As filed with the Securities and Exchange Commission on February 16, 1994.
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TEREX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 3550 34-1531521
(State or other (Primary standard industrial (I.R.S.employer
jurisdiction of classification code number) identification no.)
incorporation or
organization)
500 Post Road East
Westport, Connecticut 06880
(203) 222-7008
(Address, including zip code, and telephone number,
including area code, of Registrants' principal executive offices)
Marvin B. Rosenberg, Esq.
TEREX CORPORATION
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies To:
Robinson Silverman Pearce Skadden, Arps, Slate, Meagher & Flom
Aronsohn & Berman 300 South Grand Avenue
1290 Avenue of the Americas Los Angeles, California 90071
New York, New York 10104 Attention: Michael A. Woronoff, Esq.
Attention: Stuart A. Gordon, Esq.
Eric I Cohen, Esq.
Approximate date of commencement of proposed sale to public: From time to time
after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, check the following box: x
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount Offering Aggregate Amount of
Securities to be to be Price Offering Registration
Registered Registered per Share(1) Price (1) Fee
Common Stock Purchase 1,300,000 --(2) --(2) --(2)
Warrants
Common Stock, par value 3,900,000 $8.25 $32,175,000 $11,094.83
$.01 (3)
(1)Estimated solely for purposes of calculation of the registration fee.
Pursuant to Rule 457(c), the offering price and registration fee are computed
on the basis of the average of the high and low prices of the Common Stock on
the New York Stock Exchange on February 10, 1994.
(2)Pursuant to Rule 457(g), no separate registration fee is required for the
Common Stock Purchase Warrants when the Common Stock offered pursuant thereto
is being registered for distribution in the same registration statement.
(3)Represents shares of Common Stock which may be purchased upon exercise of
the Common Stock Purchase Warrants. Pursuant to Rule 416, there are also being
registered such additional shares of Common Stock which may become issuable
pursuant to the anti-dilution provisions of such Warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TEREX CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K Showing
Location in Prospectus of Information Required by Items in Form S-1
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus Outside Front Cover Page of
the Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside Back
Cover Pages of the
Prospectus, Additional
Information
3. Summary Information/Risk Factors/
Ratio of Earnings to Fixed
Charges Prospectus Summary/Investment
Considerations/Not Applicable
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Outside Front Cover Page of
the Prospectus; Plan of
Distribution
9. Description of Securities to
Be Registered Description of Securities
10. Interests of Named Experts
and Counsel Legal Matters; Auditors
11. Information with Respect to
the Registrant Outside Front Cover Page of
the Prospectus; Prospectus
Summary; The Company;
Investment Considerations;
Market for Common Stock and
Dividend Policy;
Capitalization; Selected
Consolidated Financial Information;
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations; Business;
Principal Stockholders;
Management; Certain
Transactions; Description of
Securities
12. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 16, 1994
1,300,000 Warrants
3,900,000 Shares
TEREX CORPORATION
Common Stock Purchase Warrants and Common Stock
This Prospectus relates to the registration of (i) 1,300,000 common stock
purchase warrants (the "Warrants") exercisable for shares of common stock, par
value $.01 per share (the "Common Stock"), of Terex Corporation (the "Company")
and (ii) the shares of Common Stock issuable upon exercise or redemption of the
Warrants (the "Warrant Shares"). The Warrants were issued by the Company,
together with 1,200,000 shares of the Company's Series A Cumulative Redeemable
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
in a private placement effected on December 20, 1993. All of the Warrants and
Warrant Shares are being registered for resale by the holders thereof (the
"Selling Security Holders") and the Warrant Shares are also being registered
for their issuance to the Selling Security Holders upon their exercise of the
Warrants. See "Selling Security Holders." The Company will not receive any of
the proceeds from the resale by the Selling Security Holders of the Warrants or
the Warrant Shares. The Company will receive proceeds of $.01 per Warrant
Share issued upon exercise of the Warrants.
The Warrants are not exercisable for Warrant Shares until the opening of
business on the day following the date designated as the "Warrant Ratio
Determination Date" by the Board of Directors of the Company, which date shall
be a trading day during the 12 month period beginning on December 20, 1993 or,
if no such date is designated, the last day of such 12 month period; provided,
that if the Board of Directors has not yet designated a Warrant Ratio
Determination Date and the Current Market Price (as defined under "Description
of Securities--Warrants") of the Common Stock on any date during such 12 month
period equals or exceeds $18.00, the "Warrant Ratio Determination Date" will be
such date.
