<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
<TABLE>
<S> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996).
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-24354
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _________ TO _________
</TABLE>
DORSEY TRAILERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 58-2110729
(State or jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
</TABLE>
2727 PACES FERRY ROAD
ONE PACES WEST, SUITE 1700
ATLANTA, GEORGIA
30339
(Address of principal executive offices)
(770) 438-9595
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
COMMON STOCK $.01 PAR VALUE
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].
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 27, 1997 was $6,345,060, based upon the closing price of
the Company's common stock as quoted on The Nasdaq Stock Market composite tape
on such date.
The number of shares outstanding of the registrant's common stock as of
March 28, 1997 was 4,997,422.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held April 22, 1997 are incorporated into this form 10-K Part III by
reference.
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<PAGE> 2
TABLE OF CONTENTS
DORSEY TRAILERS, INC.
FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PAGES
-----
<S> <C> <C>
PART I.
Item 1. Business.................................................... 1
Item 2. Properties and Insurance.................................... 4
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to Vote of Security Holders........... 5
PART II.
Item 5. Market for the Registrant's Common Stock and Related 5
Stockholder Matters.........................................
Item 6. Selected Financial and Operating Data....................... 5
Item 7 Management's Discussion and Analysis of Financial Condition 6
and Results of Operations...................................
Item 8. Financial Statements and Supplementary Data................. 11
Item 9. Changes in and Disagreement with Accountants on Accounting 11
and Financial Disclosure....................................
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 11
Item 11. Executive Compensation...................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and 12
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 12
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 12
8-K.........................................................
SIGNATURES.............................................................. 16
</TABLE>
<PAGE> 3
PART I
ITEM I - BUSINESS
Dorsey Trailers, Inc. ("the Company" or "Dorsey") designs, manufactures and
markets a broad line of high-quality, customized truck trailers, including
aluminum and steel dry freight trailers, refrigerated trailers, flatbed
trailers, package carrier trailers and dump trailers. The Company competes in
the customized segment of the truck trailer industry and sells to many large,
highly regarded and growth-oriented customers, including AAA Cooper
Transportation, Averitt Express, Inc., Builders Transport, Covenant Transport,
Landstar System, Roadway Package Service, Ryder Truck Rental, Inc., Salem
Leasing Corp., Shaw Industries, Southeastern Motor Lines, Tyson Foods, United
Parcel Service, U.S. Xpress and XTRA, Inc.
PRODUCTS
The Company's broad line of customized products includes:
- Aluminum and Steel Dry Freight Vans. These trailers are also known as
sheet and post trailers and are the trailers purchased by most segments of
the trucking industry. The Company produces both aluminum and steel
full-size vans, shorter "pup" vans that are used in doubles or triples
operation and piggybacks used in intermodal transportation.
- CargoGuard(R). The CargoGuard(R) trailer was introduced by the Company
in 1994 and has achieved continued. These trailers are proprietary,
high-capacity, aluminum sheet and post vans with one-piece, seamless
plastic interior liners. The Company believes that CargoGuard(R) is
superior to traditional dry freight vans because of its greater cubic
capacity and because its seamless liner is less expensive to maintain than
plywood lining. The Company also believes that CargoGuard(R) offers
certain advantages over aluminum plateside trailers, including the
capability of bulk loading due to greater sidewall stiffness and decreased
aluminum content, thereby lessening exposure to the volatility of
commodity aluminum prices.
- Refrigerated Vans. These trailers are used to transport temperature
sensitive products. The Company's refrigerated vans are thermally
efficient and were among the first to employ insulation material that is
not harmful to the ozone layer of the atmosphere. The Company builds both
full size and "pup" refrigerated trailers. Dorsey's food service delivery
trailers are highly customized and may include such features as multiple
compartments with different temperatures.
- Package Carrier Vans. The Company has worked closely with the small
package carrier industry to develop lightweight, durable, high-capacity
trailers. These trailers frequently include specialized design features
such as integrated interior shelving and roller systems for efficient
loading and unloading.
- Flatbed Trailers. Flatbed trailers, also known as platform trailers, are
used to carry loads such as steel and building materials. The Company
produces a wide variety of platform trailers, including straight frames,
drop frames and multi-axle units for specialized loads. All steel as well
as composite steel and aluminum designs are produced to satisfy specific
customer requirements.
- Dump Trailers. Dump trailers are used to haul bulk products such as
dirt, sand, rock and gravel. The Company builds a variety of dump
trailers, including double trailers with frame and frameless designs, of
aluminum and steel construction.
- Other Products. The Company's other products include drop frame vans,
open top trailers, chip haul trailers, exterior post vans, bulk fruit
trailers and converter dollies. The Company has participated in the
international intermodal market by constructing container chassis and
specialized aluminum containers used in the transportation of chemicals
and other bulk products in Australia.
- Parts and Accessories. Replacement parts and accessories are primarily
sold to authorized Dorsey dealers.
<PAGE> 4
The Company provides a limited five-year warranty against defects in
material and workmanship on van trailers, refrigerated van trailers and platform
trailers. The Company provides a similar two year warranty on dump trailers. The
Company's warranty costs historically have been approximately one percent of net
sales per year. The Company is also involved in the sale of used trailers, which
are supplied primarily by trade-ins from its new trailer customers.
SALES AND MARKETING
The Company's marketing strategy is to offer a broad line of high quality
trailers manufactured to the design specifications of its customers. The Company
markets and distributes its products in two principal ways. Dorsey's national
accounts typically include the larger truckload and less-than-truckload common
carriers, large private carriers, leasing companies, third party logistics
companies, household moving and storage carriers, package carriers and
intermodal carriers. Dorsey authorized dealers primarily serve smaller and
medium-sized carriers, owner-operators and private fleets in the region where
the dealer is located.
CUSTOMERS
National Account Sales. The Company strives to establish and maintain
close, long-term relationships with its national account customers. Dorsey
involves manufacturing and engineering personnel in its team approach to
developing relationships with customers. The Company has been successful in
developing significant relationships as a supplier to many large,
growth-oriented customers, one of which accounted for more than 10% Dorsey's
1996 net sales, in the transportation industry, including:
- Dry Freight Vans: AAA Cooper Transportation, Averitt Express, Covenant
Transport, Landstar System, Southeastern Motor Lines, U.S. Xpress, Victory
Express and Watkins.
- CargoGuard(R): Decker Truck Lines, Rosedale Group, Shaw Industries,
Stop-n-Shop and U.S. Xpress.
- Refrigerated Trailers: Decker Truck Lines, KAT, Martrac (a subsidiary of
UPS), Pro-Source Distribution (formerly Burger King Distribution),
Stop-n-Shop, Tyson Foods and XTRA.
- Package Carrier Vans: Roadway Package Service, General Parcel Service
and United Parcel Service.
- Flatbed Trailers: Boyd Brothers, Builders Transport, and Landstar
System.
- Piggyback (intermodal) Trailers: Transamerica Leasing and United Parcel
Service.
Dealer Sales. Smaller and medium-sized customers are served through
Dorsey's independent dealer network. Dealer sales account for a substantial
percentage of sales of refrigerated, flatbed and dump trailers. The Company's
independent dealers are highly responsive to customers in their service areas,
allowing the Company to access these regional markets. There are 73 authorized
Dorsey dealers located in 36 states and five Canadian provinces, and each dealer
is independently owned. Most provide parts, general and warranty repair service
for trailers and also sell used trailers, thereby providing a sales outlet for
trailers taken in trade by the Company. The Company has no ownership interest in
any Dorsey dealership and owns no branches. Management believes that
independently owned dealerships are a more cost efficient distribution system
than Company-owned branches and has no plans to develop any.
The Company's relationships with its dealers are governed by non-exclusive
agreements that are terminable by either party upon 30 days' notice. These
agreements generally provide that it is the primary responsibility of the dealer
to promote the sale of the Company's products in the geographic area the dealer
serves.
ENGINEERING AND MANUFACTURING
Dorsey considers its engineering expertise, combined with the manufacturing
experience of its work force, key competitive advantages. The Company utilizes
this experience and expertise in its marketing by including engineering and
manufacturing personnel in initial meetings with potential Dorsey customers to
2
<PAGE> 5
assist in defining and meeting the customer's objectives. This team approach
often results in new and unique ways of satisfying the customer's needs. The
process also ensures effective communication throughout the organization.
In response to customer demands and to reduce costs, the Company seeks ways
to reduce trailer weight and material content. The Company also seeks to improve
its manufacturing methods to reduce the labor required to build its products.
These efforts involve teams from all disciplines, including the manufacturing
work force.
Each of the Company's trailers is manufactured from highly customized
designs based on detailed customer specifications of each aspect of the trailer,
including dimensions, structural requirements, fabrication materials, component
parts and accessories. Examples of some of the custom design features available
include extra floor support for heavy loads, specialized door placements, pull
out steps and platforms at doors, fluorescent interior lighting systems, axle
systems, braking systems, and specialized placement of cargo tie downs. The
manufacturing process involves the fabrication of components. Additional
materials, which need no modification prior to assembly, are also utilized in
the manufacturing process. These materials include wood floors, tires, wheels,
axles and support gear. The Company believes that there are multiple sources of
raw materials used in the manufacturing process.
BACKLOG
The Company's backlog of orders was approximately $26 million, $44 million
and $180 million at December 31, 1996, 1995 and 1994, respectively. Dorsey
includes in backlog only those orders for trailers for which a confirmed
customer order has been received. Dorsey expects to fill all of these orders by
the end of 1997. The Company manufactures trailers only to customer or dealer
order and generally does not maintain an inventory of "stock" trailers in
anticipation of future orders. However, many of Dorsey's dealers do maintain an
inventory of trailers.
EMPLOYEES
As of December 31, 1996, the Company employed 984 persons, of whom 29 were
employed in engineering, 884 in manufacturing, 18 in sales and marketing, 16 in
materials and 37 in administration, finance and management.
Substantially all of the Company's manufacturing employees at the Elba,
Alabama plant are represented by the International Association of Machinists and
Aero Space Workers ("IAM") under a three year collective bargaining agreement
that expires April 30, 1999. The Cartersville, Georgia and Dillon, South
Carolina plants are non-union.
The Company considers its relationship with its employees to be
satisfactory.
COMPETITION
The truck trailer manufacturing industry is highly competitive and barriers
to entry are relatively low. Dorsey faces competition from numerous truck
trailer manufacturers of various sizes and financial strength. Dorsey is one of
the larger manufacturers of truck trailers. Some of the other largest
manufacturers are Great Dane Limited Partnership, Wabash National Corporation,
Strick Trailers, Inc., Monon Corporation, Trailmobile, Inc., Utility Trailer
Manufacturing Company, Stoughton Trailers, Inc., Fruehauf Trailer Corporation
and Hyundai Precision America, Inc. The Company competes on the basis of price,
product availability and delivery time, design and engineering innovations and
capabilities, product quality and durability, warranties, service,
manufacturer's financial viability, and customer relationships.
The truck trailer industry faces competition from other types of products
in markets, such as the domestic intermodal container and chassis market, in
which the Company currently does not compete. The Company currently has chosen
not to participate in the intermodal container market based upon its belief that
the opportunity for container differentiation is minimal and industry
manufacturing supply is more than adequate. However, Dorsey's engineering and
marketing teams remain current on developments in this
3
<PAGE> 6
industry segment and could quickly produce containers and container chassis if
the market dynamics were to become more favorable.
REGULATION
Truck trailer length, height, width, gross vehicle weight and other
specifications are regulated by the National Highway Traffic Safety
Administration and individual states. Changes and anticipated changes in these
regulations have resulted in significant fluctuations in demand for new
trailers, thereby contributing to industry cyclicality. The Company also is
governed by a variety of regulations established by various federal, state and
local agencies governing such matters including employee safety and working
conditions, environmental protection and other activities.
ENVIRONMENTAL MATTERS
Subsequent to the closing of the Company's Edgerton, Wisconsin plant in
1989, the Wisconsin Department of Natural Resources (WDNR) conducted an
environmental inspection that identified certain environmental response
requirements. The Company and certain prior owners of the Edgerton plant are
cooperating in conducting remediation at the plant site and in joining with
other potentially responsible parties in addressing an adjacent landfill site.
The Company has established accruals that it believes to be adequate to address
its environmental liabilities associated with these matters.
In December 1990, a leak was detected in an underground storage tank
containing an industrial solvent at the Elba, Alabama facility. The Company
notified the Alabama Department of Environmental Management ("ADEM") of the leak
and hired an environmental consulting firm to investigate the problem and
conduct corrective action. Based on the consultant's investigations and
discussions with ADEM, the Company does not expect the costs of corrective
action to exceed the accruals it has established for this purpose.
PATENTS AND TRADEMARKS
The Company has been issued a patent in the United States to protect the
design concept and manufacturing method of the Company's CargoGuard(R) van
trailer. The Company has been granted a trademark registration for the
CargoGuard(R) name in the United States.
ITEM 2 - PROPERTIES AND INSURANCE
The Company's design and manufacture of truck trailers are performed at
three facilities. Dry freight vans and refrigerated vans are produced at a
400,000 square foot facility on 74 acres in Elba, Alabama. Platform trailers are
produced at a 150,000 square foot facility on 16 acres in Cartersville, Georgia.
Dump trailers are produced at a 45,100 square foot facility in Dillon, South
Carolina. Management believes these facilities have sufficient manufacturing
capacity to produce the Company's current market share of the estimated industry
shipments for the foreseeable future.
The Company also owns an inactive 343,000 square foot plant in Edgerton,
Wisconsin and an inactive 92,000 square foot facility in Griffin, Georgia.
Additionally, in December, 1995, the Company closed its 144,000 square foot
plant on 40 acres in Northumberland, Pennsylvania. The Company's principal
executive offices are located in an approximately 7,000 square foot office in
Atlanta, Georgia, which is leased by the Company.
The Company maintains insurance to limit certain risks associated with its
business activities. The Company's comprehensive property policy insures
business interruption losses in addition to the Company's buildings, machinery
and inventory. The property insurance has a total limit of $84 million and a
flood sub-limit of $15 million, subject to a $100,000 deductible per occurrence.
In addition, the Company maintains insurance covering general, product and
workers' compensation liabilities with a per occurrence and annual aggregate
limit of $21 million, subject to a self-insured retention of $250,000 for each
occurrence ($350,000 for workers' compensation losses).
4
<PAGE> 7
ITEM 3 - LEGAL PROCEEDINGS
See "Business -- Environmental Matters" for a description of certain legal
proceedings. In April, 1995, a class action lawsuit alleging racial
discrimination was filed against the Company, and in the normal course of
business, the Company is a defendant in certain other litigation. Management
intends to vigorously defend such litigation and believes that the ultimate
resolution of the litigation will not have a material impact on the Company's
financial position or results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
Following the Company's initial public offering of Common Stock on July 28,
1994, the Company's Common Stock has traded on The Nasdaq Stock Market under the
symbol "DSYT". The following table sets forth, for the period indicated, the
high and low sales prices per share of the Common Stock as reported on The
Nasdaq Stock Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
First Quarter....................................... $15.500 $10.500
Second Quarter...................................... $12.125 $ 8.750
Third Quarter....................................... $ 9.750 $ 7.500
Fourth Quarter...................................... $ 8.250 $ 5.125
1996
First Quarter....................................... $ 6.375 $ 3.000
Second Quarter...................................... $ 5.375 $ 2.875
Third Quarter....................................... $ 5.000 $ 3.750
Fourth Quarter...................................... $ 4.125 $ 3.125
1997
First Quarter (through March 28, 1997).............. $ 3.375 $ 2.250
</TABLE>
As of March 3, 1997, the Common Stock was held by approximately 110 holders
of record and approximately 1,300 beneficial owners.
DIVIDEND POLICY
The Company intends to retain any future earnings to provide funds for the
operation and expansion of its business and does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
ITEM 6 - SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth selected financial and operating data of the
Company. The selected financial data, except for the unaudited pro forma data,
as of December 31, 1996, 1995, 1994, 1993 and 1992 and for each of the five
years then ended have been derived from the Financial Statements of the Company
which have been audited by Price Waterhouse LLP, the Company's independent
accountants. Unaudited pro forma adjustments for 1994 and 1993 have been shown
to reflect the income tax provision which would have been made if the Company
had been a taxable corporation throughout such period. The information set forth
5
<PAGE> 8
below should be read in conjunction with the Financial Statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND
OPERATING DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales................................... $157,366 $227,944 $205,625 $170,863 $125,473
Cost of sales............................... 156,214 215,048 189,474 159,258 119,861
-------- -------- -------- -------- --------
Gross profit............................. 1,152 12,896 16,151 11,605 5,612
Selling, general and administrative
expenses................................. 8,142 7,349 6,774 6,458 5,669
Provision for plant closing................. 611 350 500 500
-------- -------- -------- -------- --------
Operating income (loss)..................... (7,601) 5,197 9,377 4,647 (557)
Interest expense, net....................... 408 62 647 1,149 889
-------- -------- -------- -------- --------
Income (loss) before income taxes........ (8,009) 5,135 8,730 3,498 (1,446)
Provision for (benefit from) income taxes... (3,084) 891
-------- -------- -------- -------- --------
Net income (loss)........................ $ (4,925) $ 4,244 $ 8,730 $ 3,498 $ (1,446)
======== ======== ======== ======== ========
Net income (loss) per share.............. $ (0.99) $ 0.85
Weighted average shares outstanding......... 4,952 4,969
Unaudited Pro Forma Data(1):
Pro forma income taxes................... $ 1,805 $ 1,332
Pro forma net income (loss).............. 6,925 2,166 $ (1,446)
Pro forma net income per share........... 1.53 0.52
Pro forma weighted average shares
outstanding............................ 4,516 4,191
Operating Data:
Number of trailers sold..................... 8,595 12,276 12,010 10,190 7,496
Sales per employee.......................... $160,251 $174,938 $155,306 $154,627 $142,260
Balance Sheet Data (at end of period):
Total assets................................ $ 45,019 $ 47,449 $ 47,516 $ 23,902 $ 20,196
Long-term debt, including current portion... 9,876 10,315 8,755 14,413 15,143
Total stockholders' equity (deficit)........ 5,615 10,193 5,248 (12,312) (15,203)
</TABLE>
- ---------------
(1) From inception of the Company in 1987 until the Company's initial public
offering in July 1994, the Company elected to be treated as an S
Corporation and, accordingly, was not subject to corporate income taxes.
Following the initial public offering, the Company became subject to
corporate income tax. Unaudited pro forma net income has been computed as
if the Company were subject to federal and state income taxes for all
periods presented, calculated in accordance with Statement of Financial
Accounting Standards ("FAS") No. 109, "Accounting for Income Taxes", based
on the tax laws in effect during the respective periods. The pro forma net
income per share calculation in 1993 includes the issuance of shares to
fund the payment of undistributed S Corporation earnings to the S
Corporation stockholders. See Note 7 of Notes to Financial Statements.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's sales are derived primarily from the sale of truck trailers
and, to a lesser extent, replacement parts and accessories and used trailers.
The Company recognizes revenue from the sale of trailers after manufacturing is
complete, at which time title is transferred to the customer. Materials
represent approximately 75% of cost of sales, with the remainder consisting of
labor and factory overhead.
6
<PAGE> 9
INCLUSION OF FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the "Letter To Our Stockholders" may be deemed to be forward-looking statements,
as defined in the Private Securities Litigation Reform Act of 1995. Any
forward-looking statements included herein have been included based upon facts
available to management as of the date of the statement. Any forward-looking
statement is, however, inherently subject to the uncertainty of future events,
whether economic, competitive or otherwise, many of which are beyond the control
of the Company, or which may involve determinations which may be made by
management in the future. There can, therefore, be no assurances that the events
or results described in such forward-looking statements will occur, and actual
events or results may vary materially from those included herein. The following
are some of the factors which may affect whether the events or results described
in such forward-looking statements will occur: increased competition, dependence
on key management, continued availability of credit from vendors to the Company,
reliance on certain customers, shortages of new materials, labor shortages or
work stoppage, dependence on industry trends, government regulations and new
technologies or products. Readers should review and consider the various
disclosures included elsewhere in this Annual Report.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of expense items
to net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net sales............................................. 100.0% 100.0% 100.0%
Cost of sales......................................... 99.3 94.3 92.1
----- ----- -----
Gross profit.......................................... 0.7 5.7 7.9
Selling, general and administrative expenses.......... 5.2 3.2 3.3
Provision for plant closing........................... .4 0.2
----- ----- -----
Income (loss) from operations......................... (4.9) 2.3 4.6
Interest expense, net................................. .2 0.3
----- ----- -----
Income (loss) before income taxes..................... (5.1) 2.3 4.3
Provision for (benefit from) income taxes............. (2.0) .4
----- ----- -----
Net income (loss)..................................... (3.1)% 1.9% 4.3
===== =====
Unaudited pro forma income taxes...................... 0.9
-----
Unaudited pro forma net income........................ 3.4%
=====
</TABLE>
Net Sales
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT
PERCENTAGE DATA)
<S> <C> <C> <C>
Net sales.................................... $157,366 $227,944 $205,625
Percentage increase (decrease) in sales from
prior period............................... (31.0)% 10.9% 20.3%
</TABLE>
Net sales for 1996 decreased 31.0% to $157.4 million from $227.9 million
for 1995. The 31% decrease in net sales represented a 30% decrease in the number
of trailers sold. The decrease in net sales and the number of trailers sold was
a direct result of the decrease in demand for trailers from customers, massive
overcapacity in the industry and, as a result of these factors, severe pricing
pressure.
Net sales for 1995 increased 10.9% to $227.9 million from $205.6 million
for 1994. The increase in 1995 net sales represented a 2.2% increase in new
trailer units sold. Net sales and number of units sold were
7
<PAGE> 10
adversely affected by the labor strike and eventual shutdown of the Company's
Pennsylvania plant. The increase in net sales in 1995 compared to 1994 reflected
the continued demand for the Company's products as well as the increased
manufacturing capacity resulting from the 1994 expansion of a dry freight line
at the Elba, Alabama plant. The Company's Cartersville, Georgia facility opened
in 1995 has a greater capacity than the closed Pennsylvania plant.
Net sales for 1994 increased 20.3% to $205.6 million from $170.9 million
for 1993. The increase in 1994 net sales represented a 17.9% increase in new
trailer units sold, reflecting strong demand for the Company's products.
Gross Profit
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------- -------
(IN THOUSANDS OF DOLLARS,
EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C>
Gross profit.................................. $1,152 $12,896 $16,151
As a percentage of net sales.................. 0.7% 5.7% 7.9%
</TABLE>
Gross profit as a percentage of net sales, or gross margin, decreased to
0.7% in 1996, from 5.7% in 1995, and gross profit decreased to $1.2 million in
1996. The decrease was largely due to the factors affecting the decrease in net
sales including substantially lower volume of trailers sold and depressed
selling prices resulting from very weak market demand due to excess production
capacity in the industry. Also contributing to the decrease was significant
start-up costs incurred in connection with the opening of the Company's flatbed
facility in Cartersville, Georgia.
Gross margin decreased to 5.7% in 1995 from 7.9% in 1994, and gross profit
decreased 20.2% to $12.9 million in 1995. This was largely due to the production
inefficiencies caused by the use of temporary workers to replace certain
striking union employees and raw material shortages. The advantages of the new
Georgia plant include lower hourly labor costs, an experienced non-union
workforce, and a more efficient manufacturing layout. Gross margin increased to
7.9% in 1994 from 6.8% in 1993, and gross profit increased 39.2% to $16.2
million in 1994. These improvements resulted primarily from manufacturing
efficiencies associated with increased volume, productivity gains,
cost-effective design changes and the Company's materials purchasing program.
Selling, General and Administrative Expenses
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS OF DOLLARS,
EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C>
Selling, general and administrative
expenses.................................... $8,142 $7,349 $6,774
As a percentage of net sales.................. 5.2% 3.2% 3.3%
</TABLE>
Selling, general and administrative ("S, G & A") expenses increased 10.8%
to $8.1 million for 1996 from $7.3 million for 1995. The increase in expenses
was primarily due to professional fees incurred in connection with strategic
planning opportunities. S, G & A, as a percentage of net sales, increased from
3.2% in 1995 to 5.2% in 1996; this increase was due primarily to the decrease in
net sales.
S, G & A expenses for 1995 increased 8.5% to $7.3 million from $6.8 million
for 1994, but declined as a percentage of net sales to 3.2% from 3.3%. S, G & A
expenses for 1994 increased 4.9% to $6.8 million from $6.5 million in 1993, but
declined as a percentage of net sales to 3.3% from 3.8%. The reduction in S, G &
A expenses as a percentage of net sales in 1995 and 1994 was due to efficiencies
gained through increased sales volume and the effects of the Company's cost
containment efforts.
8
<PAGE> 11
Provision for Plant Closing
The Company recorded $611,000 and $350,000 in 1996 and 1995, respectively,
for expenses relating to its closed facilities in Edgerton, Wisconsin and
Northumberland, Pennsylvania. The 1996 provision primarily relates to salaries,
repairs, maintenance and depreciation expense at the Northumberland plant. The
1995 provision includes the expenses relating to severance pay due to the 1995
shutdown of the Pennsylvania facility, in addition to depreciation expense on
the Wisconsin facility. The Company believes it has accrued adequate carrying
costs for the period it expects to hold the Wisconsin facility, however this
period may be extended due to the uncertainty involved in the environmental
remediation. See "Business -- Environmental Matters."
INTEREST EXPENSE, NET
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS, EXCEPT
PERCENTAGE DATA)
<S> <C> <C> <C>
Interest expense, net................... $ 408 $ 62 $ 647
As a percentage of net sales............ 0.2% * 0.3%
</TABLE>
- ---------------
* Represents less than 0.1%.
Net interest expense increased $346,000 to $408,000 for 1996. The increase
in interest expense is a result of the notes payable for the purchases of the
Cartersville, Georgia facility and the Dillon, South Carolina operation and the
reduction in interest income between the years 1996 and 1995. Net interest
expense decreased from $647,000 in 1994 to $62,000 in 1995. This decrease
primarily reflects a lower principal amount of debt outstanding and an increase
in interest income earned. Net interest expense decreased from $1.1 million in
1993 to $647,000 in 1994. This decrease was due to lower utilization of the
Company's revolving line of credit, the total repayment of mortgages on the
Company's Pennsylvania facility and the significant paydown of the Company's
Small Business Administration loan.
PROVISION FOR (BENEFIT FROM) INCOME TAXES AND NET INCOME (LOSS)
The Company reported a net loss of $4.9 million, or $.99 loss per share,
for 1996 as compared to net income of $4.2 million, or $0.85 per share for 1995.
The Company recorded a benefit for income taxes of $3.1 million in 1996 for an
effective income tax benefit rate of 38.5% as compared to a provision for income
taxes of $891,000 in 1995 for an effective income tax provision rate of 17.4%.
The lower effective income tax provision rate in 1995 was due to the utilization
of the deferred tax valuation reserve, which reduced the provision for income
taxes by $1.1 million. Net income for 1994 was $8.7 million. On a pro forma
basis, net income was $6.9 million, or $1.53 per share. See "Item 6 -- Selected
Financial and Operating Data" for discussion of the pro forma basis for 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 1996 were $101,000 as compared to
$7.7 million at December 31, 1995. The $7.6 million decrease in cash and cash
equivalents is due to funding of the Company's net losses of $4.9 million,
payment of scheduled debt of $1.0 million, the cash payment portion of the
purchase of the dump-trailer manufacturing operations in Dillon, South Carolina
of $1.2 million.
Net cash used in operating activities was $4.3 million for 1996 as compared
to net cash provided by operating activities of $3.7 million and $4.4 million
for 1995 and 1994, respectively. Cash used in operating activities for 1996 was
primarily used to fund the increase in inventory of $1.8 million, a $2.4 million
increase in income tax receivable, and operating losses of $4.9 million. The
increase in inventory was due to a $3.6 million increase in used trailers which
was offset by a decrease in raw materials of $1.9 million. The cash used by
operating activities for 1996 was primarily funded by the Company's cash and
cash equivalents and an increase in accounts payable. Cash provided by
operations for 1995 and 1994 was primarily provided by net income.
