on estimates and the assigned allocations,
the company believes its liability at the site will not be material and
its share is adequately covered through reserves established by the
company at September 30, 1997. Actual liability could vary based on
results of the study, the resources of other PRPs and the company's final
share of liability.
The company is addressing a regional trichloroethylene (TCE)
groundwater plume on the south side of Oshkosh, Wisconsin. The company
believes there may be multiple sources in the area. TCE was detected at
the company's North Plant facility with recent testing showing the highest
concentrations in a monitoring well located on the upgradient property
line. Because the investigation process is still ongoing, it is not
possible for the company to estimate its long-term total liability
associated with this issue at this time. Also, as part of the regional
TCE groundwater investigation, the company conducted a groundwater
investigation of a former landfill located on company property. The
landfill, acquired by the company in 1972, is approximately 2.0 acres in
size and is believed to have been used for the disposal of household
waste. Based on the investigation, the company does not believe the
landfill is one of the sources of the TCE contamination. Based upon
current knowledge, the company believes its liability associated with the
TCE issue will not be material and is adequately covered through reserves
established by the company at September 30, 1997. However, this may
change as investigations proceed by the company, other unrelated property
owners, and government entities.
The company is subject to other environmental matters and legal
proceedings and claims which arise in the ordinary course of business.
Although the final results of all such matters and claims cannot be
predicted with certainty, management believes that the ultimate resolution
of all such matters and claims, after taking into account the liabilities
accrued with respect to such matters and claims, will not have a material
adverse effect on the company's financial condition or results of
operations. Actual results could vary, among other things, due to the
uncertainties involved in litigation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the company are as follows:
Name Age* Title
Robert G. Bohn 44 President and Chief Executive Officer
Timothy M. Dempsey 57 Vice President, General Counsel, and
Secretary
Paul C. Hollowell 56 Executive Vice President and General
Manager, Defense Business
Charles L. Szews 41 Executive Vice President and Chief Financial
Officer
Matthew J. Zolnowski 44 Vice President, Administration
J. David Brantingham 40 Vice President, Information Systems
Fred C. Fielding 63 Vice President, Government Operations
Washington, DC Office
Dan J. Lanzdorf 49 Vice President and General Manager,
Commercial Business
Mark A. Meaders 39 Vice President, Corporate Purchasing
and Logistics
John W. Randjelovic 53 Vice President and General Manager,
Pierce Manufacturing Inc.
Donald H. Verhoff 51 Vice President, Technology
*As of December 4, 1997
All of the company's officers serve at the pleasure of the Board of
Directors.
ROBERT G. BOHN - Mr. Bohn joined the company in 1992 as Vice
President-Operations. He was appointed President and Chief Operating
Officer in 1994, and President and Chief Executive Officer in October
1997.
TIMOTHY M. DEMPSEY - Mr. Dempsey joined the company in October 1995
as Vice President, General Counsel, and Secretary. Mr. Dempsey has been
and continues to be a partner in the law firm of Dempsey, Magnusen,
Williamson and Lampe in Oshkosh, Wisconsin.
PAUL C. HOLLOWELL - Mr. Hollowell joined the company in April 1989 as
Vice President-Defense Products and assumed his present position in
February 1994.
CHARLES L. SZEWS - Mr. Szews joined the company in March 1996 as Vice
President and Chief Financial Officer and assumed his present position in
October 1997. Mr. Szews was previously employed by Fort Howard
Corporation, a manufacturer of tissue products, from June 1988 until March
1996 in various positions, including Vice President and Controller from
September 1994 until March 1996.
MATTHEW J. ZOLNOWSKI - Mr. Zolnowski joined the company as Vice
President-Human Resources in January 1992 and assumed his present position
in February 1994.
J. DAVID BRANTINGHAM - Mr. Brantingham joined the company in April
1995 as Manager of Technical Services and assumed his present position in
November 1997. Mr. Brantingham was previously employed by Western
Publishing Company, Inc., a printer and publisher of children's books and
a manufacturer of adult games, in various positions including Director of
Technical Services.
FRED C. FIELDING - Mr. Fielding joined the company in October 1989
and was elected Vice President, Government Operations by the Board of
Directors in January 1991.
DAN J. LANZDORF - Mr. Lanzdorf joined the company in 1973 as a design
engineer and has served in various assignments including Chief Engineer -
Defense, Director of Defense Engineering, Director of the Defense Business
unit, and Vice President of Manufacturing prior to assuming his current
position in November 1997.
MARK A. MEADERS - Mr. Meaders joined the company as Director of
Purchasing -Pierce Manufacturing Inc. in September 1996 and assumed his
present position in November 1997. Prior to joining the company, Mr.
Meaders was Vice President-Purchasing for the CA Short Co., Inc., a
provider of premium incentives, from 1995 until joining Pierce. Mr.
Meaders began his career at the company's former Chassis Division as the
plant manager from 1993-1995. He previously served 13 years in the U.S.
Army and departed after attaining the rank of Major.
JOHN W. RANDJELOVIC - Mr. Randjelovic joined the company in October
1992 as Vice President and General Manager in charge of the Bradenton,
Florida Division. In September 1996, he was appointed Vice President of
Manufacturing, Purchasing, and Materials for Pierce Manufacturing Inc. and
assumed his present position in November 1997.
DONALD H. VERHOFF - Mr. Verhoff joined the company in May 1973 as a
development engineer. He has held positions as Manager of the Test Lab,
and Director of New Product Development prior to assuming his present
position in November 1997.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The information under the captions Note 7 to the Consolidated
Financial Statements, and "Financial Statistics" contained in the
company's Annual Report to Shareholders for the fiscal year ended
September 30, 1997, is hereby incorporated by reference in answer to
this item.
Stock Buyback
In July 1995, the company's board of directors authorized the
repurchase of up to 1,000,000 shares of Common Stock. As of December 11,
1997, the company has repurchased 461,535 shares under this program at a
cost of $6.6 million.
Item 6. SELECTED FINANCIAL DATA.
The information under the caption "Financial Highlights" contained in
the company's Annual Report to Shareholders for the fiscal year ended
September 30, 1997, is hereby incorporated by reference in answer to this
item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information under the caption "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations"
contained in the company's Annual Report to Shareholders for the fiscal
year ended September 30, 1997, is hereby incorporated by reference in
answer to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements set forth in the company's Annual Report to
Shareholders for the fiscal year ended September 30, 1997, are hereby
incorporated by reference in answer to this item. Data regarding
quarterly results of operations included under the caption "Financial
Statistics" in the company's Annual Report to Shareholders for the fiscal
year ended September 30, 1997, is hereby incorporated by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the captions "Election of Directors" and "Other
Matters" of the company's definitive proxy statement for the annual
meeting of shareholders on February 2, 1998, as filed with the Securities
and Exchange Commission, is hereby incorporated by reference in answer to
this Item. Reference is also made to the information under the heading
"Executive Officers of the Registrant" included under Part I of this
report.
Item 11. EXECUTIVE COMPENSATION.
The information under the captions "Executive Compensation" contained
in the company's definitive proxy statement for the annual meeting of
shareholders on February 2, 1998, as filed with the Securities and
Exchange Commission is hereby incorporated by reference in answer to this
item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the caption "Shareholdings of Nominees and
Principal Shareholders" contained in the company's definitive proxy
statement for the annual meeting of shareholders on February 2, 1998, as
filed with the Securities and Exchange Commission, is hereby incorporated
by reference in answer to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the captions "Election of Directors"
and "Certain Transactions" contained in the company's definitive proxy
statement for the annual meeting of shareholders on February 2, 1998, as
filed with the Securities and Exchange Commission, is hereby incorporated
by reference in answer to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements: The following consolidated financial
statements of the company and the report of independent auditors included
in the Annual Report to Shareholders for the fiscal year ended September
30, 1997, are incorporated by reference in Item 8:
Consolidated Statements of Income (Loss) for the years ended
September 30, 1997, 1996, and 1995
Consolidated Balance Sheets at September 30, 1997, and 1996
Consolidated Statements of Shareholders' Equity for the years
ended September 30, 1997, 1996, and 1995.
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1996, and 1995
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
2. Financial Statement Schedules:
Schedule II - Valuation & Qualifying Accounts
All other schedules are omitted because they are not applicable, or
the required information is shown in the consolidated financial
statements or notes thereto.
3. Exhibits:
2.1 Stock Purchase Agreement by and among McNeilus
Companies, Inc., the shareholders of McNeilus
Companies, Inc., and Oshkosh Truck Corporation
dated December 8, 1997.
3.1 Restated Articles of Incorporation ######
3.2 Bylaws of the company, as amended *****
4.1 Credit Agreement dated as of September 18, 1996
among Oshkosh Truck Corporation, and certain
lenders with Firstar Bank Milwaukee, N.A., as
Agent (incorporated by reference to Exhibit 4 to
the company's Current Report on Form 8-K dated
September 18, 1996 (Commission File No. 0-
13886)).#######
4.2 First Amendment to Credit Agreement dated as of
November 27, 1996 among Oshkosh Truck
Corporation, and certain lenders with Firstar
Bank Milwaukee, N.A., as Agent.####
4.3 Second Amendment to Credit Agreement dated as of
April 25, 1997 among Oshkosh Truck Corporation,
and certain lenders with Firstar Bank Milwaukee,
N.A., as Agent.
10.1 Lease with Cadence Company (formerly Mosling
Realty Company) and related documents *
10.2 1990 Incentive Stock Plan for Key Employees, as
amended (through January 25, 1995) ### @
10.3 Form of Key Employee Employment and Severance
Agreement with R. E. Goodson, Chairman & CEO ** @
10.4 Employment Agreement with R. E. Goodson, Chairman
& CEO as of April 16, 1990 **** @
10.5 Restricted stock grant to R. E. Goodson, Chairman
& CEO**** @
10.6 Incentive Stock Option Agreement to R. E.
Goodson, Chairman & CEO **** @
10.7 Employment Agreement with R. E. Goodson, Chairman
& CEO as of April 16, 1992 ## @
10.8 1994 Long-Term Incentive Compensation Plan dated
March 29, 1994 ### @
10.9 Form of Key Employees Employment and Severance
Agreement with Messrs. R.G. Bohn, T.M. Dempsey,
P.C. Hollowell, C.L. Szews, and M.J. Zolnowski
### @
10.10 Employment Agreement with P.C. Hollowell,
Executive Vice President @
10.11 Form of Oshkosh Truck Corporation 1990 Incentive
Stock Plan, as amended, Nonqualified Stock Option
Agreement.##### @
10.12 Form of Oshkosh Truck Corporation 1990 Incentive
Stock Plan, as amended, Nonqualified Director
Stock Option Agreement. ##### @
10.13 Lease extension with Cadence Company (as
referenced under 10.1)
10.14 Form of 1994 Long-Term Incentive Compensation
Plan Award Agreement @
10.15 Stock Purchase Agreement, dated April 26, 1996,
among Oshkosh Truck Corporation, J. Peter
Mosling, Jr. and Stephen P. Mosling, and
consented to by R. Eugene Goodson. ####
10.16 Agreement to Terminate Strategic Alliance dated
as of April 10, 1997, between Freightliner and
Oshkosh.
11. Computation of per share earnings (contained in
Note 1 of "Notes to Consolidated Financial
Statements" of the company's Annual Report to
Shareholders for the fiscal year ended September
30, 1997)
13. 1997 Annual Report to Shareholders, to the extent
incorporated herein by reference
21. Subsidiaries of Registrant
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
*Previously filed and incorporated by reference to the company's Form S-1
registration statement filed August 22, 1985, and amended September 27,
1985, and October 2, 1985 (Reg. No. 2-99817).
**Previously filed and incorporated by reference to the company's Form 10-
K for the year ended September 30, 1987.
****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1990.
*****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1991.
## Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1992.
### Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1994.
#### Previously filed and incorporated by reference to the company's form
10-K for the year ended September 30, 1996.
@Denotes a management contract or compensatory plan or arrangement.
##### Previously filed and incorporated by reference to the company's Form
S-8 filing dated September 22, 1995. (Reg. No. 33-62687)
###### Previously filed and incorporated by reference to Exhibit A to the
company's Proxy Statement for Annual Meeting of Shareholders held on
February 3, 1997 filed on Schedule 14A.
####### Previously filed and incorporated by reference to the company's
Form 10-Q for the quarter ended April 1, 1995.
(b) The company was not required to file a report on Form 8-K during
the quarter ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OSHKOSH TRUCK CORPORATION
December 23, 1997 By /S/ Robert G. Bohn
Robert G. Bohn
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities on the dates indicated.
December 23, 1997 /S/ R. G. Bohn
R. G. Bohn
President and Chief Executive Officer
(Principal Executive Officer)
December 23, 1997 /S/ C. L. Szews
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
December 23, 1997 /S/ J. W. Andersen
J. W. Andersen
Director
December 23, 1997 /S/ D. T. Carroll
D. T. Carroll
Chairman and Member of Executive Committee
December 23, 1997 /S/ General F. M. Franks, Jr.
General F. M. Franks, Jr.
Director
December 23, 1997 /S/ M. W. Grebe
M. W. Grebe
Director
December 23, 1997
Kathleen J. Hempel
Director
December 23, 1997 /S/ S. P. Mosling
S. P. Mosling
Director and Member of Executive Committee
December 23, 1997 /S/ J. P. Mosling, Jr.
J. P. Mosling, Jr.
Director and Member of Executive Committee
December 23, 1997 /S/ R. G. Sim
R. G. Sim
Director
<PAGE>
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 1997, 1996, and 1995
(In Thousands)
Balance Balance
at Purchase Additions at
Beginning of Charged to End of
Classification of Year Pierce Expense Reductions* Year
Receivables -
Allowance for
doubtful
accounts:
1995 $431 --- $143 $(97) $477
====== ====== ====== ====== ======
1996 $477 $509 $182 $(102) $1,066
====== ====== ====== ====== ======
1997 $1,066 --- $881 $23 $1,970
====== ====== ====== ====== ======
* Represents amounts written off to the reserve, net of recoveries.
<PAGE>
INDEX TO EXHIBITS
3. Exhibits:
2.1 Stock Purchase Agreement by and among McNeilus
Companies, Inc., the shareholders of McNeilus
Companies, Inc., and Oshkosh Truck Corporation
dated December 8, 1997.
3.1 Restated Articles of Incorporation ######
3.2 Bylaws of the company, as amended *****
4.1 Credit Agreement dated as of September 18, 1996
among Oshkosh Truck Corporation, and certain
lenders with Firstar Bank Milwaukee, N.A., as
Agent (incorporated by reference to Exhibit 4 to
the company's Current Report on Form 8-K dated
September 18, 1996 (Commission File No. 0-
13886)).#######
4.2 First Amendment to Credit Agreement dated as of
November 27, 1996 among Oshkosh Truck
Corporation, and certain lenders with Firstar
Bank Milwaukee, N.A., as Agent.####
4.3 Second Amendment to Credit Agreement dated as of
April 25, 1997 among Oshkosh Truck Corporation,
and certain lenders with Firstar Bank Milwaukee,
N.A., as Agent.
10.1 Lease with Cadence Company (formerly Mosling
Realty Company) and related documents *
10.2 1990 Incentive Stock Plan for Key Employees, as
amended (through January 25, 1995) ### @
10.3 Form of Key Employee Employment and Severance
Agreement with R. E. Goodson, Chairman & CEO ** @
10.4 Employment Agreement with R. E. Goodson, Chairman
& CEO as of April 16, 1990 **** @
10.5 Restricted stock grant to R. E. Goodson, Chairman
& CEO**** @
10.6 Incentive Stock Option Agreement to R. E.
Goodson, Chairman & CEO **** @
10.7 Employment Agreement with R. E. Goodson, Chairman
& CEO as of April 16, 1992 ## @
10.8 1994 Long-Term Incentive Compensation Plan dated
March 29, 1994 ### @
10.9 Form of Key Employees Employment and Severance
Agreement with Messrs. R.G. Bohn, T.M. Dempsey,
P.C. Hollowell, C.L. Szews, and M.J. Zolnowski
### @
10.10 Employment Agreement with P.C. Hollowell,
Executive Vice President @
10.11 Form of Oshkosh Truck Corporation 1990 Incentive
Stock Plan, as amended, Nonqualified Stock Option
Agreement.##### @
10.12 Form of Oshkosh Truck Corporation 1990 Incentive
Stock Plan, as amended, Nonqualified Director
Stock Option Agreement. ##### @
10.13 Lease extension with Cadence Company (as
referenced under 10.1)
10.14 Form of 1994 Long-Term Incentive Compensation
Plan Award Agreement @
10.15 Stock Purchase Agreement, dated April 26, 1996,
among Oshkosh Truck Corporation, J. Peter
Mosling, Jr. and Stephen P. Mosling, and
consented to by R. Eugene Goodson. ####
10.16 Agreement to Terminate Strategic Alliance dated
as of April 10, 1997, between Freightliner and
Oshkosh.
11. Computation of per share earnings (contained in
Note 1 of "Notes to Consolidated Financial
Statements" of the company's Annual Report to
Shareholders for the fiscal year ended September
30, 1997)
13. 1997 Annual Report to Shareholders, to the extent
incorporated herein by reference
21. Subsidiaries of Registrant
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
*Previously filed and incorporated by reference to the company's Form S-1
registration statement filed August 22, 1985, and amended September 27,
1985, and October 2, 1985 (Reg. No. 2-99817).
**Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1987.
****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1990.
*****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1991.
## Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1992.
### Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1994.
#### Previously filed and incorporated by reference to the company's form
10-K for the year ended September 30, 1996.
@Denotes a management contract or compensatory plan or arrangement.
##### Previously filed and incorporated by reference to the company's Form
S-8 filing dated September 22, 1995. (Reg. No. 33-62687)
###### Previously filed and incorporated by reference to Exhibit A to the
company's Proxy Statement for Annual Meeting of Shareholders held on
February 3, 1997 filed on Schedule 14A.
####### Previously filed and incorporated by reference to the company's
Form 10-Q for the quarter ended April 1, 1995.
STOCK PURCHASE AGREEMENT
By and among
McNEILUS COMPANIES, INC.,
THE SHAREHOLDERS OF McNEILUS COMPANIES, INC.,
And
OSHKOSH TRUCK CORPORATION
Dated December 8, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . 1
2. PURCHASE PRICE - PAYMENT . . . . . . . . . . . . . . . . . 1
2.1. Purchase Price . . . . . . . . . . . . . . . . . . 1
2.2. Payment of Purchase Price . . . . . . . . . . . . 1
3. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . 2
3.1. Corporate. . . . . . . . . . . . . . . . . . . . . 2
3.2. Shareholders. . . . . . . . . . . . . . . . . . . 3
3.3. No Violation . . . . . . . . . . . . . . . . . . . 4
3.4. Financial Statements . . . . . . . . . . . . . . . 4
3.5. Tax Matters. . . . . . . . . . . . . . . . . . . . 5
3.6. Receivables. . . . . . . . . . . . . . . . . . . . 6
3.7. Inventory . . . . . . . . . . . . . . . . . . . . 7
3.8. Absence of Certain Changes . . . . . . . . . . . . 8
3.9. Absence of Undisclosed Liabilities . . . . . . . . 9
3.10. No Litigation . . . . . . . . . . . . . . . . . . 9
3.11. Compliance With Laws and Orders. . . . . . . . . 10
3.12. Title to and Condition of Properties. . . . . . 10
3.13. Insurance . . . . . . . . . . . . . . . . . . . 12
3.14. Contracts and Commitments . . . . . . . . . . . 12
3.15. Labor Matters . . . . . . . . . . . . . . . . . 14
3.16. Employee Benefit Plans. . . . . . . . . . . . . 14
3.17. Environmental Matters. . . . . . . . . . . . . . 16
3.18. Trade Rights . . . . . . . . . . . . . . . . . . 17
3.19. Major Customers and Suppliers. . . . . . . . . . 18
3.20. Product Warranty and Product Liability . . . . . 18
3.21. Employment Compensation . . . . . . . . . . . . 19
3.22. Affiliates' Relationships to Company. . . . . . 19
3.23. Assets Necessary to Business . . . . . . . . . . 19
3.24. No Brokers or Finders . . . . . . . . . . . . . 19
3.25. Effect of Disclosure . . . . . . . . . . . . . . 19
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . 20
4.1. Corporate. . . . . . . . . . . . . . . . . . . . 20
4.2. Authority . . . . . . . . . . . . . . . . . . . 20
4.3. No Brokers or Finders . . . . . . . . . . . . . 20
4.4. Investment Intent . . . . . . . . . . . . . . . 20
4.5. No Litigation . . . . . . . . . . . . . . . . . 21
4.6. Financial Information . . . . . . . . . . . . . 21
4.7. No Violations . . . . . . . . . . . . . . . . . 21
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 21
5.1. Certain Matters. . . . . . . . . . . . . . . . . 21
5.2. Title Insurance . . . . . . . . . . . . . . . . 21
5.3. Surveys . . . . . . . . . . . . . . . . . . . . 22
5.4. Escrow Agreement . . . . . . . . . . . . . . . . 22
5.5. Employment Agreements. . . . . . . . . . . . . . 22
5.6. Noncompetition Agreements . . . . . . . . . . . 22
5.7. General Releases . . . . . . . . . . . . . . . . 22
5.8. Incentive Compensation Plan . . . . . . . . . . 23
5.9. HSR Act Filings . . . . . . . . . . . . . . . . 23
5.10. Assistance With Financing. . . . . . . . . . . . 23
5.11. Access to Information and Records . . . . . . . 24
5.12. Conduct of Business Pending the Closing . . . . 24
5.13. Consents . . . . . . . . . . . . . . . . . . . . 26
5.14. Opinion of Counsel . . . . . . . . . . . . . . . 26
5.15. Disclosure Schedule Updates . . . . . . . . . . 26
5.16. Environmental Matters . . . . . . . . . . . . . 26
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . 27
6.1. Representations and Warranties True as of
the Closing Date . . . . . . . . . . . . . . . . 27
6.2. Compliance With Agreement . . . . . . . . . . . 27
6.3. Absence of Litigation . . . . . . . . . . . . . 27
6.4. Consents and Approvals . . . . . . . . . . . . . 28
6.5. Hart-Scott-Rodino Waiting Period . . . . . . . . 28
6.6. Shareholders' Equity . . . . . . . . . . . . . . 28
7. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS . . . 28
7.1. Compliance With Agreement . . . . . . . . . . . 28
7.2. Absence of Litigation . . . . . . . . . . . . . 28
7.3. Hart-Scott-Rodino Waiting Period . . . . . . . . 29
8. INDEMNIFICATION AND RELATED MATTERS. . . . . . . . . . . 29
8.1. Indemnification By Indemnifying Shareholders . . 29
8.2. Indemnification By Buyer . . . . . . . . . . . . 29
8.3. Indemnification By Company . . . . . . . . . . . 30
8.4. Limitation on Indemnification Liabilities . . . 30
8.5. Survival Of Representations, Warranties
And Covenants . . . . . . . . . . . . . . . . . 30
8.6. Notice of Indemnification . . . . . . . . . . . 31
8.7. Indemnification Procedure for Third-Party Claims 31
8.8. Exclusive Remedy . . . . . . . . . . . . . . . . 32
8.9. Computation of Claims for Damages Subject
to Indemnification . . . . . . . . . . . . . . . 32
8.10. Minibasket . . . . . . . . . . . . . . . . . . . 32
8.11. Commencement of Arbitration . . . . . . . . . . 32
8.12. Waiver . . . . . . . . . . . . . . . . . . . . . 33
8.13. Payment . . . . . . . . . . . . . . . . . . . . 33
9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . 33
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . 33
10.1. Right of Termination Without Breach . . . . . . 33
10.2. Termination for Breach. . . . . . . . . . . . . 33
10.3. Termination Fees. . . . . . . . . . . . . . . . 34
10.4. Confidentiality Upon Termination. . . . . . . . 34
11. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . 36
11.1. Arbitration . . . . . . . . . . . . . . . . . . 36
11.2. Arbitrators . . . . . . . . . . . . . . . . . . 36
11.3. No Appeal . . . . . . . . . . . . . . . . . . . 36
11.4. Authority . . . . . . . . . . . . . . . . . . . 36
11.5. Entry of Judgment . . . . . . . . . . . . . . . 36
11.6. Confidentiality . . . . . . . . . . . . . . . . 36
11.7. Continued Performance . . . . . . . . . . . . . 37
11.8. Discovery . . . . . . . . . . . . . . . . . . . 37
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 37
12.1. Knowledge . . . . . . . . . . . . . . . . . . . 37
12.2. Further Assurance . . . . . . . . . . . . . . . 37
12.3. Disclosures and Announcements . . . . . . . . . 37
12.4. Assignment; Parties in Interest. . . . . . . . . 37
12.5. Law Governing Agreement . . . . . . . . . . . . 38
12.6. Amendment and Modification . . . . . . . . . . . 38
12.7. Notice . . . . . . . . . . . . . . . . . . . . . 38
12.8. Expenses . . . . . . . . . . . . . . . . . . . . 40
12.9. Costs of Litigation or Arbitration . . . . . . . 41
12.10. Transfer Taxes . . . . . . . . . . . . . . . . . 41
12.11. Entire Agreement . . . . . . . . . . . . . . . . 41
12.12. Counterparts . . . . . . . . . . . . . . . . . . 41
12.13. Headings . . . . . . . . . . . . . . . . . . . . 41
12.14. No Negotiations by Buyer. . . . . . . . . . . . 41
<PAGE>
[The following schedules and exhibits to this agreement are not filed
herewith. The Registrant agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request.]
Schedules
Schedule 3.1.(c) - Foreign Corporation Qualification
Schedule 3.1.(d) - Subsidiaries
Schedule 3.1.(e) - Directors and Officers
Schedule 3.1.(f) - Shareholder List
Schedule 3.3 - Violation, Conflict, Default
Schedule 3.4 - Financial Statements
Schedule 3.5.(b) - Tax Matters
Schedule 3.6.(a) - Accounts Receivable (Aged Schedule)
Schedule 3.6.(b) - Leases
Schedule 3.7 - Inventory Off Premises
Schedule 3.8 - Certain Changes
Schedule 3.9 - Off-Balance Sheet Liabilities
Schedule 3.10 - Litigation Matters
Schedule 3.11.(a) - Non-Compliance with Laws
Schedule 3.11.(b) - Licenses and Permits
Schedule 3.12.(a) - Liens
Schedule 3.12.(c) - Owned and Leased Real Property
Schedule 3.12.(e) - Year 2000 Compliance
Schedule 3.13 - Insurance
Schedule 3.14.(b) - Personal Property Leases
Schedule 3.14.(c) - Purchase Commitments
Schedule 3.14.(d) - Sales Contracts
Schedule 3.14.(h) - Loan Agreements, etc.