Following the Warrant Ratio Determination Date and until 5:00 p.m., New York
time, on December 31, 2000 (unless earlier redeemed), each Warrant will entitle
the holder to purchase, at an exercise price of $.01 per share, a number of
Warrant Shares (the "Warrant Ratio") equal to (a) 3.0 Warrant Shares if the
Current Market Price of a share of Common Stock on the Warrant Ratio
Determination Date is $5.00 or less, (b) a number of Warrant Shares which
decreases from 3.0 shares to 1.0 share with the increase in such Current Market
Price from $5.00 to $18.00, if such Current Market Price is greater than $5.00
but less than $18.00, and (c) 1.0 Warrant Share if such Current Market Price is
$18.00 or more. The Warrant Ratio is subject to increase upon the occurrence
of certain events relating to the Company's obligation to effect the
registration of the Warrants and the Warrant Shares. The Company has reserved
3,900,000 shares of Common Stock for issuance upon exercise of the Warrants,
being the maximum number of shares that will initially be issuable following
the Warrant Ratio Determination Date. Following the Warrant Ratio
Determination Date, the Warrant Ratio is subject to adjustment upon the
occurrence of certain dilutive events. See "Description of Securities --
Warrants."
The Warrants may be redeemed by the Company in whole, but not in part, at any
time on or after the Warrant Ratio Determination Date, for a number of Warrant
Shares equal to the Warrant Ratio on the date of redemption, if, concurrently
with such redemption, the Company redeems all then outstanding shares of
Preferred Stock.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the trading symbol "TEX." On February 10, 1994, the closing price of the
Common Stock on the NYSE was $8.25 per share. See "Market for Common Stock and
Dividend Policy." The Warrant Shares have been approved for listing on the
NYSE, subject to issuance.
Prior to this offering, there has been no public market for the Warrants. The
Company does not intend to list the Warrants on any securities exchange or to
seek approval for quotation of the Warrants through any automated quotation
system. There can be no assurance that an active market for the Warrants will
develop.
The Selling Security Holders directly, through agents designated from time to
time, or through dealers or underwriters also to be designated, may sell the
Warrants and Warrant Shares from time to time on terms to be determined at the
time of sale through customary brokerage channels or private sales at market
prices then prevailing or at negotiated prices then obtainable. To the extent
required, the specific Warrants or Warrant Shares to be sold, names of the
selling security holders, purchase price, public offering price, the names of
any
(continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1994.
- -------------------------------------------------------------------------------
such agent, dealer or underwriter, amount of expenses of the offering and any
applicable commission or discount with respect to a particular offer will be
set forth in an accompanying Prospectus Supplement. Each of the Selling
Security Holders reserves the sole right to accept and, together with its
agents from time to time, to reject in whole or in part any proposed purchase
of Warrants or Warrant Shares to be made directly or through agents.
See "Plan of Distribution" for indemnification arrangements among the Company
and the Selling Security Holders.
For a discussion of certain matters which should be considered by prospective
investors, see "Investment Considerations."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at its offices at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and at Northwestern Atrium Center, 500
West Madison Street, 14th Floor, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.
The Common Stock is listed on the NYSE and reports, proxy statements and other
information concerning the Company may also be inspected at the NYSE.
The Company has filed with the Commission a Registration Statement on Form S-1
under the Securities Act with respect to the Warrants and Warrant Shares
offered hereby. The Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company and the Warrants and Warrant Shares offered hereby,
reference is made to the Registration Statement, including the exhibits thereto
and the financial statements, notes and schedules filed as a part thereof,
which may be inspected and copied at the public reference facilities of the
Commission referred to above. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete,
and in each instance reference is made to the full text of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
The Company furnishes stockholders with annual reports containing audited
financial statements. The Company also furnishes its stockholders with proxy
material for its annual meetings complying with the proxy requirements of the
Exchange Act.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Investors should
carefully consider the information set forth under the caption "Investment
Considerations."