9
<PAGE> 12
Net cash used in investing activities was $2.5 million, $15,000, and $3.6
million for 1996, 1995 and 1994, respectively. Net cash used in investing
activities for 1996 was used to fund $1.3 million for capital expenditures and
$1.2 million for the cash payment portion of the purchase of a dump trailer
manufacturing operations. In July 1996, the Company purchased the operations of
a dump trailer manufacturer for $1.8 million. An unsecured note payable of
$577,000 was issued to the seller at a floating prime interest rate. For 1995
capital expenditures were $4.0 million of which the Company funded $2.0 million
with cash. In November 1995, the Company purchased a facility in Cartersville,
Georgia for $2.0 million for the manufacture of flatbed trailers by issuing a
note payable to the seller in the amount of $2.0 million at a fixed interest
rate of 8.5%. For 1994 capital expenditures were $2.3 million which was funded
with cash. The capital expenditures for 1994 included $1.3 million to expand the
production capacity of the Elba, Alabama manufacturing plant.
Net cash used in financing activities was $800,000 and $5.5 million for
1996 and 1995, respectively. Net cash used in financing activities for 1996 was
used for the scheduled repayment of long-term debt. The net cash used in 1995
was primarily used for the distribution to stockholders of $5.2 million which
represented the previously taxed and undistributed earnings of the Company as a
result of the termination of the Company's S Corporation election. Net cash
provided by financing activities for 1994 was $8.4 million which was a result of
the $16.2 million the Company received from the issuance of 1,400,000 shares of
common stock in an initial public offering. The Company used the net proceed to:
(a) repay indebtedness of $4.4 million, (b) purchase a portion of a stock option
held by a director for $2.4 million, (c) fund capital expenditures of $1.1
million, and (d) add $8.3 million to working capital of which $5.2 million was
paid as an S Corporation distribution in 1994 and 1995.
Due to the Company's operating losses in 1996 the Company was in violation
of covenants covering tangible net worth, leverage, and fixed charges under its
$10 million line of credit with a financial institution. The Company had no
borrowings outstanding as of December 31, 1996, although $1,990,000 in letters
of credit were outstanding under this facility. On March 28, 1997, the Company
entered into a $14 million 5 year working capital line of credit ("Financing
Agreement") with an asset based lender to replace the prior $10 million working
capital line of credit. The Company's availability under the Financing Agreement
changes daily based on the level of eligible accounts receivable and
inventories. As of March 28, 1997, the Company had $3.2 million outstanding,
including $1,990,000 of letters of credit and had $6.9 million of availability
under the Financing Agreement. See Note 13 of the Notes to the Financial
Statements for further discussion on the Financing Agreement.
The Company has experienced a significant tightening of its liquidity
beginning in the fourth quarter of 1996 and continuing to date. This situation
results primarily from continuing operating losses and a higher than normal
level of inventory of used trailers. With many customers purchasing replacement
trailers only, the Company has had to increase its acceptance of used trailers
as trade-ins in order to obtain certain new trailer orders. By accepting
trade-ins, cash is not received until after the subsequent sale of the used
trailers. As of December 31, 1996 the Company's inventory of used trailers was
$4.0 million and its purchase commitments for used trailers was $15.4 million.
Subsequent to December 31, 1996, management decided to sell certain used
trailers quickly at lower than normal pricing in order to generate cash to meet
its obligations. As a result, the Company has incurred losses on the sale of
used trailers through March 28, 1997 of approximately $1.5 million. Additionally
due to management's decision to sell the Company's inventory of used trailers as
quickly as possible and the effect thereon on used trailer values, the Company
has reduced the value of its remaining used trailers by $1.8 million.
With the closing of the new $14 million Financing Agreement, management
believes that sufficient funds will be advanced under the Financing Agreement
and from the sale of used trailers in order for the Company to timely meet its
obligations. The Company's projected cash flows assume the continued receipt of
materials from trade vendors on generally the same terms as the Company is
currently receiving and that the Company is able to increase sales prices
moderately during the second half of 1997.
10
<PAGE> 13
ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board issued FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." FAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
FAS No. 125 requires an entity to recognize each of the components of the
financial instruments which it controls, derecognize the components of the
assets it has surrendered control over and derecognize liabilities which it has
paid or been legally released from. FAS No. 125 is effective for fiscal years
beginning after December 31, 1996. As the Company does not presently transfer
and/or service financial assets and/or liabilities as defined by FAS No. 125,
management does not believe the adoption of FAS No. 125 will have a significant
impact on the Company's financial position or results of operations but may
require additional disclosures regarding assets assigned as collateral to the
Company's debt.
In October of 1996, American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" (SOP
96-1). SOP 96-1 requires that environmental remediation liabilities should be
accrued when the criteria of FAS No. 5, "Accounting for Contingencies", are met.
SOP 96-1 provides guidance on what the accrual for environmental liabilities
should include and the measurement of the liability. SOP 96-1 is effective for
the Company beginning in 1997. Management has reviewed its current methodology
regarding accrual for environmental liability, and management does not believe
that the adoption of SOP 96-1 will have a materially adverse impact on the
Company's financial position or results of operations.
SEASONALITY AND INFLATION
Unit sales of new trailers are generally not affected by seasonal factors.
However, new trailer unit sales have historically been subject to cyclical
variation based upon general economic conditions. The federal government also
regulates certain trailer features, particularly with respect to safety. Any
changes in these regulations apply generally to all manufacturers in the
industry and can have a significant impact on industry sales. Long-term domestic
growth in demand for truck trailers has generally been in line with increases in
the United States Gross Domestic Product. However, in the short to intermediate
term, new trailer sales can be very cyclical. The short to intermediate term
cycle of trailer sales is also impacted by the environment for new business
investment in equipment particularly in the trucking industry.
The Company has not been materially impacted by inflation in the past three
years.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in Part IV, Item 14 of this report.
ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company hereby incorporates by reference the information under the
headings "Proposal I -- Election of Directors -- Director and Director Nominee
Information" and -- "Executive Officers of the Company" from its definitive
Proxy Statement to be delivered to the stockholders of the Company in connection
with the 1997 Annual Meeting of Stockholders to be held April 30, 1997.
11
<PAGE> 14
ITEM 11 - EXECUTIVE COMPENSATION
The Company hereby incorporates by reference the information contained
under the headings "Proposal I -- Election of Directors -- Executive
Compensation" from its definitive Proxy Statement to be delivered to the
stockholders of the Company in connection with the 1997 Annual Meeting of
Stockholders to be held April 30, 1997. In no event shall the information
contained in the Proxy Statement under the headings "Stockholder Return
Comparison" and "Report of the Compensation Committee of the Board of Directors"
be incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company hereby incorporates by reference the information contained
under the heading "Proposal I -- Election of Directors -- Principal Stockholders
of the Company" from its definitive Proxy Statement to be delivered to the
stockholders of the Company in connection with the 1997 Annual Meeting of
Stockholders to be held April 30, 1997.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hereby incorporates by reference the information contained
under the headings "Proposal I -- Election of Directors -- Executive
Compensation -- Compensation Committee Interlocks and Insider Participation" and
"-- Certain Transactions" from its definitive Proxy Statement to be delivered to
the stockholders of the Company in connection with the 1997 Annual Meeting of
Stockholders to be held April 30, 1997. Additionally, see Note 13 of the Notes
to Financial Statements for related party transactions.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of Dorsey Trailers, Inc., incorporated
by reference into Item 8, are attached hereto:
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Accountants........................... F-1
Balance Sheets as of December 31, 1996 and 1995............. F-2
Statements of Operations for the years ended December 31,
1996, 1995 and 1994....................................... F-3
Statements of Changes in Stockholders' Equity (Deficit) for
the years ended December 31, 1996, 1995 and 1994.......... F-4
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994....................................... F-5
Notes to Financial Statements............................... F-6
</TABLE>
2. Financial Statement Schedules
<TABLE>
<S> <C>
Schedule VIII -- Valuation and Qualifying Accounts.......... F-21
</TABLE>
All other schedules have been omitted because the schedules are either
inapplicable or the information required is included in the financial statements
or notes thereto.
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
------- ----------------------- -------------
<C> <S> <C>
3.1 Certificate of Incorporation of the Company.*
3.2 Bylaws of the Company.**
4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate
of Incorporation and the Bylaws of the Company defining the
rights of holders of Common Stock.
4.2 Form of Common Stock certificate of the Company.**
10.1 Accounts Financing Agreement between Congress Financial
Corporation and the Company, dated August 8, 1990.*
10.2 First Consolidated Amendment to Accounts Financing Amendment
by and between the Company and Congress Financial
Corporation, dated June 28, 1993.*
10.3 Intercreditor Agreement by and between the U.S. Small
Business Administration and Congress Financial Corporation,
dated August 8, 1990.*
10.4 First Amendment to the Intercreditor Agreement by and
between the U.S. Small Business Administration and Congress
Financial Corporation, dated June 28, 1993.*
10.5 Limited Guarantee and Waiver by Marilyn R. Marks dated June
28, 1993.*
10.6 Trademark Security Agreement between Congress Financial
Corporation and the Company, dated June 28, 1993.*
10.7 Blocked Account Agreement by and among Citizens and Southern
National Bank, Congress Financial Corporation and the
Company, dated March 5, 1991.*
10.8 Loan Authorization and Agreement between the U.S. Small
Business Administration and the Company, dated May 3, 1990.*
10.9 Letter amending the Loan Authorization and Agreement between
the U.S. Small Business Administration and the Company,
dated August 6, 1990.*
10.10 Letter amending the Loan Authorization and Agreement between
the U.S. Small Business Administration and the Company,
dated May 4, 1992.*
10.11 Letter amending the Loan Authorization and Agreement between
the U.S. Small Business Administration and the Company,
dated May 18, 1994.*
10.12 Agreement between the Company and International Association
of Machinists and Aero Space Workers, Local Lodge No. 1769,
dated May 1, 1993.*
10.13 Agreement between the Company and International Union,
United Automobile Aerospace and Agricultural Implement
Workers of America for and on behalf of, UAW Local 1868,
dated March 4, 1992.*
10.14 Shareholder Agreement by and among Trailers Acquisition
Corp. (a predecessor of the Company) and certain
stockholders of the Company, dated March 16, 1987.*
10.15 First Amendment to Shareholder Agreement and Agreement with
Former Shareholder by and among the Company, the
stockholders of the Company and a former stockholder of the
Company, dated April 11, 1988.*
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
------- ----------------------- -------------
<C> <S> <C>
10.16 Dorsey Trailers, Inc. Marks/Rymer Shareholders Agreement by
and among the Company, Marilyn R. Marks and Hoyle Rymer,
dated January 12, 1993.*
10.17 Dorsey Trailers, Inc. Shareholder Agreement by and among the
Company and certain stockholders of the Company, dated
February 25, 1994.*
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.18 Form of Stock Option Agreement by and among the
Company, Marilyn R. Marks and each of T. Charles
Chitwood, Charles W. Mudd, David A. Kemp and H.
Douglas Allgood.*
10.19 Dorsey Trailers, Inc. 1994 Long-Term Incentive
Plan.**
10.20 Dorsey Trailers, Inc. 1994 Profit Plan.*
10.21 Dorsey Trailers, Inc. Amended and Restated
Salaried Employees' Retirement Plan, effective
January 1, 1989.**
10.22 Dorsey Trailers, Inc. Amended and Restated
Salaried Employees' Savings Incentive Plan, effective
January 1, 1989.*
10.23 Dorsey Trailers, Inc. (Edgerton, Wisconsin
Division) Amended and Restated International Union
Industrial Workers of America Local #786
Employees' Pension Plan, effective January 1,
1989.*
10.24 Dorsey Trailers, Inc. Northumberland,
Pennsylvania Plant Revised and Restated U.A.W. Local
#1868 Hourly Employees' Retirement Plan, effective
January 1, 1989.*
10.25 Form of the Dorsey Trailers, Inc. 1994 Stock
Plan for Non-Employee Directors.**
10.25(a) Registration Agreements between the Company and
T. Charles Chitwood, Charles W. Mudd, David A. Kemp
and H. Douglas Allgood, respectively, dated January
1995.***
10.26 Promissory Note between the Company and Marilyn R. Marks,
dated January 12, 1993.*
10.27 Promissory Note between the Company and Marilyn R. Marks,
dated June 10, 1988.*
10.28 First Amendment to Promissory Note between the Company and
Marilyn R. Marks, dated June 10, 1991.*
10.29 Second Amendment to Promissory Note between the Company and
Marilyn R. Marks, dated June 6, 1994.**
10.30 Non-Negotiable Promissory Note between the Company and
Marilyn R. Marks, dated April 14, 1994.**
10.31 Dorsey Trailers, Inc. Excess Benefit Plan, effective May 1,
1994.**
10.32 Form of Indemnity Agreement between the Company and each
director and executive officer of the Company.**
10.33 Fifth Amendment to Accounts Financing Agreement by and
between the Company and Congress Financial Corporation,
dated May 3, 1994.**
10.34 Collateral Assignment of Certificate of Deposit by and
between the Company and Congress Financial Corporation,
dated May 3, 1994.**
10.35 Sixth Amendment to Accounts Financing Agreement by and
between the Company and Congress Financial Corporation,
dated November 1, 1994.***
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
------- ----------------------- -------------
<C> <S> <C>
10.36 Revolving Credit and Reimbursement Agreement by and between
the Company and NationsBank of Georgia, National
Association, dated August 11, 1995.****
10.37 Real Estate and Deed to Secure Debt by and between the
Company and Glenn T. Taylor and Bankhead Enterprises, Inc.,
dated November 14, 1995.****
10.38 First Amendment to Revolving Credit and Reimbursement
Agreement by and between the Company and NationsBank of
Georgia, National Association, dated June 11, 1996.*****
10.39 Agreement between the Company and International Association
of Machinists and Aerospace Workers, Local Lodge No. 1769,
dated May 1, 1996.
10.40 Asset Purchase Agreement by and among Dorsey Trailers, Inc.,
Carolina Coastal Investors, Inc and David Cottingham, dated
as of July 1, 1996 (the Registrant agrees to furnish a copy
of any schedule omitted to the Commission upon request).
</TABLE>
- ---------------
* Incorporated by reference from the exhibit of the same number in the
Registrant's Registration Statement on Form S-1 (File No. 33-79404) dated
May 26, 1994.
** Incorporated by reference from the exhibit of the same number in the
Registrant's Registration Statement on Form S-1 (File No. 33-79404) dated
May 26, 1994, as amended on July 8, 1994.
*** Incorporated by reference from the Registrant's form 10-K for the year
ended December 31, 1994.
**** Incorporated by reference from the Registrant's Form 10-K for the year
ended December 31, 1995.
***** Incorporated by reference from the Registrant's Form 10-Q for the quarter
ended June 29, 1996.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 28, 1997.
DORSEY TRAILERS, INC.
By: /s/ MARILYN R. MARKS
--------------------------------------
Marilyn R. Marks
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities indicated on March 28, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARILYN R. MARKS President, Chief Executive Officer and
- -------------------------------------------------------- Chairman of the Board of Directors
Marilyn R. Marks
/s/ T. CHARLES CHITWOOD Vice President -- Finance
- -------------------------------------------------------- (Principal Financial and Accounting Officer)
T. Charles Chitwood
/s/ ERNEST LORCH Director
- --------------------------------------------------------
Ernest Lorch
/s/ LAWRENCE E. MOCK, JR. Director
- --------------------------------------------------------
Lawrence E. Mock, Jr.
/s/ J. HOYLE RYMER Director
- --------------------------------------------------------
J. Hoyle Rymer
/s/ NEIL A. SPRINGER Director
- --------------------------------------------------------
Neil A. Springer
</TABLE>
16
<PAGE> 19
ANNUAL REPORT ON FORM 10-K
Item 14 (a) 1. and 2.
Financial Statements and Financial Statement Schedules
17
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Dorsey Trailers, Inc.
In our opinion, the financial statements listed in the index appearing
under Item 14(a) (1) and (2) on page 13 present fairly, in all material
respects, the financial position of Dorsey Trailers, Inc. at December 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Atlanta, Georgia
January 20, 1997, except for Note 13 which
is as of March 28, 1997
F-1
<PAGE> 21
DORSEY TRAILERS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 101 $ 7,738
Accounts receivable, less allowance for doubtful accounts
of $168 and $250....................................... 8,296 9,394
Inventories............................................... 19,002 16,771
Prepaid expenses and other assets......................... 2,990 663
------- -------
Total current assets.............................. 30,389 34,566
Property, plant and equipment, net.......................... 9,681 9,459
Deferred income taxes....................................... 3,953 3,418
Other assets................................................ 996 6
------- -------
Total assets...................................... $45,019 $47,449
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 705 $ 1,011
Accounts payable.......................................... 18,126 15,568
Accrued wages and employee benefits....................... 4,403 5,004
Accrued expenses.......................................... 4,299 3,669
------- -------
Total current liabilities......................... 27,533 25,252
Long-term debt.............................................. 9,171 9,304
Accrued pension liability................................... 1,600 1,600
Accrued warranty............................................ 1,100 1,100
------- -------
Total liabilities................................. 39,404 37,256
------- -------
Stockholders' equity
Preferred stock, $.01 par value, 500,000 shares
authorized; none issued or outstanding.................
Common stock, $.01 par value, 30,000,000 shares
authorized; 4,997,422 and 4,988,854 shares issued and
outstanding............................................ 49 49
Additional paid-in capital................................ 2,339 2,086
Retained earnings......................................... 3,304 8,229
Unrecognized pension liability............................ (77) (171)
------- -------
Total stockholders' equity........................ 5,615 10,193
Commitments and contingencies (Note 9)...................... -- --
------- -------
Total liabilities and stockholders' equity........ $45,019 $47,449
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 22
DORSEY TRAILERS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... $157,366 $227,944 $205,625
Cost of sales............................................... 156,214 215,048 189,474
-------- -------- --------
Gross profit.............................................. 1,152 12,896 16,151
Selling, general and administrative expenses................ 8,142 7,349 6,774
Provision for plant closing................................. 611 350
-------- -------- --------
Income (loss) from operations............................... (7,601) 5,197 9,377
Interest expense, net....................................... 408 62 647
-------- -------- --------
Income (loss) before income taxes......................... (8,009) 5,135 8,730
Provision for (benefit from) income taxes................... (3,084) 891
-------- -------- --------
Net income (loss)......................................... $ (4,925) $ 4,244 $ 8,730
======== ======== ========
Net income (loss) per share............................... $ (0.99) $ 0.85
======== ========
Weighted average number of common and common share
equivalents............................................ 4,952 4,969
======== ========
Unaudited pro forma data
Income before provision for income taxes.................. $ 8,730
Provision for income taxes................................ 1,805
--------
Net income................................................ $ 6,925
========
Net income per share...................................... $ 1.53
========
Weighted average number of common and common share
equivalents used in the pro forma net income per share
calculation............................................... 4,516
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 23
DORSEY TRAILERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL COMMON EARNINGS UNRECOGNIZED
------------------ PAID-IN STOCK (ACCUMULATED PENSION TREASURY
SHARES AMOUNT CAPITAL WARRANTS DEFICIT) LIABILITY STOCK
--------- ------ ---------- -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993.......... 3,901,682 $39 $ 703 $140 $(12,335) $(335) $(34)
Net income.......................... 8,730
Net proceeds from sale of common
stock............................. 1,400,000 14 16,215
Reclassification of accumulated
deficit to paid-in capital........ (7,590) 7,590
Accrued distribution to
stockholders...................... (5,743)
Repurchase of stock option from a
director.......................... (195,084) (2,311) (47)
Capital contribution of stock by
stockholder and cancellation by
Company........................... (55,876) (2) 2
Treasury shares canceled............ (50,722) (1) (33) 34
Issuance of common stock to non-
employee directors................ 1,728 22
Proceeds from stock purchase
notes.............................
Record unrecognized pension
liability......................... 190
--------- --- ------- ---- -------- ----- ---
Balance, December 31, 1994.......... 5,001,728 50 1,265 93 3,985 (145)
Net income.......................... 4,244
Reversal of accrued distribution to
stockholders...................... 409
Exercise of options................. 93 (93)
Record unrecognized tax benefit of
stock option compensation......... 296
Capital contribution of stock by
stockholder and cancellation by
Company........................... (14,989) (1) 1
Issuance of common stock to non-
employee directors................ 2,115 22
Record unrecognized pension
liability......................... (26)
--------- --- ------- ---- -------- ----- ---
Balance, December 31, 1995.......... 4,988,854 49 2,086 8,229 (171)
Net loss............................ (4,925)
Record unrecognized tax benefit of
stock option compensation......... 223
Issuance of common stock to non-
employee directors................ 8,568 30
Record unrecognized pension
liability......................... 94
--------- --- ------- ---- -------- ----- ---
Balance, December 31, 1996.......... 4,997,422 $49 $ 2,339 $ -- $ 3,304 $ (77) $ --
========= === ======= ==== ======== ===== ===
<CAPTION>
STOCK
PURCHASE
NOTE TOTAL
-------- --------
<S> <C> <C>
Balance, December 31, 1993.......... $(490) $(12,312)
Net income.......................... 8,730
Net proceeds from sale of common
stock............................. 16,229
Reclassification of accumulated
deficit to paid-in capital........
Accrued distribution to
stockholders...................... (5,743)
Repurchase of stock option from a
director.......................... (2,358)
Capital contribution of stock by
stockholder and cancellation by
Company...........................
Treasury shares canceled............
Issuance of common stock to non-
employee directors................ 22
Proceeds from stock purchase
notes............................. 490 490
Record unrecognized pension
liability......................... 190
----- --------
Balance, December 31, 1994.......... 5,248
Net income.......................... 4,244
Reversal of accrued distribution to
stockholders...................... 409
Exercise of options.................
Record unrecognized tax benefit of
stock option compensation......... 296
Capital contribution of stock by
stockholder and cancellation by
Company...........................
Issuance of common stock to non-
employee directors................ 22
Record unrecognized pension
liability......................... (26)
----- --------
Balance, December 31, 1995.......... 10,193
Net loss............................ (4,925)
Record unrecognized tax benefit of
stock option compensation......... 223
Issuance of common stock to non-
employee directors................ 30
Record unrecognized pension
liability......................... 94
----- --------
Balance, December 31, 1996.......... $ -- $ 5,615
===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 24
DORSEY TRAILERS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)......................................... $(4,925) $ 4,244 $ 8,730
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities
Depreciation and amortization.......................... 1,440 1,179 899
Issuance of common stock to non-employee directors..... 30 22 22
Change in assets and liabilities
Decrease (increase) in accounts receivable........... 1,098 457 (4,821)
(Increase) decrease in inventories................... (1,771) 1,034 (4,964)
Increase in prepaid expenses and other current
assets.............................................. (2,327) (583) (45)
Increase (decrease) in accounts payable.............. 2,558 (2,169) 4,531
(Decrease) increase in accrued wages and employee
benefits............................................ (449) 585 1,164
Increase in accrued expenses......................... 630 605 277
Decrease (increase) in other assets.................. 1 281 (234)
Increase in deferred income taxes.................... (593) (1,778) (1,533)
(Decrease) increase in other liabilities............. (198) 369
------- ------- -------
Net cash (used in) provided by operating
activities...................................... (4,308) 3,679 4,395
------- ------- -------
Cash flows from investing activities
Purchase of business assets............................... (1,198)
Capital expenditures...................................... (1,338) (2,015) (2,287)
Redeem (purchase) certificates of deposit................. 2,000 (1,300)
------- ------- -------
Net cash used in investing activities............. (2,536) (15) (3,587)
------- ------- -------
Cash flows from financing activities
Payments of long-term debt................................ (1,016) (490) (5,454)
Tax benefit from exercise of stock options................ 223 296
Proceeds from stock purchase notes........................ 323
Net proceeds from sale of common stock.................... 16,229
Repurchase of stock option from a director................ (2,358)
Distribution to stockholders.............................. (5,029) (305)
------- ------- -------
Net cash (used in) provided by financing
activities...................................... (793) (5,223) 8,435
------- ------- -------
(Decrease) increase in cash and cash equivalents............ (7,637) (1,559) 9,243
Cash and cash equivalents at beginning of year.............. 7,738 9,297 54
------- ------- -------
Cash and cash equivalents at end of year.................... $ 101 $ 7,738 $ 9,297
======= ======= =======
Supplemental disclosures of cash flow information
Cash paid during the year for interest.................... $ 384 $ 431 $ 891
======= ======= =======
Cash paid during the year for income taxes................ $ 36 $ 2,686 $ 1,777
======= ======= =======
Disclosure of non-cash investing and financing activities
Issuance of note payable for acquisition of property...... $ 577 $ 2,050
======= =======
Accrued stockholder distributions......................... $ 5,238
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 25
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company designs, manufactures and markets truck trailers. Significant
accounting policies followed by the Company are summarized below:
INITIAL PUBLIC OFFERING
On July 28, 1994, the Company sold 1,400,000 shares of common stock in an
initial public offering (the "Offering") and selling stockholders sold 670,000
shares including the over-allotment option of shares. The net proceeds received
by the Company were $16.2 million and were used to reduce debt, repurchase stock
option from a director, fund capital expenditures and fund a distribution to the
S Corporation stockholders (see Note 7).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investment instruments
with an original maturity of three months or less.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
The Company recognizes revenue from the sale of trailers when title and
risks of ownership are transferred to the customer, which generally is upon
shipment or customer pick-up. A customer may be invoiced for and receive title
to trailers prior to taking physical possession when the customer has made a
fixed written commitment to purchase, the trailers have been completed and are
available for pick-up or delivery, and the customer has requested the Company to
hold the trailers until the customer determines the most economical means of
taking physical possession. Upon such a request, the Company has no further
obligation except to segregate the trailers, invoice them under normal billing
and credit terms, and hold them for a short period of time as is customary in
the industry, generally for two weeks, until pick-up or delivery. Trailers are
built to customer specification and no right of return or exchange privileges
are granted. Accordingly, no provision for sales allowances or returns is
recorded.
For the year ended 1996, sales to one customer exceeded 10% of the
Company's total sales. For 1996, total sales to one customer were $16.0 million.
For the years ended 1995 and 1994, no one customer represented greater than 10%
of total sales of the Company. The Company markets its products directly to
national accounts and through a nationwide network of dealers into all of the
major segments of the trucking industry. The diverse customer base reduces the
risk of concentration in any market segment or geographical area. Although the
Company is affected by the credit worthiness of its customers, management does
not believe significant credit risk exists at December 31, 1996. The Company
generally does not require collateral and maintains accruals for potential
credit losses.
INVENTORIES
Inventories are stated primarily at the lower of first-in, first-out (FIFO)
cost or market values. Used trailers are carried at the lower of their estimated
net realizable value or cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided
using the straight-line method over the estimated lives of the assets ranging
from five to twenty years. Maintenance and repairs are charged to expense as
incurred; expenditures for renewals and betterments are capitalized. When assets
are retired or otherwise disposed of, the property accounts are relieved of
costs and accumulated depreciation and any resulting gain or loss is credited or
charged to income.
F-6
<PAGE> 26
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
POSTRETIREMENT MEDICAL AND LIFE INSURANCE BENEFITS
The Company accrues the estimated cost of retiree benefit payments, other
than pensions, during employees' active service period in accordance with
Statement of Financial Accounting Standards ("FAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
INCOME TAXES
From its inception through July 28, 1994, the Company elected to be taxed
as an S Corporation, whereby the income tax effect of the Company's activities
accrued directly to its stockholders. Accordingly, no provision for income taxes
is included in the accompanying financial statements through July 28, 1994. At
the time of the Offering, the Company's S Corporation election terminated and in
connection therewith the Company adopted the provisions of FAS No. 109,
"Accounting for Income Taxes". FAS No. 109 requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Using the enacted
tax rate in effect for the year in which the differences are expected to
reverse, deferred tax assets and liabilities are determined based on the
differences between the financial reporting basis and income tax basis of assets
and liabilities.
ACCRUED WARRANTY
The Company provides for warranty costs at the time of sale based on
experience and management's judgment. The portion of the warranty reserve
expected to be paid beyond one year is classified as noncurrent in the
accompanying financial statements.
ENVIRONMENTAL ACCRUAL
The Company accrues environmental costs when it is probable that the
Company has incurred a liability and the amount can be reasonably estimated.
Estimated costs associated with closure/postclosure are accrued over the
facilities' estimated remaining useful lives. Accruals for environmental
liabilities are included in accrued expenses at undiscounted amounts and exclude
claims for recoveries from insurance companies or other third parties.
Environmental costs are capitalized if they extend the life of the related
property, increase its capacity or mitigate or prevent future contamination.
GOODWILL
Goodwill represents the excess of the aggregate price paid by the Company
in acquisitions accounted for as purchases over the fair market value of the net
tangible assets acquired. Goodwill is being amortized on a straight-line basis
over 15 years. The carrying value of the goodwill is evaluated for indications
of possible impairment whenever events or changes in circumstances indicate that
the carrying value of an intangible asset may not be recoverable.