Schedule 3.14.(i) - Guarantees
Schedule 3.14.(l) - Material Contracts
Schedule 3.15 - Labor Matters
Schedule 3.16 - Employee Matters
Schedule 3.17 - Environmental Matters
Schedule 3.18 - Trade Rights
Schedule 3.19.(a) - Major Customers
Schedule 3.19.(b) - Major Suppliers
Schedule 3.19.(c) - Dealers and Distributors
Schedule 3.20 - Product Warranty, Warranty Expense and
Liability Claims
Schedule 3.21 - Compensation
Schedule 3.22.(a) - Contracts with Affiliates
Schedule 3.22.(b) - Obligations of and to Affiliates
Schedule 4.7 - Violation, Conflict, Default
Schedule 5.1. - Disposition of Certain Assets and Matters
Schedule 5.5.(b) - Employees Subject to Form Employment Agreements
Schedule 5.8 - Key Executives
Schedule 5.12.(e) - Approved Corporate Changes
Schedule 6.4 - Material Consents, Approvals or Waivers
Schedule 8.1 - Indemnification Obligations
Exhibits
A - Form of Escrow Agreement
B - Form of Employment Agreements
C - Form of Noncompetition Agreement
D - Form of Shareholders' Counsel Opinion
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of December 8, 1997,
by and among McNeilus Companies, Inc., a Minnesota corporation (the
"Company"), all of the Shareholders of the Company listed on the signature
page (individually a "Shareholder"; collectively, the "Shareholders") and
Oshkosh Truck Corporation, a Wisconsin corporation (the "Buyer").
RECITALS
A. Company is engaged in, among other things, the design,
manufacture, distribution and sale of refuse packer systems, rear-
discharge concrete mixer systems and ready-mix concrete batch plants,
including the arrangement of financing for such sales (the "Business").
Shareholders own all of the issued and outstanding shares (the "Shares")
of capital stock of Company.
B. Buyer desires to purchase the Shares from Shareholders
and Shareholders desire to sell the Shares to Buyer, upon the terms and
conditions herein set forth.
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and
conditions hereinafter set forth, and intending to be legally bound
hereby, the parties hereto agree as follows.
1. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, on the
Closing Date (as hereinafter defined) Shareholders shall sell to Buyer and
Buyer shall purchase from Shareholders all the Shares.
2. PURCHASE PRICE - PAYMENT
2.1. Purchase Price. The purchase price (the "Purchase Price")
payable for the Shares shall be Two Hundred Twelve Million Dollars
($212,000,000).
2.2. Payment of Purchase Price. The Purchase Price shall be paid by
Buyer as follows:
2.2.(a) Cash to Escrow Agent. At the Closing, Buyer shall
deliver to the Escrow Agent, under the Escrow Agreement (as defined
in Section 5.5), the sum of Seven Million Dollars ($7,000,000).
2.2.(b) Cash to Shareholders. At the Closing, Buyer shall
deliver to the Shareholders the sum of Two Hundred Twelve Million
Dollars ($212,000,000), less the amount paid to the Escrow Agent
pursuant to Subsection 2.2.(a) above.
2.2.(c) Method of Payment. All payments under this Section
2.2 shall be made by wire transfer of immediately available funds to
an account designated by the Shareholders, which account shall be
designated not less than 48 hours prior to the time for payment
specified herein.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
Company and Shareholders make the following representations and
warranties to Buyer, each of which is true and correct on the date hereof,
shall remain true and correct to and including the Closing Date, and shall
survive the Closing of the transactions provided for herein. Regardless
of the foregoing the Church (defined hereinafter) only makes the
representations and warranties set forth in Section 3.2.
3.1. Corporate.
3.1.(a) Organization. Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Minnesota.
3.1.(b) Corporate Power. Company has all requisite corporate
power and authority to own, operate and lease its properties and to
carry on its business as and where such is now being conducted.
3.1.(c) Qualification. Except as set forth on Schedule
3.1.(c), Company is duly licensed or qualified to do business as a
foreign corporation, and is in good standing, in each jurisdiction
wherein the character of the properties owned or leased by it, or the
nature of its business, makes such licensing or qualification
necessary. The states in which Company is licensed or qualified to
do business and states in which it is not qualified or licensed but
is doing business are listed in Schedule 3.1.(c).
3.1.(d) Subsidiaries. Schedule 3.1.(d) sets forth the name,
jurisdiction of incorporation, capitalization, ownership and officers
and directors of each corporation in which the Company has a direct
or indirect equity interest ("Subsidiary") and the jurisdictions in
which each Subsidiary is qualified or licensed to do business as a
foreign corporation. Except as listed in Schedule 3.1.(d), the
Company does not own, directly or indirectly, any capital stock or
other equity securities of any corporation or have any direct or
indirect equity or other ownership interest in any entity or
business. All of the outstanding shares of capital stock of each
Subsidiary owned by the Company are free and clear of any security
interest, restriction, option, voting trust or agreement, proxy,
encumbrance, claim or charge of any kind whatsoever, and are validly
issued, fully paid and nonassessable. Each Subsidiary is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation, has full corporate
power and authority to carry on its business as it is now being
conducted and to own and lease the properties and assets it now owns
and leases, and, except as set forth on Schedule 3.1.(d), is in good
standing and is duly qualified or licensed to do business as a
foreign corporation in each of the jurisdictions listed opposite the
name of such Subsidiary in Schedule 3.1.(d). The states in which
each subsidiary is licensed and/or qualified to do business and
states in which each is not qualified and/or licensed but is doing
business, are listed on Schedule 3.1.(d).
3.1(e) The term "Company" as used hereinafter means the
Company and each Subsidiary, except where the specific provisions
provide otherwise.
3.1(f) Corporate Documents, etc. The copies of the Articles
of Incorporation and By-Laws of the Company, including any amendments
thereto, which have been delivered by Shareholders to Buyer are true,
correct and complete copies of such instruments as presently in
effect. The corporate minute book and stock records of the Company
which have been furnished to Buyer for inspection are true, correct
and complete. The directors and officers of the Company are listed
in Schedule 3.1.(e).
3.1(g) Capitalization of the Company. The authorized capital
stock of the Company (not including Subsidiaries) consists entirely
of 10,000,000 shares of common stock, no par value, of which 100,000
shares are designated as Class A voting common stock and 9,900,000
shares are designated as Class B nonvoting common stock. No shares
of such capital stock are issued or outstanding except for 76,061
shares of Class A voting common stock and 7,380,264 shares of Class B
nonvoting common stock of the Company (not including Subsidiaries)
which are owned of record and beneficially by Shareholders in the
respective numbers set forth in Schedule 3.1.(f). All such shares of
capital stock of the Company are validly issued, fully paid and
nonassessable. There are no (a) securities convertible into or
exchangeable for any of the Company's capital stock or other
securities, (b) options, warrants or other rights to purchase or
subscribe to capital stock or other securities of the Company or
securities which are convertible into or exchangeable for capital
stock or other securities of the Company, or (c) contracts,
commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale or transfer of any capital stock or
other equity securities of the Company, any such convertible or
exchangeable securities or any such options, warrants or other
rights.
3.2. Shareholders.
3.2.(a) Power. Each Shareholder has full power, legal right
and authority to enter into, execute and deliver this Agreement and
the other agreements, instruments and documents to be executed and
delivered pursuant to this Agreement (such other documents sometimes
referred to herein as "Ancillary Instruments") and to carry out the
transactions contemplated hereby.
3.2.(b) Authorization. The execution and delivery of this
Agreement and the Ancillary Instruments, and full performance
thereunder, have been duly authorized by the respective boards of
directors and the shareholders of each Shareholder which is a
corporation, and no other or further corporate act on the part of any
such Shareholder is necessary therefor.
3.2.(c) Validity. This Agreement has been duly and validly
executed and delivered by each Shareholder and when executed by each
other party thereto is, and when executed and delivered the other
documents and instruments to be executed and delivered by Company and
Shareholders pursuant hereto, will constitute valid and binding
agreements of Company and Shareholders, enforceable in accordance
with their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
3.2.(d) Title. At Closing Buyer will receive, good and
marketable title to the Shares to be sold by such Shareholder
hereunder, free and clear of all Liens (as defined in Section 3.12)
including, without limitation, voting trusts or agreements, proxies,
marital or community property interests.
3.3. No Violation. Except as set forth on Schedule 3.3, neither the
execution and delivery of this Agreement or the Ancillary Instruments nor
the consummation by Company and Shareholders of the transactions
contemplated hereby and thereby (a) will violate any statute, law,
ordinance, rule or regulation (collectively, "Laws") or any order, writ,
injunction, judgment, plan or decree (collectively, "Orders") of any
court, arbitrator, department, commission, board, bureau, agency,
authority, instrumentality or other body, whether federal, state,
municipal, foreign or other (collectively, "Government Entities"), (b)
except for applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), will require any authorization,
consent, approval, exemption or other action by or notice to any
Government Entity (including, without limitation, under any "plant-
closing" or similar law), or (c) subject to obtaining the consents
referred to in Schedule 3.3, will violate or conflict with, or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any
Lien upon any of the assets of Company (or the Shares) under, any term or
provision of the Articles of Incorporation or By-Laws of Company or of any
contract, commitment, understanding, arrangement, agreement or restriction
of any kind or character to which Company or any Shareholder is a party or
by which Company or any Shareholder or any of its or their assets or
properties may be bound or affected.
3.4. Financial Statements. Included as Schedule 3.4 are complete and
correct copies of the audited consolidated financial statements of the
Company consisting of (i) consolidated balance sheets as of February 28,
1993, 1994, 1995, 1996 and 1997, and the related consolidated statements
of income, stockholders' equity and cash flows for each of the years then
ended (including the accompanying notes), which financial statements are
accompanied by unqualified opinions of Larson Allen Weishair & Co., LLP,
independent auditors for the Company for such years, and (ii) a
consolidated unaudited balance sheet of the Company as of August 31, 1997
(the "Recent Balance Sheet"), and the related unaudited consolidated
statement of income for the six (6) months then ended and for the
corresponding period of the prior year, and (iii) unaudited consolidated
statements of income and balance sheets for the eight (8) months ended
October 31, 1997. With the exception of those financial statements
referred to in Section 3.4.(ii), all of such consolidated financial
statements, along with the unaudited interim consolidated financial
statements or other financial data provided or to be provided pursuant to
Section 5.10, have been or shall have been prepared in accordance with
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited interim financial statements, for the absence of footnote
disclosure and statements of cash flows) applied on a consistent basis and
Regulation S-X for financial statements required under Section 5.10, have
been or shall have been prepared from and agree with the books and records
of Company, and fairly present or shall fairly present, in accordance with
GAAP, the financial position, results of operations and cash flows of the
Company as of the dates and for the years and interim periods indicated.
Schedule 3.4 sets forth the comparative backlog of Company sales by
product line as of November 17, 1997 and November 30, 1996.
3.5. Tax Matters.
3.5.(a) The term "Tax" shall mean any federal, state, local or
foreign income, alternative, minimum, accumulated earnings, personal
holding company, franchise, capital stock, profits, windfall profits,
gross receipts, sales, use, value added, transfer, registration,
stamp, premium, excise, customs duties, severance, environmental
(including taxes under section 59A of the Internal Revenue Code of
1986, as amended ("Code")), real property, personal property, ad
valorem, occupancy, license, occupation, employment, payroll, social
security, disability, unemployment, workers' compensation,
withholding, estimated or other similar tax, duty, fee, assessment or
other governmental charge or deficiencies thereof (including all
interest and penalties thereon and additions thereto). The term "Tax
Return" shall mean any tax return, report, information, return,
schedule or other document (including any related or supporting
information) filed or required to be filed with respect to Taxes.
3.5.(b) Except as set forth on Schedule 3.5.(b):
(i) (A) all Tax Returns relating to the Company and the
business or assets thereof that were required to be filed on or
before the Closing Date have been filed, (B) the Company has paid or
made adequate provision for all Taxes that are due or claimed to be
due by any taxing authority and (C) the Company is not currently the
beneficiary of any extension of time within which to file any Tax
Return;
(ii) to the knowledge of the Company, there has been no claim or
issue (other than a claim or issue that has been finally settled)
concerning any liability for Taxes of the Company asserted, raised or
threatened by any taxing authority and no written notice of such
claim or issue has been received;
(iii) the Company has not (A) waived any statute of
limitations or (B) agreed to any extension of the period for
assessment or collection;
(iv) there are no liens for Taxes upon any assets of the Company
except for statutory liens for current Taxes not yet due;
(v) except as set forth on Schedule 3.5.(b), no power of
attorney has been executed by the Company with respect to any matter
relating to Taxes that is currently in force;
(vi) the Company is not a party to any agreement, contract, or
other arrangement that would result, separately or in the aggregate,
in the requirement to pay any "excess parachute payment" within the
meaning of Section 280G of the Code; and
(vii) all Taxes that the Company is required by law to
withhold or to collect for payment have been duly withheld and
collected, and have been paid or accrued, reserved against and
entered on the books of the Company.
3.6 Receivables.
3.6.(a) Accounts. Except as set forth on Schedule 3.6.(a),
all accounts receivable of Company reflected on the Recent Balance
Sheet, and as incurred in the normal course of business since the
date thereof, represent arm's length sales actually made in the
ordinary course of business; are collectible (net of the reserve
shown on the Recent Balance Sheet for doubtful accounts) in the
ordinary course of business are subject to no valid counterclaim or
setoff; and to the knowledge of the Company are not in dispute.
Schedule 3.6.(a) contains an aged schedule of accounts receivable
included in the Recent Balance Sheet. All accounts receivable of
Company incurred prior to the Closing Date will represent arm's
length sales actually made in the ordinary course of business and
will be collected (net of the reserve shown on the balance sheet as
of the Closing Date for doubtful accounts) in the ordinary course of
business and will be subject to no valid counterclaim or set-off.
3.6.(b) Leases. Set forth in Schedule 3.6.(b)(i) is a
complete and accurate list of each lease entered by McNeilus
Financial Services, Inc. ("MFSI") (the "Lease Agreements"), including
a description of the lessee, principal amount, implicit interest
rate, and payment schedule. Each Lease Agreement and any credit,
financing, title and security documents, including related exhibits,
associated with each Lease Agreement are collectively referred to
herein as the "Lease Documents". Each Lease Document represents the
valid and binding obligations of the parties thereto; was entered
into by such parties in the normal course of their respective
business (and are complete and accurate in all material respects);
and represents an arm's length transaction between or among such
parties. Each Lease Agreement is enforceable against the lessee
thereunder in accordance with its terms and any amounts due
thereunder are collectible (net of the reserve shown on the Recent
Balance Sheet for doubtful accounts) in the ordinary course of
business without the necessity of commencing legal proceedings, are
not subject to counterclaim or set off and are not in dispute. No
Lease Document has had its payment terms restructured, extended or
modified; no amounts due thereunder are past due; and to the
knowledge of the Company, lessee is not in default under any of the
Lease Documents except for defaults of non-payments. Company has no
knowledge that any lessee under a Lease Agreement is insolvent or
otherwise unable to pay its debts as they become due. In each case,
the lessee under each Lease Agreement has accepted the goods leased
under such Lease Agreement. Company has performed all of its
obligations and is not in default under any of the Lease Documents.
Company has good and marketable title to, or a valid and perfected
security interest in, the goods leased under any of the Lease
Agreements and such goods are free and clear of any Liens other than
the interests of the lessees under the Lease Agreements and the Liens
set forth in Schedule 3.6.(b)(ii). Neither Company nor any of its
agents or dealers has participated in any fraudulent act or omission
in connection with entering into any Lease Document. Each Lease
Document conforms with all applicable Laws and Company has full
power, right and authority under and, except as otherwise disclosed
in Schedule 3.1.(c) and 3.1.(d), is fully licensed under all
applicable Laws to enter into and enforce each of the Lease
Documents. Any and all Tax(es) which are incurred, assessed or
imposed prior to Closing with respect to the Lease Documents shall
have been paid to the proper taxing authority or accrued properly
prior to Closing, and all such Lease Documents have been accounted
for on the books and records of Company in accordance with GAAP. The
execution, delivery and performance of this Agreement by Company and
the consummation of the transactions contemplated thereby will not
violate any of the Lease Documents and will not cause any default or
event of default thereunder. Schedule 3.6.(b)(iii) sets forth any
support or guaranty letters or documents in favor of MFSI issued by
Company or an Affiliate. Except as set forth on Schedule
3.6.(b)(iii), Company has not guaranteed the payment or performance
of any of MFSI's obligations under the Lease Documents.
3.7. Inventory. Except as set forth on Schedule 3.7 of slow moving
inventory, all inventory of Company reflected on the Recent Balance Sheet
consists of a quality and quantity useable and saleable in the ordinary
course of business and is valued in accordance with GAAP at the lower of
cost (on a LIFO basis) or market. All inventory purchased since the date
of such balance sheet consists of a quality and quantity useable and
saleable in the ordinary course of business. Except as set forth in
Schedule 3.7, all inventory of Company is located on premises owned or
leased by Company as reflected in this Agreement.
3.8. Absence of Certain Changes. Except as and to the extent set
forth in Schedule 3.8, since the date of the Recent Balance Sheet there
has not been:
3.8.(a) No Adverse Change. Any material adverse change in the
financial condition, assets, liabilities, business, prospects or
operations of Company;
3.8.(b) No Damage. Any loss, damage or destruction, whether
covered by insurance or not, materially affecting Company's business
or properties on Schedule 3.8.(b);
3.8.(c) No Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other
employee benefit granted, made or accrued, except such increases made
in the ordinary course of business;
3.8.(d) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to
the business.
3.8.(e) No Commitments. Any commitment or transaction by
Company (including, without limitation, any borrowing or capital
expenditure) for consideration in excess of $100,000 or obligating
the Company to perform over a 12 month period other than in the
ordinary course of business consistent with past practice;
3.8.(f) No Dividends. Except as may be required to comply
with Section 5.1., any declaration, setting aside, or payment of any
dividend or any other distribution in respect of Company's capital
stock; any redemption, purchase or other acquisition by Company of
any capital stock of Company, or any security relating thereto; or
any other payment to any shareholder of Company as such a
shareholder;
3.8.(g) No Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of Company,
except as may be required to comply with Section 5.1 and except for
the sale of inventory items and other assets in the ordinary course
of business;
3.8.(h) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by Company, other than in the
ordinary course of business;
3.8.(i) No Liens. Any mortgage, pledge, lien or encumbrance
made on any of the properties or assets of Company except for liens
on inventory acquired in the ordinary course;
3.8.(j) No Amendment of Contracts. Any entering into,
amendment or termination by Company of any contract, or any waiver of
material rights thereunder, other than in the ordinary course of
business;
3.8.(k) Loans and Advances. Any loan or advance (other than
advances to employees in the ordinary course of business for travel
and entertainment in accordance with past practice) to any person
including, but not limited to, any Affiliate (for purposes of this
Agreement, the term "Affiliate" shall mean and include all
Shareholders, directors and officers of Company; the spouse of any
such person; any person who would be the heir or descendant of any
such person if he or she were not living; and any entity in which any
of the foregoing has a direct or indirect interest, except through
ownership of less than 5% of the outstanding shares of any entity
whose securities are listed on a national securities exchange or
traded in the national over-the-counter market); or
3.8.(l) Credit. Any grant of credit to any customer or
distributor on terms or in amounts not in compliance with Company's
policies or practices with respect to the granting of credit, nor any
change in any practices or policies.
3.9. Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet, or in Schedule 3.9,
Company does not have any liabilities, commitments or obligations (secured
or unsecured, and whether accrued, absolute, contingent, direct, indirect
or otherwise), other than commercial liabilities and obligations incurred
since the date of the Recent Balance Sheet in the ordinary course of
business and consistent with past practice and none of which has or will
have a material adverse effect on the business, financial condition or
results of operations of Company. Except as and to the extent described
in the Recent Balance Sheet or in Schedule 3.9, the Company has no
knowledge of any basis for the assertion against Company of any liability
and there are no circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may give rise to
liabilities, except commercial liabilities and obligations incurred in the
ordinary course of Company's business and consistent with past practice.
3.10. No Litigation. Except as set forth in Schedule 3.10 there
is no action, suit, arbitration, proceeding, investigation or inquiry,
whether civil, criminal or administrative ("Litigation") pending or, to
the knowledge of the Company, threatened against Company, its directors
(in such capacity), its business or any of its assets, nor does Company
know, or have grounds to know, of any basis for any Litigation. Schedule
3.10 also identifies all Litigation to which Company or any of its
directors (in such capacity) have been parties since 1992, except for
product liability suits which shall be set forth on Schedule 3.20. Except
as set forth in Schedule 3.10, neither Company nor its business or assets
is subject to any Order of any Government Entity. Company has disclosed
to Buyer all matters that have been the subject of Litigation against the
Company and that were settled or compromised within the last six years
upon payment by the Company of a sum in excess of $25,000.
3.11. Compliance With Laws and Orders.
3.11.(a) Compliance. Except as set forth in Schedule 3.11.(a),
to the best of Company's knowledge (including each and all of its
operations, practices, properties and assets) it is in compliance in
all material respects with all applicable Laws and Orders, including,
without limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and
pricing, product warranties, zoning, building and sanitation,
employment, retirement and labor relations, product advertising and
the Environmental Laws as hereinafter defined. Except as set forth
in Schedule 3.11.(a), to the knowledge of the Company, Company has
not received notice of any violation or alleged violation of, and is
subject to no liability for past or continuing violation of, any Laws
or Orders. All reports and returns required to be filed by Company
with any Government Entity have been filed, and were accurate and
complete when filed. Shareholders shall not be liable for any
assertion by Governmental Entity that this transaction gives rise to
a right to apply regulations or ordinances to the assets or business
which were not previously applied because of a "grandfather" right
applied to the Company.
3.11.(b) Licenses and Permits. To the knowledge of the Company
and except as disclosed in Schedule 3.1.(c) and 3.1.(d), it has all
licenses, permits, approvals, authorizations and consents of all
Government Entities and all certification organizations required for
the conduct of the Business (as presently conducted and as proposed
to be conducted) and operation of its facilities. To the knowledge
of the Company, all such licenses, permits, approvals, authorizations
and consents are described in Schedule 3.11.(b), are in full force
and effect. Except as set forth in Schedule 3.11.(b), Company
(including its operations, properties and assets) is and has been in
material compliance with all such permits and licenses, approvals,
authorizations and consents.
3.12. Title to and Condition of Properties.
3.12.(a) Marketable Title. At Closing, Company shall have good
and marketable title to all of Company's assets, business and
properties, free and clear of all mortgages, liens, (statutory or
otherwise) security interests, claims, pledges, licenses, equities,
options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions,
limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens") except (i) those described in Schedule
3.12.(a), (ii) in the case of real property, Liens for taxes not yet
due or which are being contested in good faith by appropriate
proceedings (and which have been sufficiently accrued or reserved
against in the Recent Balance Sheet), (iii) municipal and zoning
ordinances and easements for public utilities, and (iv) Liens or
imperfections in title which individually or in the aggregate do not
materially detract from the value, or impair in any significant
manner the use, of the property subject thereto or the operations of
the Company. None of Company's assets, business or properties are
subject to any restrictions with respect to the transferability
thereof; and the Company's title thereto will not be affected in any
way by the transactions contemplated hereby.
3.12.(b) Condition. All property and assets owned or utilized
by Company are in adequate operating condition and repair, free from
any material defects (except such minor defects as do not interfere
with the use thereof in the conduct of the normal operations of
Company). All buildings, plants and other structures owned or
otherwise utilized by Company are in good condition and repair
(except such minor defects as do not interfere with the use thereof
in the conduct of the normal operations of Company) and, to the
knowledge of the Company, have no structural defects or defects
affecting the plumbing, electrical, sewerage, or heating, ventilating
or air conditioning systems which would interfere with the use
thereof in the conduct of the normal operations.
3.12.(c) Real Property. Schedule 3.12.(c) sets forth all real
property owned, used or occupied by Company (the "Real Property"),
including a description of all land (or, if not of record, of which
Company has notice or knowledge). Schedule 3.12.(c) also sets forth,
with respect to each parcel of Real Property which is leased, the
material terms of such lease. To the knowledge of the Company, all
of the Real Property has permanent rights of access to dedicated
public highways; no fact or condition exists which would prohibit or
adversely affect the ordinary rights of access to and from the Real
Property from and to the existing highways and roads and there is no
pending or threatened restriction or denial, governmental or
otherwise, upon such ingress and egress. To the knowledge of the
Company, there is not (i) any claim of adverse possession or
prescriptive rights involving any of the Real Property, (ii) any
structure located on any Real Property which encroaches on or over
the boundaries of neighboring or adjacent properties or (iii) any
structure of any other party which encroaches on or over the
boundaries of any of such Real Property. None of the Real Property
is located in a flood plain, flood hazard area, wetland or lakeshore
erosion area within the meaning of any Law, regulation or ordinance.
To the knowledge of the Company, no public improvements have been
commenced and none are planned which in either case may result in
special assessments against or otherwise materially adversely affect
any Real Property. Except as set forth on Schedule 3.12.(c), no
portion of any of the Real Property has been used as a landfill or
for storage or landfill of hazardous or toxic materials.
3.12.(d) No Condemnation or Expropriation. Neither the whole
nor any portion of the property or any other assets of Company is
subject to any Order to be sold or is being condemned, expropriated
or otherwise taken by any Government Entity with or without payment
of compensation therefor.
3.12.(e) Year 2000 Compliance. Except as identified on
Schedule 3.12.(e), none of the personal property, equipment or assets
owned or utilized by the Company, including but not limited to
computer software, databases, hardware, controls and peripherals,
contains any defect related to the occurrence of the year 2000 or the
use of any date after December 31, 1999 in connection with such
property or asset (a "Year 2000 Defect"). Except as identified on
Schedule 3.12.(e), none of the property or assets owned or utilized
by the Company will fail to perform in any material respect or
require any repair, rewrite, conversion or other adaptation because
of, or due in any way to, a Year 2000 Defect.
3.13. Insurance. Set forth in Schedule 3.13 is a complete and
accurate list and description of all policies of fire, liability, product
liability, workers compensation, health and other forms of insurance
presently in effect with respect to the business and properties of
Company, true and correct copies of which have heretofore been delivered
to Buyer. No notice of cancellation or termination has been received with
respect to any such policy currently in effect, and Company has no
knowledge of any act or omission of Company which could result in
cancellation of any such policy currently in effect prior to its scheduled
expiration date. There is no claim by Company pending under any such
policies as to which coverage has been questioned, denied or disputed by
the underwriters of such policies, and Company knows of no basis for
denial of any claim under any such policy.
3.14. Contracts and Commitments. Except as otherwise previously
disclosed in the Disclosure Schedules:
3.14.(a) Real Property Leases. Except as set forth in Schedule
3.12.(c), Company has no leases of real property.
3.14.(b) Personal Property Leases. Except as set forth in
Schedule 3.14.(b), Company has no leases of personal property as
Lessee involving consideration or other expenditure in excess of
$75,000 or involving performance over a period of more than 12
months.
3.14.(c) Purchase Commitments. Except as set forth on Schedule
3.14.(c), Company has no purchase commitments for inventory items or
supplies which aggregate in excess of $1,000,000 from any one
supplier, or together with amounts on hand, constitute in excess of
12 months' normal usage.
3.14.(d) Sales Commitments. Except as set forth on Schedule
3.14.(c), Company has no sales contracts or commitments to customers
or distributors which aggregate in excess of $1,000,000 to any one
customer or distributor (or group of affiliated customers or
distributors). Company has no sales contracts or commitments except
those made in the ordinary course of business, at arm's length, and
no such contracts or commitments are for a sales price which would
result in a loss to the Company.
3.14.(e) Contracts With Affiliates and Certain Others. Except
as set forth on Schedule 3.22.(a), Company has no agreement,
understanding, contract or commitment (written or oral) with any
Affiliate that is not cancelable by Company on notice of not longer
than 30 days without liability, penalty or premium of any nature or
kind whatsoever.