The Company
Terex Corporation ("Terex" or the "Company") is a global provider of capital
goods and equipment used in the mining, commercial building, infrastructure,
manufacturing and construction industries. Through the Company's Heavy
Equipment Segment, the Company designs, manufactures and markets heavy-duty,
off-highway, earthmoving, construction, lifting, material handling and aerial
lift equipment and related components and replacement parts. Through its
Material Handling Segment, the Company is engaged in designing, manufacturing
and marketing a complete line of internal combustion ("IC") and electric lift
trucks, electric walkies, automated pallet trucks, industrial tow tractors and
related components and replacement parts. Terex also owns an approximate 22.6%
equity interest in Fruehauf Trailer Corporation ("Fruehauf"). Fruehauf
designs, manufactures and markets truck trailers, making a wide range of van,
refrigerated, platform, tank, dump trailer and other models, and related parts
and accessories. See "The Company" and "Business."
The Offering
On December 20, 1993 (the "Issue Date"), the Company completed the private
placement of (i) 1,300,000 common stock purchase warrants (the "Warrants")
exercisable for shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company and (ii) 1,200,000 shares of the Company's Series A
Cumulative Redeemable Convertible Preferred Stock (the "Preferred Stock"), to
institutional investors for aggregate gross proceeds to the Company of $30.2
million. Jefferies & Company, Inc. ("Jefferies") was the placement agent for
the sale of the Warrants and Preferred Stock. The Warrants were issued
pursuant to the terms of a Warrant Agreement dated as of December 20, 1993 (the
"Warrant Agreement") between the Company and Mellon Securities Trust Company,
as Warrant Agent (the "Warrant Agent").
In connection with the sale of the Warrants, the Company and the purchasers of
the Warrants entered into a Registration Rights Agreement dated as of December
20, 1993 (the "Warrant Registration Rights Agreement") relating to the Warrants
and the shares of Common Stock issuable upon exercise or redemption of the
Warrants (the "Warrant Shares"). Pursuant to the terms of the Warrant
Registration Rights Agreement, the Company agreed to file the Registration
Statement of which this Prospectus forms a part and is required to maintain the
effectiveness of this Registration Statement until all Warrants and Warrants
Shares have been sold pursuant to an effective registration statement or Rule
144 under the Securities Act.
Summary of Terms of the Warrants
Issuer Terex Corporation.
Issue Common Stock Purchase Warrants exercisable for
shares of Common Stock. The number of Warrant
Shares for which each Warrant will be
exercisable (the "Warrant Ratio") will be
determined as of the Warrant Ratio Determination
Date, as described below.
Aggregate Number of Warrants 1,300,000.
Expiration Date The Warrants will expire at 5:00 p.m. New York
time on December 31, 2000 (unless earlier
redeemed).
Optional Redemption The Warrants will be redeemable upon not less
than 30 days prior written notice by the
Company, in whole but not in part, at any time
on or after the Warrant Ratio Determination Date
(as described below); provided, that the Company
concurrently redeems all then outstanding shares
of Preferred Stock. Each Warrant will be
redeemable for a number of Warrant Shares equal
to the Warrant Ratio on the date of redemption.
Warrant Ratio Each Warrant entitles the holder thereof to
purchase a number of Warrant Shares initially as
determined below. If for the 30 consecutive
trading days ending on the Warrant Ratio
Determination Date, the average closing market
price per share of Common Stock is:
(i) $5.00 per share or lower, each Warrant will
be exercisable for 3.0 Warrant Shares;
(ii) between $5.00 and $18.00 per share, each
Warrant will be exercisable for a number of
Warrant Shares which decreases from 3.0 shares
to 1.0 share with the increase in such average
per share closing market price from $5.00 to
$18.00; or
(iii) $18.00 per share or greater, each Warrant
will be exercisable for 1.0 Warrant Share.
The Company shall give the holders of Warrants
written notice of the Warrant Ratio on or prior
to the fifth day after the Warrant Ratio
Determination Date. The Warrant Ratio is
subject to increase upon the occurrence of
certain events relating to the Company's
obligation to effect the registration of the
Warrants and the Warrant Shares. Following the
Warrant Ratio Determination Date, the Warrant
Ratio is subject to adjustment upon the
occurrence of certain dilutive events.
Exercise Price $.01 per Warrant Share purchased upon the
exercise of the Warrants.
Warrant Ratio
Determination Date A date designated by the Board of Directors of
the Company, which date shall be a trading day
during the 12 month period beginning on the
Issue Date or, if no such date is designated,
the last day of such 12 month period; provided,
that if the Board of Directors has not yet
designated a Warrant Ratio Determination Date
and the average closing price of the Common
Stock equals or exceeds $18.00 per share for any
30 consecutive trading days during such 12 month
period, the Warrant Ratio Determination Date
will be the last such trading day. The Warrants
will not be exercisable for Warrant Shares prior
to the Warrant Ratio Determination Date. The
Company will give the holders of Warrants
written notice of the Warrant Ratio
Determination Date on or prior to the 25th
trading day before the Warrant Ratio
Determination Date.