Goodwill was $991,000 at December 31, 1996 net of accumulated amortization
of $34,000. There was no goodwill in 1995.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 27
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common shares and common share equivalents outstanding during the period. Common
stock equivalents consist of the Company's common shares issuable upon the
exercise of stock options using the treasury stock method.
UNAUDITED PRO FORMA NET INCOME PER SHARE
Unaudited pro forma net income per share is computed using the weighted
average number of common shares and common share equivalents outstanding during
each period as adjusted for the stock split (see Note 8). Common share
equivalents consist of the Company's common shares issuable upon the exercise of
stock options using the treasury stock method.
RECLASSIFICATION
Certain 1995 and 1994 amounts have been reclassified to conform to the 1996
presentation.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Raw materials............................................... $ 8,376 $10,284
Work-in-process............................................. 5,833 4,948
Finished trailers........................................... 981 1,312
Used trailers............................................... 3,812 227
------- -------
$19,002 $16,771
======= =======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Land........................................................ $ 688 $ 688
Building.................................................... 6,270 6,000
Equipment................................................... 10,516 9,178
------- -------
17,474 15,866
Less -- Accumulated depreciation............................ 7,793 6,407
------- -------
$ 9,681 $ 9,459
======= =======
</TABLE>
At December 31, 1996, property, plant and equipment include land and
buildings held for sale as idle facilities of $760,000 in Northumberland,
Pennsylvania (see Note 10), and $280,000 in Edgerton, Wisconsin. The assets are
recorded at net book value which management believes is less than net realizable
value.
In November, 1995, the Company acquired a manufacturing facility in
Cartersville, Georgia, which was financed with the issuance of a note payable to
the seller.
F-8
<PAGE> 28
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
4. REVOLVING LINE OF CREDIT
At December 31, 1996, the Company had a $10 million revolving line of
credit, including a $3 million letter of credit facility, with a financial
institution. The revolving line of credit was secured by substantially all of
the assets of the Company. Due to the Company's 1996 net loss, the Company was
in violation of covenants covering tangible net worth, leverage, and fixed
charges. The lender did not agree to waive this event of default and informed
the Company that funding requests under this agreement would not be honored as
long as the covenant violations existed. The Company had no borrowings
outstanding under this facility at December 31, 1996, although $1,990,000 in
letters of credit were outstanding under this facility.
Subsequent to year-end, the Company has completed negotiations with an
asset-based lender to provide a working capital line of credit. See Footnote 13
"Subsequent Events" for a discussion of the Company's new revolving line of
credit.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
------ -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Note payable to Small Business Administration bearing
interest at 4%, payable in equal monthly principal and
interest installments of $69,000, secured by substantially
all of the Company's assets (subordinated to all other
notes payable)............................................ $7,296 $ 8,265
Note payable bearing interest at 8.5%, payable in quarterly
principal and interest installments of $89,250 commencing
in 1997, due 2005, secured by property, plant and
equipment................................................. 2,050 2,050
Note payable bearing interest at the prime rate, payable in
monthly principal and interest installments of $11,779,
due 2001, unsecured....................................... 530
------ -------
9,876 10,315
Less -- Current portion of long-term debt................... 705 1,011
------ -------
$9,171 $ 9,304
====== =======
</TABLE>
In addition to the monthly principal and interest installments of $69,000
to the Small Business Administration, the Company is required to make
supplemental annual payments equal to 50% of the Company's net operating income,
as defined in the agreement, in excess of $3,000,000. At December 31, 1996, no
supplemental payment was required. At December 31, 1995, the current portion of
long-term debt includes $500,000 for the 1995 required supplemental payment.
During 1994, the required supplemental payment of $1.0 million was made in
addition to payments of $3.4 million from the proceeds of the Offering.
F-9
<PAGE> 29
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
As of December 31, 1996, aggregate principal maturities of long-term debt
are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------
<S> <C>
1997...................................................... $ 705
1998...................................................... 877
1999...................................................... 923
2000...................................................... 979
2001...................................................... 968
Thereafter................................................ 5,424
------
$9,876
======
</TABLE>
6. RETIREMENT AND EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has a noncontributory defined-benefit retirement plan covering
all salaried employees and two noncontributory defined-benefit plans covering
certain former hourly employees who have met certain plan eligibility
provisions. Benefits under the hourly employees' plans are based on years of
service while benefits under the salaried employees' plan are based on years of
service and the employee's compensation during the five consecutive calendar
years prior to retirement. The Company makes contributions as required to
maintain the plans on an actuarially sound basis.
The following tables summarize the plans' funded status and amounts
recognized in the Company's financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
---------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $ 5,525 $ 5,455
Nonvested................................................. 120 132
------- -------
$ 5,645 $ 5,587
======= =======
Projected benefit obligation for services rendered to
date...................................................... $ 6,279 $ 6,394
Plan assets, primarily common stock and bond funds, at fair
value..................................................... 4,663 3,750
------- -------
Excess of projected benefit obligation over plan assets..... (1,616) (2,644)
Unrecognized prior service cost............................. 120 105
Unrecognized net loss (gain) including actual gains and
losses not yet reflected in market-related asset value.... (442) 381
------- -------
Accrued pension cost included in the accompanying balance
sheet ($411,000 and $360,000 classified as current at
December 31, 1996 and 1995)............................... $(1,938) $(2,158)
======= =======
</TABLE>
For financial reporting purposes, a pension plan is considered underfunded
when the fair value of the plan assets is less than the accumulated benefit
obligation. The difference between the underfunded liability of the pension plan
and the accrued pension costs is recorded net of deferred taxes as a reduction
to stockholders equity. As of December 31, 1996, the difference was $126,000
with a reduction to stockholders' equity of $77,000. As of December 31, 1995,
the difference was $278,000 with a reduction to stockholders' equity of
$171,000.
F-10
<PAGE> 30
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Net pension cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Costs related to services provided by employees............. $ 254 $ 233 $ 243
Interest cost on projected benefit obligations.............. 458 445 388
Actual return on plan assets................................ (540) (614) 48
Net amortization and deferral............................... 229 366 (321)
----- ----- -----
Net pension cost.................................. $ 401 $ 430 $ 358
===== ===== =====
</TABLE>
In addition to net pension cost, net losses of $35,000 were recorded in
1995 pursuant to FAS No. 88, "Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits", due
to termination of employees' services earlier than expected with respect to the
closing of the Company's Northumberland, Pennsylvania facility (see Note 10).
The assumptions used in accounting for the pension plans, where applicable,
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 7.25% 7.00% 8.50%
Rate of increase in compensation levels..................... 4.00% 4.00% 5.50%
Expected long-term rate of return on assets................. 8.50% 8.50% 8.50%
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, the Company
contributed $409,000, $492,000 and $437,000, respectively, to a multi-employer
retirement plan sponsored by the I.A.M. National Pension Fund covering the Elba,
Alabama facility's hourly employees.
POSTRETIREMENT MEDICAL AND LIFE INSURANCE BENEFITS
In addition to providing pension benefits, the Company provides certain
medical and life insurance benefits to substantially all salaried employees upon
retirement. Salaried employees are eligible for these postretirement benefits
after attaining the age of 60 and providing five years of service. The Company
pays for claims when submitted by the retirees. The accounting for the
postretirement plan assumes future increases in annual costs will be divided
equally between the Company and the retirees.
The following tables summarize the plan's obligation and amounts recognized
in the Company's financial statements:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
----- -----
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 65 $ 33
Fully eligible active participants........................ 37 24
Other active participants................................. 349 269
----- -----
451 326
Unrecognized transition obligation.......................... (293) (311)
Unrecognized net gain (loss)................................ (29) 73
----- -----
Accrued postretirement benefit cost....................... $ 129 $ 88
===== =====
</TABLE>
F-11
<PAGE> 31
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Net postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Costs related to services provided by employees............. $31 $13 $14
Interest cost on accumulated postretirement benefit
obligation................................................ 33 24 26
Amortization of transition obligation....................... 18 18 18
Amortization of unrecognized net gain....................... (16) (2)
--- ---- ---
$82 $39 $56
=== ==== ===
</TABLE>
The discount rate used in determining the accumulated benefit obligation
was 7.25% in 1996, 7.0% in 1995, and 8.25% in 1994. The accrued medical trend
rate used in 1996 was 9%, in 1995 was 10%, and in 1994 was 11%, decreasing 1%
per year until the ultimate rate of 5% is reached.
If the medical trend rate assumptions were increased by 1%, the accumulated
benefit obligation as of December 31, 1996 would be increased by approximately
$95,000. The effect of this change on the service and interest components of net
periodic postretirement benefit cost for the year would be an increase of
approximately $15,000.
SUPPLEMENTAL RETIREMENT PLAN
The Company also maintains a 401(k) supplemental retirement plan for
salaried employees. The Company, at the discretion of the Board of Directors,
may match up to one-half of an employee's contributions of up to ten percent of
gross salary. The Company accrued approximately $0, $139,000 and $115,000 of
matching contributions to the plan in 1996, 1995 and 1994, respectively.
Effective January 1, 1997, the Company established "Dorsey Trailers, Inc.
Hourly Employee Savings Incentive Plan" which is a 401(k) retirement plan for
hourly employees not covered by the union contract.
7. INCOME TAXES
The Company adopted FAS No. 109 effective July 28, 1994. The effect of
adopting FAS No. 109 did not have a material effect on the Company's financial
position or results of operations.
The components of the provision for (benefit from) income taxes for the
years ended December 31, 1996, and 1995 and the period July 29, 1994 through
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD OF
------------------ JULY 29, 1994 -
1996 1995 DECEMBER 31, 1994
------- ------- -----------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current
Federal................................................ $(2,774) $ 2,408 $ 1,300
State.................................................. (45) 314 234
------- ------- --------
(2,819) 2,722 1,534
------- ------- --------
Deferred
Federal................................................ (1,533) (1,300)
State.................................................. (265) (298) (234)
------- ------- --------
(265) (1,831) (1,534)
------- ------- --------
$(3,084) $ 891 $ --
======= ======= ========
</TABLE>
F-12
<PAGE> 32
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The Company's provision for income taxes differs from the amount computed
by applying the statutory federal income tax rate of 34% to income (loss) before
income taxes of ($8,009,000) and $5,135,000 for the years ended December 31,
1996 and 1995, respectively, and $3,755,000 for the period from July 29, 1994 to
December 31, 1994 as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD OF
------------------ JULY 29, 1994 -
1996 1995 DECEMBER 31, 1994
------- ------- -----------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax at federal statutory rate............................ $(2,723) $ 1,746 $ 1,277
State income taxes, net of federal benefit............... (317) 203 149
Reduction in valuation reserve........................... (1,086) (1,534)
Tax exempt interest income............................... (48) (81) (19)
Other.................................................... 4 109 127
------- ------- --------
$(3,084) $ 891 $ --
======= ======= ========
</TABLE>
Upon termination of the S election, deferred income taxes were recorded to
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities as of December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------ ------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred assets
Employee benefits......................................... $1,351 $1,173
Pension benefit........................................... 953 979
Accrued warranty.......................................... 814 862
Provision for plant closing............................... 213 181
State net operating loss carryforward..................... 265
Other..................................................... 481 333
------ ------
4,077 3,528
------ ------
Deferred liabilities
Depreciation.............................................. (124) (106)
Other..................................................... (4)
------ ------
(124) (110)
------ ------
$3,953 $3,418
====== ======
</TABLE>
At the time of the Offering, the Company established a valuation allowance
of $2,620,000. The change in the valuation allowance for the year ended December
31, 1995 was $1,086,000 and for the period July 29, 1994 through December 31,
1994 was $1,534,000.
PRO FORMA INCOME TAX INFORMATION (UNAUDITED)
From its inception through July 28, 1994, the Company elected to be an S
Corporation under the Internal Revenue Code. Accordingly, taxable income or loss
passed directly to the stockholders, and the Company did not provide for income
taxes. For information purposes, the statement of operations includes unaudited
pro forma adjustments for income taxes which would have been recorded had the
Company not
F-13
<PAGE> 33
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
been an S Corporation, based on the tax laws in effect during the period
presented. Unaudited pro forma income taxes for the period is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Current
Federal................................................... $ 3,137
State..................................................... 564
Deferred
Federal................................................... (1,601)
State..................................................... (295)
--------
$ 1,805
========
</TABLE>
The differences between unaudited pro forma income taxes at the statutory
federal income tax rate of 34 percent and pro forma income taxes reported in the
statement of operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Tax at federal statutory rate............................... $ 2,968
State income taxes, net of federal benefit.................. 343
Tax exempt interest income.................................. (40)
Reduction in valuation reserve.............................. (1,534)
Effect of proration of S Corporation earnings............... 61
Other....................................................... 7
--------
$ 1,805
========
</TABLE>
INTERNAL REVENUE SERVICE EXAMINATION
During the year ended December 31, 1995, the Internal Revenue Service
examination of the Company's federal income tax returns for the years 1988
through 1990 was settled with no adverse consequences to the Company.
DISTRIBUTIONS TO STOCKHOLDERS
In connection with the termination of the Company's S Corporation election,
the Company distributed $5,241,000 to the S Corporation stockholders during 1994
and 1995. This amount represented the previously taxed and undistributed
earnings of the Company through the offering date.
8. COMMON STOCK, OPTIONS AND WARRANTS
The Board of Directors declared a stock split of 3.901682 shares for every
share previously held effective May 25, 1994. The accompanying financial
statements have been retroactively restated to reflect the stock split.
Additionally, the Company amended its Articles of Incorporation to authorize
issuance of 500,000 shares of preferred stock and increase the authorized common
shares to 30,000,000.
On March 18, 1987, the Company issued a warrant for the purchase of
1,560,672 shares of common stock to Westinghouse Credit Corporation (WCC) as
part of a financing arrangement. The Company reserved 1,560,672 shares of common
stock for issuance in connection with the warrant.
F-14
<PAGE> 34
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
On January 12, 1993, the Company's majority stockholder borrowed $400,000
from an investor and purchased the warrant from WCC at $0.256 per share.
Simultaneously, the warrant was exchanged by the majority stockholder for
1,560,672 shares of the Company's common stock. As consideration of the majority
stockholder's loan from the investor, the investor holds the common shares as
security for repayment of the loan and releases the shares as note payments are
made. In addition, the investor was granted an option to purchase 585,252 shares
of the Company's common stock for $0.017 per share through January 12, 2013. In
1994, a portion of these options were repurchased and then canceled by the
Company with some of the net proceeds of the Offering. During 1995, the investor
exercised the remaining options to purchase 375,179 shares of the Company's
common stock. In conjunction with the exercising of the options, the majority
stockholder contributed 14,989 shares of common stock to the Company, which were
immediately canceled by the Company.
Simultaneously, with the warrant repurchase and investor loan, the majority
stockholder executed a loan agreement with the Company whereby the Company
loaned the majority stockholder the principal and interest payments due under
the investor loan at 6.5%. From January 1993 through June 1994, the Company made
payments of $234,000 under this agreement. At December 31, 1993 the $400,000
note payable from the majority stockholder to the investor and the related note
receivable from the majority stockholder were recorded on the Company's
financial statements. The note payable to the investor was discounted to
$260,000 to reflect the fair value of the options granted in connection with the
debt. The note payable to the Company was repaid on December 31, 1994 by the
majority stockholder.
MAJORITY STOCKHOLDER PLAN
The Company's majority stockholder sponsors a stock option plan for the
benefit of the Company and its employees. The exercise price of the options is
not less than the estimated fair market value of the common stock on the date of
grant as determined by the Company's majority stockholder or, in the case of the
January 12, 1993 grant, by comparison to a third-party transaction. Current
options granted are fully vested.
LONG-TERM INCENTIVE PLAN
During 1994, the Board of Directors adopted the 1994 Long-Term Incentive
Plan and reserved 250,000 shares of common stock for future issuance under the
plan. Pursuant to the terms of the 1994 Incentive Plan, the Board of Directors
or a committee thereof is authorized to identify officers and key employees of
the Company eligible to receive incentive stock options, non-qualified stock
options, or similar stock based awards under the plan. Grants have been awarded
at option prices equal to the fair market value of the common stock as of the
date of grant. Options vest equally over three years based on the date of grant
and expire ten years after date of grant.
F-15
<PAGE> 35
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
A summary of the status of the Company's stock option plans as of December
31, 1996 and 1995, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Majority Stockholder Plan
Outstanding at beginning of year.............. 738,389 $0.273 829,806 $0.269
Granted.....................................
Exercised................................... (146,240) 0.275 (85,536) 0.242
Forfeited/canceled.......................... (5,881) 0.256
-------- -------
Outstanding at end of year.................... 592,149 0.268 738,389 0.273
======== =======
Available for grant at end of year............ 5,881 5,881
Options exercisable at year-end............... 592,149 738,389
======== =======
</TABLE>
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Long-Term Incentive Plan
Outstanding at beginning of year............. 75,000 $ 7.54
Granted...................................... 50,000 5.44 75,000 $7.54
Exercised....................................
Forfeited/canceled........................... (25,000) 11.125
------- -------
Outstanding at end of year..................... 100,000 5.59 75,000 $7.54
======= =======
Available for grant at end of year............. 150,000 175,000
Options exercisable at year-end................ 16,667
Weighted-average fair value of options granted
during the year.............................. $ 5.44 $7.54
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
NUMBER WEIGHTED-
OUTSTANDING AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF AT REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Majority Stockholder Plan
$0.053 - $0.320................. 592,149 5.35 $0.268 592,149 $0.268
Long-Term Incentive Plan
$5.44 - $5.75................... 100,000 9.50 $5.59 16,667 $5.75
</TABLE>
The Company has adopted FAS No. 123, "Accounting for Stock-Based
Compensation". In accordance with the provisions of FAS 123, the Company applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for its Long-Term
Incentive Plan. If the Company had elected to recognize compensation expense
based upon the fair value at the grant dates for awards under this plan
consistent with the methodology prescribed by FAS 123, the Company's net
F-16
<PAGE> 36
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
income (loss) and net income (loss) per share would be reduced to the unaudited
pro forma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
------- ------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net income (loss)......................................... As reported $(4,925) $4,244
Pro forma (4,989) 4,210
Net income (loss) per share............................... As reported (0.99) 0.85
Pro forma (1.01) 0.85
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively; expected volatility
of 47% and 53% and risk-free interest rates of 5.50% and 5.55%. An expected
option term of 6 years for both periods was developed based on historical grant
information.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Board of Directors adopted the 1994 Stock Plan for Non-Employee
Directors. Pursuant to the Directors' Plan, each director (other than employees,
former employees or immediate family members of current or former employees)
automatically will receive on the day following each annual meeting of
stockholders a grant of shares of common stock with a fair market value of
$7,500 on the date of issuance. During 1996 and 1995, 8,568 and 2,115 shares,
respectively, were issued to eligible directors. In addition, each eligible
director serving on the Board of Directors at the time of the Offering received
a grant of shares of common stock with a fair market value of $7,500 based upon
the initial public offering price of the common stock. A total of 1,728 shares
were issued to eligible directors at the completion of the Offering.
9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases office facilities and certain equipment under
noncancelable lease agreements which expire at various times through 2006.
Minimum annual rentals under these agreements at December 31, 1996 are
summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1997..................................................... $ 333
1998..................................................... 238
1999..................................................... 208
2000..................................................... 166
2001 and thereafter......................................... 844
------
$1,789
======
</TABLE>
Rent expense under these and other lease agreements approximated $289,000,
$209,000 and $165,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-17
<PAGE> 37
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
WORKERS' COMPENSATION INSURANCE AND CERTIFICATE OF DEPOSIT
The Company is self-insured for workers' compensation claims up to $350,000
per occurrence. In order to secure the Company's obligation to fund its
self-insured retention, the Company has obtained standby letters of credit of
$1,990,000 from a bank under its revolving credit agreement. Prior to May, 1995,
the Company used letters of credit secured by certificates of deposit to secure
its obligation to fund such retention. The accompanying financial statements
include an insurance accrual based upon third party administrator's and
management's evaluations of estimated future ultimate costs of outstanding
claims and an estimated liability for claims incurred, but not reported, on an
undiscounted basis. The ultimate cost of these claims will depend on the
individual claims given the potential for these claims to increase or decrease
over time. Management believes that any claims as of December 31, 1996, arising
under this self-insurance program will not have a material adverse effect on the
financial position, results of operations, or cash flows of the Company.
CUSTOMER FINANCING
The Company is contingently liable under repurchase agreements with a
finance company that provides wholesale floor plans for certain Dorsey dealers
and who also provides financing to end users for some trailers sold through such
dealers. The total contingent liability is approximately $4.8 million at
December 31, 1996.
In the opinion of management, it is not probable that the Company will be
required to satisfy this contingent liability.
PURCHASE COMMITMENTS
At December 31, 1996, the Company has executed sales agreements with
various customers which include purchase commitments for used trailers totaling
$15.4 million.
LITIGATION
In April, 1995, a class action lawsuit alleging racial discrimination was
filed against the Company, and in the normal course of business, the Company is
a defendant in certain other litigation. Management believes such litigation is
without merit and intends to contest the suits vigorously. Management believes
that the ultimate resolution of the litigation will not have a material impact
on the Company's financial position or results of operations.
ENVIRONMENTAL MATTERS
Subsequent to the closing of the Company's Edgerton, Wisconsin plant in
1989, the Wisconsin Department of Natural Resources (WDNR) conducted an
environmental inspection that identified certain environmental response
requirements. The Company and certain prior owners of the Edgerton plant are
cooperating in conducting remediation at the plant site and in joining with
other potentially responsible parties in addressing an adjacent landfill site.
The Company has established reserves that it believes to be adequate to address
its environmental liabilities associated with these matters.
In December 1990, a leak was detected in an underground storage tank
containing an industrial solvent at the Elba, Alabama facility. The Company
notified the Alabama Department of Environmental Management ("ADEM") of the leak
and hired an environmental consulting firm to investigate the problem and
conduct corrective action. Based on the consultant's investigations and
discussions with ADEM, the Company does not expect the costs of corrective
action to exceed the reserves it has established for this purpose.
F-18
<PAGE> 38
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
10. CLOSING OF NORTHUMBERLAND, PENNSYLVANIA FACILITY
In December 1995, the Company closed its trailer manufacturing facility in
Northumberland, Pennsylvania. In connection with the plant closing, the Company
recorded a provision of $250,000 for employee termination costs which are
included in income from operations in the accompanying financial statements. The
plan of termination included 20 managerial and administrative employees and was
completed by December 1996.
11. BUSINESS COMBINATIONS
In July 1996, the Company acquired certain assets of a Dillon, South
Carolina based dump trailer manufacturer. The acquisition was accounted for
under the purchase method. As such, the results of operations of the acquired
company are included in the Company's financial statements for the period
subsequent to its acquisition date. The aggregate purchase price was $1.8
million paid in the form of cash and note payable. The excess of the purchase
price over the estimated fair value of the tangible and identifiable intangible
assets acquired was $1,025,000 and is being amortized on a straight-line basis
over 15 years. In connection with the acquisition, the Company entered into a
ten year lease agreement with the former owner for the manufacturing facility.
The pro forma effect of the acquisition for the years ending December 31, 1996
and 1995 is not provided since the effect of such acquisition was not material.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments, the
Company has reasonably assumed that the carrying amount approximates the
estimated fair value for cash and cash equivalents, accounts and other
receivables, accounts payable and other accrued expenses. The estimated fair
value of long-term debt instruments is based upon the current interest rate
environment and remaining term to maturity. The carrying value and estimated
fair value for long-term debt instruments as of December 31, 1996 and 1995 are
as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Long-term debt............................................ $9,876 $8,430 $10,315 $8,485
</TABLE>
In addition, the Company has certain off-balance sheet items such as
letters of credit and contingent liabilities. In the opinion of management, the
estimated fair value of the fees associated with these commitments is not
material to the Company.
13. SUBSEQUENT EVENTS
Subsequent to year-end 1996 through March 28, 1997, the Company has
purchased $14 million in used trailers, has incurred losses on the sale of used
trailers of approximately $1.5 million, and has reduced the value of the
remaining used trailers by approximately $1.8 million. These losses, recorded in
the first quarter of 1997, were a direct result of management's decision to
liquidate these trailers quickly in order to provide cash flow from operations
until such time as the credit facility, discussed below, could be finalized.
Subsequent to year-end 1996 through March 28, 1997, the Company sold used
trailers at various dates, upon the approval of the Board of Directors of the
Company, in the amount of approximately $4,657,000 to TYM, Inc. TYM, Inc. is a
corporation wholly-owned by Marilyn R. Marks, Chief Executive Officer of the
Company. The Company has incurred losses of approximately $819,000 on the sales
to TYM, Inc. In the opinion of management, based upon actual third-party offers,
the terms of the sale of these used trailers are no less favorable than terms
that could have been obtained from unaffiliated parties.
F-19
<PAGE> 39
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
On March 28, 1997 the Company entered into a $14 million, five year line of
credit (Financing Agreement), including a $4 million term loan which amortizes
evenly over the next four consecutive months and a letter of credit facility of
up to $3 million, with an asset-based lender. This Financing Agreement replaces
the Company's $10 million revolving credit agreement the Company had with a
financial institution. In connection with the closing of the $14 million
Financing Agreement, the Company incurred cost of approximately $1.2 million
which will be amortized over the life of the Financing Agreement. The Financing
Agreement bears interest at prime plus 1.75%, at March 28, 1997 the interest
rate was 10.25%, and interest is payable monthly. Annual commitment fees for the
unused portion of the Financing Agreement and outstanding letters of credit are
.375% and 2.0%, respectively. Additionally, the Company is required to pay
monthly a $5,000 servicing fee and an annual facility fee of .50% of the $14
million. The Financing Agreement allows advances of up to the lesser of $14
million less the outstanding principal amount of the term loan and letters of
credit obligations, or 80% of eligible accounts receivable plus 30% of eligible
raw material, 40% of eligible used trailers, and 60% of eligible finished goods
inventory less the outstanding principal amount of the term loan and letters of
credit obligations. The Company has certain limitations on the maximum amount of
advances the Company can receive against inventory. As of March 28, 1997, the
Company had $3.2 million outstanding under the Financing Agreement including
$1,990,000 in letters of credit with $6.9 million of availability under the
Financing Agreement. The Financing Agreement is secured by a first security
interest in the Company's accounts receivable and inventory.
The Financing Agreement contains certain operational and financial
covenants and other restrictions with which the Company must comply. The
covenants include, but are not limited to, the following: maximum amount of
capital expenditures; minimum tangible net worth; minimum working capital;
limitations on future indebtedness; sales of assets; and compliance with laws
and regulations.
F-20
<PAGE> 40
DORSEY TRAILERS, INC.
SCHEDULE VIII: VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO ACCOUNTS BALANCE AT
BEGINNING OF COSTS AND RECOVERED END OF
DESCRIPTION PERIOD EXPENSES (WRITTEN OFF) PERIOD
----------- ------------ ---------- ------------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for Doubtful Accounts $250 $ -- $(82) $168
==== ==== ==== ====
Year ended December 31, 1995
Allowance for Doubtful Accounts $150 $ -- $100 $250
==== ==== ==== ====
Year ended December 31, 1994
Allowance for Doubtful Accounts $145 $ -- $ 5 $150
==== ==== ==== ====
</TABLE>
F-21
<PAGE> 1
EXHIBIT 10.39
AGREEMENT
This Agreement, made the 1st day of May, 1996, by and between DORSEY
TRAILERS, INC., hereinafter referred to as the Company, and the International
Association of Machinists and Aerospace Workers Local (Coffee) Lodge No. 1769,
hereinafter called the Union.
ARTICLE 1
RECOGNITION
The Company recognizes local (Coffee) Lodge 1769, International
Association of Machinists and Aerospace Workers, AFL-CIO, as the sole
bargaining agent for all production and maintenance employees employed by
Dorsey Trailers, Inc., at its Elba, Alabama, plant, including those in the
classification of machinist, electrician, foamer, refrigeration, maintenance
mechanic, auto mechanic, aluminum welder, steel welder, serviceman, material
expeditor, quality specialist, painter, fabricator, assembler, utility truck
driver, warehouseman, janitor, surface preparer, and truck driver, but
excluding office clerical employees, technical employees, professional
employees, guards, and supervisors.