3.14.(f) Powers of Attorney. The Company has not given a power
of attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever, except such powers granted to
lessees of the Leases for purposes of registering vehicle title and
for tax matters disclosed on Schedule 3.5.(b).
3.14.(g)Collective Bargaining Agreements. Company is not a
party to any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups.
3.14.(h) Loan Agreements. Except as set forth in Schedule
3.14.(h), Company is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness
as a signatory, guarantor or otherwise for an amount in excess of
$75,000.
3.14.(i) Guarantees. Except for the guarantees and other
support documents set forth in Schedule 3.14.(i), which amount of
guarantees and support documents shall not exceed Seventy Million
Dollars ($70,000,000), Company has not guaranteed the payment or
performance of any person, firm or corporation, agreed to indemnify
any person or act as a surety, or otherwise agreed to be contingently
or secondarily liable for the obligations of any person.
3.14.(j) Contracts Subject to Renegotiation. Company is not a
party to any contract with any governmental body which is subject to
renegotiation.
3.14.(k) Restrictive Agreements. Company is not a party to nor
is it bound by any agreement requiring Company to assign any interest
in any trade secret or proprietary information, or prohibiting or
restricting Company from competing in any business or geographical
area or soliciting customers or otherwise restricting it from
carrying on its business anywhere in the world.
3.14.(l) Other Material Contracts. Company has no lease,
contract or commitment of any nature involving consideration or other
expenditure in excess of $100,000, or involving performance over a
period of more than 12 months, or which is otherwise individually
material to the operations of Company, except as explicitly described
in Schedule 3.14.(l) or in any other Schedule.
3.14.(m) No Default. Company is not in default under any
lease, contract or commitment, nor has any event or omission occurred
which through the passage of time or the giving of notice, or both,
would constitute a default thereunder or cause the acceleration of
any of Company's obligations or result in the creation of any Lien on
any of the assets owned, used or occupied by Company. To the
knowledge of the Company, no third party is in default under any
lease, contract or commitment to which Company is a party, nor has
any event or omission occurred which, through the passage of time or
the giving of notice, or both, would constitute a default thereunder
or give rise to an automatic termination, or the right of
discretionary termination, thereof.
3.15. Labor Matters. Except as set forth in Schedule 3.15,
within the last two (2) years Company has not experienced any labor
disputes, union organization attempts or any work stoppage due to labor
disagreements in connection with its business. Except to the extent set
forth in Schedule 3.15, (a) Company is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, and is not engaged in any unfair labor
practice; (b) Company has not received written notice, nor does the
Company have knowledge of an unfair labor practice charge or complaint
against Company pending or threatened; (c) Company has not received
written notice, nor does the Company have knowledge of a labor strike,
dispute, request for representation, slowdown or stoppage actually pending
or threatened against or affecting Company nor any secondary boycott with
respect to products of Company; (d) no question concerning representation
has been raised or, to the Company's knowledge, is threatened respecting
the employees of Company; (e) no grievance which might have a material
adverse effect on Company, nor any arbitration proceeding arising out of
or under collective bargaining agreements, is pending and no such claim
therefor exists; and (f) Company has not received written notice, nor does
the Company have knowledge of any administrative charges or court
complaints against Company concerning alleged employment discrimination or
other employment related matters pending or threatened before the U.S.
Equal Employment Opportunity Commission or any Government Entity.
3.16. Employee Benefit Plans.
3.16.(a) Schedule 3.16.(a) contains a complete list of each
pension, retirement, profit-sharing, deferred compensation, bonus or
other incentive, medical, health, life insurance, disability or other
welfare or severance plan, agreement or arrangement sponsored or
contributed to by the Company or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer within the meaning of
section 4001 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), for the benefit of any employee or terminated
employee of the Company or any ERISA Affiliate (individually a "Plan"
and collectively, the "Plans"). All Plans comply with the applicable
requirements of law, including but not limited to ERISA and the Code,
except for failures to comply that, either individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect. No Plan which is subject to Part 3 of Subtitle B of
Title I of ERISA has incurred any "accumulated funding deficiency,"
whether or not waived, within the meaning of section 302 of ERISA or
section 412 of the Code and all contributions required to be made
with respect thereto on or prior to the Closing Date have been timely
made. Neither the Company nor any ERISA Affiliate has incurred any
material liability pursuant to Title IV of ERISA with respect to any
Plan and no condition exists that presents a material risk to the
Company or any ERISA Affiliate of incurring liability under such
Title. Neither the Company nor any ERISA Affiliate, nor any Plan,
trust created thereunder or trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any
ERISA Affiliate, any Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any such
trust could be subject to either a material civil penalty assessed
pursuant to section 409 or 502(i) or ERISA or a material tax imposed
pursuant to section 4975 or 4976 of the Code.
3.16.9(b) Except as provided on Schedule 3.16.(b), no plan is a
"multiemployer pension plan," as defined in section 3(37) of ERISA,
nor is any Plan a plan described in section 4063(a) of ERISA. With
respect to any ERISA Plan that is a "multiemployer pension plan," as
such term is defined in section 3(37) of ERISA, covering employees of
the Company or any ERISA Affiliate, (i) neither the Company nor any
ERISA Affiliate has, since September 26, 1980, made or suffered a
"complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in sections 4203 and 4205 of ERISA, (ii) no
event has occurred that presents a material risk of a partial
withdrawal, (iii) neither the Company nor any ERISA Affiliate has any
contingent liability under section 4204 of ERISA, and (iv) the
aggregate withdrawal liability of the Company and the ERISA
Affiliates, computed as if a complete withdrawal by the Company and
the ERISA Affiliates had occurred under each such Plan on the date
hereof, would not exceed $25,000. Each Plan intended to be
"qualified" within the meaning of section 401(a) of the Code is so
qualified and the trusts maintained thereunder are exempt from
taxation under section 501(a) of the Code. No amounts payable under
the Plans or under any employment, severance or other agreements or
arrangements maintained by the Company will fail to be deductible for
federal income tax purposes by virtue of section 280G of the Code.
3.16.(c) Except as provided on Schedule 3.16.(c), no plan
provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former
employees of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than (i) coverage
mandated by applicable law or (ii) death benefits or retirement
benefits under any "employee pension plan," as that term is defined
in section 3(2) of ERISA). To the Knowledge of the Company, there
are no pending, threatened or anticipated claims by or on behalf of
any Plan, by any employee or beneficiary covered under any such Plan,
or otherwise involving any such Plan (other than routine claims for
benefits).
3.17. Environmental Matters.
3.17.(a) Definitions. For purposes of this Paragraph 3.17 the
following terms shall have the following meanings:
"Environmental Claim" shall mean any investigation, notice,
violation, demand, suit, injunction, order, consent decree, penalty, fine,
lien, proceeding, or claim (whether administrative, judicial, or private
in nature) arising (a) pursuant to, or in connection with, a violation by
the Company of any Environmental Law, (b) in connection with any Hazardous
Material, (c) from any abatement, removal, remedial, corrective, or other
response action by the Companies or any of their Subsidiaries in
connection with a Hazardous Material, Environmental Law or order of a
Governmental Authority or (d) from any damage, injury, threat, or harm to
the environment by the Companies or any of their Subsidiaries.
"Environmental Law" shall mean any past or current Legal
Requirement pertaining to the protection of the environment, including
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 USC 6901
et seq. ("RCRA"), and any implementing law, and any amendment, rule, or
regulation issued thereunder.
"Hazardous Material" shall mean any material which is hazardous
or toxic to the environment and/or which is subject to regulation, control
or remediation under Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyl ("PCBs") and petroleum (including crude
oil and any fraction thereof).
"Legal Requirement" shall mean any treaty, convention, statute,
law, regulation, ordinance, Governmental Approval, injunction, judgment,
order, consent decree, or other requirement of any Governmental Authority
relating to health, safety, natural resources and the environment.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injection, escaping, leaching, dumping,
or disposing into the indoor or outdoor environment including, without
limitation, the abandonment or discarding of barrels, drums, containers,
tanks, and other receptacles containing or previously containing any
Hazardous Material.
3.17.(b) Warranties and Representations. Except as described
in Schedule 3.17, to the knowledge of the Company:
(i) The Company and each of the Facilities of the Company
(the "Facilities") comply in all material respects with any and
all applicable Environmental Laws.
(ii) The Company has obtained all necessary Governmental
Approvals necessary for the operations of their businesses and
properties.
(iii) The Company (a) has not caused any Release or
disposal of any Hazardous Material at the Real Property or (b)
caused any Release of any Hazardous Material at any third party
property.
(iv) The Company has not received any written notification
of, nor does it have knowledge of, any actual or potential
responsibility for any Release at any third party property.
(v) The Real Property does not contain any: (a)
underground storage tank, (b) asbestos containing building
material, PCBS, radon, or urea formaldehyde foam, (c) landfill
or dump, or (d) hazardous waste management facility as defined
pursuant to RCRA or any comparable state law.
(vi) There is no Environmental Claim involving the Real
Property or other property formerly owned, leased or operated by
the Company or to the knowledge of the Company threatened
against the Company.
(vii) There are no conditions on, under or in any way
affecting the Real Property which would impose liability to the
Company under any Environmental Law.
3.18. Trade Rights. Schedule 3.18 lists all Trade Rights (as
defined below) in which Company now has any interest, specifying whether
such Trade Rights are owned, controlled, used or held (under license or
otherwise) by Company, and also indicating which of such Trade Rights are
registered. All Trade Rights shown as registered in Schedule 3.18 have
been properly registered, all pending registrations and applications have
been properly made and filed and all annuity, maintenance, renewal and
other fees relating to registrations or applications are current. In
order to conduct the business of Company, as such is currently being
conducted or proposed to be conducted, Company does not require any Trade
Rights that it does not already have. Except as set forth on Schedule
3.18, Company has received no written notice, nor does it have knowledge,
that it is infringing and has infringed any Trade Rights of another in the
operation of the business of Company, nor, to the Company's knowledge, is
any other person infringing the Trade Rights of Company. Company has not
granted any license or made any assignment of any Trade Right listed on
Schedule 3.18, nor does Company pay any royalties or other consideration
for the right to use any Trade Rights of others. There is no Litigation
pending or, to the knowledge of the Company, threatened to challenge
Company's right, title and interest with respect to its continued use and
right to preclude others from using any Trade Rights of Company. All
Trade Rights of Company are valid, enforceable and in good standing, and
there are no equitable defenses to enforcement based on any act or
omission of Company. As used herein, the term "Trade Rights" shall mean
and include: (i) all trademark rights, business identifiers, trade dress,
service marks, trade names and brand names, all registrations thereof and
applications therefor and all goodwill associated with the foregoing; (ii)
all copyrights, copyright registrations and copyright applications, and
all other rights associated with the foregoing and the underlying works of
authorship; (iii) all patents and patent applications, and all
international proprietary rights associated therewith; (iv) all contracts
or agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask
works and mask work registrations, know-how, discoveries, improvements,
designs, trade secrets, shop and royalty rights, employee covenants and
agreements respecting intellectual property and non-competition and all
other types of intellectual property; and (vi) all claims for infringement
or breach of any of the foregoing.
3.19. Major Customers and Suppliers.
3.19.(a) Major Customers. Schedule 3.19.(a) contains a list of
the 20 largest customers, including distributors, of Company for each
of the two (2) most recent fiscal years (determined on the basis of
the total dollar amount of net sales) showing the total dollar amount
of net sales to each such customer during each such year. Company
has no knowledge or information of any facts indicating, nor any
other reason to believe, that any of the customers listed on Schedule
3.19.(a) will not continue to be customers of the business of Company
after the Closing.
3.19.(b) Major Suppliers. Schedule 3.19.(b) contains a list of
the 20 largest suppliers to Company for each of the two (2) most
recent fiscal years (determined on the basis of the total dollar
amount of purchases) showing the total dollar amount of purchases
from each such supplier during each such year. Company has no
knowledge or information of any facts indicating, nor any other
reason to believe, that any of the suppliers listed on Schedule
3.19.(b) will not continue to be suppliers to the business of Company
after the Closing.
3.19.(c) Dealers and Distributors. Schedule 3.19.(c) contains
a list of all sales representatives, dealers and/or distributors of
Company, together with representative copies of all sales
representative, dealer and/or distributor contracts and policy
statements, and a description of all substantial modifications or
exceptions.
3.20. Product Warranty and Product Liability. Schedule 3.20
contains a true, correct and complete copy of Company's standard warranty
or warranties for sales of Products (as defined below) and, except as
stated therein, there are no warranties, commitments or obligations with
respect to the return, repair or replacement of Products. Schedule 3.20
contains a description of all product liability claims and similar
Litigation relating to products manufactured or sold, or services
rendered, which are presently pending or which to Company's knowledge are
threatened, or which have been asserted or commenced against Company
within the last three (3) years, in which a party thereto either requests
injunctive relief or alleges damages in excess of $25,000 (whether or not
covered by insurance). Since 1985, there has been no adverse judgment or
other final adjudicated claim or suit against the Company alleging a
defect in design, construction or manufacture of Products. Schedule 3.20
contains a description of all campaigns and programs of replacement, field
fix, retrofit, modification or recall by Company currently pending and, to
Company's knowledge, no facts or conditions exist which could reasonably
be expected to result in such a campaign or program. The Products have
been designed and manufactured so as to meet and comply with all
applicable governmental standards and specifications in effect when the
Products were sold, (or in the case of chasis, in effect when
manufactured) including all National Highway Safety and Traffic
Administration acts, rules or regulations. Such products have received
all applicable governmental approvals necessary to allow their sale and
use. As used in this Section 3.20, the term "Products" means any and all
products currently or at any time previously manufactured, distributed or
sold by Company, or by any predecessor of Company under any brand name or
mark under which products are or have been manufactured, distributed or
sold by Company, specifically excluding products similar to current
Products that have not been manufactured, distributed or sold by the
Company.
3.21. Employment Compensation. Schedule 3.21 contains a true and
correct list of all employees to whom Company is paying compensation,
including bonuses and incentives, at an annual rate in excess of One
Hundred Thousand Dollars ($100,000) for services rendered or otherwise,
and such list identifies the current annual rate of compensation for each
employee.
3.22. Affiliates' Relationships to Company.
3.22.(a). No Adverse Interests. Except as set forth on Schedule
3.22.(a), no Affiliate has any direct or indirect interest in (i) any
entity which does business with Company or is competitive with
Company's business, or (ii) any property, asset or right which is
used by Company in the conduct of its business.
3.22.(b). Obligations. All obligations of any Affiliate to
Company, and all obligations of Company to any Affiliate, are listed
on Schedule 3.22.(b).
3.23. Assets Necessary to Business. To the knowledge of the
Company, Company presently has and at the Closing will have good, valid
and marketable title to all property and assets, tangible and intangible,
and all leases, licenses and other agreements, necessary to permit Buyer
to carry on the business of Company as presently conducted.
3.24. No Brokers or Finders. Neither Company nor any of its
directors, officers, employees, Shareholders or agents have retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof.
3.25. Effect of Disclosure. For purposes of this Agreement any
information contained on any Disclosure Schedule shall be deemed a
disclosure for all purposes and on any other Disclosure Schedule relevant
thereto.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the
Shareholders, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, and shall
survive the Closing of the transactions provided for herein.
4.1. Corporate.
4.1.(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Wisconsin.
4.1.(b) Corporate Power. Buyer has all requisite corporate
power to enter into this Agreement and the other documents and
instruments to be executed and delivered by Buyer and to carry out
the transactions contemplated hereby and thereby.
4.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of
Buyer. No other corporate act or proceeding on the part of Buyer or its
shareholders is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by Buyer pursuant
hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by Buyer
pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may
be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable
principles.
4.3. No Brokers or Finders. Except for Credit Suisse First Boston,
neither Buyer nor any of its directors, officers, employees or agents have
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation
thereof.
4.4. Investment Intent. The Shares are being acquired by Buyer for
investment only and not with the view to resale or other distribution.
4.5. No Litigation. There is no action, suit, arbitration,
proceeding, investigation or inquiry, whether civil, criminal or
administrative ("Litigation") pending, or to the knowledge of the Buyer,
threatened against Buyer, its directors (in such capacity), its business
or any of its assets, nor does Buyer know, or have grounds to know, of any
basis for any Litigation which would have a material adverse impact on the
Buyer or Buyer's ability to obtain the financing necessary to complete the
transactions contemplated by this Agreement.
4.6. Financial Information. Buyer has delivered to the Company a
copy of its financial statements for the year ending September 30, 1996
which fairly presents the financial condition and assets and liabilities
of the Buyer as of said date. Buyer is not aware, other than reasonable
underwriting risks beyond Buyer's reasonable control, of any material
financial reason to believe that Buyer is not able to secure the financing
necessary to effectuate the consummation of the transactions contemplated
by this Agreement.
4.7. No Violations. Except as set forth on Schedule 4.7, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement violates or conflicts or
constitutes a default under any term or provision of its articles of
incorporation or by-laws or of any contract, or indenture to which it is a
party.
5. COVENANTS
5.1. Certain Matters.
5.1.(a) Disposition of Certain Subsidiaries and Assets. At or
prior to the Closing, the Company shall dispose of the subsidiaries
or assets identified in Schedule 5.1 in the manner and as provided in
such schedule, provided Shareholders (and the buyers of such assets)
shall be responsible for, and shall indemnify Buyer and the Company
against, any and all Tax(es) imposed on the Company or Buyer with
respect to such transactions, including any interest or penalties
related thereto.
5.1.(b) Termination of Certain Matters. At or prior to
Closing, the Company shall terminate, release or discharge the
obligations or matters described in Schedule 5.1 in the manner and as
provided in such Schedule.
5.2 Title Insurance. Not less than five (5) days prior to the
Closing, Company, at its expense, shall provide to Buyer title insurance
commitments, issued by a title insurance company reasonably satisfactory
to Buyer, agreeing to issue to Company standard form owner's (or lessee's,
as the case may be) policies of title insurance with respect to all Real
Property, together with a copy of each document to which reference is made
in such commitments. In the case of owned Real Property, such policies
shall be standard ALTA Form 1990 owner's policies in the full fair market
value thereof, insuring good and marketable title thereto (expressly
including all easements and other appurtenances). In the case of leased
Real Property, such policies shall be upon standard ALTA Form 1990
leasehold owner's policies and in such amounts as such shall be reasonably
acceptable to Buyer.
5.3. Surveys. At Buyer's option, Buyer may obtain prior to Closing
at its expense surveys of all Real Property, prepared in accordance with
ALTA/ASCM standards, provided such shall not delay the Closing under
Article 9 of this Agreement.
5.4. Escrow Agreement. At the Closing, Shareholders and Buyer (other
than the Church) shall execute and deliver an Escrow Agreement (the
"Escrow Agreement") in the form of Exhibit A hereto.
5.5. Employment Agreements.
5.5.(a) At or prior to the Closing, Shareholders shall cause
to be delivered to Buyer an Employment Agreement, substantially in
the form of Exhibit B hereto, duly executed by each of Garwin
McNeilus, Denzil McNeilus, Brandon McNeilus and Thomas Winkels and
the Company.
5.5.(b) At or prior to Closing, Shareholders shall cause to be
delivered to Buyer employment and non-competition agreements
currently in effect at the Company as of the date of this Agreement
duly executed by Company and the employees listed on Schedule
5.5.(b).
5.6. Noncompetition Agreements. At the Closing, Shareholders shall
cause to be delivered to Company a Noncompetition Agreement, substantially
in the form of Exhibit C hereto, duly executed by Thomas Winkels and each
Shareholder other than the General Conference of the Seventh Day Adventist
Church (the "Church"). In addition to the consideration paid under this
Agreement, Buyer shall cause the Company or Buyer to pay Sixteen Million
Dollars ($16,000,000) each to Denzil and Brandon McNeilus, Three Million
Dollars ($3,000,000) to Garwin McNeilus, and Three Million Dollars
($3,000,000) to Thomas Winkels in consideration for the non-competition
agreements. Denzil and Brandon McNeilus' non-competition period shall be
fifteen (15) years. Garwin McNeilus' non-competition period shall be ten
(10) years. Thomas Winkels' non-competition period shall be fifteen (15)
years.
5.7. General Releases. At the Closing, each Shareholder shall
deliver, and shall cause Thomas Winkels, to deliver, general releases to
Buyer, in form and substance reasonably satisfactory to Buyer and its
counsel (and containing appropriate waiver procedures), releasing Company
and the directors, officers, agents and employees of Company from all
claims to the Closing Date, except (i) as may be described in written
contracts disclosed in the Disclosure Schedule and expressly described and
excepted from such releases, (ii) in the case of persons who are employees
of the Company, compensation for current periods expressly described and
excepted from such releases, (iii) workers' compensation claims and (iv)
this Agreement and Ancillary Documents. Such releases shall also contain
waivers of any right of contribution or other recourse against Company
with respect to representations, warranties or covenants made herein by
Company.
5.8. Incentive Compensation Plan. Within sixty (60) days of Closing,
Buyer shall cause Company to implement an incentive compensation plan
pursuant to which the key employees listed on Schedule 5.8 shall be
eligible for incentive compensation in the form of actual or phantom stock
of the Company or Buyer (or such other form of consideration as Buyer
deems appropriate), such compensation not to exceed Two Million Dollars
($2,000,000), of which fifty percent (50%) shall be provided by Garwin
McNeilus through contribution or other payment to the Company.
5.9. HSR Act Filings. Each party shall, in cooperation with the
other parties, file or cause to be filed any reports or notifications that
may be required to be filed by it under the HSR Act, with the Federal
Trade Commission and the Antitrust Division of the Department of Justice,
and shall furnish to the others all such information in its possession as
may be necessary for the completion of the reports or notifications to be
filed by the other and as requested by a Government Authority.
5.10. Assistance With Financing.
5.10.(a) From the date hereof until the Closing, Shareholders
(except for the Church) shall cause Company and/or the Company's
financial, accounting or legal advisors to (i) provide such
information to Buyer for its preparation of information memoranda and
financial materials required to complete the documentation associated
with financing this transaction, (ii) assist in discussions to
finance this transaction and finance or refinance the lease debt and
retitle (if necessary) the leased assets associated with the Lease
Agreements; and (iii) permit the inclusion of audited consolidated
financial statements and unaudited interim financial statements, and
opinions and comfort letters of Company's independent auditors in a
bank financing offering or an offering memorandum for the placement
of debt securities.
5.10.(b) Shareholders (except for the Church) and Company shall
provide to Buyer by no later than January 15, 1998: (i) audited
consolidated financial statements of the Company consisting of
consolidated balance sheets as of February 28, 1995, 1996 and 1997
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years then ended prepared in
accordance with GAAP and in accordance with Regulation S-X of the
Securities and Exchange Commission; (ii) unaudited interim,
comparative, consolidated balance sheets as of November 30, 1996 and
1997 and the related consolidated statements of income, stockholders'
equity and cash flows for the nine-month periods then ended in
accordance with GAAP and in accordance with Regulation S-X of the
Securities and Exchange Commission applied on a consistent basis with
that of the preceding year; and (iii) interim financial data and
other data needed to prepare pro forma disclosures in accordance with
Regulation S-X and GAAP with respect to the financing of this
transaction. In the event the Closing has not occurred by February
28, 1998, at the request of Buyer, Shareholders and Company shall
cause its independent auditors to provide, on an expedited basis,
audited consolidated financial statements at and for the year ended
February 28, 1998 in accordance with Regulations S-X and GAAP and
other appropriate pro forma data. Company shall also provide interim
financial statements and other management reports as and when they
are available and as may be required to complete this transaction and
the financing thereof.
5.11. Access to Information and Records. During the period prior
to the Closing, Shareholders shall cause Company to give Buyer, its
counsel, accountants, bankers, investment bankers and other
representatives (i) access during normal business hours to all of the
facilities, properties, books, records, contracts and documents of Company
for the purpose of such inspection, investigation and testing as Buyer
deems appropriate (and Company shall furnish or cause to be furnished to
Buyer and its representatives all information with respect to the business
and affairs of Company as Buyer may request); (ii) with the prior consent
of the Company in each instance, which consent Company shall not
unreasonable withhold or delay access to employees, agents and
representatives for the purposes of such meetings and communications as
Buyer reasonably desires; and (iii) with the prior consent of Company in
each instance (which consent shall not be unreasonably withheld), access
to vendors, customers, manufacturers of its machinery and equipment, and
others having business dealings with Company.
5.12. Conduct of Business Pending the Closing. From the date
hereof until the Closing, and except as otherwise expressly provided for
herein or approved in writing by the Buyer, Company covenants as follows,
and Shareholders shall cause each of the following to occur:
5.12.(a). No Changes. Company will carry on its business
diligently and in the same manner as heretofore and will not make or
institute any changes in its methods of purchase, sale, management,
accounting or operation.
5.12.(b). Maintain Organization. Company will take such action
as may be necessary to maintain, preserve, renew and keep in favor
and effect the existence, rights and franchises of Company and will
use its best efforts to preserve the business organization of Company
intact, to keep available to Company the present officers and
employees, and to preserve for Company its present relationships with
suppliers and customers and others having business relationships with
Company.
5.12.(c) No Breach. Company and Shareholders will not do or
omit any act, or permit any omission to act, which may cause a breach
of any material contract, commitment or obligation, or any breach of
any representation, warranty, covenant or agreement made by Company
and/or the Shareholders herein, or which would have required
disclosure on Schedule 3.8 had it occurred after the date of the
Recent Balance Sheet and prior to the date of this Agreement.
5.12.(d) No Material Contracts. No contract or commitment will
be entered into, and no purchase of raw materials or supplies and no
sale of goods or services (real, personal, or mixed, tangible or
intangible) will be made, by or on behalf of Company, except
contracts, commitments, purchases or sales which are in the ordinary
course of business and consistent with past practice, are not
material to the Company (individually or in the aggregate), and would
not have been required to be disclosed in the Disclosure Schedule had
they been in existence on the date of this Agreement, provided
however, no contract or commitment will be entered into on behalf of
the Company for trucks except in the ordinary course of business.
5.12.(e) No Corporate Changes. Except as set forth on Schedule
5.12.(e), Company shall not amend its Articles of Incorporation or
By-Laws or make any changes in authorized or issued capital stock.
5.12.(f) Maintenance of Insurance. Company shall maintain all
of the insurance in effect as of the date hereof.
5.12.(g) Maintenance of Property. Company shall use, operate,
maintain and repair all property of Company in a normal business
manner.
5.12.(h) No Negotiations. Neither Company nor any Shareholder
will directly or indirectly (through a representative or otherwise)
solicit or furnish any information to any prospective buyer,
commence, or conduct presently ongoing, negotiations with any other
party or enter into any agreement with any other party concerning the
sale of Company, Company's assets or business or any part thereof or
any equity securities of Company (an "acquisition proposal"), and
Company and Shareholders shall immediately advise Buyer of the
receipt of any acquisition proposal.
5.12.(i) No Transfer of Shares. No Shareholder shall transfer
or attempt to transfer any of the Shares except to Buyer pursuant
hereto; and Company shall refuse to accept any certificates for
Shares to be transferred or otherwise to allow such transfers to
occur upon its books, provided, however, Shareholders may transfer
Shares to another Shareholder or to a public charity, private
foundation, or an immediate member of Shareholder's family or trust
for the benefit of the same so long as such transferee executes a
power of attorney in form and substance reasonably satisfactory to
Buyer's counsel appointing the transferor his/her/its agent and
attorney-in-fact with authority to act on their behalf in connection
with the transaction contemplated hereby, including transferring the
Shares to Buyer pursuant to the terms of this Agreement.