Investment Considerations
See "Investment Considerations" for a discussion of certain factors that should
be considered in connection with an investment in the Warrants and the Warrant
Shares.
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands except per share amounts)
The following summary consolidated financial data is derived from the Selected
Consolidated Financial Information appearing elsewhere in this Prospectus.
Certain prior year financial information has been adjusted to conform to the
1992 classification and restated as further discussed in Note B --
"Restatements" to the Consolidated Financial Statements for December 31, 1992.
As explained in Note B of the Notes to Consolidated Financial Statements for
December 31, 1992 and Note F of the Notes to Condensed Consolidated Financial
Statements for September 30, 1993, the financial statements and, accordingly,
the summary financial information presented herein, are presented giving effect
to the deconsolidation of Fruehauf as of January 1, 1992:
Nine Months
Ended As of and for the Year Ended December 31,
September 30,
1993 1992 1991 1990 1989 1988
Summary of Operations (1)
Net Sales $519,510 $523,355 $784,194$1,023,178 $790,903 $343,721
Income (loss)
from
operations (18,369) (4,125) (36,200) 44,386 39,397 21,994
Net income (loss) (45,095) (57,175) (29,786) 6,053 17,772 13,418
Net income (loss)
per share (2) (4.53) (5.75) (3.00) 0.61 1.82 1.20
Ratio of earnings
to fixed
charges (3) (4) (4) (4) 1.1x 1.4x 2.0x
Total Assets $402,576 $477,356 $617,203 $745,065 $833,338 $287,864
Capitalization (5)
Long-term debt
and notes
payable,
including
current
maturities $ 229,115 $217,605 $216,085 $305,858 $309,796 $109,858
Stockholders'
investment (57,868) (6,168) 59,881 101,257 80,248 66,912
Book value
per share (2) $ (5.81) $(0.62) $6.03 $10.24 $8.24 $6.89
Dividends per
share (2) --- --- $0.06 $0.05 $0.04 ---
(1) The Selected Financial Data includes the results of operations of the
businesses acquired from the date of their respective acquisitions. See a
further discussion of acquisitions in Note C -- "Acquisitions" and Note D --
"Investment in Fruehauf Trailer Corporation" in the Notes to Consolidated
Financial Statements for December 31, 1992.
(2) The net income (loss) per share, book value per share and dividends per
share for all periods shown above reflect the May 1990 five-for-four stock
split.
(3) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before income taxes,
minority interest, extraordinary items and fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issuance costs and
rental expense representative of the interest factor.
(4) The ratio of earnings to fixed charges is less than 1.0 for these periods.
The deficiency amounts are $44,225 for the nine months ended September 30,
1993, $22,130 for 1992 and $50,890 for 1991.
(5) See "The Company -- Recent Developments" and "Capitalization" for a
description of the Preferred Stock and Warrants issued in December 1993 and
presentation of resulting pro forma capitalization.
INVESTMENT CONSIDERATIONS
In addition to other matters described in this Prospectus, the following should
be carefully considered in connection with an investment in the Warrants and
the Warrant Shares:
Continued Losses From Operations and Uncertainties
In their report dated April 14, 1993 on the Company's 1992 financial statements
(set forth on page F-3), the Company's independent accountants indicated in an
explanatory paragraph that there are matters which raise substantial doubt
about the Company's ability to continue as a going concern. The Company has
suffered recurring and significant losses from operations, which have continued
during 1993. The Company has also experienced cash flow difficulties and has a
net capital deficiency. On a consolidated basis, the Company experienced an
operating loss of approximately $4.1 million and a net loss of approximately
$57.2 million (approximately $22.1 million, excluding the Company's equity in
the net losses of Fruehauf) for the year ended December 31, 1992 and an
operating loss of approximately $18.4 million and a net loss of approximately
$45.1 million for the nine months ended September 30, 1993. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
High Leverage, Substantial Payment Obligations
and Compliance with Restrictions Imposed by Lenders
The Company is highly leveraged. As of September 30, 1993, the Company had
approximately $229.1 million of debt and negative stockholders' equity of $57.9
million. The Company has outstanding Senior Secured Notes due 1996 (the
"Secured Notes") in the aggregate principal amount of $160.0 million as of
September 30, 1993 and Senior Subordinated Notes due 1997 (the "Subordinated
Notes"; together with the Secured Notes, the "Notes") in the aggregate
principal amount of approximately $33.3 million as of September 30, 1993. The
Company also has outstanding as of September 30, 1993 approximately $18.7
million under a permanent lending facility of up to $20 million (the "Lending
Facility") provided by Foothill Capital Corporation ("Foothill") and
approximately $6.1 million in acquisition debt due July 1994.