ARTICLE 2
MANAGEMENT RIGHTS
A. The Union recognizes that is the function and right of the
management to exercise its own judgment and discretion in developing processes
which meet customers acceptance, to meet competition, in order that its
business, jobs, and wages be protected. To attain these benefits, the Union
recognizes as included in, but not limited to, the following rights and duties
of management.
B. The management of the Company's business and the direction of the
working forces, including the right to hire, suspend for cause or to discharge
for cause, to discipline for cause, to reclassify, to transfer, to maintain
order and efficiency, and the right to relieve employees from duty because of
lack of work or for other legitimate reasons is vested exclusively in the
company.
C. It is further understood and recognized that all rights heretofore
exercised by or inherent in the management and not expressly contracted away by
the terms of this Agreement or waived herein are retained by management. Among
the rights which are and continue to be vested in the Company but not intended
as a wholly inclusive list of them shall be; the Company shall be the judge of
all matters pertaining to the location of operations, production schedule, and
the methods, processes and means of manufacture or servicing and materials to
be used, including the right to introduce new and improved methods or
facilities and to change existing methods or facilities, to determine the
quantity and quality of production, TO SCHEDULE WORK BY SHIFT AS IS
<PAGE> 2
APPROPRIATE, and the right to sub-contract work customarily performed in the
Company plant.
D. The Company shall have the right to make and enforce reasonable
rules and regulations as it may deem necessary for the purpose of maintaining
order, safety and efficiency PROVIDED THE SAME ARE NOT IN CONFLICT WITH THE
PROVISIONS OF THIS AGREEMENT. SUCH RULES SHALL BE ADMINISTERED FAIRLY AND
CONSISTENTLY.
E. THERE SHALL BE NO DISCRIMINATION IN REGARD TO CONDITIONS OF
EMPLOYMENT BECAUSE OF RACE, COLOR, RELIGION, SEX, MARITAL STATUS, AGE NATIONAL
ORIGIN OR PHYSICAL HANDICAP, PROVIDED THAT IT SHALL NOT BE CONSIDERED AS
DISCRIMINATION UNDER THIS ARTICLE UNLESS IT IS ALSO DISCRIMINATION UNDER
APPLICABLE FEDERAL OR STATE LAW.
ARTICLE 3
SENIORITY
A. Seniority shall be deemed to consist of length of continuos service
with the Company. In the application of principles of seniority as provided in
the Agreement, the employee involved must have the ability, physical fitness,
dependability, AND AVAILABILITY, and be otherwise qualified to perform the
ESSENTIAL FUNCTIONS OF THE JOB WITH OR WITHOUT REASONABLE ACCOMMODATIONS. The
Company will give preference to length of service if all other factors are
substantially equal. Length of service in connection with an employees
seniority shall be computed from the first date of hire, except that if there
has been a break in his continuous service record as provided in this
Agreement, seniority will then be computed from the last date of rehire.
B. LOSS OF SENIORITY - An employees continuos service shall be
considered broken and the employee shall lose seniority and all rights under
this Agreement shall be forfeited except as otherwise specifically provided
herein when the employee:
1. Quits
2. Is discharged
3. Fails to report for work from layoff within six days when
called by the Company by certified mail or telegram directed to his last
address appearing on the Company's records, provided, however, that no employee
shall lose seniority if failure to report to work is caused by sickness or
accident and the Company is so notified within six working days. For the
purpose of computing the six working days under this paragraph, the day the
notice is sent shall not be included.
4. Is absent for three (3) consecutive working days without
notice to the Company, unless notification is beyond employees control. It is
the employees
2
<PAGE> 3
responsibility to report his absence, even if such is done by a third party who
must, like the absent employee, receive a CALL IN NUMBER from the main guard
house of Personnel Office. Compliance with this paragraph is not to be
construed to mean that excessive absenteeism will be tolerated.
5. Is absent due to layoff, or disability, for a period in
excess of his continuous service with the Company at the time of such layoff or
disability, or in excess of ONE (1) year.
6. Receives permanent total disability benefits under WorkERs
Compensation or under a group insurance policy held by the Company.
7. Retires
8. Fails to return to work on the first day following the end
of an authorized leave of absence or fails to report prior to the expiration of
said leave of absence his inability to return to work.
C. CHANGE OF ADDRESS - Employees shall notify the Company in writing
of any change of address. Employee will be given a copy of this change of
address as a receipt. Should any question arise regarding an employees
address, the last address appearing on the Companys records shall be considered
true and correct.
D. If an employee is transferred from the bargaining unit to a
non-bargaining unit job, the Company may later transfer such employee back to
the bargaining unit. In such case the employee shall maintain his previous
seniority in the bargaining unit, but shall not accumulate seniority for the
time he is outside the bargaining unit.
E. Seniority shall be plant wide by classification.
F. WORK ASSIGNMENT
1. The Company will make assignments without restriction
within a classification to qualified employees.
2. Temporary Work assignments from one classification to
another will be restricted to TWENTY (20) WORKING DAYS. The employee being
transferred shall receive the higher rate of pay.
3. The Company may assign employees out of seniority between
shifts for a period of up to SIXTY (60) work days when needed for training,
temporary workload, leave of absence, vacation replacement, changes in
production line, LACK OF WORK, ABSENTEEISM, AND/or similar situations.
3
<PAGE> 4
4. Employees may make a written request in the Personnel
Office indicating a shift preference. The employee shall receive a copy as
receipt. When an opening occurs for which the employee is qualified, he will
be transferred in order of seniority. THAT JOB WILL THEN BE BACKFILLED BY
SHIFT PREFERENCE AND SENIORITY BY THE QUALIFIED EMPLOYEE UNTIL NO SHIFT
PREFERENCE REMAINS. ANY REMAINING OPENINGS WOULD THEN BE BID UPON BY
CLASSIFICATION REQUEST. SHIFT PREFERENCE WILL TAKE PRECEDENCE OVER A
CLASSIFICATION REQUEST. SHIFT REQUESTS WILL REMAIN ACTIVE FOR SIX (6) MONTHS
FROM THE DATE RECEIVED IN HUMAN RESOURCES.
G. CHANGES IN THE WORK FORCE
1. IN THE EVENT OF A LAYOFF, PROBATIONARY EMPLOYEES WILL BE
LAID OFF FIRST. IF FURTHER LAYOFFS ARE NECESSARY, THE LAST PERSON HIRED WILL
BE THE FIRST LAID OFF, PROVIDING THAT THE REMAINING EMPLOYEES ARE QUALIFIED IN
THE JUDGEMENT OF THE COMPANY TO PERFORM THE WORK AVAILABLE.
2. When increasing a classification after a layoff, the most
senior qualified employee(s) on layoff FROM THAT CLASSIFICATION OR WITH A
CLASSIFICATION CHANGE REQUEST, IF LAID OFF FROM A DIFFERENT CLASSIFICATION,
will be recalled first. SHOULD AN EMPLOYEE WISH TO BE RECALLED TO A DIFFERENT
CLASSIFICATION FROM WHICH HE WAS LAID OFF, HE MUST SUBMIT A REQUEST TO HUMAN
RESOURCES PRIOR TO THE LAYOFF. THE MOST SENIOR QUALIFIED EMPLOYEE(S) ON LAYOFF
WILL BE RECALLED FIRST.
3. Employees facing a layoff from a classification may
displace in other classifications provided they HAVE WORKED IN THE AFFECTED
CLASSIFICATION PREVIOUSLY, HAVE PLANT SENIORITY, AND ARE OTHERWISE QUALIFIED AS
DETERMINED BY THE COMPANY TO PERFORM THE WORK AVAILABLE.
4. Employees being laid off will be given AT LEAST 16 working
hourS notice.
5. IN MAKING PROMOTIONS, DEMOTIONS, OR RECLASSIFICATION
EXCEPT TO LEADER, THE MOST SENIOR EMPLOYEE(S) WITH THE ABILITY TO PERFORM THE
WORK WILL BE PROMOTED, DEMOTED OR RECLASSIFIED PROVIDED THEY HAVE MADE A
WRITTEN REQUEST IN THE PERSONNEL OFFICE FOR THE JOB IN QUESTION. THE EMPLOYEE
WILL BE PROVIDED A COPY OF THE WRITTEN REQUEST AS A RECEIPT. NO MORE THAN 25%
OF A CLASSIFICATION WITHIN A DEPARTMENT WILL BE ALLOWED TO BE DEMOTED IN A 60
DAY PERIOD. CLASSIFICATION CHANGE REQUESTS WILL REMAIN ACTIVE FOR SIX (6)
MONTHS FROM THE DATE RECEIVED IN HUMAN RESOURCES.
4
<PAGE> 5
6. The Company shall have the right to select from each
classification qualified employees to serve as Leaders. Leaders shall be
selected on the following basis: job skills; ability to lead, instruct, and
direct the work of others; judgment; knowledge of plant operations; maturity;
and seniority.
H. NOTIFICATION TO THE UNION
1. The Company shall submit PERIODICALLY to the Business
Representative and Chairman of Grievance Committee a list of all employees laid
off, promoted, or recalled. The list will include the employees name,
classification, and last date of hire.
2. The Company shall furnish an updated seniority list each
90 days to the Business Representative, each Shop Steward and Chairman of
Grievance Committee. The Company shall post the seniority list on bulletin
boards at appropriate locations for employee use.
3. Any error in seniority listings reported to the Company by
the Union, upon showing of proof, will be corrected; however the Company will
not be obligated for any application of retroactivity.
I. SPECIAL SHUTDOWNS SITUATIONS
1. WHEN THERE IS A NEED FOR EMPLOYEES TO WORK DURING A
PLANNED PLANT SHUTDOWN PERIOD, QUALIFIED EMPLOYEES IN THE NEEDED CLASSIFICATION
AND DEPARTMENT WILL BE ALLOWED TO WORK IN ORDER OF SENIORITY. IF ADDITIONAL
EMPLOYEES ARE NEEDED, EMPLOYEES WITH THE ABILITY TO PERFORM THE WORK WILL BE
ALLOWED TO WORK IN ORDER OF SENIORITY. MAINTENANCE mechanics, electricians,
and machinists may be required to work during vacation shutdowns, however, 10%
of the employees in each classification will be allowed to take vacation during
the shutdown period.
2. IT IS UNDERSTOOD AND AGREED THAT WHILE OTHER PARAGRAPHS IN
THIS AGREEMENT REFER TO PERMANENT OR INDEFINITE LAYOFFS, THIS SHALL NOT
RESTRICT THE COMPANY FROM LAYING OFF A PERSON, A COST CENTER, A DEPARTMENT, A
CLASSIFICATION, OR A SHIFT OF EMPLOYEES, ON A TEMPORARY BASIS, FOR A PERIOD NOT
TO EXCEED FIFTEEN (15) WORKING DAYS BECAUSE OF BREAKDOWNS, SHORTAGES IN
INVENTORIES, SHORTAGES IN ORDERS OR BUSINESS, CIVIL DISORDER, ACTS OF GOD,
LABOR DISTURBANCES, LACK OF RAW MATERIALS, AND/OR OTHER NON-DELIBERATE ACTS
OVER WHICH THE COMPANY HAS LITTLE OR NO CONTROL. HOWEVER, PRIOR TO ANY
TEMPORARY LAYOFF, THE COMPANY WILL DISCUSS THE MATTER WITH THE UNION. THE
COMPANY WILL NOT ABUSE ITS RIGHTS UNDER THIS SECTION.
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DURING THIS PERIOD, THE EMPLOYEES INVOLVED WILL HAVE NO RIGHT TO EXERCISE THEIR
SENIORITY.
3. IN THE EVENT OF AN UNPLANNED SHUTDOWN, EMPLOYEES WILL BE
SENT HOME BY SENIORITY, BY SHIFT, AND COST CENTER IN THE AFFECTED
CLASSIFICATION(S).
ARTICLE 4
PROBATION PERIOD
A. Employees who are newly hired will be probationary for their first
ninety (90) working days. A DAY WILL BE COUNTED AS A WORKING DAY ONLY WHEN THE
EMPLOYEE WORKS EIGHT (8) OR MORE HOURS IN THAT DAY.
B. After successfully completing the probationary period, and
employees seniority shall be computed as of the date of initial hire in the
current period of employment. The probationary period will be extended by the
number of days a probationary employee is absent for any reason.
C. Termination of employment during the probationary period shall not
be made on the basis of a claim or grievance against the Company and there
shall be no obligation to reemploy such person.
ARTICLE 5
LEAVE OF ABSENCE
A. THE COMPANY, AT ITS SOLE DISCRETION, MAY GRANT A LEAVE OF ABSENCE
WITHOUT PAY FOR ANY REASON DEEMED ACCEPTABLE TO THE COMPANY FOR A PERIOD NOT TO
EXCEED THIRTY (30) CALENDAR DAYS. AN EMPLOYEE MAY REQUEST, AND THE COMPANY MAY
GRANT IN ITS SOLE DISCRETION, AN EXTENSION OF SAID LEAVE BY MAKING A WRITTEN
APPLICATION FIVE (5) DAYS PRIOR TO THE END OF THE ORIGINAL LEAVE, SUPPORTED BY
APPROPRIATE REASONS. THE MAXIMUM CUMULATIVE LEAVE UNDER THIS PARAGRAPH WILL BE
THREE (3) MONTHS.
B. EMPLOYEES MAY REQUEST A FAMILY MEDICAL LEAVE OF ABSENCE (FMLA) FOR
THE PURPOSE OF REARING A NEWBORN, NEWLY ADOPTED OR FOSTER CHILD, TO CARE FOR A
PARENT, PARENT-IN-LAW, OR CHILD WHO SUFFERS FROM A SERIOUS HEALTH CONDITION, OR
DUE TO A SERIOUS HEALTH CONDITION THAT MAKES THE EMPLOYEE UNABLE TO PERFORM THE
ESSENTIAL FUNCTIONS OF HIS JOB. EMPLOYEES REQUESTING A FAMILY MEDICAL LEAVE
MUST COMPLETE A FAMILY MEDICAL LEAVE FORM WHICH IS AVAILABLE THROUGH THE HUMAN
RESOURCES DEPARTMENT.
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<PAGE> 7
1. ALL LEAVES OF ABSENCE UNDER FMLA WILL BE UNPAID, WITH THE EXCEPTION
OF THOSE COVERED UNDER ACCIDENT AND SICKNESS, AND MUST BE TAKEN AFTER
ALL UNUSED VACATION AND PERSONAL HOLIDAYS ARE EXHAUSTED. FMLA LEAVES
CAN BE TAKEN FOR UP TO TWELVE WEEKS, AND REQUIRE AN EMPLOYEE TO HAVE
WORKED FOR AT LEAST 1,250 HOURS DURING THE PRECEDING TWELVE MONTHS IN
ORDER TO QUALIFY. CERTIFICATION BY A PHYSICIAN OR MEDICAL PRACTITIONER
MAY BE REQUIRED BEFORE THE APPROVAL OF LEAVE UNDER FMLA. WHERE
FORESEEABLE, AN EMPLOYEE MAY BE REQUIRED TO GIVE THE COMPANY THIRTY (30)
DAYS NOTICE PRIOR TO THE BEGINNING OF THE LEAVE.
C. Employees away from their jobs because of a compensable disease or
injury as defined by the Workers Compensation Act of Alabama will be given
leave of absence and shall accrue seniority while on such leave.
D. Any leave of absence obtained through false pretense shall be
invalid and the employees absence shall be recorded as unauthorized and such
disciplinary action shall be taken as the Company believes warranted.
E. All applications for leaves of absence WILL BE SUBMITTED in
writing by the employee and if approved or disapproved, the employee will be so
notified in writing THROUGH THE UNIT MANAGER, SECTION MANAGER, MANUFACTURING
MANAGER, AND/OR HUMAN RESOURCES MANAGER.
F. Military Leave - MILITARY LEAVE WILL BE GRANTED TO EMPLOYEE(S) IN
ACCORDANCE WITH APPLICABLE FEDERAL AND STATE LAW.
G. BEREAVEMENT Leave - BEREAVEMENT leave will be granted to eligible
full time Company employees in accordance with the following guidelines:
Up to three days for the DEATH of the employees spouse, parents,
son, daughter, or legal stepchildren.
Up to two days for the DEATH of the employees sister, brother,
grandparent, grandchildren, legal stepmother, legal stepfather,
father-in-law, mother-in-law, son-in-law, or daughter-in-law.
UP TO ONE DAY FOR the DEATH of the employees SPOUSES: GRANDPARENTS,
BROTHERS, SISTERS, BROTHERS WIFE, OR SISTERS HUSBAND.
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<PAGE> 8
BEREAVEMENT LEAVE applies to days lost during the regularly scheduled
WORK WEEK, EXCLUDING WEEKENDS.
H. JURY DUTY - AN EMPLOYEE REQUIRED TO SERVE ON ANY MUNICIPAL,
COUNTY, OR FEDERAL JURY, (NOT GRAND JURY), WILL BE GIVEN A LEAVE OF ABSENCE FOR
THE PERIOD THE EMPLOYEE IS REQUIRED TO SERVE ON THE JURY. DURING THE PERIOD OF
JURY DUTY, THE EMPLOYEE WILL BE PAID THE DIFFERENCE BETWEEN JURY DUTY PAY AND A
MAXIMUM OF EIGHT (8) HOURS OF STRAIGHT-TIME PAY PER SCHEDULED WORK DAY. SUCH
DUTY TIME WILL NOT BE CONSIDERED AS TIME WORKED.
1. THE EMPLOYEE MUST REPORT TO THE HUMAN RESOURCES DEPARTMENT PRIOR TO
BEGINNING JURY SERVICE WITH A COPY OF THE JURY SUMMONS. IF JURY DUTY IS
LONGER THAN ONE (1) WEEK, THE EMPLOYEE MUST REPORT TO THE HUMAN
RESOURCES DEPARTMENT AT THE END OF EACH WEEK OF JURY DUTY.
2. IF JURY DUTY IS A HALF DAY OR LESS ON A REGULARLY SCHEDULED WORKDAY,
THE EMPLOYEE MUST BE AVAILABLE FOR WORK FOR THE BALANCE OF THAT DAY
UNLESS EXCUSED BY THE HUMAN RESOURCES DEPARTMENT.
3. WHEN AN EMPLOYEE PERFORMS JURY DUTY ON A RECOGNIZED HOLIDAY FOR
WHICH HE WAS SCHEDULED TO WORK, THE EMPLOYEE WILL RECEIVE HOLIDAY PAY
WITH NO DEDUCTION FOR JURY DUTY PAY FOR THAT DAY.
4. ALLOWANCE FOR TRAVELING TIME OR OTHER EXPENSE ALLOWANCE GIVEN AN
EMPLOYEE IN CONNECTION WITH JURY DUTY WILL NOT BE CONSIDERED JURY DUTY
PAY.
5. AT THE END OF JURY DUTY SERVICE, THE EMPLOYEE IS REQUIRED TO SUBMIT
TO THE HUMAN RESOURCES DEPARTMENT EVIDENCE OF THE AMOUNT OF JURY DUTY
PAY RECEIVED.
I. Employees elected or selected to full time jobs in the local
union, Federal IAM Credit Union or the International Union, which takes them
from their employment with the Company shall upon written request to the
Company receive a leave of absence, without pay, for a period equal to their
tenure of employment. Upon completion of their leaves of absence during the
existence of this Agreement, they shall be reemployed according to the length
of continuous service, in work generally similar to that which they did last
prior to leaving, at the wage rates existing in the plant at the time of their
return provided such work is available for them according to their length of
continuous
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<PAGE> 9
service, and they are qualified to perform such work. Length of continuous
service shall accumulate during such leaves of absence.
J. Leaves of absence without pay will be granted by the Company on
three days written request of the Union, to Union representatives in a number
not to exceed that allotted by the International Union in accordance with its
constitution for the purpose of attending National Conventions, Union Schools,
State Conventions, and other Union business, but in no event is the number to
exceed eight (8) employees. The Union agrees to honor and respect the
requirements of production in requests for leaves of absence for such
delegates.
ARTICLE 6
GRIEVANCE PROCEDURE
A. Grievances are defined as any alleged violation of a specific AND
EXPRESSED term of this agreement or dispute as to its interpretation or
application when filed in accordance with the provisions of this article.
B. Grievances as defined herein shall be settled promptly in the
following manner:
Step 1 - A grievance shall first be taken up verbally with the UNIT
MANAGER. The grieving employee may request that a Shop Steward be present, and
when requested, will be made available as soon as possible, but in no case
LATER THAN THE END OF THE SHIFT. Grievances must be submitted within five (5)
working days of the occurrence AND MUST BE A VIOLATION OF A SPECIFIC ARTICLE
AND PARAGRAPH OF THE CURRENT LABOR AGREEMENT. An answer will be given within
one working day of presentation of the grievance, otherwise it will be
considered denied.
Step 2 - If the grievance is not satisfactorily resolved in Step I, the
Shop Steward shall reduce it to writing and present it to the HUMAN RESOURCES
MANAGER for his written answer, but a grievance may not be presented in Step 2
beyond five (5) working days of the Step One (1) grievance answer. THE HUMAN
RESOURCES MANAGER shall have five (5) working days to answer the grievance.
Failure to do so will serve as denial and automatically move the grievance to
the next step. Grievances shall be filed on a form provided by the Company.
Step 3 - If no satisfactory settlement is reached in Step 2, a meeting
will be held at a mutually established time between the VICE PRESIDENT - HUMAN
RESOURCES, the Director of Manufacturing, or their representatives, the Union
Grievance Committee, and a representative of the International Union. The
Union must request such a meeting within ten (10) working days of the answer in
Step 2, or the grievance will be considered abandoned. Both committees must
have the authority to settle the grievance. THE VICE PRESIDENT OF HUMAN
RESOURCES OR HIS REPRESENTATIVE will submit a written
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<PAGE> 10
answer within five working days of the meeting. Failure to do so will serve as
denial and will automatically move the grievance to the next step. The Union
grievance committee will be composed of three Shop Stewards and the Chairman of
the Grievance Committee.
C. In the event of multiple grievances involving substantially the
same issue, only one grievance may be filed. Other employees may become
parties to the grievance by signing a sheet attached to the grievance form.
D. Grievances concerning discharge must be initially submitted at
Step 3 within ten (10) days of the discharge.
E. The Company will recognize up to one shop steward per one hundred
employees but in no case fewer than three (3) shop stewards on the day shift
and one on the OFF SHIFTS. Shop stewards and the Chairman of the Grievance
Committee will be the last to be transferred or laid off from their
classification.
F. Grievances MAY BE WRITTEN AND FILED DURING THE LAST THIRTY (30)
MINUTES OF THE SHIFT IN NON-WORK AREAS.
ARTICLE 7
ARBITRATION
A. Should a grievance that involves the interpretation or application
of a provision of this Agreement not be satisfactorily settled in accordance
with Step 3 of the grievance procedure, it may be submitted to the first name
of the following panel of arbitrators in sequence.
1. John Caraway
2. David W. Grissom
3. Dean L. Howell
Should the panel be reduced by death, resignation or otherwise, the
arbitrator shall be replaced by another chosen by mutual agreement between the
Company and Union.
The request for arbitration must be made AND SCHEDULED within TEN (10)
days of the answer in Step 3, otherwise the grievance shall be considered
settled on the basis of the last decision made by the Company and not be
subject to further appeal. The fees and expenses of the arbitration shall be
borne by the losing party.
B. The decision of the Arbitrator shall be final and binding on the
Company, Union, and the employee(s) involved. The arbitrator shall be limited
to rendering an award which is remedial, and under no circumstances shall an
employee be made more than whole. Unemployment Compensation, Workers
Compensation, and any interim earnings, shall be deducted from any award for
back pay. An employee shall not be eligible for back pay for more than twenty
days prior to the first filing of the grievance in
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<PAGE> 11
writing, and furthermore, no award for back pay shall exceed the amount of wages
the employee would have earned at his regular straight time wage rate.
ARTICLE 8
STRIKES, LOCKOUTS, AND WORK STOPPAGES
A. The Union, its officers and members agree that for the duration of
this Agreement there shall be no strike, sit downs, slow downs, stoppages of
work or any acts of any nature which would interfere with production and no
picketing of any kind, WHETHER PREDICATED UPON ECONOMIC ISSUES, ALLEGED
GRIEVANCES, ALLEGED CONTRACT VIOLATIONS, ALLEGED UNFAIR LABOR PRACTICES,
SYMPATHY FOR OTHER EMPLOYEES OF THE COMPANY OR OF ANY OTHER EMPLOYER, OR
OTHERWISE. Failure or refusal on the part of any employee of the Company to
comply with any and all provisions of this section shall be sufficient grounds
for penalty or discharge. The Company agrees that for the duration of the
Agreement there shall be no lockouts. A lockout as mentioned herein shall not
be construed as the closing down of operation or any part thereof or curtailing
any operations for business reasons.
B. It is agreed that in the event of any such action as described
above, the Union and its officers shall require all members to return to work,
and immediately notify the employer that the action of the participants is
unauthorized. The Union shall never countermand a Management order, the work
will proceed as ordered, and complaints shall be handled through the grievance
procedure.
ARTICLE 9
HOURS OF WORK AND OVERTIME
A. Nothing in this article shall be construed as a guarantee of hours
of work for any period. FOR THE PURPOSES OF CALCULATING OVERTIME, THE NORMAL
WORKWEEK FOR ALL EMPLOYEES SHALL CONSIST OF FORTY (40) HOURS SCHEDULED IN FIVE
(5) DAYS OF EIGHT (8) HOURS. THE COMPANY RESERVES THE RIGHT TO OPERATE ON A
SIX (6) OR SEVEN (7) DAY BASIS. THE NORMAL WORKDAY SHALL CONSIST OF EIGHT (8)
HOURS WITH A ONE-HALF (1/2) HOUR PAID MEAL BREAK. THE START OF THE NORMAL
WORKWEEK WILL BEGIN AT 11:00 P.M. ON SUNDAY.
B. Any hours worked in excess of 40 in a week or 8 in a day shall be
paid at time and one-half (1 1/2). Any hours worked on Saturday shall be paid
at time and one-half (1 1/2). Any hours worked on Sunday, with the exception
of the hour between 11:00 P.M. and 12:00 Midnight, shall be paid at double time
(2x). This last hour, 11:00-12:00 shall be considered the first hour of the
third shift, and shall be paid at the straight time rate. For all work
performed on holidays according to Article 10, the employee shall receive
holiday pay plus time and one-half (1 1/2). Employees called in
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<PAGE> 12
for work when not regularly scheduled, will be paid a minimum of 4 hours at the
appropriate rate.
C. The Company will have the right to require overtime as needed, as
follows:
1. When overtime is needed, QUALIFIED employees within a
classification and a cost center will be required to work. The Company agrees
to administer an overtime list that contains the name and classification of
each employee in his home cost center. The Company will attempt to equalize
overtime by classification within a cost center and shift. QUALIFIED Employees
with the least amount of overtime hours in a classification, cost center and
shift will be given the first opportunity to work. Employees who are absent
for any reason will be charged overtime hours for any overtime he should have
otherwise worked. Employees refusing overtime will be charged as though they
had worked. If the Company needs additional employee(s) to work overtime due
to refusals, the employee(s) lowest on the overtime roster may be required to
work. No employee will be required to work more than two (2) hours overtime in
a regular work day, Monday through Friday inclusive.
2. Newly hired employees shall be charged with the equivalent of the
overtime hours of the highest employee in his cost center and classification
plus two (2) hours. Employees who transfer or are reclassified from one home
cost center to another will carry with them their charged overtime hours to the
new cost center.
3. ANY WORK ASSIGNED TO, PARTIALLY COMPLETED, BUT STILL IN PROGRESS BY
AN EMPLOYEE OR GROUP OF EMPLOYEES AT THE END OF A SHIFT, WHICH WOULD RESULT IN
AN EXCESSIVE LOSS OF PRODUCTION TIME TO TIE-IN OR INSTRUCT OTHER EMPLOYEES ON
THE STATUS OF THE WORK REMAINING TO BE DONE, MAY BE CONTINUED BY EMPLOYEE(S) WHO
HAVE BEEN PERFORMING THE WORK, IF THE WORK IS CONTINUED IN THE SAME DAY.
D. There shall be no pyramiding of premiums or overtime pay and
nothing in this Agreement shall be construed so as to require the payment of
premium or overtime pay more than once for the same hours worked.