5.12.(j) No Dividends. Except as provided in this Agreement,
Company shall not declare, set aside or pay any dividend or make any
other distribution in respect of Company's or any Subsidiary's
capital stock other than inter-company dividends to entities other
than those entities described in Section 5.1 and neither Company nor
any Subsidiary shall redeem, purchase or otherwise acquire any
capital stock of Company or any Subsidiary.
5.13. Consents. Company and Shareholders will use their best
efforts prior to Closing to obtain all consents necessary for the
consummation of the transactions contemplated hereby.
5.14. Opinion of Counsel. At Closing, Company shall cause its
counsel to deliver to Buyer an opinion of counsel in a form substantially
similar to Exhibit D hereto, duly executed by such counsel.
5.15. Disclosure Schedule Updates. After the delivery on the
date hereof of the Disclosure Schedules required by this Agreement by
Company and Shareholders to Buyer, Company and Shareholders shall have a
continuing obligation to promptly notify Buyer, in writing, and Buyer
shall have the continuing obligation to promptly notify the Company and
Shareholders of any matter hereafter arising or hereafter discovered which
if known by Company on the date hereof would have been required to be set
forth or described in the Disclosure Schedules. Any such Disclosure
Schedule updates shall not constitute a breach of Company and Shareholders
representation and warranties subject to indemnification pursuant to
Article 8 hereof but can be considered by Buyer as claims for damages for
purposes of Section 6.1. However, no such disclosure subsequent to the
date hereof shall be allowed to cure a breach by Company or Shareholders
of any representation or warranty contained in the Disclosure Schedules on
the date hereof.
5.16. Environmental Matters. The Company will investigate,
comply, remove, close and clean up the environmental matters disclosed in
Schedule 3.17.(b). Following the Closing, Buyer shall cause the Company
to investigate, comply, remove, close and/or clean up the environmental
matters disclosed in Schedule 3.17.(b) that have not been investigated or
remediated before Closing, and all such matters discovered during the
investigation or remediation of the same, but shall consult with
Shareholders as investigation and remediation plans or reports are
developed. Buyer agrees to obtain competitive bids for any investigation
and remediation. The Escrow Funds (as defined in the Escrow Agreement)
shall be available to reimburse Buyer and Company for such investigations
and remediations occurring after Closing, upon presentation to the Escrow
Agent of proper documentation. The limitations of Sections 8.4 and 8.10
shall not apply to the post-closing obligations under this Section 5.16.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the
Closing of each of the following conditions:
6.1 Representations and Warranties True as of the Closing Date. No
breach of any of the representations and warranties made by Shareholders
and Company in this Agreement (including supplemental disclosures of
matters arising after the date of this Agreement) shall have occurred or
be alleged, which, in the reasonable judgment of Buyer, would result in
Claims (as defined in Article 8) in excess of $5,000,000. If any such
breaches shall occur, the parties to this Agreement shall meet and confer
regarding such breaches. After such meeting, Buyer shall have the option
of terminating this Agreement as provided in Article 10. If Buyer elects
to waive this condition and close, any such Claims (other than Claims
resulting from the supplemental disclosure of matters arising after the
date hereof pursuant to Section 5.15 for which Buyer shall not be entitled
to indemnification) shall be subject to indemnification in accordance with
Article 8.
6.2. Compliance With Agreement. Shareholders and Company shall have
in all material respects performed and complied with all of their
agreements and obligations under Sections 5.1, 5.4, 5.5.(a), 5.6, 5.9-
5.12, 5.14 and 5.15 of this Agreement which are to be performed or
complied with by them prior to or on the Closing Date, including the
delivery of the closing documents specified in such Sections. If Buyer,
in its reasonable belief determines that Shareholders or Company are in
breach of their obligations under this Section 6.2, Buyer shall promptly
notify Shareholders and Company of their alleged breach in writing,
specifying with particularity, the nature of the alleged breach and the
steps Buyer believes must be taken to cure the breach. Thereafter,
Shareholders and Company shall have thirty (30) days to cure the breach,
or to set forth in writing an explanation of why they believe that no such
breach has occurred. If Buyer rejects Shareholders' or Company's
explanation and a breach then exists, Buyer may declare a condition
precedent to closing has not occurred or, if Buyer elects to waive this
condition and close, any Claim (other than Claims resulting from the
supplementary disclosure of matters arising after the date hereof pursuant
to Section 5.15 for which Buyer shall not be entitled to indemnification)
shall be subject to indemnification in accordance with Article 8.
6.3. Absence of Litigation. No Litigation or investigation shall
have been commenced or threatened by any Government Entity, against Buyer,
Company or any of the affiliates, officers or directors of any of them,
with respect to the transactions contemplated hereby.
6.4. Consents and Approvals. All material approvals, consents and
waivers set forth on Schedule 6.4 that are required to effect the
transactions contemplated hereby shall have been received, and executed
counterparts thereof shall have been delivered to Buyer not less than two
business days prior to the Closing.
6.5. Hart-Scott-Rodino Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
6.6. Shareholders' Equity. Combined Shareholders' Equity as of the
last day of the month not more than 45 days immediately preceding the
Closing Date after giving effect to the transactions in Section 5.1 shall
be not less than Eighty-Three Million Two Hundred Thousand Dollars
($83,200,000), determined in accordance with GAAP, applied on a consistent
basis and prepared in accordance with the books and records of the
Company.
7. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the
Closing of the following conditions:
7.1. Compliance With Agreement. Buyer shall have in all material
respects performed and complied with all of Buyer's agreements and
obligations under this Agreement which are to be performed or complied
with by Buyer prior to or on the Closing Date. If Shareholders in their
reasonable belief determine that Buyer is in breach of its obligations
under this Section 7.1, Shareholders shall promptly notify Buyer of its
alleged breach in writing, specifying with particularity, the nature of
the alleged breach and the steps Shareholders believe must be taken to
cure the breach. Thereafter, Buyer shall have thirty (30) days to cure
the breach, or to set forth in writing, an explanation of why it believes
that no such breach has occurred. If Shareholders reject Buyer's
explanation, and a breach then exists, Shareholders may declare a
condition precedent to closing has not occurred or, if Shareholders elect
to waive this condition and close, any Claims for damages resulting from
the supplementary disclosure of matters arising after the date hereof
pursuant to shall be subject to indemnification in accordance with Article
8.
7.2. Absence of Litigation. No Litigation or investigation shall
have been commenced or threatened by any Government Entity, against Buyer,
Company or any of the affiliates, officers or directors of any of them,
with respect to the transactions contemplated hereby.
7.3. Hart-Scott-Rodino Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
8. INDEMNIFICATION AND RELATED MATTERS.
8.1. Indemnification By Indemnifying Shareholders. Subject to the
provisions of this Article 8 and after the Closing, each of Brandon
McNeilus, Denzil McNeilus and Garwin McNeilus (the "Indemnifying
Shareholders"), severally in accordance with the percentages listed on
Schedule 8.1 hereby agrees to indemnify and hold the Buyer, its directors,
officers, employees and controlled and controlling persons (hereinafter
"Buyer's Affiliates") and the Company harmless from and against all Claims
asserted against, resulting to or imposed upon, or incurred by Buyer,
Buyer's Affiliates or the Company including without limitation, those
arising from third-party claims, which result from or arise out of:
8.1.(a) The breach of any of the representations or warranties
contained in Article 3 of this Agreement, it being understood that to
the extent that any of such representations and warranties were made
as of a specified date the same shall apply only to the breach of
such representations or warranties as of such specified date; or
8.1.(b) The failure of the Company or Shareholders to comply
with any of the covenants and agreements contained in this Agreement
which were required to be performed by the Company or any
Shareholder;
8.1.(c) Any Tax or other liability incurred, assessed or
imposed on Company or Buyer arising out of the sale or disposition of
assets pursuant to Section 5.1 hereto, or the remediations set forth
pursuant to Section 5.16.
8.2. Indemnification By Buyer. Subject to the terms and conditions
of this Article 8, Buyer agrees to indemnify and hold the Shareholders
harmless from and against all Claims asserted against, resulting to or
imposed upon or incurred by Shareholders including, without limitation,
those arising from third-party claims, which result from or arise out of:
8.2.(a) The breach of any of the representations or warranties
contained in Article 4 of this Agreement, it being understood that to
the extent that any of such representations and warranties were made
as of a specified date the same shall apply only to the breach of
such representations or warranties as of such specified date;
8.2.(b) The failure of the Buyer to comply with any of the
covenants and agreements contained in this Agreement which are
required to be performed by the Buyer;
8.2.(c) The operation of the Company on or after the date of
closing; or
8.2.(d) The Buyer agrees to indemnify and hold the Company and
the Shareholders (including the Church) harmless from and against any
Claims arising out of the Buyer's actions in seeking financing for or
equity investment in Buyer and/or Company, excluding advisory fees
and expenses (which shall be subject to Section 12.8), save and
except for any claims or damages arising out of the breach by Company
or Shareholders of any representation, warranty or covenant contained
in this Agreement or any fraud or misrepresentation by Company or any
Shareholder.
8.3. Indemnification By Company. Subject to the terms and conditions
of this Article 8 and until the Closing, the Company hereby agrees to
indemnify, defend and hold harmless Buyer and Buyer's Affiliates from and
against all Claims asserted against, resulting to, imposed upon or
incurred by Buyer or Buyer's Affiliates, arising out of or resulting from
(a) the breach of any of the representations or warranties contained in
Article 3 of this Agreement, it being understood that to the extent that
any of such representations and warranties were made as of a specified
date the same shall apply only to the breach of such representations or
warranties as of such specified, or (b) the failure of the Company or
Shareholders to comply with any of the covenants and agreements contained
in this Agreement which were required to be performed by the Company or
any Shareholder.
8.4. Limitation on Indemnification Liabilities. Notwithstanding any
of the provisions herein contained, the Indemnifying Shareholders and
Company shall not have any indemnification obligation with respect to
Claims unless and until such Claims shall total Four Million Dollars
($4,000,000.00) in the aggregate and then only to the extent such claims
exceed Four Million Dollars ($4,000,000.00) in the aggregate, and (ii) the
cumulative indemnification obligation of the Indemnifying Shareholders and
Company shall terminate once the dollar amount of all such Claims
indemnified against under Article 8 hereof aggregates Twenty-Four Million
($24,000,000); provided, however, that the limitations contained in
clauses (i) and (ii) above shall not apply to indemnification obligations
relating to:
8.4.(a) any breach of the Shareholders' representations and
warranties regarding ownership of Shares under Section 3.2.;
8.4.(b) any claims under Section 8.1.(c); and
8.4.(c) any break-up fee under Article 10.
8.5 Survival Of Representations, Warranties And Covenants.
Notwithstanding anything herein to the contrary, the Indemnifying
Shareholders shall have no obligation to the Buyer or Company under
Section 8.1 with respect to any Claim for which Buyer gives notice to the
Indemnifying Shareholders later than eighteen (18) months following the
Closing, except with respect to (i) a breach of a representation or
warranty with respect to Taxes in Section 3.5 where the applicable statute
of limitation extends beyond such date, in which case notice must be given
not later than sixty (60) days following the expiration of the relevant
statute of limitations, (ii) Claims relating to the ownership of the
shares, with respect to which notice of such claims must be given not
later than sixty (60) days following the expiration of relevant statute of
limitations, (iii) breaches of the Shareholders' and Company's
representations and warranties regarding environmental matters, with
respect to which notice of claims must be given not later than sixty (60)
days following the fifth (5th) anniversary of the Closing.
8.6. Notice of Indemnification. In the event any legal proceeding
shall be threatened or instituted or any claim or demand shall be asserted
by any person in respect of which payment may be sought by one party
hereto from the other party under the provisions of this Article 8 or upon
the discovery of any facts which one party believes may give rise to a
claim for indemnification under this Article 8, the party seeking
indemnification (the "Indemnitee") shall promptly cause written notice of
such claims which it reasonably believes to be covered by this indemnity
to be forwarded to the other party (the "Indemnitor"); provided, however,
that except for the notice required by Section 8.6, the failure to give
such notice shall not effect the indemnification provided hereunder except
to the extent the Indemnitor has actually been prejudiced as a result of
such failure. Any notice of a Claim by reason of any of the
representations, warranties or covenants contained in this Agreement shall
state specifically the representation, warranty or covenant with respect
to which the claim is made, the facts giving rise to an alleged basis for
the claim, and the amount of liability asserted against the Indemnitor by
reason of the claim.
8.7. Indemnification Procedure for Third-Party Claims. Except as
otherwise provided herein, in the event of the initiation of any legal
proceedings against an Indemnitee by a third-party, the Indemnitor shall
have the absolute right after the receipt of notice, at its option and at
its own expense, to be represented by counsel, which counsel shall be
reasonably satisfactory to the Indemnitee and to defend against,
negotiate, settle or otherwise deal with any proceeding, claim, or demand
which relates to any Claims indemnified against hereunder; provided,
however, (i) that the Indemnitor exercises such option in writing within
thirty (30) days of receipt of notice; (ii) that the Indemnitee may
participate in any such proceeding with counsel of its choice and at its
expense; (iii) that in the case of any Claims seeking equitable relief or
requiring remedial action in respect of the Shares, the Buyer shall have
the right to defend (using counsel reasonably satisfactory to the
Indemnifying Shareholders) or settle such claim, regardless of whether the
Buyer is the Indemnitor or the Indemnitee; and (iv) that the Indemnitor
shall not settle any proceeding, claim or demand which imposes any
liability or obligation on the Indemnitee without the Indemnitor's
consent, which consent shall not be unreasonably withheld. The parties
hereto agree to cooperate fully with each other in connection with the
defense, negotiation or settlement of any such legal proceeding, claim or
demand. To the extent the Indemnitor elects not to defend such
proceeding, claim or demand, and the Indemnitee defends against or
otherwise deals with any such proceeding, claim or demand, the Indemnitee
may retain counsel (reasonably satisfactory to the Indemnitor), at the
expense of the Indemnitor, the Indemnitor shall nevertheless indemnify the
Indemnitee for the full amount of the Claims relating to such proceeding,
claim or demand and the Indemnitee shall control the defense in settlement
of such proceedings; provided, that the Indemnitee shall give the
Indemnitor ten (10) days written notice prior to entering into any such
settlement and shall not settle any such claim without the consent of the
Indemnitor, which consent shall not be unreasonably withheld or delayed.
8.8. Exclusive Remedy. The exclusive remedy available to any party
to this Agreement in respect of the transactions contemplated hereby shall
be to proceed in the manner and subject to the limitations contained in
this Article 8.
8.9. Computation of Claims for Damages Subject to Indemnification.
As used in this Article 8, the term "Claims" shall include (i) all valid
debts, liabilities and obligations; (ii) all losses, damages, judgments,
awards, settlements, costs and expenses (including, without limitation,
interest (including prejudgment interest in any litigation matter),
penalties, court costs and attorney fees and expenses); and (iii) all
demands, claims, suits, actions, costs of investigation, causes of action,
proceeding and assessments, provided, further however, that the amount of
any Claims for which indemnification is provided under this Article 8
shall (i) be computed net of any insurance proceeds from insurance
companies, (ii) there shall be disregarded any tax liabilities arising by
reason of (A) any reduction or disallowance of deductions from taxable
income in one taxable year, to the extent such reduction or disallowance
would result in a corresponding increase in allowable deductions from
income in another taxable year, (B) the shifting of items of income from
one taxable year to another, or (C) the capitalization of amounts which
were expensed, but only if such capitalized amounts are subject to
amortization or depreciation or recovery in costs of goods sold, inventory
or materials, except insofar as such reduction, disallowance, shifting or
capitalization would only result in the increase of any unutilized net
operating loss, capital loss or credit carryover, and (iii) exclude lost
profits and lost business opportunities.
8.10. Minibasket. Except with respect to Claims under Section
8.1.(c) and for breaches of representations or warranties contained in
Section 3.2, any inaccuracy or breach of a representation or warranty
shall not constitute a Claim unless the amount for a particular inaccuracy
or breach of a representation or warranty exceeds Ten Thousand Dollars
($10,000.00), and in such event, the Indemnitee shall be entitled to
indemnification in full for such breach.
8.11. Commencement of Arbitration. Any claim made by a party
hereunder by a demand for arbitration in accordance with Article 11 hereof
for breach of a representation or warranty prior to the termination of the
survival period for such claim shall be preserved despite the subsequent
termination of such survival.
8.12. Waiver. The Closing of the transaction contemplated by
this Agreement shall not constitute a waiver by any party of its right to
indemnification hereunder.
8.13. Payment. The Indemnitor shall promptly pay the Indemnitee
any amount due under this Article 8.
9. CLOSING
The closing of this transaction ("the Closing") shall take place
within two (2) days following Buyer's ability to obtain the financing
necessary to complete this transaction and all other conditions of
Articles 6 and 7 have been fulfilled or at such other time as the parties
hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date". The Closing shall take place in a city and offices to
be agreed upon by the parties.
10. TERMINATION
10.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
10.1.(a) by mutual written agreement of Buyer and Shareholders,
or
10.1.(b) by either Buyer or Shareholders if the Closing shall
not have occurred on or before June 1, 1998, provided the terminating
party has not, through breach of a representation, warranty or
covenant, prevented the Closing from occurring on or before such
date.
10.1.(c) by either Buyer or Shareholders if Buyer is unable
after reasonable efforts to obtain financing for this transaction
within 60 days after the later of (i) delivery of financials
statements required by Section 5.10.(b); and (ii) the expiration of
the applicable waiting periods related to HSR.
10.2. Termination for Breach.
10.2.(a) Termination by Buyer. If (i) there has been a
material violation or breach by any Shareholder or Company of any of
the agreements or representations or warranties contained in Section
3.2 or Section 3.3 (as it relates to Shareholders) of this Agreement
which has not been waived in writing by Buyer, or (ii) there has been
a failure of satisfaction of a condition to the obligations of Buyer
which has not been so waived, or (iii) Company or any Shareholder
shall have attempted to terminate this Agreement for any reason other
than those specified in Sections 10.1 and 10.2.(b), then Buyer may,
by written notice to Shareholder at any time prior to the Closing
that such violation, breach, failure or wrongful termination attempt
is continuing, terminate this Agreement with the effect set forth in
Section 10.3 hereof.
10.2.(b) Termination by Shareholders. If (i) there has been a
material violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Shareholders, or (ii) there has been a
failure of satisfaction of a condition to the obligations of
Shareholders which has not been so waived, or (iii) Buyer shall have
attempted to terminate this Agreement for any reason other than those
specified in Sections 10.1 and 10.2.(a), then Shareholders may, by
written notice to Buyer at any time prior to the Closing that such
violation, breach, failure or wrongful termination attempt is
continuing, terminate this Agreement with the effect set forth in
Section 10.3 hereof.
10.3. Termination Fees.
10.3.(a) If this Agreement is terminated by Buyer pursuant to
Section 10.2.(a) (other than for a failure of the satisfaction of
closing conditions in Sections 6.1, 6.3, 6.4, 6.5 and 6.6), then
Company shall pay Buyer a fee of Ten Million Dollars ($10,000,000)
upon such termination; payable in immediately available funds on the
third business day following termination under Section 10.2.(a). In
such event, there shall be no further liability on the part of
Company or Shareholders to Buyer.
10.3.(b) If this Agreement is terminated by Shareholders or
Buyer pursuant to Section 10.1.(c) (provided all other closing
conditions have been met) or by Shareholders pursuant to Section
10.2.(b) (other than for a failure of satisfaction of closing
conditions set forth in Sections 7.2 and 7.3) then Buyer shall pay to
Company a fee of Ten Million Dollars ($10,000,000), upon such
termination; payable in immediately available funds on the third
business day following termination under Section 10.1.(c) or Section
10.2.(b). In such event, there shall be no further liability on the
part of Buyer to Company or Shareholders.
10.3.(c) In the event this Agreement is terminated by any party
for any reason other than those set forth in Sections 10.3.(a) or (b)
above, there shall be no further liability on the part of the Company
or Shareholders to Buyer or Buyer to the Company or Shareholders.
10.4. Confidentiality Upon Termination.
10.4.(a) In the event this Agreement is terminated by any party
for any reason, each party agrees to treat confidentially any
information received from another party, its representatives or
agents, whether furnished before or after the date of this Agreement,
and whether disclosed in writing or orally or obtained through
observation of facilities, and all notes, analysis, compilations,
studies and other documents which contain or otherwise reflect such
information disclosed ("Confidential Information"). The term
"Confidential Information" does not include information which (i)
becomes generally available to the public other than as a result of a
disclosure by the recipient, its affiliates, or their directors,
officers, employees, agents or representatives; (ii) was rightfully
available and disclosed to the recipient on a non-confidential basis
prior to its disclosure to the recipient by the disclosing party, or
(iii) prior to disclosure by a disclosing party became rightfully
available and disclosed to recipient on a non-confidential basis from
a source other than the disclosing party, provided that such source
is not to recipient's knowledge, after reasonable inquiry, bound by a
confidentiality agreement with the disclosing party or otherwise
prohibited from transmitting the information to recipient by a
contractual, legal or fiduciary obligation.
10.4.(b) Without the prior written consent of the disclosing
party, the recipient will not, and will direct its affiliates and
their directors, agents, representatives and employees who have
knowledge of any circumstances concerning the transactions
contemplated hereby not to disclose or divulge to any third person
any Confidential Information or use any of the Confidential
Information for any reason or purpose.
10.4.(c) In the event that the recipient, any affiliates or
their directors, officers, employees, agents or representatives are
requested or required (by oral questions, interrogatories, requests
for information or documents, subpeona, civil investigative demand or
similar process) to disclose the transactions contemplated by this
Agreement or any Confidential Information supplied to recipient prior
to or after the execution of this Agreement, the recipient agrees to
provide the disclosing party with prompt notice of such request(s) so
that the disclosing party may seek an appropriate protective order
and/or waive compliance with the provisions of this Section, except
that approval of the Shareholders or Company shall not be required as
to any statements and other information which Buyer may be required
to make pursuant to any rule or regulation of the Securities and
Exchange Commission or The Nasdaq Stock Market, Inc. If failing the
entry of a protective order or the receipt of a waiver hereunder, the
recipient is, in the opinion of its counsel, compelled to disclose
Confidential Information or otherwise be liable for contempt or other
censure or penalty, recipient may disclose that portion of the
Confidential Information which its counsel shall have advised it is
compelled to disclose. In any event, recipient will not oppose
action by the disclosing party to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be
accorded the Confidential Information, and will take all reasonable
efforts to cooperate in the same and to maintain confidentiality of
the transactions contemplated by this Agreement and Confidential
Information.
10.4.(d) In the event of termination, each party will promptly
upon request deliver to the requesting party all documents or other
matters furnished to it by another party constituting Confidential
Information, without retaining any copy thereof.
11. RESOLUTION OF DISPUTES
11.1. Arbitration. Any dispute, controversy or claim arising out
of or relating to this Agreement or any contract or agreement entered into
pursuant hereto or the performance by the parties of its or their terms
shall be settled by binding arbitration held in Chicago, Illinois in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as specifically otherwise
provided in this Article 11. Notwithstanding the foregoing, Buyer may, in
its discretion, apply to a court of competent jurisdiction for equitable
relief from any violation or threatened violation of the covenants or any
covenants not to compete contained in any Employment Agreement or Non-
Competition Agreement delivered pursuant to Section 5.5 or Section 5.6
hereof.
11.2. Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed $200,000, then the panel to be appointed shall
consist of three neutral arbitrators; otherwise, one neutral arbitrator.
11.3. No Appeal. The decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in
the arbitration process.
11.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or
preliminary relief, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorneys fees and expenses in such
manner as is determined to be appropriate by the arbitrator(s).
11.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject
matter jurisdiction. Buyer and each Shareholder hereby submit to the in
personam jurisdiction of the Federal and State courts in the Northern
District of Illinois, for the purpose of confirming any such award and
entering judgment thereon.
11.6. Confidentiality. All proceedings under this Article 11,
and all evidence given or discovered pursuant hereto, shall be maintained
in confidence by all parties.
11.7. Continued Performance. The fact that the dispute
resolution procedures specified in this Article 11 shall have been or may
be invoked shall not excuse any party from performing its obligations
under this Agreement and during the pendency of any such procedure all
parties shall continue to perform their respective obligations in good
faith, subject to any rights to terminate this Agreement that may be
available to any party.
11.8. Discovery. In any arbitration, either party shall be
entitled to conduct discovery in accordance with applicable rules of civil
procedure during the course of such arbitration.
12. MISCELLANEOUS
12.1. Knowledge. For each of those warranties and
representations made in Article 3 that are subject to the qualification of
Company "to the knowledge of the Company," "to the best of Company's
knowledge," "to the Company's knowledge," or similar words or phrases,
such warranties and representations shall be deemed limited to those
matters of which any of the following officers of the Company has actual
knowledge: Garwin McNeilus, Denzil McNeilus, Brandon McNeilus, and Thomas
Winkels.
12.2. Further Assurance. From time to time, at Buyer's request
and without further consideration, Company and Shareholders will execute
and deliver to Buyer such documents and take such other action as Buyer
may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
12.3. Disclosures and Announcements. Announcements concerning
the transactions provided for in this Agreement by Buyer, Company or
Shareholders shall be subject to the approval of the other parties in all
essential respects or that is otherwise required by law. Following
execution of this Agreement and the filing of a Hart-Scott-Rodino notice,
the Shareholders and Buyer agree to jointly prepare a statement regarding
this transaction for public disclosure.
12.4. Assignment; Parties in Interest.
12.4.(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other parties. Notwithstanding the foregoing, Buyer may, without
consent of any other party, cause one or more subsidiaries of Buyer
to carry out all or part of the transactions contemplated hereby;
provided, however, that Buyer shall, nevertheless, remain liable for
all of its obligations, and those of any such subsidiary, to
Shareholders hereunder.
12.4.(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement.
12.5. Law Governing Agreement. This Agreement may not be
modified or terminated orally, and shall be construed and interpreted
according to the internal laws of the State of Minnesota, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
12.6. Amendment and Modification. Buyer and Shareholders may
amend, modify and supplement this Agreement in such manner as may be
agreed upon in writing between Buyer and Shareholders.
12.7. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or
other electronic means of transmitting written documents; or (c) sent to
the parties at their respective addresses indicated herein by registered
or certified U.S. mail, return receipt requested and postage prepaid, or
by private overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
Oshkosh Truck Corporation
2307 Oregon Street
P.O. Box 2566
Oshkosh, WI 54903-2566
Attention: Robert Bohn
Chief Executive Officer
Facsimile: (920) 233-9624
(with a copy to)
Timothy M. Dempsey, Esq.
Oshkosh Truck Corporation
2307 Oregon Street
P.O. Box 2566
Oshkosh, WI 54903-2566
Facsimile: (920) 233-9669
(and an additional copy to)
Benjamin F. Garmer, III
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
Facsimile: (414) 297-4900
or to such other person or address as Buyer shall furnish to Shareholders
in writing.
(b) If to Shareholders:
Garwin McNeilus
Route 3, Box 321
Dodge Center, MN 55927
(507) 374-6761
(with a copy to)
Denzil McNeilus
Route 1, Box 59
Dodge Center, MN 55927
(507) 374-6701
(with a copy to)
Brandon McNeilus
Route 1, Box 64
Dodge Center, MN 55927
(507) 374-2802
(with a copy to)
Gerald S. Duffy
SIEGEL, BRILL, GREUPNER, DUFFY & FOSTER, P.A.