This substantial leverage has several important consequences, including the
following: (i) the ability of the Company to obtain additional financing in the
future may be impaired, (ii) the significant interest expense and principal
repayment obligations will require a substantial amount of the Company's cash
flow to be expended on debt service (in 1994, approximately $27.6 million of
interest on the Secured Notes, the Subordinated Notes and the Lending Facility
(of which approximately $12.9 million has been paid as of February 1) and
approximately $14.4 million for a required sinking fund payment on the
Subordinated Notes and the maturity of the acquisition debt) and (iii) the
Company's ability to withstand competitive pressures, adverse economic
conditions and adverse changes in governmental regulation, to make
acquisitions, and to take advantage of significant business opportunities that
may arise, may be negatively impacted.
The instruments governing the Company's indebtedness contain a number of
restrictive covenants, including covenants limiting the incurrence of debt and
sales of assets and requiring the Company to maintain certain financial ratios
and specified levels of net worth. Adverse operating results, whether in the
near future or thereafter, could cause non-compliance with the instruments
governing the Company's indebtedness.
As of July 31, 1993, the Company was not in compliance with the tangible net
worth covenant under the Lending Facility. Following the closing on August 20,
1993 of Fruehauf's restructuring and financing transactions described in
"Business -- Fruehauf Trailer Corporation," Foothill agreed that the Company's
noncompliance with the tangible net worth covenant under the Lending Facility
is no longer continuing. Foothill also waived the noncompliance. The Company
believes, based on management's current estimates, that it will be in
compliance with such covenant over the next 12 months. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The indentures governing the Notes require, among other things, that the
Company maintain certain levels of tangible net worth ("Net Worth Covenants")
and collateral ("Collateral Covenant"). In the event that the Company's net
worth is not in excess of the amount required under the Net Worth Covenants for
any two consecutive quarters, the Company must offer to repurchase, at par plus
accrued interest, 20% of the outstanding principal amount of the Notes. In the
event the Company is not in compliance with the Collateral Covenant at the end
of any calendar quarter, the Company must offer to repurchase, at par plus
accrued interest, $16.0 million principal amount of the Secured Notes or such
greater amount as would be necessary to bring the Company into compliance with
the Collateral Covenant. As of September 30, 1993, the Company's tangible net
worth as defined in the Notes indentures was less than the $15 million minimum
set forth in the indentures. Management believes that the Company was in
compliance with the Net Worth Covenants and Collateral Covenant at December 31,
1993. If the Company continues to sustain losses from operations, it may not
be in compliance with the Net Worth Covenants in the future. If any offer to
repurchase Notes were required to be made, it is likely that the Company would
require additional funding to complete the offer, and if such funding were
unavailable to it, the Company would be unable to comply with the terms of the
Notes and the maturity of the Notes may be accelerated. Such circumstances
would result in a material adverse impact on the Company and its financial
position. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
On December 20, 1993, the Company completed the private placement of 1,200,000
shares of the Preferred Stock and 1,300,000 Warrants for aggregate net proceeds
to the Company of $27.2 million. See "The Company -- Recent Developments."
The proceeds of such private placement are being used by the Company for
additional working capital. In addition, in December 1993, Terex Equipment
Limited ("TEL"), a subsidiary of the Company located in Scotland, entered into
a pd28 million ($42 million) credit facility with Standard Chartered Bank
providing for a credit facility and foreign exchange and bonding lines of
credit. The Company is also generating cash through the sale of excess
inventory in the Heavy Equipment Segment, deferring certain capital
expenditures, selling certain real estate and other assets and continuing
corporate wide cost containment efforts. Management believes that the Lending
Facility together with these additional financings, new equity and other cash
generating activities, will allow the Company to meet its operating payment
obligations on a timely basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Uncertainty as to Warrant Ratio
The Warrants are not exercisable until the opening of business on the day
following the Warrant Ratio Determination Date. Under the terms of the Warrant
Agreement, the designation of the Warrant Ratio Determination Date is in the
discretion of the Board of Directors of the Company, provided that such date
must occur on or before December 20, 1994 and that such date will occur earlier
if the Current Market Price per share of Common Stock equals or exceeds $18.00
before such date. Until the occurrence of such date, the number of Warrant
Shares issuable upon exercise of a Warrant, and the value of the Warrants when
they first become exercisable, are not determinable.