ARTICLE 10
HOLIDAYS
A. The Company recognizes the following ten holidays in the calendar
year: New Years Day, Good Friday, Independence Day, Labor Day, Thanksgiving
Day, Friday after Thanksgiving, Christmas Eve, Christmas Day, AND TWO PERSONAL
HOLIDAYS. The personal holidays must be scheduled one week in advance, and
must not interfere with production. THE COMPANY WILL NOT BE OBLIGATED TO
SCHEDULE MORE THAN 10% OF THE EMPLOYEES IN SAID CLASSIFICATION AND COST CENTER
FOR PERSONAL HOLIDAYS. Conflicts about requests for personal holiday will be
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settled by seniority. With the exception of Christmas Eve and Christmas Day,
holidays which fall on a Saturday will be observed on Friday; holidays which
fall on Sunday will be observed on Monday. IF A HOLIDAY FALLS WITHIN AN
EMPLOYEES VACATION PERIOD, SUCH HOLIDAY SHALL NOT BE CONSIDERED PART OF THE
VACATION PERIOD. THE EMPLOYEE, SHALL, INSTEAD, RECEIVE AN ADDITIONAL DAY OFF
WITH PAY, IF REQUESTED ONE WEEK PRIOR TO THE START OF THE VACATION PERIOD.
B. All employees on the active payroll of the Company, except those
excluded herein, shall receive eight (8) hours pay at his regular rate for
holidays specified above.
C. An employee, in order to be eligible to receive holiday pay must
have worked his scheduled shift, unless excused by THE MANUFACTURING MANAGER,
on the last work day immediately preceding and the first day immediately
following such holiday. TO BE CONSIDERED EXCUSED FOR THE PURPOSE OF THIS
ARTICLE, THE ABSENCE MUST BE ACCOMPANIED BY A WRITTEN PHYSICIANS EXCUSE.
D. An employee shall not receive holiday pay if: such holiday occurs
during an employees personal leave of absence; such holiday occurs during an
indefinite layoff; such holiday occurs during a sickness or accident leave in
excess of 30 calendar days; such holiday occur during a military leave in
excess of 30 calendar days; such employee has not completed the probationary
period.
E. An employee who is scheduled to work on a holiday and fails to
work, unless excused, shall not receive holiday pay for such holiday.
F. The Company may, at its option, observe the above recognized
holidays by closing the plant or scheduling work on them.
ARTICLE 11
GROUP INSURANCE
A. The following insurance plan will be in effect for the life of
this agreement. The Company will secure insurance for employees and their
dependents, and will pay for a portion of the costs. The employee shall pay
$51.85 per month for employee only HEALTH coverage. Family HEALTH coverage
will be $149.19 per month. Future premium increases will be shared by the
Company and the employee ON A 50% COMPANY, 50% EMPLOYEE BASIS. SHOULD THE
EMPLOYEE CONTRIBUTION REACH $60.00 PER MONTH FOR EMPLOYEE ONLY COVERAGE, THE
COMPANY WILL PAY PREMIUM INCREASES ABOVE THAT AMOUNT. SHOULD THE EMPLOYEE
FAMILY CONTRIBUTION REACH $175.00 PER MONTH FOR FAMILY COVERAGE, THE COMPANY
WILL PAY PREMIUM INCREASES ABOVE THAT AMOUNT. NEW EMPLOYEES WILL BE ELIGIBLE
FOR COVERAGE ON THE FIRST DAY FOLLOWING THE SUCCESSFUL COMPLETION OF THEIR
PROBATIONARY PERIOD.
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<PAGE> 14
The schedule on this page is intended to provide employees with an
available reference and general outline of the benefits provided in the group
insurance plan. For detailed information, refer to your group insurance plan
booklet.
1. Life insurance - employee . . . . . . . . . . . . .$15,000
2. Accidental Death and Dismemberment
employee . . . . . . . . . . . . . . . . . . . .$15,000
3. Weekly sickness and accident benefits - $125 beginning first day
in case of accident, eighth day for sickness, except first day for sickness if
hospitalized - employee only (reduced by amount received from Workmens
Compensation). MAXIMUM OF TWENTY-SIX (26) WEEKS BENEFIT.
4. Health Plan
1. Lifetime Maximum - ONE MILLION DOLLARS
2. Plan pays 100% after annual out-of-pocket covered expenses
reach set limit of $2,000 per individual or $4,000 per
family.
3. Plan pays 80%. Insured pays 20% until reach limit of
annual out-of-pocket covered expenses.
4. Hospital confinement subject to annual deductible. If a
private room is required by the attending physician, the
plan will pay the most common daily rate for a semi-private
room at 80%.
5. Deductible of $300 per calendar year per individual, or
$600 per family applicable to all other medical
expenses, except those incurred due to treatment of an
injury.
6. Other Features:
a. Psychiatric care for mental and nervous disorders
reimbursed at 80% for in-patient care. Out-patient
treatment covered at 50%. Lifetime maximum of
$25,000. Maximum of one, thirty day calendar
confinement per year.
b. In and out-patient surgery payable at 80% subject
to deductible.
c. Second and third opinions for elective surgery
covered at 100% of covered expenses incurred for
the fee charged. Diagnostic laboratory or X-ray
examinations also covered at 100% of expenses
incurred.
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d. Skeletal adjustments reimbursed at 80% following
deductible. No maximums.
e. Alcohol and Drug Abuse treatment covered at 80%
following deductible. Lifetime maximum of $25,000.
Thirty day maximum per year for inpatient alcohol and
drug abuse treatment.
7. Policy will include coordination of benefit clause.
8. The plan includes a hospital pre-admission review program.
Participants must comply with the pre-admission review
procedure in order to receive the maximum level of eligible
benefits under this group health plan. Failure to comply
with applicable procedure will result in 50% reimbursement
of covered expense associated with a non-certified hospital
stay.
9. Expense for generic prescription drugs will be reimbursed
at 100% after the satisfaction of the calendar year
deductible. IF A GENERIC IS AVAILABLE, AND THE EMPLOYEE
REQUESTS A NAME BRAND DRUG IT IS REIMBURSABLE AT 50% AFTER
SATISFACTION OF THE CALENDAR YEAR DEDUCTIBLE. IF THE
PHYSICIAN REQUIRES A NAME BRAND DRUG IT WILL BE REIMBURSED
AT 100% AFTER SATISFACTION OF THE CALENDAR YEAR
DEDUCTIBLE.
10. Use of emergency room facilities covered at 80%.
11. The following comprehensive medical benefits are payable
at 100%.
a. Diagnostic X-rays and Laboratory
b. Pre-admission Testing Benefit
c. Home Health Care Benefit, up to 40 visits per
calendar year.
d. Hospice Care, up to $10,000 maximum
12. THE BLUE CROSS/BLUE SHIELD OF ALABAMA PREFERRED MEDICAL
DOCTOR PROGRAM (PMD) PROVIDES BENEFITS FOR PHYSICIAN
SERVICES AND OUTPATIENT FACILITIES. THIS BENEFIT ONLY
APPLIES IF THE EMPLOYEE SELECTS A PARTICIPATING DOCTOR OR
OUTPATIENT FACILITY. THE EMPLOYEE PAYS $15 PER DOCTOR
OFFICE VISIT OR SERVICE. THE DOCTOR CO-PAY FEE IS WAIVED
FOR CERTAIN SERVICES AS OUTLINED IN THE PMD PLAN. THE
EMPLOYEE PAYS A $25 FACILITY FEE FOR EACH OUTPATIENT
SURGERY OR MEDICAL EMERGENCY UTILIZATION. THE FACILITY
CO-PAY IS WAIVED FOR
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ACCIDENT-RELATED SERVICE, DIAGNOSTIC X-RAY, LABORATORY AND
PATHOLOGY SERVICES.
13. FOR CONFINEMENTS IN A PARTICIPATING BLUE CROSS/BLUE SHIELD
OF ALABAMA HOSPITAL FACILITY, THE PLAN PAYS COVERED
EXPENSES AFTER THE INSURED PAYS A $250 DEDUCTIBLE PER
HOSPITAL ADMISSION AND A $50 PER DAY CO-PAY FOR EACH
REMAINING ELIGIBLE DAY. THE CO-PAYMENT APPLIES TO THE
EMPLOYEES ANNUAL OUT-OF-POCKET LIMIT STATED ABOVE; THE
CO-PAYMENT DOES NOT APPLY TOWARD THE CALENDAR YEAR
DEDUCTIBLE(S).
B. In the event an employee who has qualified for coverage under this
section is on approved leave of absence or on a leave of absence due to
occupational injury or disease, the Company will continue to provide insurance
coverage for the employee and dependents, provided that the employee continues
to make his/her portion of premium costs during the leave.
C. Employees who are laid off will have such coverage maintained for
the month of layoff, PROVIDED THAT THE EMPLOYEE CONTINUES TO MAKE HIS/HER
PORTION OF PREMIUM COSTS FOR THAT MONTH. In the event of a layoff extending
beyond the month of a layoff, the employee may make provisions with the Company
for a continuation of insurance coverage under the COBRA ACT (Comprehensive
Omnibus Budget Reconciliation Act), provided the employee shall assume the cost
of such coverage.
D. A joint management/labor committee will be established to study
insurance trends and methods to lower costs. Should this committee identify
cost savings through changes in the plan or by additional cost-containment
measures, it will have the right to present recommendations to management and
the bargaining committee for possible changes. All cost savings realized as a
result of these changes will be passed on to employees.
E. A hospital self audit plan whereby employee receives 50% of
savings from any error found, corrected and verified. The maximum an employee
may receive is $500 per occurrence.
F. An employee who has completed five years of continuous employment,
and has reached the age of 62, and elects to retire, may continue to
participate in Dorseys Group Life and Medical Insurance program by paying the
established monthly premiums with the following stipulations:
1. Weekly disability benefits are excluded.
2. Life insurance coverage is optional, but may be retained
only if the retiree selects medical coverage.
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3. Retiree will give immediate notice and withdraw from the
program should he become employed by another employer who
provides medical insurance on his behalf.
4. Retirees pay the same premiums for the specified coverage
as are paid for covered employees. Premiums must be made
payable to Dorsey Trailers, Inc., Elba, Alabama.
5. Retirees must enroll in the plan at least 30 days before
their effective date of retirement.
6. Participation in the program will be discontinued on the
earlier date of: the last day of the month in which he
attains age 65 or the date he becomes eligible for
Medicare.
ARTICLE 12
VACATIONS
A. The vacation year for eligibility and service credit shall be from
hiring anniversary date to anniversary date. Employees shall receive vacation
time off and vacation pay according to the amount of their seniority with the
Company, as stated below:
<TABLE>
<CAPTION>
SENIORITY VACATION
<S> <C>
After completing 1 year 1 week
After 2 years to 10 years 2 weeks
Over 10 years to 20 years 3 weeks
Over 20 years 4 weeks
</TABLE>
B. The Company will attempt to schedule shutdowns which will include
July 4, and Christmas. Employees eligible for vacation must take their
vacation during these periods. Any employee not permitted to take a vacation
in accordance with this section will be allowed to schedule such vacation at a
later date.
C. EMPLOYEES WITH vacation days in excess of 2 weeks may TAKE one day
at a time, provided the taking of vacation does not interfere with production
AND IS SCHEDULED AT LEAST FIVE WORKING DAYS IN ADVANCE OF SAID VACATION.
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D. In the event the number of employees who schedule their vacation
in any classification in any work week would impair production, the Company
will not be obligated to schedule more than 10% of the employees in said
classification and COST CENTER for vacation. EMPLOYEES MUST SCHEDULE VACATION
AT LEAST FIVE WORKING DAYS IN ADVANCE OF SAID VACATION. Vacations will be
scheduled by seniority.
E. Employees will accrue vacation credits as follows:
<TABLE>
<CAPTION>
MONTHS OF MONTHLY
SERVICE VACATION ACCRUAL
<S> <C> <C>
1-12 months 40 hrs. per yr. 3.333 hrs.
13-108 months 80 hrs. per yr. 6.667 hrs.
109-228 months 120 hrs. per yr. 10.000 hrs.
229 and over 160 hrs. per yr. 13.333 hrs.
</TABLE>
F. Upon termination of employment, an employee shall be paid for any
unused vacation time in accordance with the Company accrual system as specified
above, except employees failing to complete 90 days service. Such payment will
be made within 30 calendar days.
G. An employee shall receive vacation credits for those months during
which he worked at least eighty-nine (89) hours. Vacation pay will be based on
the employees regular hourly rate in effect at the time his vacation commences.
There shall be no vacation carry over past the vacation anniversary date. The
employee shall be paid for any vacation not taken. If a holiday or holidays
fall during an employees vacation, such employee shall receive holiday pay in
addition to vacation pay.
ARTICLE 13
GENERAL
A. Supervisory personnel or other personnel not covered by this
Agreement shall not, at any time, perform work normally performed by employees
in the bargaining unit, unless by agreement with the Union, except that
supervisory personnel may perform such work necessary in case of emergency,
research work, experimental work (pilot model), and for the purpose of
instructing employees properly. IT IS FURTHER UNDERSTOOD THAT UNDER NO
CIRCUMSTANCES WILL THE PERFORMANCE OF BARGAINING UNIT WORK BY NON-BARGAINING
EMPLOYEES BE CONSIDERED AN ARGUABLE VIOLATION OF THIS AGREEMENT UNLESS THE
PERFORMANCE OF SUCH WORK INITIATED THE LAYOFF OF BARGAINING
18
<PAGE> 19
UNIT EMPLOYEES ON THE ACTIVE PAYROLL. The Company will use its best efforts to
insure that the terms of this provision are understood and applied throughout
the Company in keeping with the intent herein.
B. Those employees working on shifts with as paid lunch period shall
not receive any paid break period during said shift.
1. Employees who are scheduled to work two or more hours prior
to the start of their normal shift, will be granted a five
minute break immediately preceding the start of such shift.
2. Employees who are required to work overtime at the end of
their eight (8) hour shift, will be granted a five minute
break at the beginning of each two hours of overtime.
C. An employee shall be expected to be at his work station ready for
work at the beginning of his shift and shall be expected to continue working
until the end of the said shift, or to the end of the overtime required, with
the exception of break periods provided for in this Agreement.
D. If an employee is especially notified and scheduled to start work
four (4) hours or less before the starting time of his regular scheduled shift,
within his assigned work week, he shall be given the opportunity to remain at
work until the end of his regular shift.
E. The Company agrees to make available to new hires within the
bargaining unit a copy of the Labor Management Agreement. The Company will
make a copy of the Labor Management Agreement, in effect, Available to all
employees within 60 days after the Agreement is signed.
F. Time spent by union negotiating committee on union business which
would otherwise be spent working will be counted as time worked in computing
vacation accruals
G. Employees will be given a copy of any written notice issued to
them. Likewise, the chairman of the Grievance Committee or his designee shall
receive a copy of each written warning notice issued to bargaining unit
employees. Warning notices shall be kept in an employees file permanently, but
shall be considered inactive and void after 12 months. NO WRITTEN WARNING, 3
YEARS OR OLDER WILL BE USED AGAINST AN EMPLOYEE IN AN ARBITRATION CASE.
H. It is understood and agreed that the Company will make weekly
payroll deductions with weekly submission to the Credit Union of amounts
authorized by employees under a payroll deduction plan for the operation of a
IAM Federal Credit Union. A list of deductions and a check covering the total
monies deducted will be
19
<PAGE> 20
dispatched to the Credit Union no later than Wednesday of the week following pay
day on Friday. This list will provide a total of all monies deducted weekly
from each employees wages.
I. The Company agrees to provide bulletin boards at appropriate
locations for the use of the Union and Credit Union for the purpose of
legitimate business of interest to the employees as follows:
1. Notices of Union recreational and social affairs.
2. Notices of Union election.
3. Notices of Union appointments and results of elections.
4. Notices of Union Meetings
5. Notices of Union business.
6. Any other notice which has been specifically approved in
writing by the PERSONNEL MANAGER or his designee.
J. During the existence of this Agreement, the Company, insofar as
permitted by State and Federal Laws, will deduct out of the current net
earnings payable to an employee, covered by this Agreement, union dues, an
initiation fee, and a reinstatement fee upon receipt of and in accordance with
a deduction authorization, duly executed by the employee, on a card as agreed
upon between the Company and the Union and shall continue deductions until such
authorization is duly revoked by the employee. Authorizations must be on a
card before said authorizations will be accepted by the Company.
1. Deductions from money due to the employee pursuant to this
article will be made from the net earnings due the employee,
payable to him on the second regular pay day each month,
provided the Company has received such authorization and
notice from the Financial Secretary of Local Lodge 1769, by
the 25th day of the preceding month in which such deductions
are made. There shall be only one remittance per month by the
Company.
2. In the event an employee does not have sufficient earnings
due him on the second regular pay day in the month to cover
the amount of said deductions for that month, the Company
agrees to make such deductions from the earnings due the
employee on the second regular pay day of the next succeeding
month. Except as provided above, deductions for dues shall be
for the current month only.
20
<PAGE> 21
3. Deductions shall be remitted to the Financial Secretary of
the local union not later than 10 days following the pay day
on which the deductions were made. The Company shall furnish
to the Financial Secretary of the local Union at the same
time, a list showing those members for whom deductions have
been made and the amount thereof.
4. Should an employee be promoted or transferred to a job not
covered by this Agreement, the Company shall cease deducting
dues from such employees wages. When ceasing to deduct dues
for reasons cited in this paragraph, the Company will submit
the names of such employees to the Financial Secretary of
the local Union.
5. In making deductions and remittance for initiation or
reinstatement fees and dues to the Union, the Company is
entitled to rely upon the notification of the Financial
Secretary of Local 1769, of the amount of money due the Union
by the employee. The Union agrees to and does hereby hold and
save the Company harmless for any and all liability,
responsibility or damage for any deduction, payment,
authorization or notification as provided for in this
Article, and assumes full responsibility for the disposition
of the funds so deducted, when turned over to the Financial
Secretary of the Union.
6. THE COMPANY OR ANY UNION MEMBER WILL NOT INTERFERE WITH,
RESTRAIN, INTIMIDATE, OR COERCE ANY EMPLOYEE BECAUSE OF
MEMBERSHIP OR NON-MEMBERSHIP IN THE UNION. ALLEGED
DISCRIMINATORY ACTION REPORTED TO THE COMPANY OR UNION
OFFICIALS WILL BE INVESTIGATED AND IF CONFIRMED, CORRECTIVE
ACTION WILL BE TAKEN.
K. REPORTING PAY. An employee who is scheduled and reports for work
at the scheduled time, without having been notified not to so report, shall be
given four (4) hours work or pay thereof, at the regular hourly rate, except in
case there is no work available, MATERIAL SHORTAGES, UNEXPECTED SITUATIONS
AND/OR because of a strike or an act of God.
L. CLEAN UP TIME. Employees will be allowed to clean up their work
stations during a three (3) minute period immediately prior to the end of each
shift. Once this is done the employees may use the remainder of the period to
wash their hands and to prepare to leave the plant. Employees may not,
however, line up at the clock until the signal at the end of the shift.
Painters will be allowed an additional six (6) minute period (total of nine (9)
minutes) to remove paint and accomplish the above.
M. JOB DESCRIPTIONS FOR CLASSIFICATION TITLES COVERED BY THIS
AGREEMENT SHALL BE DEVELOPED BY THE COMPANY. THEY SHALL BE MADE A PART OF THIS
AGREEMENT AND WILL REMAIN IN EFFECT FOR THE DURATION OF THIS AGREEMENT.
21
<PAGE> 22
ARTICLE 14
TRUCK DRIVERS
A. D.O.T REGULATIONS. Drivers will not be asked to make runs which
will violate D.O.T. Regulations. Drivers who falsify their logs and other
D.O.T. documents will be subject to disciplinary action and possible discharge
after verbal warning, written warning and one week suspension.
B. Drivers are subject to Federal Motor Carrier Safety Regulations.
Disqualifying offenses listed in U.S., D.O.T., title 49, paragraph 391.15 are
considered to be termination type offenses, and will subject drivers to
discharge. This includes D.O.T. mandatory drug testing.
C. Failure to pass I.C.C. physical examination will render a driver
ineligible to drive.
D. OFFICIAL MILEAGE. The Company agrees to use the latest official
published Rand-McNally Standard Highway Mileage Guide, as it may be revised
from time to time, over routes specified by the Company for the computation of
pay. It is further agreed that the Company pay for all toll charges when
drivers are authorized to run toll roads. The driver shall upon request, have
access to the records on which his mileage and stops are logged so as to
ascertain that proper payment has been made.
E. DISPATCH PROCEDURE. Trips will be assigned on a First-in,
First-out basis, with trips of less than 250 miles (one way) to last-in-first.
No trips will be held over until the next day in order to give a privileged
driver a preference of more or better trips. Trips shall be assigned in
accordance with the above procedure on the day the trips are available for
departure. Atlanta, Georgia, will be considered a short trip.
1. Drivers out on short trips previously signed in will be
assigned long trips, if available for such trip.
2. No driver will be assigned more than one trip, except that
during peak periods, when there are enough long trips
available for all incoming drivers the Company may assign
drivers to both a long and a short trip.
3. After 5:00 P.M. Monday through Friday and on Saturday,
Sunday, and holidays, the unassigned trips will be posted in
the guard house at the Traffic Department. Drivers will log
in at the guard house at the Traffic Department upon arrival
and will have their choice of available long trips in order of
arrival. If only short trips are available, first-in drivers
will have their choice of short trips in order of arrival.
4. A long trip shall be considered to be anything over 500
miles round trip; however, trips which involve deliveries
to maintain specific commitment
22
<PAGE> 23
delivery dates or pickups which originate in connection with
the return of material, supplies or other items necessary for
the profitable operation of the plant, may be assigned to any
available driver, if on sign in book and properly noted.
F. Drivers removed from the sign in book, for any excusable reason
(including out of hours), will be put back on the sign in book, upon
notification to the dispatcher that he is available for work. He will,
however, have the least trip selection rights of available drivers at the next
dispatch meeting, i.e., he will follow available drivers for trip selection, to
include long and short trips.
G. The following payments will be made to truck drivers in addition to
the mileage rates. The hourly rate in all cases will be $8.90 per hour.
1. On outbound and inbound trips requiring parts drops and/or
material or parts pickup, except for the original or final
destination, the Company will pay 3/4 hour pay for each such
drop or pickup. On trips requiring two drivers (double), the
payment is to be split equally.
2. Drivers will be paid 3/4 hour pay for chaining down a
multi-unit load of trailer units. On trips requiring two
drivers (double), the payment is to be split equally.
3. When a driver is unable to drive 10 hours in a 24 hour period
due to a bonafide layover that is not the fault of the driver,
he will be paid the hourly rate to make up the 10 hours.
Drivers must obtain prior clearance from the Company in order
to be eligible for this pay. Drivers will not be paid any
layover time while on mandatory layover pursuant to ICC
regulations.
4. Drivers will be paid for additional mileage necessary to
obtain fuel or repairs from leasing company facilities if
directed by the company.
5. On racking trips, each driver will be paid a racking fee of
1/2 hour pay, provided that the drivers rack the tractors at
the beginning of the racking trip, and unrack them at the
completion of the trip.
6. Drivers weekly pay will be itemized and given to the driver
with his pay check.
H. VACATIONS. Vacations will be in accordance with Article 12, and
will be based on average weekly earnings during previous calendar year, less
overtime.
I. PHYSICAL EXAMINATIONS. The Company will select the physical
examiner and will pay the cost of any examination required by the Company.
23
<PAGE> 24
J. PAYMENT OF LABOR. The Company agrees to reimburse the driver for
money spent in hiring, upon direction by the Company, the necessary help to
load or unload truck, exercised reasonably.
K. MAINTENANCE. Drivers reporting for work who are required to wait
on a trip due to needed maintenance on his tractor or trailer will be paid
layover pay at the applicable rate, not to exceed four hours, in the event that
he is not assigned to another tractor or trip.
ARTICLE 15
SAFETY & HEALTH
A. Before an employee returns to work after a serious injury or
illness, the employee must furnish the Personnel Office a certificate signed by
a physician showing that he is physically fit to return to work. The Company
reserves the right to require a second opinion from the Company Doctor at
Company expense. A Doctors certificate will not be required on daily absences
due to sickness or injury of less than three (3) consecutive days.
B. The Company shall provide appropriate annual medical examinations
by the Company physician and at Company expense for employees doing
sandblasting, painters, foamers, and welders who are exposed to toxic
substances. Such examination shall be given on Company time and at Company
expense. Where necessary, transportation shall be furnished by the Company.
C. The Company agrees to allow a qualified Union representative to
tour the plant along with Company safety representatives on safety inspection
tours or any other safety inspection ON A MONTHLY BASIS. If the Union
representative is an employee this shall be without loss of pay.
D. The Company agrees to provide at no cost, painters coveralls to
each employee classified as a painter.
E. The Company agrees to provide at no cost, one (1) pair of welding
gloves on November 1 and May 1 of each year to each employee in the
classifications of Welder and Maintenance Mechanic.
F. The Company shall give all employees a list of tools of the trade
appropriate to the employees job classification, which the employee will be
required to furnish and maintain.
G. THE COMPANY WILL PROVIDE FOR AN EYE EXAMINATION AND ONE PAIR OF
PRESCRIPTION SAFETY GLASSES ONCE EVERY 24 MONTHS.
24
<PAGE> 25
ARTICLE 16
PENSIONS
A. During the term of this Agreement, the Company shall contribute
twenty (20) cents per hour for reach hour worked for each employee in the
bargaining unit to the I.A.M. National Pension Fund, Benefit Plan B.
B. The Company shall continue contributions based on a forty (40)
hour work week while an employee is off work due to paid vacations and paid
holidays.
C. The Company shall commence contributions at the completion of the
employees probationary period, but no later than sixty (60) days after the date
of hire.
D. The I.A.M. Lodge and the Employer adopt and agree to be bound and
hereby assent to, the Trust Agreement dated May 1, 1960, as amended, creating
the I.A.M. National Pension Fund and the Plan rules adopted by the Trustees of
the I.A.M. National Pension Fund in establishing and administering the
foregoing Benefit Plan pursuant to the said Trust Agreement, as currently in
effect and as the Trust and Plan may be amended from time to time.
E. The parties acknowledge that the Trustees of the I.A.M. National
Pension Fund may terminate the participation of the employees and the employer
in the Plan if the successor collective bargaining agreement fails to renew the
provisions of this Pension Article, other than to increase the Contribution
Rate or to add job classifications or categories of hours for which
contributions are payable.
F. This Article contains the entire agreement between the parties
regarding pensions and retirement under this Benefit Plan and any contrary
provisions in this Agreement shall be void. No oral or written modification of
this Agreement shall be binding upon the Trustees of the I.A.M. National
Pension Fund. No grievance procedure, settlement or arbitration decision with
respect to the obligation to contribute shall be binding upon the Trustees of
the said Pension Fund.
G. Contributions shall be made no later than the twentieth (20th) of
each month covering payroll period endings in the previous month.
ARTICLE 17
JOB CLASSIFICATION AND WAGE RATES
<TABLE>
<CAPTION>
A. CLASSIFICATION WAGE RATES
5/1/93 5/1/94 5/1/95
<S> <C> <C> <C>
Machinist . . . . . . . . . . 10.11 10.44 10.76
Electrician . . . . . . . . . 10.00 10.33 10.65
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
Foamer . . . . . . . . . . . 9.73 10.06 10.38
Refrigeration . . . . . . . . 9.73 10.06 10.38
MAINTENANCE MECHANIC . . . . 9.69 10.02 10.34
Auto Mechanic . . . . . . . . 9.69 10.02 10.34
ALUMINUM Welder . . . . . . . 9.69 10.02 10.34
STEEL Welder. . . . . . . . . 9.69 10.02 10.34
SERVICEMAN. . . . . . . . . . 9.69 10.02 10.34
MATERIAL EXPEDITOR . . . . . 9.60 9.93 10.25
QUALITY SPECIALIST . . . . . 9.60 9.93 10.25
Painter . . . . . . . . . . 9.52 9.85 10.17
Fabricator . . . . . . . . . 9.52 9.85 10.17
Assembler . . . . . . . . . . 9.30 9.63 9.95
UTILITY TRUCK DRIVER. . . . . 9.30 9.63 9.95
Warehouseman. . . . . . . . . 9.30 9.63 9.95
JANITOR . . . . . . . . . . . 9.30 9.63 9.95
SURFACE PREPARER. . . . . . . 9.30 9.63 9.95
Truck Driver . . . . . . . .
1. Single .2455 .2542 .2626
2. Double .1964 .2033 .2100
3. Holiday 9.42 9.75 10.07
4. Non driving Pay 9.42 9.75 10.07
</TABLE>
B. Leader will be paid 50 cents per hour more than his classification
rate.