1300 Washington Square
100 Washington Avenue South, Suite 1300
Minneapolis, MN 55401
(612) 339-7131
Facsimile: (612) 339-6591
or to such other person or address as Shareholders shall designate in
accordance with this Agreement.
(c) If to Company, to:
McNeilus Companies, Inc.
P.O. Box 70, 518 Highway Street N.E.
Dodge Center, MN 55927
Attention: President
Facsimile: (507) 374-8000
(with a copy to)
Gerald S. Duffy
SIEGEL, BRILL, GREUPNER, DUFFY & FOSTER, P.A.
1300 Washington Square
100 Washington Avenue South, Suite 1300
Minneapolis, MN 55401
(612) 339-7131
Facsimile: (612) 339-6591
In addition, any notice to Company given prior to Closing shall also be
given in the same manner to Shareholders; and any notice to Company given
after Closing shall also be given in the same manner to Buyer.
If personally delivered, such communication shall be deemed
delivered upon actual receipt; if electronically transmitted pursuant to
this paragraph, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof
of delivery); if sent by overnight courier pursuant to this paragraph,
such communication shall be deemed delivered upon receipt; and if sent by
U.S. mail pursuant to this paragraph, such communication shall be deemed
delivered as of the date of delivery indicated on the receipt issued by
the relevant postal service, or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to
this Agreement may change its address for the purposes of this Agreement
by giving notice thereof in accordance with this Section.
12.8. Expenses. Except as may otherwise be specifically provided
herein, the parties hereto shall pay their own legal fees and expenses
incurred in connection with the negotiation and consummation of the
transactions contemplated by this Agreement, provided that the Company
shall pay the reasonable and verifiable fees and expenses incurred by the
Company or Shareholders, including the fees and expenses of Siegel, Brill,
Greupner, Duffy & Foster, P.A. ("SBGD&F") and Larson Allen Weishair & Co.,
LLP ("LAW"), related to this transaction. Set forth on Schedule 12.8 are
the actual fees and expenses to date and good faith estimates of fees and
expenses to complete the transaction contemplated hereby of SBGD&F and
LAW. Buyer shall be furnished with copies of itemized statements for all
such fees in such form as Buyer may request and upon Buyer's request,
SBGD&F and LAW shall provide information to support the reasonableness and
accuracy of such fees and expenses. The Buyer shall be responsible for
any fees paid to any brokers, consultants, or other agents retained by
Buyer in connection with the transactions contemplated hereby.
12.9. Costs of Litigation or Arbitration. The parties agree that
(subject to the discretion, in an arbitration proceeding, of the
arbitrator as set forth in Section 11.4) the prevailing party in any
action brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party or
parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action, including
without limitation attorneys' fees and prejudgment interest.
12.10. Transfer Taxes. Any sales, use, excise, transfer or other
similar tax imposed with respect to the transactions provided for in this
Agreement, any interest or penalties related thereto, shall be paid by the
party who customarily bears such expenses under Minnesota law customer
practice.
12.11. Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements,
representations or warranties between the parties other than those set
forth or provided for herein.
12.12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.13. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
12.14. No Negotiations by Buyer. From the date hereof to the date
of closing, Buyer will not directly or indirectly (through a
representative or otherwise) solicit or furnish any information about
Company to any prospective buyer, commence or conduct presently ongoing
negotiations with any other party or enter into any agreement with any
other party concerning the sale of Company, Company's assets or business
or any part thereof or any equity securities of Company (an "acquisition
proposal").
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
OSHKOSH TRUCK CORPORATION McNEILUS COMPANIES, INC.
("Buyer") ("Company")
By: /s/ Robert Bohn By: /s/ Denzil McNeilus
Robert Bohn Denzil McNeilus
Chief Executive Officer President
SHAREHOLDERS
/s/ Garwin McNeilus
Garwin McNeilus
/s/ Marilee McNeilus
Marilee McNeilus
/s/ Denzil McNeilus
Denzil McNeilus
/s/ Brandon McNeilus
Brandon McNeilus
General Conference of the
Seventh Day Adventist Church
By: /s/
Name:
Title:
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment"),
dated as of April 25, 1997, amends the Credit Agreement dated as of
September 18, 1996, as previously amended by the First Amendment to Credit
Agreement dated as of November 27, 1996 but with retroactive effect to
September 28, 1996, by and among OSHKOSH TRUCK CORPORATION, a Wisconsin
corporation (the "Borrower"), those Subsidiaries identified as a
"Guarantor" on the signature pages hereto and such other Subsidiaries as
may from time to time become a party hereto (the "Guarantors"), the
several lenders identified on the signature pages hereto and such other
lenders as may from time to time become a party hereto (the "Lenders"),
FIRSTAR BANK MILWAUKEE, N.A., as agent for the Lenders (in such capacity,
the "Agent") and BANK ONE, MILWAUKEE, NA, NATIONSBANK, N.A. and HARRIS
TRUST AND SAVINGS BANK, as co-agents (as so amended, the "Credit
Agreement").
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.
2. Amendment. The parties hereby agree to amend the Credit
Agreement as follows:
2.1 Section 1.1. The definition of "Permitted Investments" in
Section 1.1 of the Credit Agreement is deleted in its entirety and
replaced by the following new definition:
"Permitted Investments" means (i) cash and Cash Equivalents,
(ii) receivables owing to the Borrower or any of its Subsidiaries for
trade credit, in each case if created, acquired or made in the
ordinary course of business, (iii) advances to vendors of the
Borrower and its Subsidiaries (which may include Steeltech
Manufacturing, Inc.), or suppliers to such vendors, to enable such
vendors and suppliers to purchase goods or parts to be processed and
sold to the Borrower and its Subsidiaries, provided, however, that
the aggregate of such advances and the liability of the Borrower and
its Subsidiaries under Guarantee Obligations of the Borrower and its
Subsidiaries permitted by clause (ii) of the definition of Permitted
Guarantee Obligations shall not exceed $15,000,000 outstanding at any
one time, (iv) investments in and advances to a domestic Credit
Party, (v) loans and advances to officers, directors, employees and
Affiliates in an aggregate amount not to exceed $1,000,000 at any
time outstanding, (vi) investments (including debt obligations)
received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations
of, and other disputes with, customers and suppliers arising in the
ordinary course of business, (vii) investments, acquisitions or
transactions permitted under Section 8.4(b), (viii) with respect to
any pension trust maintained for the benefit of any present or former
employees of the Borrower or any Subsidiary, such loans, advances
and/or investments as the trustee or administrator of the trust shall
deem advisable pursuant to the terms of such trust, (ix) investments
of a nature not contemplated by the foregoing clauses hereof that are
outstanding as of the Closing Date and set forth on Schedule 1.1(b),
(x) the Borrower's repurchase from Freightliner Corporation of all
shares of the Borrower's capital stock and all warrants for the
purchase of additional shares of the Borrower's capital stock owned
by Freightliner Corporation, up to a maximum aggregate repurchase
price of $6,750,000, and (xi) additional loans, advances and/or
investments of a nature not contemplated by the foregoing clauses
hereof provided that such loans, advances and/or investments made
pursuant to this clause (xi) shall not exceed an aggregate amount of
$5,000,000 outstanding at any one time and further provided that no
such loans, advances and/or investments shall be used to acquire all
or substantially all of the voting stock of any corporation the board
of directors of which has not approved such acquisition. As used
herein, "investment" means all investments, in cash or by delivery of
property made, directly or indirectly in, to or from any Person,
whether by acquisition of shares of capital stock, property, assets,
indebtedness or other obligations or securities or by loan advance,
capital contribution or otherwise.
2.2 Section 3.15. Section 3.15 of the Credit Agreement is
deleted in its entirety and replaced by the following new Section 3.15:
Cleanup Period. Notwithstanding any provision to the contrary
contained herein, Borrower agrees that for at least sixty (60)
consecutive days during each fiscal year ending on the dates
specified below the aggregate amount of outstanding Revolving Loans,
Swing Line Loans and Term Loans shall not exceed the amount specified
for such fiscal year:
Fiscal Year Ending Amount
September 30, 1997 $ 160,000,000
September 30, 1998 $ 145,000,000
September 30, 1999 $ 130,000,000
2.3 Section 7.9(a). Section 7.9(a) of the Credit Agreement is
deleted in its entirety and replaced by the following new Section 7.9(a):
(a) Consolidated Funded Debt Ratio. There shall be maintained
as of the end of each fiscal quarter to occur during the periods
shown below a Consolidated Funded Debt Ratio of not greater than:
Period
From Closing Date through
December 27, 1996 4.75:1.0
December 28, 1996 through
March 28, 1997 4.50:1.0
March 29, 1997 through
June 29, 1997 4.25:1.0
June 30, 1997 through
September 29, 1997 4.00:1.0
September 30, 1997 through
September 29, 1998 3.25:1.0
September 30, 1998 through
September 29, 1999 3.00:1.0
September 30, 1999 though
September 29, 2000 2.50:1.0
September 30, 2000 through
September 29, 2001 2.25:1.0
September 30, 2001 through
September 29, 2002 2.00:1.0
September 30, 2002 and thereafter 1.75:1.0
2.4 Section 7.9(c). Section 7.9(c) of the Credit Agreement is
deleted in its entirety and replaced by the following new Section 7.9(c):
(c) Interest Coverage Ratio. There shall be maintained as of
the end of each fiscal quarter to occur during the periods shown
below an Interest Coverage Ratio of at least:
Period
From Closing Date through
March 28, 1997 0.85:1.0
March 29, 1997 through
June 29, 1997 1.00:1.0
June 30, 1997 through
September 29, 1997 1.25:1.0
September 30, 1997 through
December 30, 1997 1.75:1.0
December 31, 1997 through
March 30, 1998 2.00:1.0
March 31, 1998 through
September 29, 1998 2.25:1.0
September 30, 1998 through
September 29, 2000 2.50:1.0
September 30, 2000 and thereafter 3.00:1.0
2.5 Section 8.11. The word "The" at the beginning of Section
8.11 of the Credit Agreement is deleted and replaced by the following:
Except as permitted in subsection (x) of the definition of
Permitted Investments, the
3. Conditions Precedent. This Second Amendment shall become
effective on the date that the Agent (for the benefit of the Lenders)
shall have received this Second Amendment, duly executed by an authorized
representative of each of the Credit Parties and the Lenders.
4. Representations and Warranties. To induce the Lenders to enter
into this Second Amendment, each of the Credit Parties hereby represents
and warrants to the Agent and to each Lender that:
(a) the representations and warranties contained in the Credit
Agreement are true and correct as of the date of this Second Amendment;
and
(b) no Default or Event of Default has occurred and is
continuing as of the date of this Second Amendment.
5. Full Force and Effect. Except as provided herein, all of the
terms and conditions set forth in the Credit Agreement, and all additional
documents entered into in connection with the Credit Agreement, shall
remain unchanged and shall continue in full force and effect as originally
set forth, and each of the foregoing is hereby ratified and confirmed in
all respects.
6. Binding Effect. This Second Amendment shall be binding upon the
parties hereto and their respective successors and assigns.
[REMAINDER OF PAGE DELIBERATELY BLANK]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Second Agreement to be duly executed and delivered as
of the date first above written.
BORROWER: OSHKOSH TRUCK CORPORATION,
a Wisconsin corporation
By: /s/
Title:_____________________________
GUARANTORS: PIERCE MANUFACTURING INC.,
a Wisconsin corporation
By: /s/
Title:_____________________________
SUMMIT PERFORMANCE SYSTEMS, INC.,
a Wisconsin corporation
By: /s/
Title:_____________________________
LENDERS: FIRSTAR BANK MILWAUKEE, N.A.,
in its capacity as Agent and as a
Lender
By: /s/
Title:_____________________________
BANK ONE, MILWAUKEE, NA,
in its capacity as a Co-Agent and
as a Lender
By: /s/
Title:_____________________________
NATIONSBANK, N.A.,
in its capacity as a Co-Agent and
as a Lender
By: /s/
Title:_____________________________
HARRIS TRUST AND SAVINGS BANK,
in its capacity as a Co-Agent and
as a Lender
By: /s/
Title:_____________________________
BANK OF AMERICA ILLINOIS, as Lender
By: /s/
Title:_____________________________
LASALLE NATIONAL BANK, as Lender
By: /s/
Title:_____________________________
FIRST BANK (N.A.), as Lender
By: /s/
Title:_____________________________
THE NORTHERN TRUST COMPANY, as Lender
By: /s/
Title:_____________________________
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Lender
By: /s/
Title:_____________________________
COMERICA BANK, as Lender
By: /s/
Title:_____________________________
EMPLOYMENT AGREEMENT
AN AGREEMENT made as of the 31st day of August, 1995, by and
between OSHKOSH TRUCK CORPORATION, a Wisconsin corporation (the
"Company"), and PAUL C. HOLLOWELL (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive has been serving as Executive Vice
President of the Company and as President of Oshkosh Truck International
Inc., a subsidiary of the Company ("Oshkosh International");
WHEREAS, the Company desires to continue to retain the services
of the Executive, and the Executive desires to continue to be employed by
the Company, on the terms and conditions set forth in this Agreement; and
WHEREAS, in consideration of the Company's commitment to employ
the Executive during the term of this Agreement, the Executive is willing
to agree to the provisions respecting noncompetition and protection of
Confidential Information (as defined below) set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Duties. The Company hereby agrees to
continue to employ the Executive, and the Executive hereby agrees to
continue to be employed by the Company. The Executive's current
responsibilities include leadership of the Company's defense business
strategy; marketing and planning for both domestic and foreign sales of
military products; and responsibility for all international strategy,
marketing and sales. The Executive also serves as a member of the
Chairman's Council, the primary executive advisory council to the
Company's Chairman and Chief Executive Officer.
2. Term. The employment of the Executive will continue until
the occurrence of the first of the following events:
(a) The last day of the Company's 1997 fiscal year, subject to
extension as described below; or
(b) The Executive's death; or
(c) The Executive shall have become totally disabled within the
meaning of the Oshkosh Truck Corporation Long Term Disability Program for
Salaried Employees (the "LTD Program") such that the Executive is entitled
to receive benefits under the LTD Program; or
(d) Termination of this Agreement under Section 8 hereof.
If the Executive's employment continues following the date and extension
identified in clause (a) above and a Renewal Notice is not provided, then
for so long as the Executive is employed by the Company the Executive
shall be an at-will employee. The provisions of Sections 6, 7 and 10
shall survive the expiration of the term of this Agreement.
The last date on which the Executive's employment hereunder may
terminate pursuant to paragraph (a) may be extended at successive one-year
intervals if the Company has provided a written notice of renewal (a
"Renewal Notice") to the Executive on or before June 30 in the year prior
to the year in which the Executive's employment hereunder would terminate
but for the application of this sentence. As an example, if the Company
gives a Renewal Notice to the Executive on or before June 30, 1996, the
date set forth in Section 2(a) shall be changed from the last day of the
Company's 1997 fiscal year to the last day of the Company's 1998 fiscal
year. If a Renewal Notice is not given within the prescribed time and
unless otherwise agreed in writing by the parties, then the Executive's
employment hereunder may terminate in accordance with the provisions of
this Section 2 (as paragraph (a) may have been previously extended by the
parties) and Section 9. In addition, the Executive may terminate his
employment hereunder at any time upon thirty (30) days' written notice to
the Company.
3. Compensation. During the term of this Agreement, the
Executive shall be entitled to the following compensation for services
rendered to the Company and Oshkosh International:
(a) Base Salary. The Executive shall receive a base salary,
payable not less frequently than monthly in arrears, at the annual rate of
$170,000. The Board of Directors of the Company shall review the
Executive's base salary annually to determine whether such salary should
be increased based upon the Company's performance and/or the Executive's
performance and upon such other criteria as the directors shall consider
in their sole discretion. (In this Agreement, the term "Base Salary"
shall mean the amount established and adjusted from time to time pursuant
to this paragraph (a).)
(b) Annual Bonus. The Executive shall be entitled to
participate in the bonus plan for senior management personnel of the
Company, subject to all of the terms and conditions of the plan. In the
bonus plan, the Executive will have a bonus potential of 50% of his Base
Salary unless modified by the Board of Directors in accord with an overall
bonus modification for all senior executives.
(c) Vacations and Holidays. The Executive shall be entitled to
receive 20 days of paid vacation per year together with the paid holidays
available to all other senior management personnel.
(d) Fringe Benefits. The Executive shall be entitled to
participate in all fringe benefit plans and programs in effect from time
to time for, and on the same basis as, all other senior executives of the
Company, including medical and dental insurance, expense reimbursements,
pension and retirement benefits and other similar benefits.
4. Reimbursements. The Company shall reimburse the Executive
for actual out-of-pocket costs incurred by him in the course of carrying
out his duties hereunder, such reimbursements to be made in accordance
with the policies and procedures of the Company in effect from time to
time.
5. Withholding. All payments under this Agreement shall be
subject to withholding or deduction by reason of the Federal Insurance
Contributions Act, the federal income tax and state or local income tax
and similar laws, to the extent such laws apply to such payments.
6. Noncompetition. In consideration of the Company's
commitment to employ the Executive during the term of this Agreement, the
Executive agrees that, except in the event of a material breach of this
Agreement by the Company, for a period of one year after the termination
of the Executive's active employment with the Company (whether such
termination occurs before or after the expiration of the term of this
Agreement), he shall not, except as permitted by the Company's prior
written consent, engage in, be employed by, or in any way advise or act
for, or have any financial interest in, any business that, as of the date
of such termination, is engaged directly or indirectly in a business that
is similar or identical to any business engaged in by the Company or any
of its subsidiaries that was within the scope of the Executive's duties,
activities or knowledge. The geographic scope of the Executive's
agreement not to compete shall extend to all of the United States and to
any other country if the Company has directly or indirectly (i) sold
product for delivery to a customer in that country during the 36 months
preceding the date of termination, (ii) actively sought to sell product
for delivery to any customer in that country during such period or
(iii) made plans, in which the Executive participated, to sell product for
delivery to any customer in that country during such period, whether or
not the Company pursued or abandoned such plans prior to the date of
termination. The ownership of minority and noncontrolling shares of any
corporation whose shares are listed on a recognized stock exchange or
traded in an over-the-counter market, even though such corporation may be
a competitor of the Company or any subsidiary specified above, shall not
be deemed as constituting a financial interest in such competitor. This
covenant shall survive the termination of this Agreement.
7. Confidential Information.
(a) Defined. "Confidential Information" shall mean ideas,
information, knowledge and discoveries, whether or not patentable, that
are not generally known in the trade or industry and about which the
Executive has knowledge as a result of his employment with the Company,
including without limitation defense product engineering information,
marketing, sales, distribution, pricing and bid process information,
product specifications, manufacturing procedures, methods, business plans,
marketing plans, internal memoranda, formulae, trade secrets, know-how,
research and development and other confidential technical or business
information and data. Confidential Information shall not include any
information that the Executive can demonstrate is in the public domain by
means other than disclosure by the Executive.
(b) Nondisclosure. For a period of five years after the
termination of the Executive's active employment with the Company (whether
such termination occurs before or after the expiration of the term of this
Agreement) and indefinitely thereafter in respect of any Confidential
Information that constitutes a trade secret or other information protected
by law, the Executive will keep confidential and protect all Confidential
Information known to or in the possession of the Executive, will not
disclose any Confidential Information to any other person and will not use
any Confidential Information, except for use or disclosure of Confidential
Information for the exclusive benefit of the Company as it may direct or
as necessary to fulfill the Executive's continuing duties as an employee
of the Company.
(c) Return of Property. All memoranda, notes, records, papers,
tapes, disks, programs or other documents or forms of documents and all
copies thereof relating to the operations or business of the Company or
any of its subsidiaries that contain Confidential Information, some of
which may be prepared by the Executive, and all objects associated
therewith in any way obtained by him shall be the property of the Company.
The Executive shall not, except for the use of the Company or any of its
subsidiaries, use or duplicate any such documents or objects, nor remove
them from facilities and premises of the Company or any subsidiary, nor
use any information concerning them except for the benefit of the Company
or any subsidiary, at any time. The Executive will deliver all of the
aforementioned documents and objects, if any, that may be in his
possession to the Company at any time at the request of the Company.
8. Termination for Cause.
(a) By the Company. The Executive agrees that this agreement
may be terminated by the Company at any time for theft, dishonesty,
fraudulent conduct, disclosure of trade secrets, gross dereliction of duty
or other grave misconduct on the part of the Executive which is
substantially injurious to the Company.
(b) By the Executive. The Executive may terminate this
Agreement at any time in the event of a material breach by the Company of
the terms and conditions of this Agreement.
9. Continuing Liability. Unless this Agreement is terminated
by the Company as provided in Section 8 and except in the event of the
voluntary resignation (other than pursuant to Section 8), retirement,
disability, or death of the Executive, the Company shall have no right to
terminate the Agreement without the continuing liability to the Executive
for the unexpired term for the Base Salary and fringe benefits provided in
this Agreement, in which event:
(a) An amount equal to the largest bonus paid or payable to the
Executive by the Company with respect to any 12 consecutive month period
during the three years ending with the date of termination of this
Agreement shall be considered an increase in Base Salary as of January 1
of the year in which such termination occurs for the purpose of
determining continued liability to the Executive; and
(b) The Company shall provide the Executive with fringe
benefits, but in no event shall fringe benefits be reduced in type or
amount from the level of fringe benefits being received by the Executive
as of the date of termination of this Agreement.
The Company shall have a continuing liability to the Executive in the
event the Executive terminates this Agreement pursuant to the provisions
of Section 8(b) unless the Board of Directors of the Company shall
determine in good faith that there has not been such a material breach by
the Company as to constitute good cause for termination by the Executive
pursuant to Section 8(b). In the event of such determination, the
Executive shall be deemed to have voluntarily resigned without cause;
provided, however, that any such determination by the Board of Directors
shall be subject to judicial review.
10. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors.
11. Miscellaneous.
(a) Severability. This Agreement is to be governed by and
construed according to the laws of the State of Wisconsin. If any
provision of this Agreement shall be held invalid and unenforceable for
any reason whatsoever, such provision shall be deemed deleted and the
remainder of the Agreement shall be valid and enforceable without such
provision.
(b) Amendments. This Agreement may be modified only in writing
signed by the parties hereto.
(c) Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(i) If to the Executive:
Paul C. Hollowell
1004 Washington Avenue
Oshkosh, WI 54901
or, in person, by hand to the Executive at the
Executive's place of employment
(ii) If to the Company:
Oshkosh Truck Corporation
2307 Oregon Street
P.O. Box 2566
Oshkosh, WI 54903-2566
Attn: Corporate Secretary
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notices and communications shall be
effective when personally delivered or on the second business day
following the day on which such item was mailed.
(d) Entire Agreement. This Agreement contains the entire
understanding between the Company and the Executive with respect to the
subject matter hereof, except for the following additional agreements
between the Company and the Executive:
(i) Key Executive Employment and Severance Agreement
(the "KEESA");
(ii) Any stock option agreement under the Company's
1990 Incentive Stock Plan, as amended; and
(iii) Any award agreement under the Company's 1994
Long-Term Incentive Compensation Plan.
Anything in this Agreement to the contrary notwithstanding, in the event
of a Change in Control of the Company (as defined in the KEESA) at a time
that the KEESA is in effect, then the rights and obligations of the
Company and the Executive in respect of the Executive's employment shall
be determined in accordance with the KEESA rather than under this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
OSHKOSH TRUCK CORPORATION
By: /s/ R. Eugene Goodson
R. Eugene Goodson
Title: Chairman and Chief Executive
Officer
Date: September 18, 1995
Attest: /s/ Connie S. Stellmacher
AGREED TO:
By: /s/ Paul C. Hollowell
Paul C. Hollowell
Title: Executive Vice President and
President - Oshkosh Truck
International
Date: August 21, 1995
Attest: /s/ Connie S. Stellmacher
AGREEMENT TO TERMINATE STRATEGIC ALLIANCE
I. The Parties
The Parties to this Agreement are:
1.01 Freightliner Corporation, a Delaware corporation located at Portland,
Oregon ("Freightliner").
1.02 Oshkosh Truck Corporation, a Wisconsin corporation located at
Oshkosh, Wisconsin ("Oshkosh").
II. The Recitals
2.01 The Date of this Agreement is April 10, 1997.
2.02 The Parties entered into a Strategic Alliance Agreement on June 5,
1995, pursuant to the terms of which Freightliner purchased 350,000
shares of unregistered Class B Common Stock of Oshkosh and 1,250,000
Warrants for the purchase of that number of unregistered Class B
Common Shares of Oshkosh, and each Party entered into certain
performance covenants.
2.03 Pursuant to the Strategic Alliance Agreement the Parties also entered
into a Distribution Agreement on December 13, 1995, pursuant to the
terms of which each Party entered into certain performance
covenants.
2.04 The Parties now wish to terminate the Strategic Alliance Agreement
and the Distribution Agreement, and release each other from their
respective performance covenants under those Agreements and other
liabilities with respect thereto, as set forth below.
III. The Agreement
Therefore, the Parties agree as follows:
3.01 The Recitals. The Recitals are a part of this Agreement.
3.02 Termination of Alliance. Effective upon completion of the payments
and deliveries described below, the Strategic Alliance Agreement
dated June 5, 1995, shall be terminated in all respects.
3.03 Purchase and Sale of Shares and Warrants. On June 9, 1997, or such
earlier date as Oshkosh may designate in writing, Oshkosh shall
purchase, and Freightliner shall sell all of its 350,000 shares of
Class B Common Stock and its 1,250,000 Warrants for the purchase of
that number of Class B Common Stock of Oshkosh, for the aggregate sum
of $6,750,000.00.
3.031 Freightliner shall deliver to Oshkosh its stock certificate
evidencing the 350,000 shares of Class B Common Stock of
Oshkosh which were purchased from Oshkosh on June 5, 1995,
duly endorsed to the order of Oshkosh, together with its
Warrant certificate evidencing the Warrants to purchase
1,250,000 Warrant Shares of Class B Common Stock of Oshkosh
which were purchased from Oshkosh on June 5, 1995, duly
endorsed to the order of Oshkosh.
3.032 Oshkosh shall deliver to Freightliner a wire transfer of
immediately available funds in the amount of $6,750,000.00
to any Bank in the United States designated in writing by
Freightliner with accompanying wiring instructions at least
two business days prior to the scheduled closing date.
3.033 The Parties each shall deliver such other agreements and
payments as are described below in this Agreement.
3.04 Settlement of Accounts. Except as set forth in this Section 3.04,
accounts relating to, or arising out of the normal course of business
between the Parties shall be settled in the normal course of
business. Amounts which either Party has claimed, or could have
claimed from the other arising out of disagreements about
contribution sharing or costs reimbursements under the Distribution
Agreement, or arising out of the transfer to Oshkosh and subsequent
return to Freightliner of the manufacture and assembly of the M-915
family of vehicles, shall be settled in full by the payment of the
sum of $180,000.00 by Freightliner to Oshkosh. This sum shall be
offset against the sum payable to Freightliner by Oshkosh under Sec.
3.03, above.
3.05 Sales of FLD Cabs. Freightliner will sell to Oshkosh its FLD cab
requirements in accordance with the Cab Purchase Agreement attached
as Exhibit "B" and incorporated here by reference. Customers of
Oshkosh who purchase trucks incorporating FLD cabs shall obtain
aftermarket service and support for such cabs through authorized
Freightliner dealers.