Absence of Public Market
As of January 19, 1994, there were 21 holders of the Warrants. There has
previously been no public market for the Warrants. The Company does not intend
to list the Warrants on any securities exchange or to seek approval for
quotation through any automated quotation system. There can be no assurance
that an active market for the Warrants will develop. In addition, resales of a
substantial percentage of the outstanding Warrants could constrain the ability
of any market maker to develop or maintain a market for the Warrants. To the
extent that a market for the Warrants does develop, the market value of the
Warrants will depend on the price of the Common Stock, general economic
conditions, the Company's financial condition and other conditions and may be
subject to substantial price volatility.
Future Sales of Common Stock; Control
The Company is unable to predict the effect, if any, that any future sales of
Common Stock, including the shares of Common Stock covered hereby, will have on
the market price of the Common Stock and, therefore, the value of the Warrants,
prevailing from time to time.
As of the date of this Prospectus, Randolph W. Lenz is the beneficial owner,
directly and indirectly, of approximately 49.1% of the outstanding Common Stock
of the Company. Mr. Lenz currently pledges, and intends to pledge in the
future, shares of Common Stock owned by him as collateral for loans. A
registration statement has been filed with the Commission with respect to all
of the shares of Common Stock directly owned by Mr. Lenz, and Mr. Lenz has
advised the Company that such registration is for the purpose of facilitating
financing by Mr. Lenz through the pledge of his shares of Common Stock. See
"Principal Stockholders." If Mr. Lenz does not pay such loans when due, the
pledgee may have the right to sell the shares of Common Stock pledged to it in
satisfaction of Mr. Lenz's obligations. The sale or other disposition of a
substantial amount of such shares of Common Stock in the public market could
adversely affect the prevailing market price for the Common Stock and,
therefore, the value of the Warrants. In addition, the sale of a substantial
amount of such pledged shares of Common Stock by a pledgee could result in a
change of control of the Company under the indentures relating to the Notes,
requiring the Company to offer to repurchase certain of these securities as
provided for in their respective indentures.
Pursuant to the terms of a Registration Rights Agreement dated December 20,
1993 relating to the Preferred Stock (the "Preferred Stock Registration Rights
Agreement"), the Company agreed to file a shelf registration statement covering
the outstanding shares of Preferred Stock and the 2,700,000 shares of Common
Stock which may be issuable upon conversion of the Preferred Stock. The sale
or other disposition of a substantial number of such shares of Common Stock in
the public market could adversely affect the prevailing market price for the
Common Stock and, therefore, the value of the Warrants.
Dividend Policy
Contractual restrictions exist which limit the Company's ability to pay
dividends on its capital stock. The terms of the Preferred Stock also limit
the Company's ability to pay cash dividends on any class of capital stock of
the Company junior to or on a parity with the Preferred Stock. See
"Description of Securities -- Preferred Stock." The Company does not plan on
paying dividends on the Common Stock in the foreseeable future. In addition,
under Delaware law the Company's ability to pay dividends is subject to the
statutory limitation that such payment be either (i) out of its surplus (the
excess of its net assets over its total liabilities plus stated capital) or
(ii) in the event that there is no surplus, out of its net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
See "Market for Common Stock and Dividend Policy."
Industry Cyclicality
The Company's Heavy Equipment and Material Handling Segments have experienced
declines in sales which are in part attributable to the overall economic
slowdown and weakness of industry demand faced both domestically and abroad.
Sales of products manufactured by the Heavy Equipment and Material Handling
Segments have historically been subject to substantial cyclical variation based
on general economic conditions. See "Selected Consolidated Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Environmental and Related Matters
The Company's production facilities and operations are subject to a variety of
federal, state, local and foreign environmental, health and job safety laws and
regulations. The Company believes that reserves and planned expenditures are
adequate to meet potential liabilities and costs in the next several years
attributable to applicable environmental, health and job safety requirements.