C. Newly hired employees will be paid according to the schedule as
outlined below:
1. Hiring rate - $1.50 less than the rate of classification
2. After 90 days - $1.00 lass than the rate of classification
3. After 1 year - $.75 less than the rate of classification
4. After 18 mo. - $.50 less than rate of classification
5. After 24 mo. - To rate of classification
D. A shift premium will be paid of 15 cents per hour for the second
shift and 19 cents per hour for the third shift.
E. Employees will be paid weekly on Company time.
F. The term regular rate means the employees straight time hourly
rate plus any shift premium pay or Leader pay.
26
<PAGE> 27
G. THE COMPANY RESERVES THE RIGHT TO DEVELOP AND IMPLEMENT A
GAINSHARING PLAN. UNDER NO CONDITION WOULD SUCH A PLAN REDUCE THE WAGE
SCHEDULE CONTAINED HEREIN.
ARTICLE 18
COMPLETE AGREEMENT
A. The parties having fully discussed or having had an opportunity to
discuss and resolve between themselves all matters which might be made the
subject of collective bargaining agree that any such matters not expressly
covered by the language of the Agreement, are hereby waived by the parties for
the term of this Agreement. The Union expressly waives all right to bargain
with the Company with respect to any economic or non-economic demand for the
term of this Agreement. This writing constitutes the complete understanding
and there are no side agreements or understandings not herein included.
B. The waiver of any breach or condition of this agreement by either
party shall not constitute a precedent for any further waiver of such reach or
condition.
C. This contract is to be gender neutral. That is, use of the word
he, him shall be construed as applying equally to women, and as including
female pronouns unless the context clearly indicated otherwise.
ARTICLE 19
DURATION OF AGREEMENT
This agreement shall be effective from May 1, 1996 to May 1, 1999 and
shall automatically renew from year to year thereafter unless written notice of
termination is given at least sixty (60) days prior to the expiration date by
either of the parties.
The notification to be effective must be received by the other party at
its regular business address by MARCH 2, 1999.
FOR THE COMPANY FOR THE UNION
/s/ DONALD E. SWANSON /s/ B.R. BRONNELL
- ---------------------- -----------------------
/s/ WILLIAM HALL, JR. /s/ HAROLD BANNIN
- ---------------------- -----------------------
/s/ KENNY D. SAWYER /s/ FLOYD WAMBLES
- ---------------------- -----------------------
/s/ ROBERT W. HOORISON
-----------------------
/s/ ROY T. BROOKS JR.
-----------------------
/s/ CHARLES E. FREE
-----------------------
27
<PAGE> 1
EXHIBIT 10.40
THIS AGREEMENT IS SUBJECT TO ARBITRATION BY ITS TERMS AND CONDITIONS
ASSET PURCHASE AGREEMENT
BY AND AMONG
DORSEY TRAILERS, INC.
"PURCHASER,"
CAROLINA COASTAL INVESTORS, INC.
"SELLER"
AND
DAVID COTTINGHAM
"GUARANTOR"
DATED AS OF JULY 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I PURCHASE AND SALE OF ASSETS...............................
1.1 Purchase and Sale of Assets.................................
1.2 Excluded Assets of Seller...................................
ARTICLE 2 ASSUMPTION OF LIABILITIES.................................
2.1 Assumption of Liabilities of Seller.........................
2.2 Excluded Liabilities of Seller..............................
ARTICLE 3 OTHER AGREEMENTS..........................................
3.1 Noncompetition Agreements...................................
3.2 Consulting Agreement........................................
ARTICLE 4 PURCHASE PRICE............................................
4.1 Purchase Price..............................................
4.2 Payment of Purchase Price...................................
4.3 Transfer Expenses...........................................
4.4 Allocation of Purchase Price................................
ARTICLE 5 LEASE OF REAL PROPERTY....................................
5.1 Facility Lease..............................................
ARTICLE 6 PROCEDURE FOR CLOSING.....................................
6.1 Time and Place of Closing...................................
6.2 Transactions at the Closing.................................
6.3 Inspection of Property......................................
6.4 Environmental Matters.......................................
6.5 Further Assurances..........................................
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER.....................
7.1 Organization and Qualification..............................
7.2 Authority...................................................
7.3 Inventory...................................................
7.4 Fixed Assets................................................
7.5 Contracts...................................................
7.6 Intellectual Property.......................................
7.7 Insurance...................................................
7.8 Environmental Matters.......................................
7.9 Litigation..................................................
7.10 Brokers and Finders.........................................
7.11 Labor Matters...............................................
7.12 Governmental Approval and Consents..........................
7.13 Taxes.......................................................
7.14 Compliance with Laws........................................
7.15 Title to Assets.............................................
7.16 Correctness of Representations..............................
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF PURCHASER..................
8.1 Organization and Qualification..............................
8.2 Authority...................................................
8.3 Litigation..................................................
8.4 Brokers and Finders.........................................
8.5 Governmental Approval and Consents..........................
8.6 Correctness of Representations..............................
</TABLE>
A-i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 9 COVENANTS OF SELLER..........................................
9.1 Conduct of Business Prior to Closing........................
9.2 Access and Information......................................
9.3 Notification of Changes.....................................
9.4 Other Transactions..........................................
9.5 Consents....................................................
9.6 Supplemental Disclosure.....................................
9.7 Conditions Precedent........................................
9.8 Discharge of Liens and Encumbrances.........................
9.9 Seller's Information........................................
ARTICLE 10 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.........
10.1 Certificate Regarding Schedules and Representations and
Warranties..................................................
10.2 Compliance by Seller........................................
10.3 No Injunction, Etc..........................................
10.4 Operation in the Ordinary Course............................
10.5 Consents, Authorizations, approval of Legal Matters.........
10.6 Incumbency..................................................
10.7 Certified Resolutions.......................................
10.8 Release of Liens............................................
10.9 Accuracy of Schedules.......................................
10.10 No Adverse Change...........................................
10.11 Instruments of Transfer.....................................
10.12 Opinion of Seller's Counsel.................................
10.13 Proceedings.................................................
10.14 Condition of Acquired Assets................................
ARTICLE 11 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER............
11.1 Certificate Regarding Representations and Warranties........
11.2 Compliance by Purchaser.....................................
11.3 Certified Resolutions.......................................
11.4 No Injunction; Etc..........................................
11.5 Consents; Authorizations....................................
11.6 Incumbency..................................................
11.7 Certificates................................................
11.8 Opinion of Purchaser's Counsel..............................
11.9 Proceedings.................................................
ARTICLE 12 MUTUAL COVENANTS.........................................
12.1 Mutual Covenants............................................
ARTICLE 13 POST CLOSING MATTERS.....................................
13.1 Employment of Employees.....................................
13.2 Seller's Benefit Plans......................................
13.3 Temporary Employment by Seller..............................
ARTICLE 14 TERMINATION..............................................
14.1 Termination.................................................
14.2 Effect of Termination.......................................
</TABLE>
A-ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 15 INDEMNIFICATION.............................................
15.1 Definitions.................................................
15.2 Agreement of Seller, as Indemnitor, to Indemnify............
15.3 Agreement of Purchaser, as Indemnitor, to Indemnify.........
15.4 Procedures for Indemnification..............................
15.5 Third Party Claims..........................................
15.6 Other Rights and Remedies Not Affected......................
15.7 Survival....................................................
15.8 Time Limitations............................................
15.9 Subrogation.................................................
ARTICLE 16 GENERAL PROVISIONS.......................................
16.1 Fees and Expenses...........................................
16.2 Notices.....................................................
16.3 Assignment; Binding Effect..................................
16.4 No Benefit to Others........................................
16.5 Headings, Gender, and Person................................
16.6 Counterparts................................................
16.7 Integration of Agreement....................................
16.8 Time of Essence.............................................
16.9 Governing Law...............................................
16.10 Partial Invalidity..........................................
16.11 Investigation...............................................
16.12 Public Announcements........................................
16.13 Arbitration.................................................
ARTICLE 17 GUARANTY BY GUARANTOR....................................
</TABLE>
A-iii
<PAGE> 5
TABLE OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Noncompetition, Nonsolicitation and Confidentiality
Agreement
Exhibit B Consulting Agreement
Exhibit C Promissory Note
Exhibit D Facility Lease
Exhibit E Seller Opinion
Exhibit F Purchaser Opinion
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1.1 Fixed Assets
Schedule 1.1.2 Contracts
Schedule 1.2 Excluded Assets
Schedule 2.1 Assumed Liabilities
Schedule 5.1 Real Property
Schedule 7.5 Status of Contracts
Schedule 7.6 Intellectual Property
Schedule 7.7 Insurance Requirements
Schedule 7.8 Environmental Matters
Schedule 7.9 Litigation Matters
Schedule 7.11 Employees and Labor Matters
Schedule 7.12 Permits and Licenses
Schedule 7.13 Tax Matters
Schedule 7.15 Security Interests and Encumbrances
Schedule 13.3 Employees Providing Services to Seller
</TABLE>
A-iv
<PAGE> 6
CROSS REFERENCES TO DEFINED TERMS
<TABLE>
<CAPTION>
SECTION IN
TERM WHICH DEFINED
---- -------------------
<S> <C>
Acquired Asset(s)........................................... Section 1.1
Acquired Inventory.......................................... Section 1.1(b)
Acquisition Documents....................................... Section 7.2
Acquisition Proposal........................................ Section 9.4
Agreement................................................... Preamble
Assumed Liabilities......................................... Section 2.1
Books and Records........................................... Section 1.1(e)
Business.................................................... Preamble
CERCLA...................................................... Section 6.4(c)(i)
Closing..................................................... Section 6.1
Closing Date................................................ Section 6.1
Company Benefit Plans....................................... Section 13.1
Contract(s)................................................. Section 1.1(c)
Cottingham.................................................. Preamble
Effective Time.............................................. Section 6.1
Environmental Audit Report(s)............................... Section 6.4(a)
Environmental Consultant(s)................................. Section 6.4(a)
Environmental Laws.......................................... Section 6.4(c)(i)
Environmental Liability..................................... Section 6.4(c)(ii)
Environmental Litigation.................................... Section 6.4(c)(iii)
Environmental Matter........................................ Section 6.4(c)(iv)
ERISA....................................................... Section 13.1(i)
Excluded Assets............................................. Section 1.2
Excluded Liabilities........................................ Section 2.2
Facility Lease.............................................. Section 5.1
Fixed Assets................................................ Section 1.1(a)
GAAP........................................................ Section 4.1(b)
Guarantor................................................... Preamble
Hazardous Substance......................................... Section 6.4(c)(v)
Hired Employee(s)........................................... Section 13.1
Indemnification Claim....................................... Section 15.1(a)
Indemnitees................................................. Section 15.1(b)
Indemnitor.................................................. Section 15.1(c)
Intellectual Property....................................... Section 1.1(d)
Inventory................................................... Section 1.1(b)
Labor Claims................................................ Section 7.11
Losses...................................................... Section 15.1(d)
Note........................................................ Section 4.2
Permits..................................................... Section 1.1(f)
Person...................................................... Section 16.5
Purchaser................................................... Preamble
Purchase Price.............................................. Section 4.1
Purchaser Opinion........................................... Section 6.2(b)(v)
RCRA........................................................ Section 6.4(c)(i)
Real Property............................................... Section 5.1
Seller...................................................... Preamble
Seller Opinion.............................................. Section 6.2(a)(iv)
Taxes....................................................... Section 2.2(i)
Third Party Claim........................................... Section 15.1(e)
</TABLE>
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 1st day of July, 1996, by and among DORSEY TRAILERS, INC., a Delaware
corporation ("Purchaser"), CAROLINA COASTAL INVESTORS, INC., a South Carolina
corporation ("Seller"), and DAVID COTTINGHAM, a resident of South Carolina
("Cottingham" or "Guarantor").
A. Seller is engaged in the business of designing, manufacturing and
marketing dump trailers of various materials and configurations under the name
"Montone Manufacturing" (the "Business"). Cottingham is the sole shareholder of
Seller.
B. Purchaser is in the business of designing, manufacturing and marketing a
broad line of customized truck trailers of various materials and configurations
and desires to purchase from Seller the fixed assets, inventories, intellectual
property and certain other assets of the Business identified in this Agreement
and lease the manufacturing facility located at I-95 and Highway 9, Dillon,
South Carolina, on and subject to the terms and conditions contained in this
Agreement.
C. Seller desires to sell to Purchaser the identified assets of the
Business and lease to Purchaser the manufacturing facility on and subject to the
terms and conditions contained in this Agreement.
D. Cottingham, as the sole shareholder of Seller, in order to induce
Purchaser to enter into this Agreement and consummate the transactions
contemplated hereby, has agreed to guarantee the performance of Seller hereunder
and to consult with Purchaser regarding the Business for two years.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. At the Closing (as hereinafter defined),
on and subject to the terms and conditions of this Agreement, Seller shall sell,
assign, transfer, convey, and deliver to Purchaser, and Purchaser shall
purchase, acquire, and accept from Seller, all of the right, title, and interest
of Seller in and to all of the assets, properties, and rights of Seller
identified below, wherever located and whether or not reflected on the books of
Seller, free and clear of all liens, claims, charges, security interests, and
encumbrances of any kind or nature, including the following, as the same shall
exist at the Closing Date (as hereinafter defined):
(a) All machinery, equipment, tools, tooling, fixtures, motor
vehicles, trucks, forklifts, and other rolling stock, computers, terminals,
computer equipment, office equipment, furniture, business machines,
telephones and telephone systems, parts, accessories, and the like, listed
on SCHEDULE 1.1.1, wherever located, together with any incidental tools,
parts, supplies and equipment which are located in or on the Real Property
(as hereinafter defined) and which are used by the Seller in the Business,
and any and all assignable warranties of third parties with respect thereto
(the "Fixed Assets");
(b) All of the raw material, work-in-process and finished goods
inventory of Seller wherever located, reflected on the books and records of
Seller (the "Inventory"), together with all rights of Seller against
suppliers of the Inventory including, without limitation, Seller's rights
under express or implied warranties with respect to such Inventory and
Seller's rights to receive refunds or rebates in connection with its
purchase of Inventory. The specific Inventory to be purchased by Purchaser
(the "Acquired Inventory") will be determined by Purchaser based upon a
physical inventory taken jointly by Seller and Purchaser prior to the
Closing Date.
(c) The contracts, warranties, commitments, agreements, arrangements,
and purchase and sales orders, whether oral or written, listed on SCHEDULE
1.1.2, together with the right of Seller to receive income in respect of
such contracts, leases, warranties, commitments, agreements, arrangements,
and
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purchase and sales orders on and after the Closing Date (individually, a
"Contract" and collectively, the "Contracts");
(d) All patents, designs, art work, designs-in progress, formulations,
know-how, prototypes, inventions, trademarks, trade names, trade styles,
service marks, and copyrights owned or held by Seller and related to the
Business including without limitation all rights to the names "Montone,"
"Montone Trailer Company," "Montone Manufacturing" and associated logos,
but not including the name "Carolina Coastal Investors"; all registrations
thereof and applications therefor, both registered and unregistered,
foreign and domestic; all trade secrets or processes owned by or belonging
to Seller and related to the Business; all computer software (including
documentation and related object and, if applicable, source codes) owned by
or belonging to Seller and related to the Business; and all confidential or
proprietary information (i) owned by Seller or Guarantor and related to the
Business, whether or not reflected on the books and records of the
Business, or (ii) as to which Seller has rights as licensee, constituting
all of the intellectual property of Seller used exclusively in the Business
(the "Intellectual Property");
(e) All existing data, data bases, books, records, correspondence,
business plans and projections, records of sales, customer and vendor
lists, files, papers, and, to the extent permitted under applicable law or
regulation, all copies of historical personnel, payroll and medical records
of each of the Hired Employees (as defined in Section 13.1 hereof) in the
possession of Seller and related to the Business, including without
limitation, employment applications, I-9 forms, corrective action reports,
disciplinary reports, notices of transfer, notices of rate changes, other
similar documents, and any summaries of such documents regularly prepared
by Seller; all reported medical claims made for each Hired Employee; and
all manuals and printed instructions of Seller relating to the Acquired
Assets (as hereinafter defined) and to the operation of the Business (the
"Books and Records");
(f) To the extent permitted under applicable law or regulation, all
licenses, permits, certificates, and governmental authorizations of Seller
and related to the Business or the Acquired Assets (the "Permits");
All of the items described in this Section 1.1 to be purchased by Purchaser
and which are not Excluded Assets as defined in Section 1.2 hereof are
hereinafter collectively referred to as the "Acquired Assets."
1.2 Excluded Assets of Seller. Seller shall not sell and Purchaser shall
not purchase or acquire and the Acquired Assets shall not include the assets,
properties, and rights specifically listed and described on SCHEDULE 1.2.
All of the assets described in this Section 1.2 are hereinafter
collectively referred to as the "Excluded Assets".
ARTICLE 2
ASSUMPTION OF LIABILITIES
2.1 Assumption of Liabilities of Seller. As of the Effective Time,
Purchaser shall assume responsibility for the performance of Seller's
obligations under the Contracts listed on SCHEDULE 2.1 (the "Assumed
Liabilities").
2.2 Excluded Liabilities of Seller. Purchaser shall not assume or become
liable for any obligations, commitments, or liabilities of Seller, whether known
or unknown, absolute, contingent, or otherwise, and whether or not related to
the Acquired Assets, except for the Assumed Liabilities (the obligations and
liabilities of Seller not assumed by the Purchaser are hereinafter referred to
as the "Excluded Liabilities"). Without limiting the generality of the preceding
sentence, Purchaser shall not assume or become liable for any
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obligations and liabilities of Seller not specifically described in Section 2.1,
including without limitation, the following:
(a) Any liability or obligation arising out of any employee benefit
plan maintained by or covering employees of Seller or to which Seller has
made any contribution or to which Seller could be subject to any liability;
(b) Any losses, costs, expenses, damages, claims, demands and
judgments of every kind and nature (including the defenses thereof and
reasonable attorneys' and other professional fees) related to, arising out
of, or in connection with Seller's failure to comply with the Bulk Transfer
Act or any similar statute as enacted in any jurisdiction, domestic or
foreign;
(c) Any liability or obligation arising out of any breach by Seller
prior to the Effective Time of any provision of the Contracts or any other
contract to which Seller is a party;
(d) Any liability of Seller with respect to any claim or cause of
action, regardless of when made or asserted, which arises (i) out of or in
connection with the business and operations of Seller prior to the
Effective Time, (ii) with respect to any product purchased or manufactured
or any service provided by Seller on or prior to the Effective Time,
including without limitation, any liability or obligation (A) pursuant to
any express or implied representation, warranty, agreement, or guarantee
made by Seller or (B) imposed or asserted to be imposed by operation of
law, in connection with any service performed or product designed,
manufactured, sold, or leased by or on behalf of Seller prior to the
Effective Time, including without limitation, any claim related to any
product delivered in connection with the performance of such service and
any claims seeking to recover for consequential damage, lost revenue, or
income, including pursuant to any doctrine of product liability, or (iii)
out of or in connection with the Business and operations of Seller prior to
the Effective Time under any federal, state, or local law, rule, or
regulation relating to (A) environmental protection or clean-up, (B)
taxation, or (C) employment or termination of employment;
(e) Any liabilities or obligations of Seller relating to the Excluded
Assets;
(f) Any liability or obligation, arising prior to or as a result of
the Closing, to any employee, agent, or independent contractor of Seller,
whether or not employed by Purchaser after the Closing, or under any
benefit arrangement with respect thereto;
(g) Any liability of Seller existing at the Effective Time;
(h) Any liability or obligation of Seller arising or incurred in
connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated hereby,
including without limitation, fees and expenses of its counsel,
accountants, and other experts;
(i) Any liability or obligation for federal, state, county, local,
foreign and other taxes, assessments, charges, fees, and impositions,
including interest and penalties thereon or with respect thereto, whether
disputed or not ("Taxes"), including any liabilities or obligations of
Seller relating to sales and use, transfer, documentary, income or other
Taxes levied on the transfer of the Acquired Assets; and
(j) All wages, commissions, vacation, holiday, workers' compensation
and sick pay obligations of Seller with respect to its respective employees
for the calendar year in which the Closing Date (as hereinafter defined)
occurs, accrued through the Closing Date or any prior year and all bonuses
and fringe benefits as to such employees accrued through the Closing Date,
and all severance pay obligations of Seller to employees resulting from
Seller's consummation of the transactions contemplated by this Agreement.
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ARTICLE 3
OTHER AGREEMENTS
3.1 Noncompetition Agreements. Seller and Cottingham shall each enter
into, as of the Closing Date, a Noncompetition, Nonsolicitation and
Confidentiality Agreement with Purchaser in the form of EXHIBIT A.
3.2 Consulting Agreement. Cottingham and Purchaser shall enter into as of
the Closing Date a Consulting Agreement in the form of EXHIBIT B under which
Cottingham will provide consulting services to Purchaser for two years after the
Closing Date.
ARTICLE 4
PURCHASE PRICE
4.1 Purchase Price. The aggregate consideration to be paid to Seller for
the sale, transfer, and conveyance of the Acquired Assets (the "Purchase Price")
shall be determined as follows:
(a) The purchase price for the fixed assets shall be
Dollars ($ );
(b) The purchase price for the Acquired Inventory shall be equal to
the lower of Seller's cost or market value as determined in accordance with
generally accepted accounting principles ("GAAP") consistently applied
based upon the physical inventory taken jointly by Seller and Purchaser
prior to the Closing Date;
(c) Plus One Million Dollars ($1,000,000.00) as the purchase price for
all other Acquired Assets.
4.2 Payment of Purchase Price. On the Closing Date, Purchaser shall pay
the Purchase Price to Seller by delivery of a promissory note in the form of
EXHIBIT C (the "Note") made by Purchaser in favor of Seller in the original
principal amount equal to thirty-three percent (33%) of the Purchase Price and
the balance of the Purchase Price in cash by delivery of a check to Seller.
4.3 Transfer Expenses. Seller shall pay any sales and use, transfer or
recording, documentary, or other taxes or charges levied on the transfer of the
Acquired Assets. All Acquired Inventory, if any, shall be claimed as exempt from
sales or use tax by Purchaser and Purchaser shall furnish Seller at Closing with
the sales tax exemption certificates covering the Acquired Inventory.
4.4 Allocation of Purchase Price. The Purchase Price paid for the Acquired
Assets shall be allocated among the Acquired Assets in accordance with the
provisions contained in Treasury Regulation Section 1.1060-1T(d). The parties
agree to be bound by such allocation and to report the transaction contemplated
herein for federal income tax purposes in accordance with such allocation. In
furtherance of the foregoing, the parties hereto agree to execute and deliver
Internal Revenue Service Form 8594 reflecting such allocation.
ARTICLE 5
LEASE OF REAL PROPERTY
5.1 Facility Lease. Seller shall lease to Purchaser and Purchaser shall
lease from Seller the real property identified on SCHEDULE 5.1 and the building,
fixtures and improvements located thereon (the "Real Property") on the terms and
conditions contained in the form of lease (the "Facility Lease") attached hereto
as EXHIBIT D.
ARTICLE 6
PROCEDURE FOR CLOSING
6.1 Time and Place of Closing. The closing for the purchase and sale
contemplated by this Agreement (the "Closing") shall be held at the offices of
Anderson & Associates, P.A., 208B Candi Lane, Columbia,
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South Carolina 29210, on July 1, 1996 or, if later, on the next business day
after all conditions to the Closing have been satisfied or waived, commencing at
10:00 a.m., local time, or at such other time and place as the parties hereto
may agree in writing (the date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date"). Subject to the consummation of
the Closing on the Closing Date, the sale, assignment, transfer, and conveyance
to Purchaser of the Acquired Assets will be effective as of 12:01 a.m. Eastern
Daylight Time on the Closing Date (the "Effective Time").
6.2 Transactions at the Closing. At the Closing, each of the following
items shall be delivered:
(a) Seller shall deliver to Purchaser the following:
(i) such bills of sale, motor vehicle titles, assignments,
endorsements, and other good and sufficient instruments and documents of
conveyance and transfer, in form reasonably satisfactory to Purchaser
and its counsel, as shall be necessary and effective to transfer and
assign to and vest in Purchaser good and valid title in and to all of
the Acquired Assets;
(ii) the certificate of Seller with respect to the matters
described in Sections 10.1 and 10.2 hereof and the certificate of Seller
with respect to the matters described in Section 10.10 hereof;
(iii) the certificate of the Secretary of Seller with respect to
the matters described in Sections 10.6 and 10.7 hereof;
(iv) the opinion of counsel to Seller in substantially the form of
Exhibit E hereto (the "Seller Opinion");
(v) copies of the consents and waivers described in Section 10.5
hereof;
(vi) satisfactory evidence of the approvals described in Section
10.5 hereof;
(vii) a certificate of existence and good standing of Seller, as of
a date within twenty (20) days prior to the Closing Date, from the State
of South Carolina; and
(viii) such other evidence of the performance by Seller of all
covenants and the satisfaction by Seller of all conditions required by
this Agreement to be performed or satisfied by Seller at or prior to the
Closing Date as Purchaser or its counsel may reasonably require.
The documents and certificates to be delivered hereunder by or on behalf of
Seller on the Closing Date shall be in form and substance reasonably
satisfactory to Purchaser and its counsel.
(b) Purchaser shall deliver to Seller the following:
(i) the Note;
(ii) a check in the amount of the balance of the Purchase Price not
paid by delivery of the Note;
(iii) a certificate of Purchaser with respect to the matters
described in Sections 11.1 and 11.2 hereof;
(iv) a certificate of the Secretary of Purchaser with respect to
the matters described in Sections 11.3 and 11.7 hereof;
(v) the opinion of counsel to Purchaser in substantially the form
of Exhibit F hereto (the "Purchaser Opinion");
(vi) certificates of existence or certificates of good standing of
Purchaser, as of a date within twenty (20) days prior to the Closing
Date, from the State of Delaware; and
(vii) such other evidence of the performance by Purchaser of all
covenants and satisfaction by Purchaser of all of the conditions
required by this Agreement to be performed or satisfied by Purchaser at
or before the Closing Date, as Seller or its counsel may reasonably
require.
The documents and certificates to be delivered to Seller hereunder by or on
behalf of the Purchaser on the Closing Date shall be in form and substance
reasonably satisfactory to Seller and its counsel.
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6.3 Inspection of Property. Purchaser and Purchaser's agents, employees
and independent contractors shall have the right and privilege to enter upon the
Real Property prior to the Closing Date to inspect the Real Property and to
conduct soil borings and other geological, engineering, percolation, hydrologic,
feasibility, or landscaping tests or studies, all at Purchaser's sole cost and
expense, provided such testing does not unreasonably interfere with the
operation of the business at that location.
6.4 Environmental Matters. (a) Prior to the Closing Date, Purchaser shall
have the right to cause Phase I environmental audits (and if necessary in the
reasonable judgment of Purchaser, Phase II environmental audits) to be conducted
on the Real Property (each an "Environmental Audit Report") by environmental
engineering consultants retained by the Purchaser (the "Environmental
Consultants"). Each Environmental Audit Report shall include (i) a statement of
all Environmental Liabilities (as defined below), if any, identified by the
Environmental Consultant at, on, or under the Real Property to which such
Environmental Audit Report relates, and (ii) a statement describing conditions
at, on or near the Real Property which may involve Environmental Liabilities and
as to which the Environmental Consultants recommend monitoring, removal, clean
up, registration or further assessment activities. A copy of each such
Environmental Audit Report shall be furnished to Seller.
(b) Based upon the Environmental Audit Reports, Purchaser shall determine
the actions required to remediate the Environmental Liabilities disclosed by
such Environmental Audit Reports and may undertake any such actions utilizing
the services of such environmental engineering consultant as Purchaser
determines and which consultant shall be reasonably satisfactory to Seller.
Purchaser shall pay the first $30,000.00 of the cost and expense incurred to
perform any such remediation of the Environmental Liabilities disclosed by such
Environmental Audit Reports, and Seller shall pay or reimburse Purchaser for all
such cost and expense in excess of $30,000.00. Seller further agrees that, if at
any time during the term of the Facility Lease, any monitoring, removal, clean
up, remediation, registration or further assessment activity with respect to any
Environmental Liability is required by any governmental agency or
instrumentality or any court or arbitrator having jurisdiction over the parcel
to which such Environmental Liability relates, Seller, and its respective
successors and assigns shall, on demand, undertake such required action and pay
and reimburse Purchaser for all cost and expense incurred by Purchaser in
effecting such monitoring, removal, clean up, remediation, registration or
further assessment, and all cost and expense of remediation of any condition
revealed by such monitoring or further assessment that involves the dumping,
storage, use, discharge, disposal, spillage or leakage of any Hazardous
Substance.