3.06 Sales of Front Drive Axles and Transfer Cases. Oshkosh will sell to
Freightliner front drive axles and transfer cases for the
Freightliner M-915 family of vehicles in volumes, and upon prices and
other terms and conditions that the Parties may agree upon from time
to time.
3.07 Termination of Distribution Agreement. The Distribution Agreement
between the Parties, dated December 13, 1995, is rescinded as of the
Date of this Agreement, except that the obligations of
confidentiality, indemnity, warranty, and for continuing support of
Oshkosh products sold under that Agreement shall survive, including
the termination of this Agreement.
3.08 Mutual Release. Each Party, for itself, its successors and assigns,
hereby releases the other Party and any other person, firm or
corporation charged with responsibility or liability, their
successors, assigns, heirs and legal representatives, from any and
all claims, demands, damages, costs, expenses, loss of services or
profits, actions and causes of action arising out of the Strategic
Alliance Agreement, the Distribution Agreement, and activities of
each Party under the said Agreements, except as provided above in
this Agreement.
Executed by the Parties on the Date of this Agreement.
OSHKOSH TRUCK CORPORATION FREIGHTLINER CORPORATION
By:____________________________ By:______________________________
Its:___________________________ Its:______________________________
<PAGE>
EXHIBIT A
INTEROFFICE CORRESPONDENCE
4/23/97
TO: Tim Dempsey
FROM: Bruce Herrmann
SUBJECT: Freightliner Parts
Following is a revision of the 9/17/96 letter showing Oshkosh part
numbers, descriptions and prices.
Freightliner Parts:
Cabs:
2218460 - Cab -
2230530 & 2282130 & 2286800 - Cab spec, L10 -
2281850 - Cab -
15-14555 010 Plate, cab mountt - 2218580 - 1.36
A16-13606-000- Value cab leveling - 2218610 - 38.68
17-10425-002 - Pivot, hood hinge - 2218740 - 3.16
22-29646-003 - Bracker, mirror brace - 2231990 - 1.12
07-10367-000 - Retainer, shift lever boot - 2232010 - 2.35
03-21750-000 - Plate, air cleaner mounting - 2233120 - 21.37
*Supplier Parts - Freightliner Tooling:
STNOZX0615 - Behr
HUN68d885 - Buckhorn - Shift lever boot - 2232000 - 6.42
DNPVH001906 - Donaldson - Pre-cleaner - 2233090 - 155.06
EBA-11-2080 - Donaldson - Air cleaner - 2233070 - 124.80
GYRIS5-040 - Goodyear - Air bag for cab mount - 2218600 - 10.50
GYR566209131 - Goodyear - Air bag for cab mount - 2232220
17-12178-000 - Specialty Stamping - Classic hood bezel - 2270630 - 121.92
22-23512-000 - Griffith Rubber
A06-23321-000 - Delphi Packard - Engine harness
681-890-00-01 - Clevite - Cab mounting isolator - 2218570 - 3.89
18-29846-000 - Arvin - Cab mount shock absorber - 9.81
A15-13788-000 - Clevite - Cab mount tie rod - 2218660 - 13.27
681-810-0106 - Grote - Mirror head - 2219560 - 7.39
18-10960-020 - Con met - Grab handle brkt - 2219860 - 2.53
LOR/J17700-5 - Lord - Hood support - 2229360 - 2.01
22-21853-001 - Grote - Mirror - 2231970 - 2.50
22-21853-002 - Grote - Mirror - 2231980 - 4.79
681-891-00-01 - Clevite - Cab Mount - 2232200 - 1.76
A03-21474 - Custom Aluminum - Air intake duct - 2233100 - 55.60
22-38052-000 - Custom Aluminum/Elixir - Intake duct - 2233110 - 16.79
18-10960-021 - Con Met - Grab handle brkt - 2233350 - 2.53
18-28171-537 - Anodizing - Grab handle
18-15887-000 - Boyd Rubber - Grab handle gasket - 2233370 - .04
680-501-08-01 - Garrett/Allied - Charge air cooler - 2259200 - 351.00
05-16397-001 - Behr - Radiator - 2259210 - 399.19
2270390 - Betts - Spring, torsion - 3.09
2270400 - Betts - Spring, torsion - 2.75
* Vendor prices shown are current prices. Oshkosh will negotiate
future prices directly with vendors.
<PAGE>
EXHIBIT B
CAB REQUIREMENTS AGREEMENT
BETWEEN FREIGHTLINER CORPORATION
AND
OSHKOSH TRUCK CORPORATION
I. The Parties
The Parties to this Agreement are:
1.01 Freightliner Corporation, a Delaware corporation having its principal
place of business at 4747 North Channel Avenue, Portland, Oregon
97208 ("Freightliner").
1.02 Oshkosh Truck Corporation, a Wisconsin corporation located at 2307
Oregon Street, Oshkosh, WI 54901 ("Oshkosh").
II. The Recitals
2.01 The Date of this Agreement is April 10, 1997.
2.02 Freightliner manufactures and sells vocational and other vehicles and
components and parts under the trade name of Freightliner, and
2.03 Oshkosh manufactures and sells heavy duty on/off highway trucks and
rear discharge concrete mixer systems for a wide variety of
applications under the trade name of Oshkosh.
2.04 Freightliner and Oshkosh entered into a Strategic Alliance Agreement
on June 5, 1995.
2.05 On the same Date of this Agreement the parties also entered into an
Agreement to Terminate Strategic Alliance.
III. The Agreement
3.01 The Recitals are a part of this Agreement.
3.02 Freightliner shall manufacture and sell to Oshkosh, and Oshkosh shall
purchase from Freightliner up to one hundred fifty (150) Freightliner
FLD truck cabs ("Cabs") per year during the term of this Agreement,
for installation on Oshkosh "FF" vehicles only. None of the Cabs may
be installed on or used with any Pierce products or models or re-sold
to any third party. Aftermarket parts for such Cabs shall be
available from and purchased through Freightliner dealers.
3.03 The prices of "FF" cab componentry which are presently available are
set forth on Attachment "A," attached to this Agreement and
incorporated herein by reference. These prices shall apply with
respect to any and all standard configuration products ordered by
Oshkosh from Freightliner for delivery through the end of the 1997
model year. Thereafter, such prices may be adjusted reasonably from
time to time by Freightliner subject, however, to the following:
3.031. A price shall not be increased except upon at least ninety
(90) days' prior written notice from Freightliner to
Oshkosh of the increase, including the anticipated amount
thereof;
3.032. A price increase shall not be retroactive in effect, and
under no circumstances shall any price increase be allowed
with respect to any accepted order; and
3.033. A price shall be adjusted only one (1) time per calendar
year, beginning with the 1998 model year.
3.04 Freightliner shall give purchase orders of Oshkosh under Sections
3.02, above, the highest priority for completion of manufacture and
delivery. Freightliner promptly shall notify Oshkosh at any time
that it determines that it is reasonably probable that an Oshkosh
delivery date cannot be met. Such notice also shall indicate the
date(s) on which such delivery(s) will be met, so that Oshkosh can
determine whether such delay is acceptable.
3.05 Periodically, Oshkosh may issue a blanket purchase order for FF cab
componentry required by Oshkosh for the period designated in such
order. All such blanket purchase orders shall be subject to the
terms and conditions of this Agreement and, unless the Parties
otherwise agree in writing, to the standard terms and conditions of
sale used generally from time to time by Freightliner for sale to
third parties, but in the event of any conflict between (A) the terms
and conditions of this Agreement (or other terms agreed upon in
writing by the Parties) and (B) said standard terms and conditions,
the terms and conditions referred to in this Agreement shall control.
Freightliner shall receive and process each blanket purchase order in
a timely manner and shall notify Oshkosh promptly of its order
acceptance(s).
3.06 Pursuant to blanket purchase orders issued by Oshkosh under Paragraph
3.08, Oshkosh shall issue individual releases against such orders for
shipments of Freightliner products as specified in each release.
Freightliner shall make timely shipments under all individual
releases.
3.07 Payment terms shall be net thirty (30) days after delivery. Delivery
shall be F.O.B. Portland.
3.08 Warranty
3.081. Freightliner warrants to Oshkosh that each Cab component
supplied under this Agreement (i) shall be new; (ii) shall
meet Freightliner's specifications, drawings and/or other
descriptive materials pertaining to it; (iii) shall conform
to applicable federal, state and/or local statutes, laws,
rules, regulations, codes and ordinances; (iv) shall be
free from liens and encumbrances; and (v) shall not
infringe any patent, trade secret or other proprietary
right of any third party.
3.082. In addition to the warranties set forth in Subparagraph
3.111, each Freightliner cab component supplied under this
Agreement shall be warranted by Freightliner as more
particularly set forth on Attachment "B" attached hereto
and incorporated herein (the "Freightliner Limited
Warranty"). Freightliner may at any time or from time to
time amend the Freightliner Limited Warranty, but no such
amendment shall be effective except upon ninety (90) days'
prior written notice from Freightliner to Oshkosh of such
amendment and of Freightliner's intention to make the same,
and no such amendment shall be retroactive in effect or,
under any circumstances, applicable to any accepted offer.
A claim for breach of the Freightliner Limited Warranty
shall be handled in accordance with the Freightliner
Limited Warranty.
3.083. Freightliner shall not be liable for incidental or
consequential damages, including lost profits or production
downtime, incurred by Oshkosh as a result of a breach of
the warranties set forth in this Paragraph 3.11. Said
warranties shall be the sole and exclusive warranties and
are in lieu of all other warranties, express or implied,
and exclude the warranties of merchantability and fitness
for a particular purpose.
3.09 Oshkosh shall provide all engineering, including application
engineering, necessary for the proper and safe installation of the
Cab components and parts in its vocational trucks. Freightliner
shall provide all necessary product labeling with each Cab together
with Operator, Service, and Parts Manuals ("Operator Materials") for
each installation. Freightliner's recommended product labeling shall
include but not be limited to, warning labels to be affixed to the
vehicle and system in accordance with Freightliner's customary
procedures.
3.10 Except as provided below, this Agreement shall have an initial term
which begins on the date of this Agreement and ends on December 31,
2000.
3.101. Freightliner may terminate this Agreement upon one hundred
eighty (180) days' prior written notice to Oshkosh, in the
event that Freightliner substantially replaces and
discontinues production of its FLD cabs. Oshkosh may
terminate this Agreement upon ninety (90) days' prior
written notice of Freightliner.
3.102. A Party may terminate this Agreement immediately upon
written notice to the other Party if said other Party
ceases to do business or is declared by a court having
jurisdiction to be insolvent or bankrupt, or makes an
assignment or other arrangement for the benefit of
creditors, or sells, assigns or transfers all or
substantially all of its assets to another party outside of
the ordinary course of business.
3.103. Notwithstanding any provision of this Agreement to the
contrary, neither the expiration of the term nor the
termination or non-renewal of this Agreement shall affect
any of a Party's rights or obligations arising under this
Agreement prior to the effective date of the expiration of
the term or the termination or non-renewal of this
Agreement with respect to products sold and delivered at or
prior to the time of such expiration of the term or the
termination or non-renewal of this Agreement. This
Agreement shall continue to apply with respect to any
purchase order submitted by Oshkosh to Freightliner under
this Agreement prior to the effective date of the
expiration of the term or the termination or non-renewal of
this Agreement.
3.104. Neither Party shall be liable to the other by reason of
termination, non-renewal or breach of this Agreement for
compensation, reimbursement or damages for: (i) loss of
present or prospective profits on sales or anticipated
sales; (ii) consequential, special, or incidental damages
or production downtime; (iii) goodwill or loss thereof; or
(iv) expenditures, investment or any other type of
commitment, financial or otherwise, made in connection with
the business of such Party or in reliance upon the
existence of this Agreement.
3.11 Oshkosh may not use or advertise the name "Freightliner/TM/," in
connection with its marketing and sale of its "FF" vehicles
incorporating Freightliner products. Oshkosh shall not publicly use
or advertise the Freightliner/TM/ trademark without the prior written
approval of Freightliner.
3.12 General Provisions
3.121. Freightliner shall, at Freightliner's expense, furnish
Oshkosh with all information necessary to enable Oshkosh
to support aftermarket service of installed Freightliner
cab components and parts.
3.122. All notices under this Agreement shall be in writing and
shall be delivered personally or sent by certified mail,
return receipt requested, postage prepaid, by telex
(acknowledged by answer back), or by telecopy of telefax
(confirmed by certified mail, return receipt requested,
postage prepaid) addressed to the Parties at the addresses
immediately below, or to such other address of which either
Party may advise the other by notice under this
Subparagraph 3.132. Notices will be deemed given when
personally delivered or sent as specified above.
Freightliner Corporation Oshkosh Truck Corporation
4747 North Channel Avenue 2307 Oregon Street
P.O. Box 3849 P.O. Box 2566
Portland, OR 97208-3849 Oshkosh, WI 54903-2566
Fax No. Fax No. 414-233-9669
Atten: Atten: Vice President & General
Counsel
3.123. Any claim or dispute arising under or out of this Agreement
shall first be presented to the other Party in a concise
written statement of the claim or dispute, accompanied by
supporting facts or data and by a designation of a
reasonable time period [but not more than thirty (30) days]
for resolution. If the matter has not been resolved within
the designated time period, the matter shall be referred to
the CEO of each of the Parties for resolution. If the CEOs
are unable to agree upon a resolution within fourteen (14)
days after the matter is referred to them, then this issue
is at impasse and either party may pursue any remedy
legally available to them. Neither Party shall initiate
arbitration proceedings or litigation without first (i)
following the procedure described above and (ii) giving the
other Party at least ten (10) days' prior written notice of
its intention to do so.
3.124. Any headings used herein are for convenience and reference
only and are not part of this Agreement, nor shall they in
any way affect the interpretation hereof.
3.125. Any action or the breach of this Agreement, except for
actions for any breach of warranty, shall be brought within
three (3) years from the date of the accrual of the cause
of action. The construction and interpretation of this
Agreement shall be governed by the laws of the State of
Oregon.
3.126. Each Party shall use its best efforts and act in good faith
in carrying out this Agreement.
3.127. This Agreement shall be amended only in writing signed by
the Parties to this Agreement.
3.128. Neither Party shall, voluntarily or involuntarily, by
operation of law or otherwise, assign or otherwise transfer
this Agreement, in whole or in part, without the prior,
express written consent of the other Party, which consent
shall not be unreasonably withheld.
3.129. This Agreement contains the entire understanding and
agreement of the Parties with respect to the subject matter
of this Agreement, and this Agreement shall supersede all
prior communications, representations, understandings,
promises or agreements between the Parties, whether verbal
or written, with respect to the subject matter of this
Agreement.
3.1210. This Agreement shall bind and benefit the Parties and their
respective legal representatives, successors and permitted
assigns.
3.1211. The warranties and representations made by a Party in this
Agreement shall survive the execution and delivery of this
Agreement.
3.13 Indemnification
3.131 Freightliner shall, upon Oshkosh's written request, defend,
indemnify, and hold Oshkosh harmless of and from any claim,
demand, suit, damage, liability, cost or expense, including
attorney fees and expenses, final judgments and
settlements, that may be asserted, commenced or arise
against Oshkosh by reason of alleged breach of warranty,
defects in material, design (except Oshkosh designs and
parts), assembly, or manufacture of Products sold by
Freightliner to Oshkosh under this Agreement. Freightliner
shall not be required to indemnify Oshkosh if the basis of
the liability asserted would have been precluded by the
inclusion of the Freightliner warranty in the contract with
the end user, in the event Oshkosh has any liability for
incidental or consequential damages arising out of the sale
of Products in the event Oshkosh has assumed liability
independent of the Freightliner warranty.
3.132. Oshkosh shall indemnify, defend and hold Freightliner
harmless from and against any and all claims or actions by
third parties, damages, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees
and other legal costs and expenses) for injury to or death
of any person or persons or damage to or destruction of any
property to the extent that such personal injury, death or
property damage is caused by (i) any negligent act or
omission of Oshkosh or Oshkosh's employees or agents, (ii)
any alteration made by Oshkosh or Oshkosh employees or
agents to Operator Materials, or to Freightliner's
recommended product labeling, without Freightliner's prior
consent or concurrence, or (iii) any allegations relating
to Oshkosh designs.
Freightliner shall promptly notify Oshkosh of any claim or
action for which indemnification will be sought by Freightliner
under this Subparagraph 3.162, and Oshkosh shall have the right,
at its expense, to assume the defense or the settlement thereof
using counsel reasonably acceptable to Freightliner , provided,
however, that Freightliner shall have the right to participate,
at its own expense, with respect to any such claim, action or
proceeding, and no such claim, action or proceeding shall be
settled without the prior written consent of Freightliner, which
consent shall not be unreasonably withhold, and in connection
with any such claim, action or proceeding, the Parties shall
cooperate with each other and provide each other with access to
relevant books and records in each Party's possession or
control.
3.14 Proprietary and Confidential Information
3.141 Proprietary Information. Oshkosh and Freightliner will use
their best efforts to keep confidential any proprietary or
secret information developed by the other party. This
obligation shall not apply to information received by
either party which : (a) is or becomes publicly known
through no fault of the recipient party; (b) is already
known to the best efforts to keep confidential any
proprietary or secret information recipient party at the
time of disclosure; (c) has been rightfully received by the
recipient party from a third party; (d) is independently
developed by the recipient party; (e) is disclosed to a
court or government agency pursuant to a subpoena or
administrative order; or (f) is expressly released in
writing by the other party.
3.142 Confidential and Third Parties. The parties' obligations
under this Paragraph 7 are not violated by dealings with
consultant, suppliers, or authorized dealers. However, in
such dealings each party will undertake to maintain the
proprietary nature of proprietary or secret information via
confidential agreements or other appropriate measures.
3.173. The covenants set forth in this Paragraph 3.14 shall
survive termination or expiration of this Agreement for any
reason, for a period of five (5) years, and shall bind the
parties, their successors and assigns.
3.15 Oshkosh agrees further that it shall not disassemble, decompile or
otherwise reverse engineer, directly or indirectly, any or all of the
proprietary parts or of Freightliner, except that Oshkosh may, with
prior authorization from Freightliner (which authorization shall not
be unreasonably withheld), disassemble any proprietary part of
Freightliner incident to the manufacture of any Oshkosh FF truck
incorporating a Freightliner cab components or parts under this
Agreement.
3.16 Force Majeure
3.161 Neither Party shall be liable to the other for any delay in
or impairment of performance under this Agreement which
results in whole or in part from: fire, floods or other
catastrophes; strikes, lockouts or labor disruption; acts
of God; wars, riots or embargo delays; government
allocations or priorities; shortages of transportation,
fuel, labor or materials; inability to procure supplies or
raw materials; severe weather conditions; or any other
circumstances or cause beyond the control of such Party in
the reasonable conduct of its business.
Executed by the Parties on the Date of this Agreement.
FREIGHTLINER CORPORATION OSHKOSH TRUCK CORPORATION
By By
Name/Title Name/Title
Date Date
Consolidated Financial Statements
Oshkosh Truck Corporation
Three years ended September 30, 1997
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Years ended September 30,
(In thousands, except per share amounts)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Sales $683,234 $413,455 $438,557 $581,275 $537,065
Income (Loss) From Continuing
Operations 10,006 (241) 11,637 13,558 1,596(1)
Per Share 1.18 (.03) 1.32 1.56 .18(1)
Discontinued Operations --- (2,859) (2,421) (504) (533)
Per Share --- (.32) (.28) (.06) (.06)
Net Income (Loss) 10,006 (3,100) 9,216 13,054 1,063(1)
Per Share 1.18 (.35) 1.04 1.50 .12(1)
Dividends Per Share
Class A Common Stock .435 .435 .435 .435 .435
Common Stock .500 .500 .500 .500 .500
Total Assets 420,394 435,161 200,916 198,678 235,386
Expenditures for Property,
Plant and Equipment 6,263 5,355 5,347 5,178 7,697
Depreciation 9,382 8,621 8,409 9,278 8,292
Amortization of Goodwill and Other
Intangible Assets 4,470 171 --- --- ---
Net Working Capital 50,113 67,469 91,777 82,010 100,967
Long-Term Debt
(Including Current Maturities) 135,000 157,882 --- 610 40,338
Shareholders' Equity 120,900 121,602 113,413 121,558 112,004
Book Value Per Share 14.55 14.08 14.82 13.96 12.89
Backlog 361,000 433,000 350,000 498,000 437,000
(1) After a charge of $4.1 million, or $.47 per share, to reflect the
cumulative effect of change in method of accounting for postretirement
benefits.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATISTICS
<CAPTION>
Cash Dividends
Quarterly (Payable February, May, August, November)
(In thousands, except per share amounts)
Fiscal 1997 Fiscal 1996
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Common Stock
Declared $ 44 $ 44 $ 45 $ 44 $ 45 $ 45 $ 44 $ 43
Per Share .10875 .10875 .10875 .10875 .10875 .10875 .10875 .10875
Common Stock
Declared $ 988 $ 943 $1,029 $1,030 $1,019 $1,040 $1,054 $1,061
Per Share .125 .125 .125 .125 .125 .125 .125 .125
</TABLE>
Oshkosh Truck Corporation Common Stock Price*
The company's Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) National Market
System. The following table sets forth prices reflecting actual sales as
reported on the NASDAQ National Market System.
Quarter
Ended Fiscal 1997 Fiscal 1996
High Low High Low
September $17-1/2 $13-1/4 $14-1/2 $11-1/4
June 15-7/8 10-5/8 15-3/8 13-7/8
March 12-7/8 10-1/8 15-3/4 13-3/8
December 12-1/4 10-1/8 15-3/4 14-1/4
<TABLE>
Quarterly Financial Data (Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Fiscal 1997 Fiscal 1996
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $185,853 $176,596 $170,465 $150,320 $117,983 $111,950 $103,139 $80,383
Gross Income 24,496 21,897 22,868 19,583 4,256 7,647 12,725 10,451
Income (Loss) From
Continuing
Operations 3,116 2,792 2,474 1,624 (1,645) (2,398) 2,230 1,572
Per Share .38 .33 .28 .19 (.19) (.27) .25 .18
Discontinued
Operations --- --- --- --- (648) (2,211) --- ---
Per Share --- --- --- --- (.07) (.25) --- ---
Net Income (Loss) 3,116 2,792 2,474 1,624 (2,293) (4,609) 2,230 1,572
Per Share .38 .33 .28 .19 (.26) (.52) .25 .18
</TABLE>
For the fourth quarter of 1996, continuing operations includes, on an
after-tax basis, approximately $2.4 million related to the IPF subcontract
and additional warranty provisions partially offset by reversal of $2.0
million of income tax provisions and related accrued interest.
Discontinued operations for the fourth quarter of 1996 includes $0.6
million of after-tax charges related to adjustments of estimated warranty
expenses.
<PAGE>
OSHKOSH TRUCK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Fiscal Year 1997 Compared to Fiscal Year 1996
Oshkosh Truck Corporation (the company) reported net income of $10.0
million, or $1.18 per share, on sales of $683.2 million for the year ended
September 30, 1997, compared to a net loss of $3.1 million, or $0.35 per
share, on sales of $413.5 million for the year ended September 30, 1996.
The fiscal 1997 results include a full year of sales and earnings of
Pierce Manufacturing Inc. (Pierce), a leading manufacturer and marketer of
fire trucks and other fire apparatus in the U.S., which was acquired on
September 18, 1996 (see Acquisitions). The fiscal 1996 results were
adversely affected by after-tax charges of $11.3 million, including $3.2
million related to a defense subcontract to Steeltech Manufacturing, Inc.
(Steeltech), $3.4 million associated with the company's Mexican bus
affiliates, and warranty and other related costs of $4.7 million. In
fiscal 1996, the company also recognized after-tax benefits of $2.0
million on the reversal of income tax provisions and related accrued
interest.
Sales of both commercial and defense products increased in fiscal 1997
compared to fiscal 1996. Commercial sales in fiscal 1997 were $394.6
million, an increase of $232.6 million, or 143.6% from 1996, principally
due to inclusion of a full year of Pierce sales in fiscal 1997.
Commercial export sales totaled $20.7 million and $20.4 million,
respectively, in fiscal 1997 and fiscal 1996. Sales of defense products
totaled $288.6 million in fiscal 1997, an increase of $37.2 million, or
14.8%, compared to fiscal 1996. The increase in defense sales is
primarily due to an increase in sales of ISO-Compatible Palletized
Flatracks (IPF), which are being produced by Steeltech, from $8.7 million
in fiscal 1996 to $41.4 million in fiscal 1997. Defense export sales also
increased to $16.6 million in fiscal 1997 compared to $2.1 million in
fiscal 1996.
Gross income in fiscal 1997 totaled $88.8 million, or 13.0% of sales,
compared to $35.1 million, or 8.5% of sales, in fiscal 1996. The increase
in gross income in fiscal 1997 was principally due to increased sales
volume as a result of the acquisition of Pierce. In addition, fiscal 1996
gross income was reduced by pre-tax charges of $5.1 million related to
production delays and cost overruns associated with the IPF subcontract to
Steeltech and increased warranty and other related costs of $5.5 million
(pre-tax).
Operating expenses totaled $60.1 million, or 8.8% of sales, in fiscal 1997
compared to $38.7 million, or 9.4% of sales, in fiscal 1996. The increase
in operating expenses in fiscal 1997 related principally to the operating
expenses of Pierce and amortization of goodwill and other intangible
assets associated with the acquisition of Pierce. The company recognized
pre-tax charges of $3.2 million in fiscal 1996 to write off its investment
in Steeltech and to write off its remaining investments and advances
associated with its Mexican bus affiliates due to prolonged weakness in
the Mexican economy and continuing high losses and high leverage reported
by the Mexican affiliates.
Interest expense increased to $12.7 million in fiscal 1997 compared to
$0.9 million in fiscal 1996 as a result of the financing for the Pierce
acquisition (see Liquidity and Capital Resources).
Miscellaneous expense was $0.3 million in fiscal 1997 compared to
miscellaneous income of $1.5 million in fiscal 1996. The miscellaneous
income in fiscal 1996 arose primarily from the reversal of accrued
interest related to income taxes.
The provision for income taxes in fiscal 1997 was $6.5 million, or 39.4%
of pre-tax income, compared to a credit for income taxes of $1.7 million
in fiscal 1996. Fiscal 1997 and fiscal 1996 benefited from the reversal
of $0.9 million and $1.0 million, respectively, of income tax provisions
recognized in earlier periods. In addition, the effective income tax rate
in fiscal 1997 was adversely affected by non-deductible goodwill of $2.6
million arising from the Pierce acquisition.
The $2.9 million after-tax loss from discontinued operations ($4.7 million
pre-tax) in fiscal 1996 resulted from the write-off of receivables of $2.6
million (pre-tax) related to the company's Mexican bus affiliates and from
a $2.1 million pre-tax charge for additional warranty and other related
costs with respect to the company's former U.S. chassis business which was
sold in June 1995.