Environmental liabilities (especially those relating to discontinued production
or waste disposal practices) are very difficult to quantify, and it is possible
that litigation or regulatory action may require significant unanticipated
expenditures or otherwise adversely affect the Company. The Company is not
aware of any conditions or circumstances that, under applicable governmental
environmental, health or safety regulations or requirements, will require
expenditures by the Company which management believes would have a material
adverse effect on its businesses. The Company may have contingent
responsibility for certain environmental liabilities of Fruehauf if Fruehauf
fails to discharge its obligation, to the extent that such liabilities arose
during the time period during which Terex was the controlling stockholder of
Fruehauf. The Company believes that Fruehauf's significant environmental
liabilities predate Terex's acquisition of Fruehauf, and therefore any
contingent responsibility of the Company is not expected to have a material
adverse effect on the Company. See "Business -- Environmental Considerations."
THE COMPANY
Terex is a global provider of capital goods and equipment used in the mining,
commercial building, infrastructure, manufacturing and construction industries.
Through the Company's Heavy Equipment Segment, the Company designs,
manufactures and markets heavy-duty, off-highway, earthmoving, construction,
lifting, material handling and aerial lift equipment and related components and
replacement parts. Through its Material Handling Segment, the Company is
engaged in designing, manufacturing and marketing a complete line of internal
combustion and electric lift trucks, electric walkies, automated pallet trucks,
industrial tow tractors and related components and replacement parts. Terex
also owns an approximate 22.6% equity interest in Fruehauf. Fruehauf designs,
manufactures and markets truck trailers, making a wide range of van,
refrigerated, platform, tank, dump trailer and other models, and related parts
and accessories. Fruehauf recently restructured its debt obligations and
completed new financings. See "Business -- Fruehauf Trailer Corporation."
The Company has grown through acquisitions and has had considerable experience
in restructuring and operating capital goods manufacturers, particularly in the
off-road truck and construction and industrial equipment industries. Following
an acquisition, in order to improve profitability, the Company traditionally
(i) consolidates manufacturing operations, (ii) adjusts new equipment
production capacity to meet the actual level of demand in the marketplace,
(iii) reduces corporate overhead and (iv) emphasizes that portion of the
business that yields the highest margins, particularly the replacement parts
business. More specifically, this strategy involves elimination of marginally
profitable or unprofitable product lines, closing underutilized and inefficient
plants, liquidating excess inventories and substantially reducing personnel.
The Company's management has made nine acquisitions since 1983. The following
table lists these acquisitions and their respective product lines:
Date of
Business Acquisition Current Product Lines
Northwest Engineering November 1983 Draglines, cranes and
Company replacement parts
BCP Construction Products March 1985 DYNAHOE backhoe/loader and
Division replacement parts for
Bucyrus-Erie machines
Terex Division December 1986 Haulers, scrapers, loaders,
crawlers and replacement
parts
Koehring Cranes & Excavators January 1987 Cranes, excavators, and
Division replacement parts
Terex Equipment Limited June 1987 Haulers, scrapers, loaders,
crawlers and replacement
parts
Unit Rig Division July 1988 Large haulers and loaders and
replacement parts
Fruehauf Trailer Corporation July 1989 Truck trailers and related
parts and services
Mark Industries, Inc. December 1991 Aerial lift equipment and
replacement parts
Clark Material Handling July 1992 Internal combustion and
Company and certain electric lift trucks and
affiliated entities replacement parts
Each of these businesses possesses three key attributes that management
believes enhance the Company's ability to improve its cash flow and
profitability: (i) a long operating history and, thus, a significant number of
units currently in the field that require replacement parts; (ii) significant
brand name recognition in the industry and a well-established distribution
network, principally through dealers, within its specialty markets; and (iii)
new machine manufacturing capabilities which can be, if appropriate, adapted to
serve specialty, higher margin markets involving products designed to address
specific user needs and manufactured in low to medium production volumes.
The principal executive offices of the Company are located at 500 Post Road
East, Westport, Connecticut 06880 and its telephone number is (203) 222-7008.
Recent Developments
The Company has continued to incur operating losses subsequent to September 30,
1993.
On December 20, 1993, the Company completed the private placement of the
Warrants and the Preferred Stock to institutional investors for aggregate net
proceeds to the Company of $27.2 million. The proceeds of such private
placement are being used by the Company for additional working capital.