(c) As used in this Agreement:
(i) "Environmental Laws" means all Laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other laws, regulations,
orders, ordinances or rules relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any Hazardous Substance.
(ii) "Environmental Liability" shall mean any liability for, or any
amounts paid for, investigatory costs, clean up costs, governmental
response costs, damages to natural resources or other property, personal
injuries, fines or penalties arising out of, based upon or resulting from
(A) the presence, handling, generation, treatment, storage, disposal,
release or threatened release into the environmental of any Hazardous
Substance at any location, or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(iii) "Environmental Litigation" means any litigation against Seller,
the Business or the Acquired Assets (including, without limitation, notice
or other communication, written or oral, by any person alleging potential
liability for investigatory costs, cleanup costs, private or governmental
response or remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based upon, or resulting
from (A) any Environmental Matter or (B) any circumstances or state of
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facts forming the basis of any liability or alleged liability under, or
violation or alleged violation of, any Environmental Law.
(iv) "Environmental Matter" means any matter or circumstances related
in any manner whatsoever to (A) the emission, discharge, disposal, release
or threatened release of any Hazardous Substance into the environment, or
(B) the transportation, treatment, storage, recycling or other handling of
any Hazardous Substance or (C) the placement of structures or materials
into waters of the United States, or (D) the presence of any Hazardous
Substance, including, but not limited to, asbestos, in any building,
structure or workplace or on any of the Real Property.
(v) "Hazardous Substance" means (A) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (B) any
pollutants, contaminants, petroleum, petroleum products, or oil.
6.5 Further Assurances. Seller from time to time after the Closing Date,
at Purchaser's request, shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require in order to vest more
effectively in Purchaser, or to put Purchaser more fully in possession of, any
of the Acquired Assets. Each of the parties hereto will cooperate with the other
and execute and deliver to the other parties hereto such other instruments and
documents and take such other actions as may be reasonably requested from time
to time by any other party hereto as necessary to carry out, evidence, and
confirm the intended purposes of this Agreement.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that:
7.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
South Carolina.
7.2 Authority. Seller has full power and authority to enter into this
Agreement and the agreements contemplated hereby, or respectively executed by it
in connection herewith (collectively, this Agreement and such other agreements
shall be referred to hereinafter as the "Acquisition Documents"), and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of each of the Acquisition Documents to which
it is a party has been duly and validly authorized and approved by all necessary
action on the part of Seller. Each of the Acquisition Documents to which Seller
is a party is the legal, valid, and binding obligation of Seller, enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable equitable principles (whether applied in a proceeding at law or in
equity) or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors' rights generally, to the exercise of judicial
discretion in accordance with general equitable principles, and to equitable
defenses that may be applied to the remedy of specific performance. The
execution and delivery by Seller of any of the Acquisition Documents to which it
is respectively a party and the consummation by Seller of the transactions
contemplated thereby will not (i) violate the Articles of Incorporation or
Bylaws of Seller (ii) violate any provisions of law or any order of any court or
any governmental entity to which Seller is subject, or by which the Acquired
Assets may be bound, (iii) conflict with, result in a breach of, or constitute a
default under any indenture, mortgage, lease, agreement, or other instrument to
which Seller is a party or by which it or any of the Acquired Assets may be
bound or affected, or (iv) result in the creation of any lien, charge, or
encumbrance upon any of the Acquired Assets.
7.3 Inventory. All Acquired Inventory is of good and merchantable quality
usable in the ordinary course of the Business.
7.4 Fixed Assets. (a) SCHEDULE 1.1.1 contains a true and correct list of
all Fixed Assets (excluding incidental tools, parts, supplies and equipment).
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(b) All of the Fixed Assets are in good operating condition and state of
repair, ordinary wear and tear excepted.
7.5 Contracts. (a) Each of the Contracts is in full force and effect and
there exists no breach or violation of or default under any of such Contracts by
Seller or, to the knowledge of Seller any other party to such Contracts or any
event which, with notice or the lapse of time, or both, will create a breach or
violation thereof or default thereunder by Seller or, to the knowledge of Seller
any other party to such Contracts. Each such Contract is fully assignable
without the consent of any third party.
(b) Except as indicated on SCHEDULE 7.5, there exists no actual or, to the
knowledge of Seller, any threatened termination, cancellation, or limitation of,
or any amendment, modification, or change to any Contract, which would have an
adverse effect on the business or condition, financial or otherwise, of the
Business, including, without limitation, (i) the business relationship of Seller
with any customer, distributor, or related group of customers or distributors,
(ii) the requirements of any customer or related group of customers of the
Business, or (iii) the business relationship of Seller with any supplier to the
Business.
7.6 Intellectual Property. SCHEDULE 7.6 contains a true and correct list
of all Intellectual Property owned or used by Seller or any affiliate of Seller
relating to or used or useful in connection with the Business, containing a
brief description of each item of Intellectual Property and the nature of
Seller's interest therein. The Acquired Assets include and, upon the purchase of
those assets, Purchaser will own or have the uncontested right to use all
patents, designs, art work, designs-in-progress, formulations, know-how,
inventions, trademarks, trade names, trade styles, service marks, copyrights,
manufacturing processes, and confidential or proprietary information necessary
for the conduct of the Business as presently conducted. No claim is pending or,
to the knowledge of Seller threatened, and Seller has not received notice that
the conduct of the Business (including without limitation, Seller's use of any
Intellectual Property) infringes upon or conflicts with any rights claimed
therein by any third party, nor is Seller aware of any unasserted claim the
assertion of which is probable. No use by Seller of any Intellectual Property
licensed to it violates the terms of any agreement pursuant to which it is
licensed. No claim is pending, or to the knowledge of Seller threatened, which
alleges that any Intellectual Property owned or licensed by Seller for use in
the Business or which Seller otherwise has the right to use is invalid or
unenforceable by Seller, nor is Seller aware of any such claim that is
unasserted, but the assertion of which is probable. With respect to the
Business, Seller does not manufacture products which are the subject of patents,
patent applications, copyrights, copyright applications, trademarks, trademark
applications, trade styles, service marks, or trade secrets owned by or licensed
from third parties. No royalties or fees are payable by Seller to anyone for use
of the Intellectual Property. All agreements pursuant to which Seller has any
license or right to use any Intellectual Property are in full force and effect
and there are no existing defaults or events of default, real or claimed, or
events which with or without notice or lapse of time or both would constitute
defaults under such agreements that would give the non-defaulting party a right
to terminate such agreement or a right to receive any payment pursuant to such
agreement. With respect to the Business, Seller has not received any notice that
the manufacture, use, or sale by Seller of its products, or any component or
part thereof, nor any manufacturing operation or machinery employed by Seller,
violates or infringes upon any claims of any United States or foreign patent or
patent application owned or held by any third party, nor is Seller aware of any
unasserted claim the assertion of which is probable. All Intellectual Property
and registrations, applications, and agreements related thereto are fully
assignable to Purchaser without the consent of any third party.
7.7 Insurance. The Acquired Assets are insured under various policies of
insurance, which policies are in adequate amounts. Seller has not been refused
any insurance with respect to the Acquired Assets by any insurance carrier to
which it has applied for insurance or with which it has carried insurance.
Except as set forth in SCHEDULE 7.7, there are no outstanding requirements or
recommendations by any current insurer or underwriter with respect to the
Acquired Assets which require or recommend any repairs or other work to be done
with respect to any of the Acquired Assets.
7.8 Environmental Matters. Except as set forth in SCHEDULE 7.8:
(a) There is no Environmental Litigation (or any litigation against
any person whose liability, or any portion thereof, for Environmental
Matters or under any Environmental Laws Seller has or may have
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retained or assumed contractually or by operation of law) pending or, to
Seller's knowledge, threatened with respect to (i) the operation of the
Business, the ownership, use, condition or operation of the Business or the
Acquired Assets, or (ii) any violation or alleged violation of or liability
or alleged liability under any Environmental Law or any order related to
Environmental Matters. Seller is not aware of any existing violations of
(i) any Environmental Law, or (ii) any order related to Environmental
Matters, with respect to the ownership, use, condition or operation of the
Business or the Acquired Assets. Seller is not aware of any past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, any Environmental Matter, that could form
the basis of (i) any Environmental Litigation against Seller, or (ii) any
litigation against any person whose liability (or any portion thereof) for
Environmental Matters or under any Environmental Laws Seller has or may
have retained or assumed contractually or by operation of law. Seller has
not used any of the Acquired Assets or any part thereof for the handling,
treatment, storage, or disposal of any Hazardous Substances. The disclosure
of facts set forth in SCHEDULE 7.8 shall not relieve Seller of any of its
obligations under this Agreement, specifically including, without
limitation, the obligation to indemnify Purchaser as set forth in Article
15 hereof.
(b) No release, discharge, spillage or disposal of any Hazardous
Substances has occurred or is occurring at the Real Property or any part
thereof while or before such Real Property was owned, leased, operated, or
managed, directly or indirectly, by Seller.
(c) No soil or water in, under or adjacent to the Real Property has
been contaminated by any Hazardous Substance while or before such assets or
premises were owned, leased, operated or managed, directly or indirectly,
by Seller or any of its predecessors.
(d) All waste containing any Hazardous Substances generated, used,
handled, stored, treated or disposed of (directly or indirectly) by Seller
or any of its predecessors has been released or disposed of in compliance
with all applicable reporting requirements under any Environmental Laws and
there is no Environmental Litigation with respect to any such release or
disposal.
(e) All underground tanks or other underground storage facilities
presently or previously located at any Real Property or any such tanks or
facilities located at the Real Property which such Real Property was owned,
leased, operated, or managed by Seller or any of its predecessors are
listed together with the capacity and contents (former and current) of each
such tank or facility in SCHEDULE 7.8. None of such underground tanks or
facilities is leaking or has ever leaked.
(f) All waste, hazardous or otherwise, has been removed from the Real
Property.
(g) Seller and each of its predecessors has complied with all
applicable reporting requirements under all Environmental Laws concerning
the disposal or release of Hazardous Substances and Seller nor any of its
predecessors has made any such reports concerning the Real Property or
concerning the operations or activities of Seller or any of its
predecessors.
(h) None of the Acquired Assets contains any asbestos-containing
materials.
(i) Without limiting the generality of any of the foregoing, (i) all
on-site and off-site locations where Seller or any its predecessors has
stored, disposed of or arranged for the disposal of Hazardous Substances
are identified in SCHEDULE 7.8 and (ii) no polychlorinated biphenyls
(PCB's) are used or stored on or in the Real Property.
(j) SCHEDULE 7.8 contains a correct and complete list of all
environmental site assessments and other studies relating to the
investigation of the possibility of the presence or existence of any
Environmental Matter with respect to Seller, the Business or the Acquired
Assets and Seller has previously delivered to Purchaser a correct and
complete copy of each such assessment and study.
7.9 Litigation. There is no suit, action, proceeding, claim or
investigation pending, or, to Seller's knowledge, threatened, against Seller
which would affect the consummation of the transactions contemplated hereby.
Except as listed and briefly described on SCHEDULE 7.9, there are no
arbitrations, grievances, actions, suits, or other proceedings pending or to the
knowledge of Seller threatened against, or adversely
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affecting any of the Acquired Assets at law or in equity or admiralty, nor to
the Seller's knowledge is there any investigation pending or threatened, before
or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign
related to the Acquired Assets. To the Seller's knowledge, Seller is not in
default under or in violation of any order, writ, injunction, or decree of any
federal, state, municipal court, or other governmental department, commission,
board, bureau, agency, or instrumentality, domestic or foreign, affecting the
Acquired Assets.
7.10 Brokers and Finders. Neither Seller nor any affiliate of Seller, has
incurred any obligation or liability to any party for any brokerage fees,
agent's commissions, or finder's fees in connection with the transactions
contemplated by this Agreement. Seller agrees to indemnify and hold Purchaser
harmless from and against any and all loss, liability, costs, claims, demands,
damages, actions, causes of action and suits arising out of or in any manner
related to the alleged employment or use by Seller of any broker, agent or other
party claiming any commission or fee.
7.11 Labor Matters. SCHEDULE 7.11 contains a correct and complete list of
all present employees employed or engaged by Seller in the Business, their total
remuneration for the year ended December 31, 1995, their current remuneration,
and a description of all perquisites and fringe benefits they receive or are
eligible to receive. Except as set forth on SCHEDULE 7.11, Seller has not,
within the last three (3) years, experienced any organized slowdown, work
interruption, strike, or work stoppage by its employees. Seller is not a party
to any collective bargaining agreements. Neither Seller nor any of its officers,
directors, or employees has been charged or threatened with the charge of any
unfair labor practice within the last two (2) years. Seller is in material
compliance with all applicable federal, state, local and foreign laws and
regulations concerning the employer-employee relationship and with all
agreements relating to the employment of Seller's employees, including
applicable wage and hour laws, fair employment laws, safety laws, worker
compensation statutes, unemployment laws, and social security laws. Except as
described on SCHEDULE 7.11, with respect to Seller, there are no pending or
threatened claims, investigations, charges, citations, hearings, consent
decrees, or litigation concerning wages, compensation, bonuses, commissions,
awards, or payroll deductions; equal employment or human rights violations
regarding race, color, religion, sex, national origin, age, handicap, veteran's
status, marital status, disability, or any other recognized class, status, or
attribute under any federal, state, local or foreign equal employment law
prohibiting discrimination; representation petitions or unfair labor practices;
grievances or arbitrations pursuant to current or expired collective bargaining
agreements; occupational safety and health; workers' compensation; wrongful
termination, negligent hiring, invasion of privacy or defamation; immigration or
any other claim based on the employment relationship or termination of the
employment relationship (collectively, "Labor Claims"). Seller is not liable for
any unpaid wages, bonuses, or commissions (other than those not yet due) or any
tax, penalty, assessment, or forfeiture for failure to comply with any of the
foregoing. Except as described on SCHEDULE 7.11, there is no outstanding
agreement or arrangement with respect to severance payments with respect to any
employee of Seller as it relates to the Business.
7.12 Governmental Approval and Consents. (a) Except as described on
SCHEDULE 7.12, Seller has obtained all governmental approvals, authorizations,
permits, licenses, and orders required for the lawful operation of the Business
and the Acquired Assets as presently conducted. SCHEDULE 7.12 contains a true
and correct copy of each such approval, authorization, permit, license, and
order.
(b) No consent, approval, or authorization of or declaration, filing, or
registration with any governmental or regulatory authority is required in
connection with the execution, delivery, and performance of this Agreement by
Seller or the consummation by Seller of the transactions contemplated hereby.
7.13 Taxes. Seller has paid, or by the Closing Date will have paid,
personal property, ad valorem and property taxes and assessments on the Acquired
Assets (including penalties and interest in respect thereof, if any) that have
become or are due with respect to any period ended on or prior to the Closing
Date, or is contesting in good faith such taxes and assessments, in which event
Seller has disclosed the details of such contests on SCHEDULE 7.13. Attached to
SCHEDULE 7.13 are true and correct copies of all personal property, ad valorem,
and property tax bills of Seller for the year 1995 which have been received by
Seller prior to the date hereof, relating to the Acquired Assets.
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7.14 Compliance with Laws. Seller is not engaging in any activity or
omitting to take any action with respect to the Business or the Acquired Assets
that is or creates a material violation of any law, statute, ordinance, or
regulation applicable to the Business or the Acquired Assets. Neither Seller nor
any of the Acquired Assets is subject to any judgment, order, writ, injunction,
or decree issued by any court or any governmental or administrative body or
agency. Seller possesses all permits and licenses required for the operation of
the Business as presently conducted and is in compliance with all applicable
laws, regulations, and orders issued by any court or governmental or
administrative body or agency.
7.15 Title to Assets. Seller has, or will have on the Closing Date, good
and marketable title to the Acquired Assets being conveyed by it to Purchaser
hereunder, free and clear of all liens, claims, charges, encumbrances and
security interests of any kind or nature. On the Closing Date, the only security
interests and encumbrances of record against the Acquired Assets are the
monetary encumbrances set forth on SCHEDULE 7.15 hereto, which encumbrances
shall be released, terminated or discharged at Closing by delivery to the
Purchaser upon payment of the Purchase Price at Closing of executed discharges,
UCC termination or partial release statements signed by the secured party.
7.16 Correctness of Representations. No representation or warranty of
Seller in this Agreement or in any Exhibit, certificate, or Schedule attached
hereto or furnished pursuant hereto, contains, or on the Closing Date will
contain, any untrue statement of material fact or omits, or on the Closing Date
will omit, to state any fact necessary in order to make the statements contained
therein not misleading in any material respect, and all such statements,
representations, warranties, Exhibits, certificates, and Schedules shall be true
and complete in all material respects on and as of the Closing Date as though
made on that date. True copies of all indentures, notes, leases, agreements, and
other instruments listed on the Schedules delivered or furnished to Purchaser
pursuant to this Agreement have been delivered to Purchaser.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
8.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all corporate power and authority to conduct its business, to
own, lease, or operate its properties in the places where such business is
conducted and such properties are owned, leased, or operated.
8.2 Authority. Purchaser has full power and authority to enter into this
Agreement and each of the other Acquisition Documents to which it is a party and
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Purchaser of this Agreement and each of the other
Acquisition Documents to which Purchaser is a party have been duly and validly
authorized and approved by all necessary action on the part of Purchaser. This
Agreement and each of the other Acquisition Documents to which Purchaser is a
party are the legal, valid, and binding obligations of Purchaser enforceable
against Purchaser in accordance with their terms, except as enforceability may
be limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally, and by the exercise of judicial discretion in accordance with
equitable principles. Neither the execution and delivery by Purchaser of this
Agreement or any of the other Acquisition Documents to which Purchaser is a
party nor the consummation by Purchaser of the transactions contemplated hereby
or thereby will (i) violate Purchaser's Certificate of Incorporation or Bylaws,
(ii) violate any provisions of law or any order of any court or any governmental
unit to which Purchaser is subject, or by which its assets are bound, or (iii)
conflict with, result in a breach of, or constitute a default under any
indenture, mortgage, lease, agreement, or other instrument to which Purchaser is
a party or by which its assets or properties are bound.
8.3 Litigation. There is no suit, action, proceeding, claim or
investigation pending, or, to Purchaser's knowledge, threatened, against
Purchaser which would affect the consummation of the transactions contemplated
hereby.
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8.4 Brokers and Finders. Neither Purchaser nor any affiliate of Purchaser
has incurred any obligation or liability to any party for any brokerage fees,
agent's commissions, or finder's fees in connection with the transactions
contemplated by the Acquisition Documents. Purchaser agrees to indemnify and
hold Seller harmless from and against any and all loss, liability, costs,
claims, demands, damages, actions, causes of action and suits arising out of or
in any manner related to the alleged employment or use by Purchaser of any
broker, agent or other party claiming any commission or fee.
8.5 Governmental Approval and Consents. Except for consents contemplated
by this Agreement, no consent, approval, or authorization of or declaration,
filing, or registration with any governmental or regulatory authority is
required in connection with the execution, delivery, and performance by
Purchaser of this Agreement or the consummation of the transactions contemplated
hereby.
8.6 Correctness of Representations. No representation or warranty of
Purchaser in this Agreement or in any Exhibit, certificate, or Schedule attached
hereto or furnished pursuant hereto contains, or on the Closing Date will
contain, any untrue statement of material fact or omits or, on the Closing Date,
will omit, to state any fact necessary in order to make the statements contained
therein not misleading in any material respect, and all such statements,
representations, Exhibits, and certificates shall be true and complete on and as
of the Closing Date as though made on that date.
ARTICLE 9
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser as follows:
9.1 Conduct of Business Prior to Closing. From the date hereof to the
Closing Date, and except to the extent that Purchaser shall otherwise consent in
writing, Seller shall:
(a) operate the Business substantially as previously operated and only
in the regular and ordinary course;
(b) not sell or otherwise dispose of any asset that would have been an
Acquired Asset hereunder, except in the ordinary course of business;
(c) maintain the Acquired Assets in their present order and condition,
reasonable wear and use excepted, and deliver the Acquired Assets to
Purchaser on the Closing Date in such condition, and maintain all policies
of insurance covering such Acquired Assets in amounts and on terms
substantially equivalent to those in effect on the date hereof; and
(d) comply with all laws applicable to the conduct of Business.
9.2 Access and Information. From the date hereof to the Closing Date and
during normal business hours, Seller shall afford to Purchaser, its lenders,
counsel, accountants, and other representatives, reasonable access to the Real
Property and shall furnish such persons with all information concerning the
Acquired Assets as they reasonably may request. Seller shall use its best
efforts to assist Purchaser, its lenders, counsel, accountants, and other
representatives in their examination. Purchaser shall, and shall use its best
efforts to cause its lenders, counsel, accountants, and representatives to, hold
in strict confidence all information so obtained from Seller.
9.3 Notification of Changes. Between the date hereof and the Closing Date,
Seller shall promptly notify Purchaser in writing of any damage to or loss of
any of the Acquired Assets or the institution of the threat of institution of
legal, administrative, or other proceedings against Seller or the occurrence or
existence of any unasserted proceedings known to Seller.
9.4 Other Transactions. Seller shall deal exclusively and in good faith
with Purchaser with regard to the sale of the Acquired Assets to Purchaser and
shall not, either directly or indirectly, through any officer, director,
employee, agent or otherwise, (i) solicit, initiate, enter into, or continue any
discussions, negotiations or agreements with any person other than Purchaser,
relating to any acquisition or purchase of all or a
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material amount of the Acquired Assets or of any equity interest in, or any
merger, consolidation or business combination with Seller (an "Acquisition
Proposal"); (ii) except as required by legal or judicial process, furnish to any
other person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate, or encourage any Acquisition
Proposal or any effort or attempt by any other person to do or obtain, any of
the foregoing; or (iii) enter into any agreement or understanding, whether in
writing or oral, that would have the effect of preventing the consummation of
the transactions contemplated by this Agreement. If, notwithstanding the
foregoing, Seller or its respective representatives or agents should receive any
Acquisition Proposal or any inquiry regarding such proposal from a third party,
such persons shall promptly inform Purchaser and its counsel thereof.
9.5 Consents. Seller shall use its best efforts to obtain, at its sole
cost and expense, prior to the Closing all consents and estoppels which, in the
reasonable judgment of Purchaser, are necessary or appropriate for the transfer
or assignment of the Acquired Assets to Purchaser and the consummation of the
transactions contemplated hereby. All such consents and estoppels shall be in
writing and in form and substance reasonably satisfactory to Purchaser, and
executed counterparts thereof will be delivered to Purchaser promptly after
receipt thereof but in no event later than the Closing. Seller will proceed
diligently and in good faith and use its best efforts, as promptly as
practicable, to make all filings with and to give all notices to governmental or
regulatory authorities or any other person required of Seller to consummate the
transactions contemplated hereby and provide such other information and
communications to such governmental or regulatory authorities or other persons
as such governmental or regulatory authorities or other persons may reasonably
request in connection therewith and provide reasonable cooperation to Purchaser
in obtaining all consents, approvals or actions of, making all filings with and
giving all notices to governmental or regulatory authorities.
9.6 Supplemental Disclosure. Seller shall have the continuing obligation
up to and including the Closing Date to supplement promptly or amend the
Schedules with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or listed in the Schedules.
9.7 Conditions Precedent. Seller shall use its best efforts to satisfy the
conditions enumerated in Article 10 hereof.
9.8 Discharge of Liens and Encumbrances. All liens, claims, charges,
security interests, pledges, assignments, or encumbrances relating to the
Acquired Assets shall be satisfied, terminated, and discharged by Seller on or
prior to the Closing Date and evidence reasonably satisfactory to Purchaser and
its counsel of such satisfaction, termination, and discharge shall be delivered
to Purchaser at or prior to the Closing.
9.9 Seller's Information. To assist Purchaser with its due diligence,
within five (5) days after the date of this Agreement, Seller shall deliver to
Purchaser copies of all documents which are in Seller's possession or which are
reasonably available to Seller relating to any of the Acquired Assets including,
without limitation, the following: (i) the real property tax assessment tax
bills with respect to the Real Property for the past two (2) calendar years;
(ii) utility bills for the preceding twelve (12) months, (iii) all available
warranties and guaranties, (iv) all licenses and permits, if any, necessary for
the operation of the Business, (vi) any environmental studies or reports and any
notices or correspondence relating to environmental matters, and (vii) any
maintenance reports or logs.
ARTICLE 10
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each of the following conditions all or any of which may be waived in
writing, in whole or in part, by Purchaser:
10.1 Certificate Regarding Schedules and Representations and
Warranties. All information required to be furnished or delivered by Seller
pursuant to this Agreement shall have been furnished or delivered as of the date
hereof and as of the Closing Date, as required hereunder; the representations
and warranties made
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by Seller in Article 7 shall be true and correct in all material respects on and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date
(except that such representations and warranties may be untrue or incorrect as a
result of actions or transactions expressly permitted by this Agreement or
actions or transactions of Seller made with the prior written consent of
Purchaser); and Purchaser shall have received a certificate dated as of the
Closing Date executed by an authorized officer of Seller to such effect.
10.2 Compliance by Seller. Seller shall have duly performed in all
material respects all of the covenants, agreements, and conditions contained in
this Agreement respectively to be performed by it on or prior to the Closing
Date, and Purchaser shall have received a certificate, dated as of the Closing
Date, executed by an authorized officer of Seller to such effect.
10.3 No Injunction; Etc. No action, proceeding, investigation, regulation,
or legislation shall be pending or threatened which seeks to enjoin, restrain,
or prohibit Purchaser, or to obtain substantial damages from Purchaser, in
respect of the consummation of the transactions contemplated hereby, or which
seeks to enjoin the operation of all or a material portion of the Acquired
Assets, which, in the reasonable judgment of Purchaser, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
10.4 Operation in the Ordinary Course. Since May 31, 1996, Seller shall
have operated the Business in the ordinary course (except as otherwise permitted
by this Agreement or as agreed to by Purchaser as evidenced by Purchaser's prior
written consent).
10.5 Consents; Authorizations; Approval of Legal Matters. Purchaser shall
have received a true and correct copy of each consent and waiver that is
required for the assignment of the Permits or otherwise required for the
execution, delivery, and performance of this Agreement by Seller. All consents,
approvals and actions of, filings with and notices to any governmental or
regulatory authority necessary to permit Purchaser and Seller to perform their
obligations under this Agreement and to consummate the transactions contemplated
hereby shall have been duly obtained, made or given and shall be in full force
and effect. Purchaser shall be satisfied with the terms, conditions, and
restrictions of and obligations under each such authorization, order, or
approval.
10.6 Incumbency. Purchaser shall have received a certificate of incumbency
of Seller executed by a secretary thereof listing the officers authorized to
execute this Agreement and certifying the authority of each such officer to
execute the agreements, documents, and instruments on behalf of Seller in
connection with the consummation of the transactions contemplated herein.
10.7 Certified Resolutions. Purchaser shall have received a certificate of
the Secretary of Seller containing a true and correct copy of the resolutions
duly adopted by the board of directors of Seller approving and authorizing each
Acquisition Document and the transactions contemplated hereby and thereby and
certifying that such resolutions have not been rescinded, revoked, modified, or
otherwise affected and remain in full force and effect.
10.8 Release of Liens. Purchaser shall have received Uniform Commercial
Code searches (which searches shall be made or caused to be made by and at the
expense of Purchaser) of filings made pursuant to Article 9 thereof in all
jurisdictions where any of the Acquired Assets are located, in form, scope, and
substance reasonably satisfactory to Purchaser and its counsel, which searches
shall reflect the release or termination of liens, claims, security interests,
or encumbrances against any of the Acquired Assets disclosed thereby, and to the
extent any such release or termination is not reflected of record, Purchaser
shall have received evidence satisfactory to it, that all such liens and
encumbrances against the Acquired Assets have been released or terminated prior
to or at the Closing.
10.9 Accuracy of Schedules. Examination by Purchaser shall not have
disclosed any material inaccuracy in the representations and warranties of
Seller set forth in this Agreement or in the Schedules delivered to Purchaser
pursuant hereto.