Fiscal Year 1996 Compared to Fiscal Year 1995
The company reported a net loss of $3.1 million, or $0.35 per share, on
sales of $413.5 million for the year ended September 30, 1996, compared to
net income of $9.2 million, or $1.04 per share, on sales of $438.6 million
for the year ended September 30, 1995. The fiscal 1996 results were
adversely affected by after-tax charges of $11.3 million, including $3.2
million related to Steeltech, $3.4 million associated with the company's
Mexican bus affiliates, and warranty and other related costs of $4.7
million. The company also recognized after-tax benefits of $2.0 million
on the reversal of income tax provisions and related accrued interest in
fiscal 1996. During the third quarter of fiscal 1995, the company sold
its chassis manufacturing business in the U.S. and its interest in a joint
venture in Mexico producing chassis for the Mexican market to Freightliner
Corporation (Freightliner). The activities of these businesses are
reported as discontinued operations and resulted in a charge to income in
fiscal 1995. In fiscal 1996, further after-tax charges of $1.2 million
were reported with respect to warranty and other related costs of the
discontinued operations. The results of Pierce from the date of
acquisition to September 30, 1996, which were not material, have been
included in the consolidated results of the company.
Sales of both commercial and defense products declined in fiscal 1996
compared to fiscal 1995. Commercial sales in fiscal 1996 decreased $14.8
million, or 8.4%, from fiscal 1995 to $162.0 million, primarily due to a
decline in sales of commercial van trailers of $31.7 million. Sales of
all other commercial product lines increased in fiscal 1996. Commercial
export sales totaled $20.4 million and $17.5 million, respectively, in
fiscal 1996 and fiscal 1995. Sales of defense products totaled $251.5
million in fiscal 1996, a decrease of $10.3 million, or 3.9%, compared to
fiscal 1995. The decrease in defense sales was a result of delays in
production of IPF's. Defense export sales were $2.1 million in fiscal
1996 compared to $1.6 million in fiscal 1995.
Gross income in fiscal 1996 totaled $35.1 million, or 8.5% of sales,
compared to $54.0 million, or 12.3%, of sales in fiscal 1995. Fiscal 1996
margins were reduced by pre-tax charges of $5.1 million related to
production delays and cost overruns associated with the IPF subcontract to
Steeltech, increased warranty and other related costs of $5.5 million
(pre-tax), and lower volume.
Operating expenses totaled $38.7 million, or 9.4% of sales, in fiscal 1996
compared to $34.7 million, or 7.9% of sales, in fiscal 1995. The company
recognized pre-tax charges of $3.2 million in fiscal 1996 to write off its
investment in Steeltech and to write off its remaining investments and
advances associated with its Mexican bus affiliates.
Miscellaneous income increased to $1.5 million in fiscal 1996 compared to
miscellaneous expense of $0.5 million in fiscal 1995 as a result of the
reversal of accrued interest related to income taxes in fiscal 1996.
The credit for income taxes totaled $1.7 million in fiscal 1996,
benefiting from the reversal of $1.0 million in income tax provisions
recognized in earlier periods, compared to a provision for income taxes of
$7.3 million in fiscal 1995.
The $2.9 million after-tax loss from discontinued operations ($4.7 million
pre-tax) in fiscal 1996 resulted from the write-off of receivables of $2.6
million (pre-tax) related to the company's Mexican bus affiliates and from
a $2.1 million pre-tax charge for additional warranty and other related
costs with respect to the company's former U.S. chassis business which was
sold in June 1995. The $2.4 million after-tax loss from discontinued
operations in fiscal 1995 reflects losses on the sale of the company's
former U.S. chassis business and from the sale of an interest in a former
Mexican bus affiliate.
Acquisitions
On September 18, 1996, the company acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire apparatus in the U.S. The acquisition price of
$156.9 million, including acquisition costs and net of cash acquired, was
financed from borrowings under a bank credit facility. On November 9,
1995, the company through its wholly-owned subsidiary, Summit Performance
Systems, Inc. (Summit), acquired the inventory, land, buildings, machinery
and equipment, and technology of Friesz Manufacturing Company (Friesz), a
manufacturer of concrete mixer systems and related aftermarket replacement
parts, from available cash for $3.9 million (see Subsequent Event).
Financial Condition
Year Ended September 30, 1997
During fiscal 1997, cash increased $23.1 million. Cash provided from
operating activities of $65.8 million was used primarily to fund $6.3
million of capital additions, $1.7 million of payments related to
discontinued operations, $22.9 million of long-term debt payments, $6.5
million of purchases of common stock and common stock warrants (net of
stock option exercise proceeds), and $4.2 million of dividends.
Year Ended September 30, 1996
During fiscal 1996, cash decreased $29.6 million. The acquisitions of
Pierce and Friesz for $160.8 million, cash used for operating activities
of $16.2 million, capital additions of $5.4 million, stock repurchases of
$5.4 million and dividends of $4.4 million, were funded principally from
long-term borrowings of $157.9 million, from available cash and from cash
provided from discontinued operations of $4.7 million. Cash was used for
operating activities in fiscal 1996 due to higher working capital
requirements associated with sales in the fourth quarter of fiscal 1996
and first quarter of fiscal 1997.
Liquidity and Capital Resources
The following contains forward looking statements, including statements
that include the words "believes" and "expects" or words of similar import
with reference to the company. These statements are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from those described in any such statement.
The company's principal uses of cash for the next several years will be
interest and principal payments on acquisition indebtedness, capital
expenditures, dividends, and potentially further acquisitions.
On September 18, 1996, the company entered into a bank credit agreement
(the Bank Credit Agreement) to finance the acquisition of Pierce and to
refinance a previous revolving credit facility. The Bank Credit Agreement
consists of a $150 million term loan which requires annual principal
payments of $15 million through fiscal 2002 and a final payment of $60
million on September 30, 2003, and a $50 million revolving credit facility
for working capital purposes which expires on September 30, 1999. Through
December 8, 1997, the company has made the $15 million principal payments
due in September 1997 and 1998, and paid another $25 million which will be
prorated against the principal payments required in fiscal 1999 through
fiscal 2003. At September 30, 1997, $3.0 million of standby letters of
credit reduced available capacity under the revolving credit facility to
$47.0 million. The total of all term loan and revolving credit facility
borrowings, excluding letters of credit, must be reduced to or below
$145.0 million and $130.0 million for 60 consecutive days in fiscal 1998
and 1999, respectively.
The Bank Credit Agreement limits capital expenditures to $15 million
annually. Capital expenditures are projected to approximate $8 to $10
million annually for the next several years. The Bank Credit Agreement
also restricts other corporate activities as described in Note 4 to the
audited consolidated financial statements. The company believes that such
limitations should not impair its future operating activities.
The company believes its internally generated cash flow, supplemented by
U.S. Government progress payments when applicable and borrowings available
under the Bank Credit Agreement will be adequate to meet working capital
and other operating and capital requirements of the company during fiscal
1998. Substantial additional borrowings beyond those available under the
Bank Credit Agreement would be required to complete the acquisition
described under Subsequent Event.
The company is dependent on its sales of defense products to the U.S.
Government, which represented $288.6 million (42.2%) and $251.5 million
(60.8%) of total sales during fiscal 1997 and fiscal 1996, respectively.
Substantial decreases in the company's level of defense business from the
current level could have an adverse effect on the company's profitability.
The company expects fiscal 1998 sales to the U.S. Government to decrease
$20 to $30 million from fiscal 1997 levels, although actual sales could
vary based on changes in the federal budget, international sales, and
other factors. Accordingly, it will be necessary for the company to
reduce its fixed costs to maintain the profitability of its defense
business at fiscal 1997 levels.
On May 2, 1997, the company and Freightliner formally terminated a
strategic alliance formed on June 2, 1995. The company repurchased from
Freightliner 350,000 shares of its Common Stock and 1,250,000 warrants for
the purchase of additional shares of Common Stock for a total of $6.8
million. The company and Freightliner will continue to supply each other
with parts and components.
Backlog
The company's backlog at fiscal year-end 1997 was $361 million, compared
to $433 million at year-end 1996. The backlog at fiscal year-end 1997
includes $205 million with respect to U.S. Government contracts, $120
million related to Pierce and the remainder relates to other commercial
products. The $72 million decrease in the backlog from year-end 1996 to
year-end 1997 is primarily due to a $67 million decrease in the backlog
related to U.S. Government contracts. Approximately 99% of the company's
backlog pertains to fiscal 1998 business. Virtually all the company's
revenues are derived from customer orders prior to commencing production.
Stock Buyback
In July 1995, the company's board of directors authorized the repurchase
of up to 1,000,000 shares of Common Stock. As of September 30, 1997 and
1996, the company had purchased 461,535 shares under this program at a
cost of $6.6 million.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share," which is required to be adopted
effective for both interim and annual financial statements for periods
ending after December 15, 1997. Among other provisions, the dilutive
effect of stock options must be excluded under the new requirements for
calculating basic earnings per share, which will replace primary earnings
per share. This change is not expected to materially impact the company's
earnings per share calculations.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes the
standards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains, and losses) as part of a full set
of financial statements. This statement requires that all elements of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The
statement is effective for fiscal years beginning after December 15, 1997.
Since this statement applies only to the presentation of comprehensive
income, it will not have any impact on the company's results of
operations, financial position or cash flows.
In June 1997, the Financial Accounting Standards Board also issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 establishes the standards for the manner in
which public enterprises are required to report financial and descriptive
information about their operating segments. The statement defines
operating segments as components of an enterprise for which separate
financial information is available and evaluated regularly as a means for
assessing segment performance and allocating resources to segments. A
measure of profit or loss, total assets, and other related information are
required to be disclosed for each operating segment. In addition, this
statement requires the annual disclosure of information concerning
revenues derived from the enterprise's products or services, countries in
which it earns revenue or holds assets, and major customers. The
statement is also effective for fiscal years beginning after December 15,
1997. The adoption of SFAS No. 131 will not affect the company's results
of operations or financial position, but will affect the disclosure of
segment information.
Subsequent Event
On December 8, 1997, the company announced that it had agreed to acquire
McNeilus Companies, Inc. (McNeilus), a $300-million manufacturer and
marketer of refuse and recycling truck bodies, rear-discharge concrete
mixers, and ready-mix batch plants. The total purchase cost for all
McNeilus stock and related non-compete and ancillary agreements is $250
million in cash. The transaction is subject to the approval of the
appropriate governmental authorities and is expected to close in the first
quarter of calendar 1998.
Under certain conditions, if the acquisition is not consummated, the
company may be required to pay McNeilus a fee of $10 million, and
conversely, McNeilus may be required to pay a $10 million fee to the
company.
<PAGE>
Oshkosh Truck Corporation
Consolidated Statements of Income (Loss)
Years ended September 30,
(In thousands, except per share amounts)
1997 1996 1995
Continuing operations:
Net sales $683,234 $413,455 $438,557
Cost of sales 594,390 378,376 384,579
-------- -------- --------
Gross income 88,844 35,079 53,978
Operating expenses:
Selling, general and
administrative 47,742 32,205 29,242
Engineering, research and
development 7,847 6,304 5,443
Amortization of goodwill and
other intangibles 4,470 171 ---
-------- -------- --------
Total operating expenses 60,059 38,680 34,685
-------- -------- --------
Income (loss) from operations 28,785 (3,601) 19,293
Other income (expense):
Interest expense (12,722) (929) (679)
Interest income 717 1,040 774
Miscellaneous, net (278) 1,508 (466)
-------- -------- --------
(12,283) 1,619 (371)
-------- -------- --------
Income (loss) from continuing
operations before income taxes 16,502 (1,982) 18,922
Provision (credit) for income
taxes 6,496 (1,741) 7,285
-------- -------- --------
Income (loss) from continuing
operations 10,006 (241) 11,637
Discontinued operations:
Loss from discontinued
operations, net of income
tax benefit of $1,623 --- --- (3,137)
Gain (loss) on disposal of
operations, net of
income tax benefit of $1,827
in 1996 and $357 in 1995 --- (2,859) 716
-------- -------- --------
--- (2,859) (2,421)
-------- -------- --------
Net income (loss) $10,006 $(3,100) $9,216
======== ======== ========
Earnings (loss) per common share:
Continuing operations $1.18 $(.03) $1.32
Discontinued operations --- (.32) (.28)
-------- -------- --------
Net income (loss) $1.18 $(.35) $1.04
======== ======== ========
See accompanying notes.
<PAGE>
Oshkosh Truck Corporation
Consolidated Balance Sheets
September 30,
(In thousands)
1997 1996
Assets
Current assets:
Cash and cash equivalents $23,219 $ 127
Receivables, net 81,235 76,624
Inventories 76,497 106,289
Prepaid expenses 3,405 3,619
Refundable income taxes --- 6,483
Deferred income taxes 9,479 7,055
------- --------
Total current assets 193,835 200,197
Deferred charges 1,067 2,645
Other long-term assets 6,660 7,834
Property, plant and equipment:
Land 7,172 7,131
Buildings 42,220 40,421
Machinery and equipment 78,270 77,485
------- -------
127,662 125,037
Less accumulated depreciation (72,174) (67,002)
------- --------
Net property, plant and
equipment 55,488 58,035
Goodwill and other intangible assets,
net 163,344 166,450
------- -------
Total assets $420,394 $435,161
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $48,220 $ 49,178
Customer advances 30,124 27,793
Payroll-related obligations 15,157 12,843
Accrued warranty 12,320 8,942
Other current liabilities 21,365 16,997
Net current liabilities of
discontinued operations 1,536 1,975
Current maturities of long-term debt 15,000 15,000
------- -------
Total current liabilities 143,722 132,728
Long-term debt 120,000 142,882
Postretirement benefit obligations 10,147 9,517
Other long-term liabilities 1,811 1,843
Net long-term liabilities of
discontinued operations 1,362 2,581
Deferred income taxes 22,452 24,008
Shareholders' equity:
Class A Common Stock 4 4
Common Stock 89 89
Paid-in capital 13,591 16,059
Retained earnings 120,085 114,246
------- -------
133,769 130,398
Cost of Common Stock in treasury (12,869) (8,796)
------- --------
Total shareholders' equity 120,900 121,602
------- -------
Total liabilities and shareholders'
equity $420,394 $435,161
======= =======
See accompanying notes.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Years ended September 30,
(In thousands, except share and per share amounts)
Pension
Common Paid-In Retained Treasury Liability
Stock Capital Earnings Stock Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 $90 $7,623 $116,890 $(2,591) $(454) $121,558
Net income --- --- 9,216 --- --- 9,216
Cash dividends:
Class A Common Stock
($.435 per share) --- --- (191) --- --- (191)
Common Stock
($.500 per share) --- --- (4,218) --- --- (4,218)
Sale of 350,000 shares of
Common Stock 3 5,247 --- --- --- 5,250
Sale of 1,250,000 stock
warrants --- 4,187 --- --- --- 4,187
Common Stock issuance costs
and cost of stock
restriction agreement --- (863) --- --- --- (863)
Purchase of Common Stock for
treasury --- --- --- (933) --- (933)
Exercise of stock options --- 12 --- 121 --- 133
Incentive compensation awards --- 327 --- --- --- 32
Pension liability adjustment --- --- --- --- (1,053) (1,053)
------ ------ ------- ------- ------- -------
Balance at September 30, 1995 93 16,533 121,697 (3,403) (1,507) 133,413
Net loss --- --- (3,100) --- --- (3,100)
Cash dividends:
Class A Common Stock
($.435 per share) --- --- (177) --- --- (177)
Common Stock
($.500 per share) --- --- (4,174) --- --- (4,174)
Purchase of Common Stock for
treasury --- --- --- (5,618) --- (5,618)
Exercise of stock options --- 43 --- 225 --- 268
Termination of incentive
compensation awards --- (517) --- --- --- (517)
Pension liability adjustment --- --- --- --- 1,507 1,507
------ ------ ------- ------- ------- -------
Balance at September 30, 1996 93 16,059 114,246 (8,796) --- 121,602
Net income --- --- 10,006 --- --- 10,006
Cash dividends:
Class A Common Stock
($.435 per share) --- --- (177) --- --- (177)
Common Stock
($.500 per share) --- --- (3,990) --- --- (3,990)
Purchase of Common Stock for
treasury --- --- --- (4,246) --- (4,246)
Purchase of 1,250,000 stock
warrants --- (2,504) --- --- --- (2,504)
Exercise of stock options --- 36 --- 173 --- 209
------ ------ ------- ------- ------- -------
Balance at September 30, 1997 $93 $13,591 $120,085 $(12,869) $ --- $120,900
====== ====== ======= ======= ======= =======
See accompanying notes.
<PAGE>
Oshkosh Truck Corporation
Consolidated Statements of Cash Flows
Years ended September 30,
(In thousands)
1997 1996 1995
Operating activities:
Net income (loss) from continuing
operations $10,006 $(241) $11,637
Depreciation and amortization 14,070 8,798 8,409
Write-off of investments 200 4,125 ---
Deferred income taxes (3,980) (1,381) 2,577
(Gain) loss on disposal of
property, plant and equipment (43) 77 (21)
Changes in operating assets and
liabilities:
Receivables (4,611) (10,648) (4,349)
Inventories 29,792 (25,071) (809)
Prepaid expenses 214 469 (540)
Deferred charges 1,578 333 (94)
Accounts payable (958) 13,314 (4,314)
Customer advances 2,331 930 (1,887)
Income taxes 7,446 (5,268) 636
Payroll-related obligations 2,314 213 313
Accrued warranty 3,378 2,094 (639)
Other current liabilities 3,447 (4,646) 11
Other long-term liabilities 598 665 (4,764)
------- ------- -------
Net cash provided from
(used for) operating
activities 65,782 (16,237) 6,166
Investing activities:
Acquisitions of businesses, net of
cash acquired --- (160,838) ---
Additions to property, plant and
equipment (6,263) (5,355) (5,347)
Proceeds from sale of property,
plant and equipment 395 2,086 114
Increase in other long-term assets (1,532) (2,124) (937)
------- ------- --------
Net cash used for investing
activities (7,400) (166,231) (6,170)
Net cash provided from (used for)
discontinued operations (1,658) 4,743 10,482
Financing activities:
Net borrowings (repayments) of
long-term debt (22,882) 157,882 ---
Sale of Common Stock and Common
Stock warrants, net of issuance
costs --- --- 8,574
Purchase of Common Stock, Common
Stock warrants and proceeds from
exercise of stock options, net (6,541) (5,350) (800)
Dividends paid (4,209) (4,396) (4,372)
------- ------- -------
Net cash provided from (used
for) financing
activities (33,632) 148,136 3,402
------- ------- -------
Increase (decrease) in cash and
cash equivalents 23,092 (29,589) 13,880
Cash and cash equivalents at
beginning of year 127 29,716 15,836
------- ------- -------
Cash and cash equivalents at end of
year $23,219 $127 $29,716
======= ======= =======
Supplemental disclosures:
Cash paid for interest:
Continuing operations $12,974 $538 $759
Discontinued operations --- --- 709
Cash paid for income taxes 2,998 3,116 2,114
See accompanying notes.
<PAGE>
Oshkosh Truck Corporation
Notes to Consolidated Financial Statements
September 30, 1997
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Operations - Oshkosh Truck Corporation and its wholly-owned subsidiaries
(the company) is a leading manufacturer of a wide variety of heavy-duty
specialized trucks. The company sells its products into three principal
markets - fire and emergency support, defense, and other commercial truck
markets. The company's fire and emergency support business is principally
conducted through its wholly-owned subsidiary, Pierce Manufacturing Inc.
(Pierce).
Principles of Consolidation and Presentation - The consolidated financial
statements include the accounts of Oshkosh Truck Corporation and all its
wholly-owned subsidiaries and are prepared in conformity with U.S.
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents - The company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents. Cash equivalents, consisting principally of commercial
paper, totaled $23,022 at September 30, 1997. The cost of these
securities, which are considered "available for sale" for financial
reporting purposes, approximates fair value at September 30, 1997.
Inventories - The company values its inventories at the lower of cost,
computed principally on the last-in, first-out (LIFO) method, or market.
Property, Plant and Equipment - Property, plant and equipment are recorded
at cost. Depreciation is provided over the estimated useful lives of the
respective assets principally on accelerated methods.
Deferred Charges - Deferred charges include certain engineering and
technical support costs incurred in connection with multi-year government
contracts. These costs are charged to cost of sales when the related
project is billable to the government, or are amortized to cost of sales
as base units are delivered under the related contracts.
Other Long-Term Assets - Other long-term assets include capitalized
software and related costs which are amortized on a straight-line method
over a three to five-year period, deferred financing costs which are
amortized to interest expense over the term of the debt, prepaid funding
of pension costs and certain investments. During fiscal 1996, the company
wrote off its $3,025 investment in a Mexican bus manufacturer, a $200
investment in Steeltech Manufacturing, Inc. (Steeltech) and a $900
investment in a joint venture which leases equipment to Steeltech (see
Note 11).
Goodwill and Other Intangible Assets - The cost of goodwill and other
intangible assets is amortized on a straight-line basis over the estimated
periods benefited ranging from 13 to 40 years. The realizability of
goodwill and other intangibles is evaluated periodically as events or
circumstances indicate a possible impairment. Such evaluations are based
on various analyses, including cash flow and profitability projections, to
determine the ability of the company to recover their carrying amounts.
The analyses necessarily involve significant judgment to evaluate the
capacity of acquired businesses to perform within projections.
Customer Advances - Customer advances principally represent amounts
received in advance of the completion of a fire apparatus vehicle.
Certain of these advances bear interest at variable rates approximating
the prime rate.
Revenue Recognition - Sales under fixed-price defense contracts are
recorded as units are accepted by the government. Change orders are not
invoiced until agreed upon by the government. Recognition of profit on
change orders and on contracts which do not involve fixed prices is based
upon estimates which may be revised during the terms of the contracts.
Sales to commercial customers are recorded when the goods or services are
billable at time of shipment or delivery of the trucks.
Research and Development- Research and development costs are charged to
expense as incurred and amounted to approximately $7,847, $6,304, and
$5,443 for continuing operations during fiscal 1997, 1996, and 1995,
respectively.
Warranty - Provisions for estimated warranty and other related costs are
recorded at the time of sale and are periodically adjusted to reflect
actual experience. Amounts expensed with respect to continuing operations
in fiscal 1997, 1996, and 1995 were $9,658, $7,741, and $4,518,
respectively.
Income Taxes - Deferred income taxes are provided to recognize temporary
differences between the financial reporting basis and the income tax basis
of the company's assets and liabilities using currently enacted tax rates
and laws.
Fair Values - The carrying amounts of accounts receivable and payable and
long-term debt approximated fair value as of September 30, 1997 and 1996.
Environmental Remediation Costs - Statement of Position 96-1
"Environmental Remediation Liabilities" (SOP 96-1) became effective for
the company in fiscal 1997. In accordance with SOP 96-1, the company
accrues for losses associated with environmental remediation obligations
when such losses are probable and reasonably estimable. Costs of future
expenditures for environmental remediation obligations are not discounted
to their present value. Recoveries of environmental remediation costs
from other parties are recorded as assets when their receipt is deemed
probable. The accruals are adjusted as further information develops or
circumstances change.
New Accounting Standards - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share," which is required to be adopted effective
for both interim and annual financial statements for periods ending after
December 15, 1997. Among other provisions, the dilutive effect of stock
options must be excluded under the new requirements for calculating basic
earnings per share, which will replace primary earnings per share. This
change is not expected to materially impact the company's earnings per
share calculations.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes the
standards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains, and losses) as part of a full set
of financial statements. This statement requires that all elements of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The
statement is effective for fiscal years beginning after December 15, 1997.
Since this statement applies only to the presentation of comprehensive
income, it will not have any impact on the company's results of
operations, financial position or cash flows.
In June 1997, the Financial Accounting Standards Board also issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 establishes the standards for the manner in
which public enterprises are required to report financial and descriptive
information about their operating segments. The statement defines
operating segments as components of an enterprise for which separate
financial information is available and evaluated regularly as a means for
assessing segment performance and allocating resources to segments. A
measure of profit or loss, total assets, and other related information are
required to be disclosed for each operating segment. In addition, this
statement requires the annual disclosure of information concerning
revenues derived from the enterprise's products or services, countries in
which it earns revenue or holds assets, and major customers. The
statement is also effective for fiscal years beginning after December 15,
1997. The adoption of SFAS No. 131 will not affect the company's results
of operations or financial position, but will affect the disclosure of
segment information.
Earnings (Loss) Per Share - Earnings (loss) per share is computed on the
basis of the weighted average number of shares of common stock outstanding
(8,502,166; 8,828,224; and 8,823,766 in fiscal 1997, 1996, and 1995,
respectively). Stock options, warrants and stock issuable under incentive
compensation awards were not dilutive in any of the years presented.
Reclassifications - Certain reclassifications have been made to the fiscal
1996 and 1995 financial statements to conform to the 1997 presentation.
2. Balance Sheet Information
1997 1996
Receivables
U.S. Government:
Amounts billed $34,399 $27,353
Amounts unbilled 1,782 4,918
------- -------
36,181 32,271
Commercial customers 45,603 41,510
Other 1,421 3,909
------- -------
83,205 77,690
Less allowance for doubtful accounts (1,970) (1,066)
------- -------
$81,235 $76,624
======= =======
The unbilled amounts represent estimated claims for government-ordered
changes which will be invoiced upon completion of negotiations and price
adjustment provisions which will be invoiced when they are agreed upon by
the government.
1997 1996
Inventories
Finished products $ 6,430 $ 15,208
Partially finished products 36,661 51,533
Raw materials 44,455 47,580
------- -------
Inventories at FIFO cost 87,546 114,321
Less: Progress payments on U.S.
Government contracts (2,988) --
Excess of FIFO cost over LIFO
cost (8,061) (8,032)
------- --------
$76,497 $106,289
======= ========
Title to all inventories related to government contracts which provide for
progress payments vests in the government to the extent of unliquidated
progress payments.
Goodwill and Other Intangible
Assets
Useful Lives 1997 1996
Goodwill 40 Years $103,887 $102,523
Distribution network 40 Years 53,000 53,000
Other 13-40 Years 11,098 11,098
------- -------
167,985 166,621
Less accumulated amortization (4,641) (171)
------- -------
$163,344 $166,450
======= =======
The increase in goodwill from 1996 to 1997 is due to finalization of
purchase accounting related to the Pierce acquisition.
3. Acquisitions
On September 18, 1996, the company acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire apparatus in the U.S. The acquisition price of
$156,926, including acquisition costs and net of cash acquired, was
financed from borrowings under a bank credit facility (see Note 4).
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the operating results of Pierce are included in the
company's consolidated statements of income (loss) since the date of
acquisition. The purchase price, including acquisition costs, was
allocated based on the estimated fair values of the assets acquired and
liabilities assumed at the date of the acquisition and was subsequently
adjusted during fiscal 1997. Approximately $62,000 of the purchase price
was allocated to the distribution network and other intangible assets. The
excess of the purchase price over the estimated fair value of net assets
acquired amounted to $103,887 which has been accounted for as goodwill.
Pro forma unaudited consolidated operating results of the company,
assuming Pierce had been acquired as of October 1, 1995 and 1994, are
summarized below:
1996 1995
Net sales $605,439 $618,555
Income (loss) from continuing (1,262) 7,699
Net income (loss) (4,121) 4,901
Earnings (loss) per share:
Continuing operations $ (0.14) $ 0.87
Net income (loss) (0.47) 0.56
These pro forma results have been prepared for informational purposes only
and include certain adjustments to depreciation expense related to
acquired plant and equipment, amortization expense arising from goodwill
and other intangible assets, interest expense on acquisition debt,
elimination of certain non-recurring expenses incurred by Pierce prior to
the acquisition, and the estimated related income tax effects of all such
adjustments. Anticipated efficiencies from the consolidation of Pierce's
manufacturing facilities and from the synergies related to the
consolidation of certain functions among Pierce and the company were not
fully determinable and therefore have been excluded from the amounts
included in the pro forma operating results. These pro forma results do
not purport to be indicative of the results of operations which would have
resulted had the combination been in effect as of October 1, 1995 and 1994
or of the future results of operations of the consolidated entities.
On November 9, 1995, the company through its wholly-owned subsidiary,
Summit Performance Systems, Inc. (Summit), acquired the land, buildings,
machinery and equipment, and technology of Friesz Manufacturing Company
(Friesz) from available cash for $3,912. Friesz was engaged in the
manufacture and sale of concrete mixer systems and related aftermarket
replacement parts. Approximately $2,150 of the purchase price has been
allocated to intangible assets, principally designs and related
technology. The acquisition was accounted for using the purchase method
of accounting and, accordingly, the operating results of Friesz are
included in the company's consolidated statements of income (loss) since
the date of acquisition. Had the acquisition occurred as of October 1,
1995 or 1994, there would have been no material pro forma effects on the
net sales, net income (loss) or earnings (loss) per share of the company
in fiscal 1996 or 1995.
4. Long-Term Debt
On September 18, 1996, the company entered into a bank credit agreement
(the Bank Credit Agreement) to finance the acquisition of Pierce (see Note
3) and to refinance a previous revolving credit facility. The Bank Credit
Agreement consists of a $150,000 term loan which requires annual principal
payments of $15,000 through fiscal 2002 and a final payment of $60,000 on
September 30, 2003, and a $50,000 revolving credit facility for working
capital purposes which expires on September 30, 1999. The total of all
term loan and revolving credit facility borrowings, excluding letters of
credit, must be reduced to or below $145,000, and $130,000 for 60
consecutive days in fiscal 1998, and 1999, respectively.
Interest on the term loan and the revolving credit facility is payable at
prime or at the applicable Eurodollar rate plus 2.25% and 1.875%,
respectively, subject to adjustment if certain financial criteria are met
(weighted average rate of 7.98% and zero, respectively, at September 30,
1997, and 8.25% and 8.25%, respectively, at September 30, 1996).
The company is charged a 0.25% fee with respect to any unused balance
under its revolving credit facility, and a 1.875% fee with respect to any
letters of credit issued under the revolving credit facility. These fees
are subject to adjustment if certain financial criteria are met. At
September 30, 1997, $2,962 of standby letters of credit reduced available
capacity under the revolving credit facility to $47,038.
At September 30, 1997, substantially all the tangible and intangible
assets of the company are pledged as collateral under the Bank Credit
Agreement. Among other restrictions, the Bank Credit Agreement: (1)
limits payments of dividends, purchases of the company's stock, and
capital expenditures; (2) requires that certain financial ratios be
maintained at prescribed levels; (3) restricts the ability of the company
to make additional borrowings, or to consolidate, merge or otherwise
fundamentally change the ownership of the company; and (4) limits
investments, dispositions of assets and guarantees of indebtedness. The
company believes that such limitations should not impair its future
operating activities.
The aggregate annual maturities of long-term debt for the five years
succeeding September 30, 1997, are as follows: 1998 - $15,000; 1999 -
$15,000; 2000 - $15,000; 2001 - $15,000; and 2002 - $15,000. From October
1, 1997 through December 8, 1997, the company has paid from available cash
the $15,000 mandatory principal payment due September 30, 1998 and paid an
additional $25,000 on the term loan which will be applied on a pro rata
basis to the principal payments due in the fiscal years of 1999 to 2003.
5. Income Taxes
Income Tax Provision
1997 1996 1995
Current:
Federal $8,236 $2,988 $5,572
State 1,866 368 873
------ ------ ------
Total current 10,102 3,356 6,445
Deferred:
Federal (3,271) (4,630) 763
State (335) (467) 77
Total deferred (3,606) (5,097) 840
------ ------- -------
$6,496 $(1,741) $7,285
====== ======= =======
Effective Rate Reconciliation
1997 1996 1995
U.S. federal tax rate 35.0% (34.0)% 35.0%
State income taxes, net 6.0 (5.0) 3.5
Reduction of prior years' excess (5.5) (50.5) --
tax provisions
Foreign sales corporation (1.5) (5.2) (0.6)
Goodwill amortization 5.4 -- --
Other, net -- 6.9 0.6
----- ----- -----
39.4% (87.8)% 38.5%
===== ===== =====
Deferred Tax Assets and Liabilities
1997 1996
Deferred tax assets:
Other current liabilities $5,277 $6,625
Accrued warranty 4,439 3,194
Postretirement benefit obligations 3,916 3,674
Investments 1,887 1,801
Payroll-related obligations 1,846 818
Other 729 419
------- -------
Total deferred tax assets 18,094 16,531
Deferred tax liabilities:
Intangible assets 23,402 24,150
Property, plant and equipment 4,175 5,972
Inventories 2,341 1,922
Deferred charges 1,091 1,091
Other 58 349
------- -------
Total deferred tax liabilities 31,067 33,484
-------- --------
Net deferred tax liability $(12,973) $(16,953)
======== ========
The company has not recorded a valuation allowance with respect to any
deferred tax assets.
6. Employee Benefit Plans
The company has defined benefit pension plans covering substantially all
employees. The plans provide benefits based on compensation, years of
service and date of birth. The company's policy is to fund the plans in
amounts which comply with contribution limits imposed by law.
Components of net periodic pension cost for these plans for fiscal 1997,
1996, and 1995, including costs of discontinued operations which are not
significant in any year presented but excluding Pierce pension costs for
1996 due to the proximity of its acquisition to the company's fiscal year
end, are as follows:
1997 1996 1995
Service cost benefits earned during
year $1,387 $1,149 $1,140
Interest cost on projected benefit
obligations 2,439 1,979 1,862
Actual return on plan assets (8,789) (3,347) (2,505)
Net amortization and deferral 6,123 1,232 438
------ ------ ------
Net periodic pension cost $1,160 $1,013 $935
====== ====== ======
The following table summarizes the funded status of the pension plans and
the amounts recognized in the company's consolidated balance sheets at
September 30, 1997 and 1996:
1997 1996
Actuarial present value of benefit
obligations:
Vested $29,334 $26,009
Nonvested 694 602
------- -------
Accumulated benefit obligations 30,028 26,611
Adjustment for projected benefit
obligations 4,759 4,731
------- --------
Projected benefit obligations 34,787 31,342
Plan assets at fair value 39,556 31,089
------- --------
Plan assets in excess of (less than)
projected benefit obligations 4,769 (253)
Unrecognized net transition asset (594) (661)
Unrecognized net (gain) loss (1,538) 4,811
Unrecognized prior service cost 1,229 345
------ ------
Prepaid pension asset $3,866 $4,242
====== ======
The plans' assets are comprised of investments in commingled equity and
fixed income funds and individually managed equity portfolios.
Actuarial assumptions are as follows:
1997 1996 1995
Discount rate 7.75% 7.75% 7.50%
Rate of increase in compensation 4.50 4.50 4.50
Expected long-term rate of return
on plan assets 9.25 9.25 9.25
In addition to providing pension benefits for the majority of its
employees, the company provides health benefits to certain of its retirees
and their eligible spouses. Approximately 50% of the company's employees
become eligible for these benefits if they reach normal retirement age
while working for the company.
The following table summarizes the status of the postretirement benefit
plan and the amounts recognized in the company's consolidated balance
sheets at September 30, 1997 and 1996:
1997 1996
Postretirement benefit obligations:
Retirees $2,828 $2,929
Fully eligible active participants 522 397
Other active participants 5,647 4,865
------- -------
8,997 8,191
Unrecognized net gain 1,150 1,326
------- -------
Postretirement benefit obligations $10,147 $9,517
======= =======
Net periodic postretirement benefit cost for fiscal 1997, 1996, and 1995,
including discontinued operations which is not significant in any year
presented, includes the following components:
1997 1996 1995
Service cost $366 $353 $372
Interest cost on the accumulated
postretirement benefit obligation 613 580 610
Amortization of unrecognized net gain (32) -- --
----- ----- -----
Net periodic postretirement benefit cost $947 $933 $982
===== ===== =====
Net change in postretirement benefit obligations includes the following:
1997 1996
Balance at beginning of year $9,517 $8,839
Benefits paid (317) (255)
Net periodic postretirement benefit cost 947 933
------- -------
Balance at end of year $10,147 $9,517
======= =======
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10.2% in fiscal 1997, declining to
6.5% in fiscal 2006. The weighted average discount rate used in
determining the postretirement benefit obligation was 7.75% in fiscal 1997
and 1996. If the health care cost trend rate was increased by 1%, the
postretirement benefit obligation at September 30, 1997 would increase by
$799 and net periodic postretirement benefit cost for fiscal 1997 would
increase by $107.
The company has defined contribution 401(k) plans covering substantially
all employees. The plans allow employees to defer 2% to 19% of their
income on a pre-tax basis. Each employee who elects to participate is
eligible to receive company matching contributions. Amounts expensed for
company matching contributions for continuing operations were $825, $401,
and $407 in fiscal 1997, 1996, and 1995, respectively.
7. Shareholders' Equity
The company is authorized to issue 1,000,000 shares of $.01 par value
Class A Common Stock of which 406,878 shares and 409,258 shares were
issued and outstanding at September 30, 1997 and 1996, respectively. The
company is authorized to issue 18,000,000 shares of $.01 par value Common
Stock. At September 30, 1997, 8,951,287 and 7,900,481 shares of Common
Stock were issued and outstanding, respectively. At September 30, 1996,
8,948,907 and 8,227,770 shares of Common Stock were issued and
outstanding, respectively. The company is also authorized to issue up to
2,000,000 shares of $.01 par value Preferred Stock, none of which were
issued or outstanding at September 30, 1997 or 1996.
On May 2, 1997, the company and Freightliner Corporation (Freightliner)
formally terminated a strategic alliance formed on June 2, 1995. The
company repurchased from Freightliner 350,000 shares of its Common Stock
and 1,250,000 warrants for the purchase of additional shares of Common
Stock for a total of $6,750. The company and Freightliner will continue
to supply each other with parts and components.
The company has a stock restriction agreement with two shareholders owning
the majority of the company's Class A Common Stock. The agreement is
intended to allow for an orderly transition of Class A Common Stock into
Common Stock. The agreement provides that at the time of death or
incapacity of the survivor of them, the two shareholders will exchange all
of their Class A Common Stock for Common Stock, and at that time, if not
earlier, will support an amendment to the Articles of Incorporation which
will provide for a mandatory conversion of all Class A Common Stock into
Common Stock.
Each share of Class A Common Stock is convertible into Common Stock on a
one-for-one basis. As of September 30, 1997, 406,878 shares of Common
Stock are reserved for the conversion of Class A Common Stock. In July
1995, the company authorized the buy back of up to one million shares of
the company's Common Stock. As of September 30, 1997 and 1996, the
company had purchased 461,535 shares of its Common Stock at an aggregate
cost of $6,551.
Dividends are required to be paid on both the Class A Common Stock and
Common Stock at any time that dividends are paid on either. Each share of
Common Stock is entitled to receive 115% of any dividend paid on each
share of Class A Common Stock, rounded up or down to the nearest $0.0025
per share.
Holders of the Common Stock have the right to elect or remove as a class
25% of the entire Board of Directors of the company rounded to the nearest
whole number of directors, but not less than one. Holders of Common Stock
are not entitled to vote on any other company matters, except as may be
required by law in connection with certain significant actions such as
certain mergers and amendments to the company's Articles of Incorporation,
and are entitled to one vote per share on all matters upon which they are
entitled to vote. Holders of Class A Common Stock are entitled to elect
the remaining directors (subject to any rights granted to any series of
Preferred Stock) and are entitled to one vote per share for the election
of directors and on all matters presented to the shareholders for vote.
The Common Stock shareholders are entitled to receive a liquidation
preference of $7.50 per share before any payment or distribution to
holders of the Class A Common Stock. Thereafter, holders of the Class A
Common Stock are entitled to receive $7.50 per share before any further
payment or distribution to holders of the Common Stock. Thereafter,
holders of the Class A Common Stock and Common Stock share on a pro rata
basis in all payments or distributions upon liquidation, dissolution or
winding up of the company.
8. Stock Option and Performance Share Award Plans
The company has reserved 756,071 shares of Common Stock at September 30,
1997 to provide for the exercise of outstanding stock options and
warrants, and the issuance of Common Stock under incentive compensation
awards. Under the 1990 Incentive Stock Plan for Key Employees (the Plan),
officers, other key employees and directors may be granted options to
purchase up to an aggregate of 825,000 shares of the company's Common
Stock at not less than the fair market value of such shares on the date of
grant. Participants may also be awarded grants of restricted stock under
the Plan. The Plan expires on April 9, 2000. Options become exercisable
ratably on the first, second and third anniversary of the date of grant.
Options to purchase shares expire not later than ten years and one month
after the grant of the option.
The following table summarizes the transactions of the Plan for the three
year period ended September 30, 1997:
Weighted
Number Average
of Exercise
Options Price
Unexercised options outstanding - 400,649 $10.22
Options granted 100,500 13.84
Options exercised (14,250) 9.31
Options forfeited or expired (9,831) 12.24
Unexercised options outstanding - 477,068 10.96
Options granted 14,500 14.68
Options exercised (24,515) 9.72
Options forfeited or expired (6,251) 12.58
Unexercised options outstanding - 460,802 11.12
Options granted 5,000 12.00
Options exercised (20,331) 10.34
Options forfeited or expired (7,570) 12.97
Unexercised options outstanding - 437,901 11.14
Price range $7.88 - $11.25
(weighted-average contractual 303,151 9.78
Price range $12.00 - $15.25
(weighted-average contractual 134,750 14.19
Exercisable options at September 30, 391,403 10.82
Shares available for grant at 318,170
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), became effective for the company in
fiscal 1997. As allowed by SFAS 123, the company has elected to continue
to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) in accounting for the Plan. Under
APB 25, the company does not recognize compensation expense on the
issuance of its stock options because the option terms are fixed and the
exercise price equals the market price of the underlying stock on the
grant date.
As required by SFAS 123, the company has determined the pro forma
information as if the company had accounted for stock options granted
since September 30, 1995, under the fair value method of SFAS 123. The
Black-Scholes option pricing model was used with the following weighted-
average assumptions: risk-free interest rates of 6.27% in 1997 and 5.39%
and 6.38% in 1996; dividend yield of 4.17% in 1997 and 3.60% and 3.28% in
1996; expected common stock market price volatility factor of .305; and a
weighted-average expected life of the options of six years. The weighted-
average fair value of options granted in 1997 and 1996 were $3.07 and
$4.08 per share, respectively. The pro forma effect of these options on
net earnings and earnings per share was not material. These pro forma
calculations only include the effects of 1996 and 1997 grants. As such,
the impacts are not necessarily indicative of the effects on reported net
income of future years.
9. Operating Leases
Total rental expense for plant and equipment charged to continuing
operations under noncancellable operating leases was $886, $797, and
$1,004 in fiscal 1997, 1996, and 1995, respectively. Minimum rental
payments due under operating leases for subsequent fiscal years are: 1998-
$937; 1999-$545; 2000-$212; 2001-$123; and 2002-$71.
Included in rental expense are charges of $128, $128, and $215 in fiscal
1997, 1996, and 1995, respectively, relating to leases between the company
and certain shareholders.
10. Discontinued Operations
On June 2, 1995, Freightliner acquired certain assets of the company's
motor home, bus and van chassis business. The consideration included cash
of $23,815 and the assumption by Freightliner of certain liabilities. The
assets sold to Freightliner consisted of inventories, property, plant and
equipment and the company's ownership interest in a Mexican chassis
manufacturer. The liabilities assumed by Freightliner included warranty
obligations related to previously produced chassis and industrial revenue
bonds that were secured by the underlying real estate. The disposition of
the chassis business has been accounted for as a discontinued operation.
Revenues of the chassis business for fiscal 1995 (through the date of
sale) were $55,804.
The net liabilities of the discontinued operations have been segregated in
the consolidated balance sheets. Details of such amounts at September 30,
1997 and 1996, are as follows:
1997 1996
Accrued warranty $1,352 $1,862
Other, net 184 113
------ -------
Net current liabilities of discontinued
operations $1,536 $1,975
====== =======
Accrued warranty $1,235 $2,181
Other, net 127 400
------ ------
Net long-term liabilities of discontinued
operations $1,362 $2,581
====== ======
In fiscal 1996, the company incurred charges totaling $2,623 arising from
the write-off of receivables and other obligations related to the
company's former joint venture in Mexico. In addition, in fiscal 1996,
the company recognized additional warranty and other related costs
totaling $2,063 with respect to the company's former U.S. chassis
business.
The company has allocated interest on the debt which was assumed by
Freightliner to discontinued operations. Interest expense included in
discontinued operations totaled $685 in fiscal 1995.
11. Contingencies, Significant Estimates and Concentrations
The company is engaged in litigation against Super Steel Products
Corporation (SSPC), the company's former supplier of mixer systems for
front-discharge concrete mixer trucks under a long-term supply contract .
SSPC sued the company in state court claiming the company breached the
contract. The company counterclaimed for repudiation of contract. On July
26, 1996, a jury returned a verdict for SSPC awarding damages totaling
$4,485. On October 10, 1996, the state court judge overturned the verdict
against the company, granted judgment for the company on its counterclaim,
and ordered a new trial for damages on the company's counterclaim. Both
SSPC and the company have appealed the state court judge's decision. The
Wisconsin Court of Appeals has agreed to hear the case and both the
company and SSPC have filed briefs in this matter.
The company currently is engaged in the arbitration of certain disputes
between the Oshkosh Florida Division and O.V. Containers, Inc., which
arose out of the performance of a contract to deliver 690 skeletal
container chassis. The arbitration is being conducted before a three-
member panel under the commercial dispute rules of the American
Arbitration Association, and is not expected to conclude before April,
1998. The company is vigorously contesting warranty and other claims made
against it, and has asserted substantial claims against O.V. Containers,
Inc. The outcome of these matters cannot be predicted at the present
time.
As part of its routine business operations, the company disposes of and
recycles or reclaims certain industrial waste materials, chemicals and
solvents at third party disposal and recycling facilities which are
licensed by appropriate governmental agencies. In some instances, these
facilities have been and may be designated by the United States
Environmental Protection Agency (EPA) or a state environmental agency for
remediation. Under the Comprehensive Environmental Response,
Compensation, and Liability Act (the Superfund law) and similar state
laws, each potentially responsible party (PRP) that contributed hazardous
substances may be jointly and severally liable for the costs associated
with cleaning up the site. Typically, PRPs negotiate a resolution with
the EPA and/or the state environmental agencies. PRPs also negotiate with
each other regarding allocation of the cleanup cost.
As to one such Superfund site, Pierce is one of 414 PRPs participating in
the costs of addressing the site and has been assigned an allocation share
of approximately 0.04%. Currently a remedial investigation/ feasibility
study is being completed, and as such, an estimate for the total cost of
the remediation of this site has not been made to date. However, based on
estimates and the assigned allocations, the company believes its liability
at the site will not be material and its share is adequately covered
through reserves established by the company at September 30, 1997. Actual
liability could vary based on results of the study, the resources of other
PRPs, and the company's final share of liability.
The company is addressing a regional trichloroethylene (TCE) groundwater
plume on the south side of Oshkosh, Wisconsin. The company believes there
may be multiple sources in the area. TCE was detected at the company's
North Plant facility with recent testing showing the highest
concentrations in a monitoring well located on the upgradient property
line. Because the investigation process is still ongoing, it is not
possible for the company to estimate its long-term total liability
associated with this issue at this time. Also, as part of the regional
TCE groundwater investigation, the company conducted a groundwater
investigation of a former landfill located on company property. The
landfill, acquired by the company in 1972, is approximately 2.0 acres in
size and is believed to have been used for the disposal of household
waste. Based on the investigation, the company does not believe the
landfill is one of the sources of the TCE contamination. Based upon
current knowledge, the company believes its liability associated with the
TCE issue will not be material and is adequately covered through reserves
established by the company at September 30, 1997. However, this may
change as investigations proceed by the company, other unrelated property
owners, and government entities .
The company is subject to other environmental matters and legal
proceedings and claims which arise in the ordinary course of business.
Although the final results of all such matters and claims cannot be
predicted with certainty, management believes that the ultimate resolution
of all such matters and claims, after taking into account the liabilities
accrued with respect to such matters and claims, will not have a material
adverse effect on the company's financial condition or results of
operations. Actual results could vary, among other things, due to the
uncertainties involved in litigation.
The company has guaranteed certain customers' obligations under deferred
payment contracts and lease purchase agreements totaling approximately
$4,178 at September 30, 1997. The company is also contingently liable
under bid, performance and specialty bonds totaling approximately $94,101
at September 30, 1997.
Provisions for estimated warranty and other related costs are recorded at
the time of sale and are periodically adjusted to reflect actual
experience. As of September 30, 1997 and 1996, the company has accrued
$12,320 and $8,942 for warranty claims. Certain warranty and other
related claims involve matters of dispute that ultimately are resolved by
negotiation, arbitration or litigation. Infrequently, a material warranty
issue can arise which is beyond the scope of the company's historical
experience. During fiscal 1997 and 1996, the company recorded warranty
and other related costs for matters beyond the company's historical
experience totaling $3,770 and $5,602, respectively, with respect to
continuing operations and $2,063 with respect to discontinued operations
in fiscal 1996 (see Note 10). It is reasonably possible that additional
warranty and other related claims could arise from disputes or other
matters beyond the scope of the company's historical experience.
The company subcontracted production under an $85,000 ISO-Compatible
Palletized Flatracks (IPF) contract for the U.S. Army to Steeltech, a
minority-owned firm, pursuant to Department of Defense regulations under
the IPF contract. Due to financial difficulties encountered by Steeltech,
the company advanced working capital requirements to Steeltech in fiscal
1995 and 1996. As a result of delays in the start-up of full-scale
production under the IPF contract, the company wrote off certain of its
advances and an investment in Steeltech totaling $3,300 in fiscal 1996.
Steeltech's IPF production passed first article testing in July 1996 and
production is expected to be completed in fiscal 1998. As of September
30, 1997 and 1996, the company had outstanding advances due from Steeltech
of $162 and $2,855, respectively. In fiscal 1996, the company also wrote
off an investment of $900 in a joint venture which leases equipment to
Steeltech and accrued $1,084 for the potential satisfaction of a guarantee
of 50% of the outstanding indebtedness of the joint venture. The company
is further contingently liable for Department of Defense progress payments
that have been advanced to Steeltech totaling $3,352 at September 30, 1997
($5,380 at September 30, 1996) in the event of incomplete performance
under the IPF contract. While management currently expects the company to
realize its remaining advances to Steeltech as of September 30, 1997 and
to avoid liability for progress payments advanced to Steeltech, it is
reasonably possible that the company could become liable for a portion of
such progress payments.
The company derives a significant portion of its revenue from the U.S.
Department of Defense, as follows:
1997 1996 1995
Defense:
U.S. Department of $272,042 $249,413 $260,112
Export 16,584 2,059 1,623
------- ------- -------
288,626 251,472 261,735
Commercial:
Domestic 373,946 141,540 159,326
Export 20,662 20,443 17,496
------- ------- -------
394,608 161,983 176,822
------- ------- -------
Net sales $683,234 $413,455 $438,557
======= ======= =======
U.S. Department of Defense sales include $17,723 and $58,855 in fiscal
1997 and 1996, respectively, for products sold internationally under the
Foreign Military Sales (FMS) Program. There were no sales under the FMS
Program in 1995.
Inherent in doing business with the U.S. Department of Defense are certain
risks, including technological changes and changes in levels of defense
spending. All U.S. Department of Defense contracts contain a provision
that they may be terminated at any time at the convenience of the
government. In such an event, the company is entitled to recover
allowable costs plus a reasonable profit earned to the date of
termination.
Various actions or claims have been asserted or may be asserted in the
future by the government against the company. A potential action by the
government against the company in connection with a grand jury
investigation was commenced in 1989. In 1996, the government discontinued
this investigation without any action against the company or its
employees, although a civil investigation is possible.
12. Subsequent Event
On December 8, 1997, the company announced that it had agreed to acquire
McNeilus Companies, Inc. (McNeilus), a $300-million manufacturer and
marketer of refuse and recycling truck bodies, rear-discharge concrete
mixers, and ready-mix batch plants. The total purchase cost for all
McNeilus stock and related non-compete and ancillary agreements is $250
million in cash. The transaction is subject to the approval of the
appropriate governmental authorities and is expected to close in the first
quarter of calendar 1998.
Under certain conditions, if the acquisition is not consummated, the
company may be required to pay McNeilus a fee of $10 million, and
conversely, McNeilus may be required to pay a $10 million fee to the
company.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheets of Oshkosh
Truck Corporation (the company) as of September 30, 1997 and 1996, and the
related consolidated statements of income (loss), shareholders' equity and
cash flows for each of the three years in the period ended September 30,
1997. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the
company at September 30, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the
period ended September 30, 1997, in conformity with generally accepted
accounting principles.
Milwaukee, Wisconsin
October 31, 1997, except for
Notes 4 and 12, as to which
the date is December 8, 1997
</TABLE>
EXHIBIT 21
Subsidiaries
State/other jurisdiction Other
Name of incorporation trade name
Pierce Manufacturing Inc. Wisconsin N/A
Summit Performance Systems, Inc. Wisconsin N/A
Oshkosh Truck Foreign
Sales Corporation Inc. U.S. Virgin Islands N/A
Dover Technologies Inc. Wisconsin N/A
Pierce Manufacturing
International Inc. Barbados N/A
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Oshkosh Truck Corporation of our report dated October 31, 1997,
except for Notes 4 and 12, as to which the date is December 8, 1997,
included in the 1997 Annual Report to Shareholders of Oshkosh Truck
Corporation.
Our audits also included the financial statement schedule of Oshkosh Truck
Corporation listed in Item 14(a). This schedule is the responsibility of
the company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects,
the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-38822 and No. 33-62687) pertaining to the
Oshkosh Truck Corporation 1990 Incentive Stock Plan of our report dated
October 31, 1997, except for Notes 4 and 12, as to which the date is
December 8, 1997, with respect to the consolidated financial statements
and schedule of Oshkosh Truck Corporation included in or incorporated by
reference in the Annual Report (Form 10-K) for the year ended September
30, 1997.
Ernst & Young LLP
Milwaukee, Wisconsin
December 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF OSHKOSH TRUCK CORPORATION AS
OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 23,219
<SECURITIES> 0
<RECEIVABLES> 83,205
<ALLOWANCES> 1,970
<INVENTORY> 76,497
<CURRENT-ASSETS> 193,835
<PP&E> 127,662
<DEPRECIATION> 72,124
<TOTAL-ASSETS> 420,394
<CURRENT-LIABILITIES> 143,722
<BONDS> 120,000
0
0
<COMMON> 93
<OTHER-SE> 120,807
<TOTAL-LIABILITY-AND-EQUITY> 420,394
<SALES> 683,234
<TOTAL-REVENUES> 683,234
<CGS> 594,390
<TOTAL-COSTS> 594,390
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 881
<INTEREST-EXPENSE> 12,722
<INCOME-PRETAX> 16,502
<INCOME-TAX> 6,496
<INCOME-CONTINUING> 10,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,006
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>