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10.10 No Adverse Change. There shall not have been any material adverse
change in the Acquired Assets since May 31, 1996, and Purchaser shall have
received a certificate dated as of the Closing Date, executed by an authorized
officer of Seller to such effect.
10.11 Instruments of Transfer. Seller shall have delivered to Purchaser
such bills of sale, motor vehicle titles, endorsements, assignments, licenses,
and other good and sufficient instruments of conveyance and transfer and any
other instruments reasonably deemed appropriate by counsel to Purchaser, all in
form and substance reasonably satisfactory to counsel to Purchaser, to vest in
Purchaser all of Seller's rights, title, and interest with respect to the
Acquired Assets free and clear of all liens, charges, encumbrances, pledges, or
claims of any nature.
10.12 Opinion of Counsel for Seller. Purchaser shall have received the
written legal opinion of Anderson & Associates, P.A., counsel to Seller,
substantially in the form of EXHIBIT E hereto.
10.13 Proceedings. The form and substance of all opinions, certificates,
assignments, orders, and other documents and instruments, hereunder shall be
satisfactory in all reasonable respects to Purchaser and its counsel.
10.14 Condition of Acquired Assets. On the Closing Date, all of the
Acquired Assets shall be in substantially the same condition as at the close of
business on the date hereof, except for ordinary use and wear thereof and
changes occurring in the ordinary course of business or expressly permitted by
this Agreement between the date hereof and the Closing Date, and Purchaser shall
have received a certificate dated as of the Closing Date, executed by an
authorized officer of Seller to such effect; provided, however, if on or prior
to the Closing Date any of the Acquired Assets shall have suffered loss or
damage on account of fire, flood, accident, act of war, civil commotion, or any
other cause or event beyond the reasonable power and control of Seller (whether
or not similar to the foregoing) to an extent which, in the reasonable opinion
of Purchaser, materially affects the value of the Acquired Assets, taken as a
whole, Purchaser shall have the right either (a) to terminate this Agreement and
all of Purchaser's obligations hereunder without incurring any liability to
Seller as a result of such termination, or (b) to consummate the transactions
provided for herein and be paid the full amount of all insurance proceeds, if
any, paid or payable to Seller, in respect of such loss plus an amount equal to
any deductible or co-insurance reserve applicable to such loss. If under the
circumstances described in the foregoing sentence, Purchaser shall elect to
consummate the transactions provided for herein, Purchaser shall receive a
credit against the Purchase Price equal to the sum of the full amount of any
insurance proceeds received by Seller in respect of any such loss, plus any
deductible or co-insurance reserve applicable to such loss. To the extent any
insurance proceeds have not been paid to Seller as of the Closing Date, Seller
shall assign all of its rights, title and interest with respect to such proceeds
to Purchaser at Closing. If, notwithstanding such assignment, Seller thereafter
receives any payment of insurance proceeds, Seller shall promptly pay to
Purchaser the full amount of such proceeds paid to Seller.
ARTICLE 11
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or before the Closing
Date hereunder, of each of the following conditions, all or any of which may be
waived, in whole or in part, by Seller.
11.1 Certificate Regarding Representations and Warranties. All information
required to be furnished or delivered by Purchaser pursuant to this Agreement
shall have been furnished or delivered as of the date hereof and the Closing
Date as required hereunder; the representations and warranties made by Purchaser
in Article 8 hereof shall be true and correct in all material respects on and as
of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date; and
Seller shall have received a certificate dated the Closing Date, executed by an
authorized officer of Purchaser to such effect.
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11.2 Compliance by Purchaser. Purchaser shall have duly performed in all
material respects all of the covenants, agreements, and conditions contained in
this Agreement to be performed by Purchaser on or before the Closing Date, and
Seller shall have received a certificate dated the Closing Date, executed by an
authorized officer of Purchaser, to such effect.
11.3 Certified Resolutions. Seller shall have received from Purchaser a
certificate executed by the Secretary of Purchaser containing a true and correct
copy of resolutions duly adopted by its Board of Directors approving and
authorizing this Agreement and each of the other Acquisition Documents to which
Purchaser is a party and each of the transactions contemplated thereby. The
Secretary or Assistant Secretary of Purchaser shall also certify that such
resolutions have not been rescinded, revoked, modified, or otherwise affected
and remain in full force and effect.
11.4 No Injunction; Etc. No action, proceeding, investigation, regulation,
or legislation shall be pending or overtly threatened which seeks to enjoin,
restrain, or prohibit Seller, or to obtain substantial damages from Seller, in
respect of the consummation of the transactions contemplated hereby, which, in
the reasonable judgment of Seller, would make it inadvisable to consummate such
transactions.
11.5 Consents; Authorizations. All consents, approvals and actions of,
filings with and notices to any governmental or regulatory authority necessary
to permit Purchaser, Guarantor and Seller to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby shall have
been duly obtained, made or given and shall be in full force and effect.
11.6 Incumbency. Seller shall have received a certificate of incumbency of
Purchaser executed by the President and attested by the Secretary or Assistant
Secretary of Purchaser listing the officers of Purchaser authorized to execute
this Agreement and the other Acquisition Documents to which Purchaser is a party
and the instruments of assumption on behalf of Purchaser and certifying the
authority of each such officer to execute the agreements, documents, and
instruments on behalf of Purchaser in connection with the consummation of the
transactions contemplated herein.
11.7 Certificates. Seller shall have received from Purchaser all such
certificates, dated as of the Closing Date, as Seller shall reasonably request
to evidence the fulfillment by Purchaser, or such other satisfaction as of the
Closing Date, of the terms and conditions of this Agreement.
11.8 Opinion of Purchaser's Counsel. Seller shall have received the
written legal opinion of Alston & Bird, counsel for Purchaser, substantially in
the form of EXHIBIT F hereto, which opinion may be based upon and incorporate
the 1992 edition of the Interpretive Standards applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia, which
Interpretive Standards shall be attached to the Opinion.
11.9 Proceedings. The form and substance of all opinions, certificates,
assignments, orders and other documents and instruments hereunder shall be
satisfactory in all reasonable respects to Seller and its counsel.
ARTICLE 12
MUTUAL COVENANTS
12.1 Mutual Covenants. Purchaser, on the one hand, and Seller and
Cottingham, on the other hand, shall each take all actions contemplated by this
Agreement, and, subject to the right of a party to terminate this Agreement
pursuant to Article 14 hereof, do all things reasonably necessary to effect the
consummation of the transactions contemplated by this Agreement. Except as
otherwise provided in this Agreement, Purchaser and Seller shall each refrain
from knowingly taking or failing to take any action which would render any of
the representations or warranties contained in Articles 7 or 8 of this Agreement
in any material respect inaccurate as of the Closing Date. Each party shall
promptly notify the other party of any action, suit, or proceeding that shall be
instituted or threatened against such party to restrain, prohibit, or otherwise
challenge the legality of any transaction contemplated by this Agreement.
A-16
<PAGE> 23
ARTICLE 13
POST CLOSING MATTERS
13.1 Employment of Employees. Purchaser may offer employment to any
employees of Seller on the Closing Date. All employees accepting Purchaser's
offer of employment are hereinafter referred to as the "Hired Employees." Seller
shall be responsible for the payment of all wages, commissions, severance pay,
accrued but unpaid wages, vacation pay, sick pay, and holiday pay to the Hired
Employees of Seller accrued through the Closing Date, and for any employees of
Seller who are not Hired Employees, up to and including the date Seller
terminates the employment of such employees. Seller shall also be responsible
for the payment to all employees of the Seller on the Closing Date (including
those that become Hired Employees) and former employees of the Seller of all
bonuses which become payable after the Effective Time with respect to any fiscal
period ended prior to the Effective Time. Seller shall be responsible for the
payment of any amounts due to its employees (including the Hired Employees)
pursuant to the Company Benefit Plans (as defined herein) as a result of the
employment of its employees, provided that in determining bonuses and other
similar payments due to Hired Employees for any period ended on or prior to the
Effective Time, Seller shall, if payment thereof will occur after the Effective
Time, waive any requirement that employees be employees of Seller on the date
such bonuses or other similar payment are paid. Seller shall be responsible for
reporting all employee-related costs and liabilities of Hired Employees accruing
prior to the Closing Date, whether payable on or after the Closing Date. Seller
is responsible for all incurred but unreported or unpaid medical claims and
workers' compensation claims occurring prior to the Effective Time and for the
costs associated with any hospital confinement which commences prior to the
Effective Time. Purchaser shall become responsible for all costs and liabilities
attributable to Hired Employees accruing on and after the Effective Time;
provided, however, that Purchaser shall not be responsible for any liabilities
arising under the Company Benefit Plans. Effective on the Closing Date, Seller
shall, and hereby does, release all Hired Employees from any employment and/or
confidentiality agreement previously entered into between Seller and such Hired
Employees.
The following plans, programs, policies, or arrangements described in
subparagraph (i) or (ii) are hereinafter collectively referred to as the
"Company Benefit Plans":
(i) any employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") or under which
either Seller, with respect to employees, has any outstanding, present, or
future obligation or liability, or under which any employee has any present
or future right to benefits which are covered by ERISA; or
(ii) any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical, life insurance, or other
employee benefit plan, program, policy, or arrangement, which Seller
maintains or to which Seller has any outstanding, present, or future
obligations to contribute or make payments under, whether voluntary,
contingent, or otherwise.
13.2 Seller's Benefit Plans. Purchaser shall assume no responsibility with
regard to any Company Benefit Plans of Seller. To the extent necessary, Seller
may continue to communicate with the Hired Employees regarding their rights and
entitlement to any benefits under the Company Benefit Plans, subject to
Purchaser's prior approval, which shall not be unreasonably withheld, and the
parties shall cooperate with each other in the administration of all applicable
employee benefit plans and programs.
13.3 Temporary Employment by Seller. Purchaser agrees that the employees
listed on SCHEDULE 13.3, if they become Hired Employees, may perform services
for Seller for the purpose of winding up the Business of Seller for up to 20
hours per week for a period of up to 8 weeks following the Closing Date without
compensation paid by Seller to Purchaser. Such services may be performed on the
Purchaser's premises using telephones and other office equipment of Purchaser
necessary to perform such services. Such services shall be performed for the
benefit of Seller by such employees acting as independent contractors outside
the scope of their employment by Purchaser and Purchaser shall have no
responsibility for the actions or performance of such employees in providing
such services.
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<PAGE> 24
ARTICLE 14
TERMINATION
14.1 Termination. This Agreement may be terminated:
(a) by the mutual consent of the Seller and the Purchaser;
(b) by Purchaser if any condition in Article 10 becomes impossible of
performance or has not been satisfied in full or previously waived by
Purchaser in writing at or prior to July 31, 1996; or
(c) by Seller if any condition in Article 11 becomes impossible of
performance or has not been satisfied in full or previously waived by
Seller in writing at or prior to July 31, 1996.
14.2 Effect of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of Section 14.1(a) hereof, this
Agreement shall become void and have no effect without any liability on the part
of any of the parties hereto or their directors, or officers or stockholders in
respect of this Agreement. In the event of the termination and abandonment
hereof pursuant to the provisions of Sections 14.1(b) or 14.1(c) hereof as a
result of a failure of a condition precedent which was not caused by the breach
of a representation, warranty or covenant by any of the parties, this Agreement
shall become void and have no effect without any liability on the part of any of
the parties hereto or their directors, officers or stockholders in respect of
this Agreement. In the event of the termination or abandonment hereof for any
other reason (including pursuant to Sections 14.1(b) or 14.1(c), the parties
shall have all such rights and remedies available to them at law or in equity
with respect to such termination or abandonment.
ARTICLE 15
INDEMNIFICATION
15.1 Definitions. For the purposes of this Article:
(a) "Indemnification Claim" shall mean a claim for indemnification
hereunder.
(b) "Indemnitees" shall mean the Purchaser or Seller (depending upon
the context) and its agents, representatives, employees, officers,
directors, shareholders, controlling persons and affiliates.
(c) "Indemnitor" shall mean Seller or Purchaser (depending upon the
context).
(d) "Losses" shall mean any and all demands, claims, actions or causes
of action, assessments, losses, diminution in value, damages (including
special and consequential damages), liabilities, costs, and expenses,
including without limitation, interest, penalties, cost of investigation
and defense, and reasonable attorneys' and other professional fees and
expenses.
(e) "Third Party Claim" shall mean any claim, suit or proceeding
(including, without limitation, a binding arbitration or an audit by any
taxing authority) that is instituted against an Indemnitee by a person or
entity other than an Indemnitor and which, if prosecuted successfully,
would result in a Loss for which such Indemnitee is entitled to
indemnification hereunder.
15.2 Agreement of Seller, as Indemnitor, to Indemnify. Subject to the
terms and conditions of this Article, Seller, as Indemnitor, agrees to
indemnify, defend, and hold harmless Purchaser and its related Indemnitees, and
each of them, from, against, for, and in respect of any and all Losses asserted
against, or paid, suffered or incurred by, an Indemnitee and resulting from,
based upon, or arising out of:
(a) the inaccuracy, untruth, or incompleteness of any representation
or warranty of the Seller contained in or made pursuant to this Agreement
or in any certificate, Schedule, or Exhibit furnished by Indemnitor in
connection herewith;
(b) a breach of or failure to perform any covenant or agreement of the
Seller or Cottingham made in this Agreement;
(c) any Excluded Liability;
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<PAGE> 25
(d) any (i) Environmental Liability, (ii) Environmental Litigation,
(iii) Environmental Matter, and/or (iv) violation of Environmental Law,
including, without limitation, Third Party Claims related thereto, to the
extent that the exposure, incident, condition, liability, matter, or
violation out of which the Losses arise occurred on or prior to the Closing
Date or to the extent that the exposure, incident, condition, liability,
matter or violation out of which the Losses arise occurred after the
Closing Date, if the same was not caused by actions of Purchaser. Without
limiting the foregoing, Seller's indemnification under this Section 15.2(d)
includes any failure of Seller prior to the Closing Date to obtain any and
all Permits required under applicable Environmental Laws and any costs and
expenses to modify, restore, change, or improve the Acquired Assets in
order to effectuate compliance with any applicable Environmental Law in
effect as of the Closing Date;
(e) any claim asserted under the South Carolina Uniform Commercial
Code -- Bulk Transfers (36-6-101 et. seq.); and
(f) any claim asserted against Indemnitees arising as a result of or
in connection with the Seller's operation of the Business and the Acquired
Assets before and upon the Closing Date.
15.3 Agreement of Purchaser, as Indemnitor, to Indemnify. Subject to the
terms and conditions of this Article, Purchaser, as Indemnitor, agrees to
indemnify, defend, and hold harmless Seller and its related Indemnitees, and
each of them, from, against, for, and in respect of any and all Losses asserted
against, or paid, suffered or incurred by an Indemnitee and resulting from,
based upon, or arising out of:
(a) the inaccuracy, untruth, or incompleteness of any representation
or warranty of the Purchaser contained in or made pursuant to this
Agreement or in any certificate, Schedule, or Exhibit furnished by
Indemnitor in connection herewith;
(b) a breach of or failure to perform any covenant or agreement of the
Purchaser made in this Agreement;
(c) any Assumed Liability;
(d) any claim asserted against Indemnitees arising as a result of, or
in connection with, the Purchaser's operation of the Business and the
Acquired Assets, from and after the Closing Date; and
(e) any (i) Environmental Liability, (ii) Environmental Litigation,
(iii) Environmental Matter, and/or (iv) violation of Environmental Law,
including, without limitation, Third Party Claims related thereto, to the
extent that the exposure, incident, condition, liability, matter, or
violation out of which the Losses arise occurred after the Closing Date and
were caused by actions of Purchaser.
15.4 Procedures for Indemnification. (a) An Indemnification Claim shall be
made by an Indemnitee by delivery of a written notice to Indemnitor requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim,
containing (by attachment or otherwise) such other information as such
Indemnitee shall have concerning such Third Party Claim. An Indemnification
Claim may be amended from time to time until the final determination of such
Indemnification Claim under the procedures set forth in this Article 15.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 15.5 hereof shall be observed by Indemnitee and
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third Party
Claim, Indemnitor shall have thirty (30) days to object to such Indemnification
Claim by delivery of a written notice of such objection to such Indemnitee
specifying in reasonable detail the basis for such objection. Failure to timely
so object shall constitute a final and binding acceptance of the Indemnification
Claim by Indemnitor, and the Indemnification Claim shall be paid in accordance
with subsection (d) hereof. If an objection is timely interposed by Indemnitor
and the dispute is not resolved by Indemnitee and Indemnitor within fifteen (15)
days from the date Indemnitee receives such objection, such dispute shall be
resolved by arbitration as provided in Section 16.13 of this Agreement.
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<PAGE> 26
(d) Upon determination of the amount of an Indemnification Claim, whether
by agreement between Indemnitor and Indemnitee or by an arbitration award or by
any other final adjudication, Indemnitor shall pay the amount of such
Indemnification Claim within ten (10) days of the date such amount is
determined. If payment of the amount of the Indemnification Claim is not
received by the Purchaser within such ten (10) days, the Purchaser may exercise
its rights of setoff under the Note.
15.5 Third Party Claims. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) Indemnitee shall give Indemnitor written notice of a Third Party
Claim promptly after receipt by Indemnitee of notice thereof, and
Indemnitor may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to Indemnitee.
The failure of Indemnitee to notify Indemnitor of such claim shall not
relieve Indemnitor of any liability that it may have with respect to such
claim except to the extent Indemnitor demonstrates that the defense of such
claim is prejudiced by such failure. If Indemnitee desires to participate
in, but not control, any such defense, compromise and settlement, it may do
so at its sole cost and expense. If, however, Indemnitor fails or refuses
to undertake the defense of such Third Party Claim within ten (10) days
after written notice of such claim has been given to Indemnitor by
Indemnitee, Indemnitee shall have the right to undertake the defense,
compromise and settlement of such claim with counsel of its own choosing.
In the circumstances described in the preceding sentence, Indemnitee shall,
promptly upon its assumption of the defense of such claim, make an
Indemnification Claim as specified in Section 15.4 which shall be deemed an
Indemnification Claim that is not a Third Party Claim for the purposes of
the procedures set forth herein.
(b) No settlement of a Third Party Claim involving the asserted
liability of Indemnitor under this Article shall be made without the prior
written consent by or on behalf of Indemnitor, which consent shall not be
unreasonably withheld or delayed. Consent shall be presumed in the case of
settlements of $50,000.00 or less where Indemnitor has not responded within
ten (10) business days of receipt of notice of a proposed settlement. If
Indemnitor assumes the defense of such a Third Party Claim, (a) no
compromise or settlement thereof may be effected by Indemnitor without
Indemnitee's consent unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect
on any other claim that may be made against Indemnitee (ii) the sole relief
provided is monetary damages that are paid in full by Indemnitor and (iii)
the compromise or settlement includes, as an unconditional term thereof,
the giving by the claimant or the plaintiff to Indemnitee of a release, in
form and substance satisfactory to Indemnitee, from all liability in
respect of such Third Party Claim, and (b) Indemnitee shall have no
liability with respect to any compromise or settlement thereof effected
without its consent.
(c) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers
of attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may
reasonably be related to any such claim or action, shall provide access to
the counsel, accountants and other representatives of each party during
normal business hours to all properties, personnel, books, tax records,
contracts, commitments and all other business records of such other party
and will furnish to such other party copies of all such documents as may
reasonably be requested (certified, if requested).
15.6 Other Rights and Remedies Not Affected. The rights of Indemnitee
under this Article 15 are independent of and in addition to such rights and
remedies as Indemnitee may have at law or in equity or otherwise for any
misrepresentation, breach of warranty or the failure to fulfill any agreement or
covenant hereunder on the part of Indemnitor, including without limitation the
right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby.
15.7 Survival. All representations, warranties and agreements contained in
this Agreement or in any certificate delivered pursuant to this Agreement shall
survive the Closing notwithstanding any investigation conducted with respect
thereto or any knowledge acquired as to the accuracy or inaccuracy of any such
representation or warranty.
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<PAGE> 27
15.8 Time Limitations. Indemnitor shall have no liability under clause (a)
of Section 15.2 with respect to: (a) the breach of any representation or
warranty, other than those set forth in Sections 7.1, 7.2, 7.8, 7.10, 7.13,
7.15, 8.1, 8.2 and 8.4 hereof, unless on or before three (3) years after the
Closing Date the Indemnitor is given notice asserting an Indemnification Claim
with respect thereto, (b) the breach of the representations and warranties of
the Indemnitor contained in Section 7.13 hereof, unless notice asserting an
Indemnification Claim based thereon is given to the Indemnitor prior to the
expiration of the applicable statute of limitations for the assertion of
liability against the Purchaser based upon the matters that are the subject of
the representations and warranties contained in such Sections, and (c) the
breach of the representations and warranties of Indemnitor contained in Section
7.8 unless notice asserting an Indemnification Claim based thereon is given to
the Indemnitor on or before the later of ten (10) years after the Closing Date
or the termination of the Facility Lease. Indemnitor shall have no liability
under clause (d) of Section 15.2 or clause (e) of Section 15.3 unless notice
asserting an Indemnification Claim based thereon is given to the Indemnitor on
or before the later of ten (10) years after the Closing Date or the termination
of the Facility Lease. An Indemnification Claim based upon a breach of the
representations and warranties set forth in Sections 7.1, 7.2, 7.10 and 7.15, as
to when Seller is the Indemnitor, or in Sections 8.1, 8.2 and 8.4, as to when
Purchaser is the Indemnitor, or based upon the failure of the Indemnitor to
perform the covenants and agreements to be performed by it hereunder, or based
upon clauses (c), (e) or (f) of Section 15.2 hereof or based upon clauses (c) or
(d) of Section 15.3 hereof may be made at any time.
15.9 Subrogation. Upon payment in full of any Indemnification Claim,
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, Indemnitor shall be
subrogated to the extent of such payment to the rights of Indemnitee against any
person or entity with respect to the subject matter of such Indemnification
Claim or Third Party Claim.
ARTICLE 16
GENERAL PROVISIONS
16.1 Fees and Expenses. Except as otherwise specifically provided in this
Agreement, Seller, on the one hand, and Purchaser, on the other hand, shall pay
their respective fees and expenses in connection with the transactions
contemplated by this Agreement. Purchaser shall pay for any and all title
insurance policies, surveys and fees related to obtaining title insurance in
connection with the Real Property.
16.2 Notices. All notices, request, demands, and other communications
hereunder shall be in writing and shall be delivered (a) in person or by
courier, (b) mailed by first class registered or certified mail, or (c)
delivered by facsimile transmission, as follows:
(a) If to Seller:
Carolina Coastal Investors
P. O. Box 989
I-95 and Highway 9
Dillon, South Carolina 29536
Attn: David Cottingham
Telephone: (803) 774-3331
Telecopier: (803) 774-9591
with a copy (which shall not constitute notice) to:
Anderson & Associates, P.A.
P. O. Box 76
Columbia, South Carolina 29202
Attn: Robert Anderson, Esq.
Telephone: (803) 252-8600
Telecopier: (803)
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<PAGE> 28
(b) If to Purchaser:
Dorsey Trailers, Inc.
One Paces West, Suite 1700
2727 Paces Ferry Road
Atlanta, Georgia 30339
Attn: T. Charles Chitwood
Telephone: (770) 438-9595
Telecopier: (770) 438-0460
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Alexander W. Patterson, Esq.
Telephone: (404) 881-7688
Telecopier: (404) 881-7777
or to such other address as the parties hereto may designate in writing to the
other in accordance with this Section 16.2. Any party may change the address to
which notices are to be sent by giving written notice of such change of address
to the other parties in the manner above provided for giving notice. If
delivered personally or by courier, the date on which the notice, request,
instruction or document is delivered shall be the date on which such delivery is
made and if delivered by facsimile transmission or mail as aforesaid, the date
on which such notice, request, instruction or document is received shall be the
date of delivery.
16.3 Assignment; Binding Effect. Prior to the Closing, this Agreement
shall not be assignable by any of the parties hereto without the written consent
of the other.
16.4 No Benefit to Others. The representations, warranties, covenants, and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Article 15 hereof, Indemnitees and its heirs,
executors, administrators, legal representatives, successors and assigns, and
they shall not be construed as conferring any rights on any other persons.
16.5 Headings, Gender, and "Person". All section headings contained in
this Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
16.6 Counterparts. This Agreement may be executed in two (2) or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
16.7 Integration of Agreement. This Agreement supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
subject matter hereof. Neither this Agreement, nor any provision hereof, may be
changed, waived, discharged, supplemented, or terminated orally, but only by an
agreement in writing signed by the party against which the enforcement of such
change, waiver, discharge, or termination is sought.
16.8 Time of Essence. Time is of the essence in this Agreement.
16.9 Governing Law. This Agreement shall be construed under the laws of
the State of South Carolina.
16.10 Partial Invalidity. Whenever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity,
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<PAGE> 29
illegality, or unenforceability shall not affect any other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision or provisions had never been contained herein unless the
deletion of such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable.
16.11 Investigation. No inspection, preparation, or compilation of
information or Schedules, or audit of the inventories, properties, financial
condition, or other matters relating to Seller conducted by or on behalf of
Purchaser pursuant to this Agreement shall in any way limit, affect, or impair
the ability of Purchaser to rely upon the representations, warranties,
covenants, and agreements of Seller set forth herein. Any disclosure made on one
Schedule shall not be deemed made on any other Schedule, unless appropriate
cross-referencing is made. The covenants and representations and warranties of
Seller and Purchaser shall survive the Closing and the execution and delivery of
all instruments of conveyance for the periods set forth in Section 15.8.
16.12 Public Announcements. Seller and Purchaser will consult with each
other before issuing any press releases or otherwise making any public
statements or filings with governmental entities with respect to this Agreement
or the transactions contemplated hereby and shall not issue any press releases
or make any public statements or filings with governmental entities prior to
such consultation and shall modify any portion thereof if the other party
reasonably objects thereto, unless the same may be required by applicable law.
16.13 Arbitration. The parties agree that any dispute between or among
them arising out of or based upon this Agreement, the remaining Acquisition
Documents or the consummation of the transactions provided for herein shall be
submitted to and resolved by arbitration in Atlanta, Georgia in accordance with
the rules and procedures of the American Arbitration Association, and the
decision of the arbiter(s) in such dispute shall be final and binding on the
parties to such arbitration proceeding. Except as the arbiter(s) may otherwise
award or assess the expenses of any such proceeding, each party shall bear its
own costs and expenses, including the expense of its counsel, in any such
arbitration proceeding.
ARTICLE 17
GUARANTY BY GUARANTOR
As an inducement to Purchaser to enter into this Agreement, this Agreement
being for the benefit of Guarantor as the sole stockholder of Seller, Guarantor
hereby unconditionally guarantees to Purchaser all of the obligations of Seller
under this Agreement, the Acquisition Documents and any other instrument,
document or agreement related to or arising out of any of the foregoing. Such
guarantee is absolute. Purchaser may pursue the enforcement of any obligations
so guaranteed directly against Guarantor, without first
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<PAGE> 30
pursuing its remedies against Seller. Guarantor waives any right it may have to
require the marshaling of assets.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf by its duly authorized officer, all as of the day and
year first above written.
<TABLE>
<S> <C>
PURCHASER:
[Corporate Seal] DORSEY TRAILERS, INC.
Attest:
By: /s/ DAVID TATUM By: /s/ T. CHARLES CHITWOOD
------------------------------------------------
- ---------------------------------------------------- Title: Vice President-Finance
Title: Assistant Secretary -----------------------------------------------------
- -----------------------------------------------------
SELLER:
[Corporate Seal] CAROLINA COASTAL INVESTORS, INC.
Attest:
By: /s/ ANNE CROMARTIE By: /s/ DAVID COTTINGHAM
------------------------------------------------
- ---------------------------------------------------- Title: Director
Title: Secretary -----------------------------------------------------
- -----------------------------------------------------
[Legal Seal] GUARANTOR:
By: /s/ DAVID COTTINGHAM
----------------------------------------------------
David Cottingham
[Legal Seal] COTTINGHAM:
By: /s/ DAVID COTTINGHAM
----------------------------------------------------
David Cottingham
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DORSEY TRAILERS, INC. FOR THE YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 8,464
<ALLOWANCES> 168
<INVENTORY> 19,002
<CURRENT-ASSETS> 300,389
<PP&E> 17,474
<DEPRECIATION> 7,793
<TOTAL-ASSETS> 45,019
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0
0
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<INCOME-PRETAX> (8,009)
<INCOME-TAX> (3,084)
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<NET-INCOME> (4,925)
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