Jefferies was the placement agent for the sale of the Preferred Stock and the
Warrants. In connection with the sale of the Warrants and the Preferred Stock,
the Company and the purchasers of the Warrants and the Preferred Stock entered
into the Warrant Registration Rights Agreement and the Preferred Stock
Registration Rights Agreement. See "Description of Securities -- Warrants" and
"-- Preferred Stock."
In December 1993, the Company repurchased in the open market Secured Notes in
the aggregate principal amount of $5.0 million for approximately $4.5 million,
including accrued interest, and the Company had such Secured Notes cancelled as
of December 31, 1993.
In December 1993, the Company sold 1,000,000 shares of the common stock of
Fruehauf in two separate transactions, which reduced the Company's percentage
ownership interest in Fruehauf to approximately 22.6%, for aggregate proceeds
to the Company of approximately $3.0 million. The Company intends to make an
offer to purchase approximately $3.0 million of outstanding Secured Notes in
the second quarter of 1994 pursuant to the terms of the indenture for the
Secured Notes.
USE OF PROCEEDS
The Company will receive proceeds of $.01 per Warrant Share issued upon
exercise of the Warrants, for an aggregate amount of up to $13,000. The
Company will use such proceeds for general corporate purposes. All Warrants
and Warrant Shares covered hereby being registered for resale are being so
registered for the account of the Selling Security Holders and, accordingly,
the Company will not receive any of the proceeds from the resale of the
Warrants or Warrant Shares by the Selling Security Holders.
MARKET FOR COMMON STOCK AND DIVIDEND POLICY
Effective March 19, 1991, the Company's Common Stock was listed on the NYSE
under the symbol "TEX".
Quarterly Market Prices
1993 1992
Fourth Third Second First Fourth Third Second First
High $9.25 $ 8.13 $10.75$11.88 $12.75 $12.50 $16.25 $18.50
Low 6.38 6.25 6.63 9.13 6.63 8.13 9.50 12.75
No dividends were declared or paid in 1993 or 1992. As discussed in Note I --
"Long-Term Obligations" to the Consolidated Financial Statements, certain of
the Company's debt agreements contain restrictions as to the payment of cash
dividends. Under these agreements, no retained earnings were available for
dividends at December 31, 1993. The terms of the Preferred Stock also restrict
the Company's ability to pay cash dividends on the Common Stock. See
"Description of Securities -- Preferred Stock." The Company intends generally
to retain earnings, if any, to fund the development and growth of its business.
The Company does not plan on paying dividends on the Common Stock in the
forseeable future. Any future payments of cash dividends will depend upon the
financial condition, capital requirements and earnings of the Company, as well
as other factors that the Board of Directors may deem relevant.
As of January 1, 1994, there were 895 stockholders of record of the Common
Stock.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of September 30, 1993. The table should be read in conjunction with the
consolidated financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. The Company has continued to incur
operating losses subsequent to September 30, 1993. See "The Company -- Recent
Developments" and "Selected Consolidated Financial Information."
(In thousands)
Actual Pro Forma (1)
Notes payable and long-term debt
(including current portion):
Secured Notes $159,080 (2) $ 159,080
Subordinated Notes 32,633 (3) 32,633
Lending Facility 18,650 (4) 18,650
Other debt, including notes payable 18,752 (5) 18,752
Total notes payable and long term debt 229,115 229,115
Redeemable Convertible Preferred Stock --- 10,328
Stockholders' investment
Common Stock Purchase Warrants --- 16,851
Common Stock 100 100
Additional paid-in capital 37,808 37,808
Retained deficit (81,326) (81,326)
Pension liability adjustment (4,452) (4,452)
Foreign currency translation adjustment (9,998) (9,998)
Total stockholders' investment (57,868) (41,017)
Total capitalization $171,247 $198,426
(1) Presented as if 1,200,000 shares of the Preferred Stock and 1,300,000
Warrants were issued as of September 30, 1993. See "The Company -- Recent
Developments."
(2) Represents $160.0 million principal amount of Secured Notes (of which $5.0
million were repurchased subsequent to September 30, 1993) which bear interest
at 13% and are due August 1996. These notes are secured by substantially all
inventory and property, plant and equipment of the Company's Material Handling
and Heavy Equipment Segments as well as the Company's investment in common
stock of Fruehauf.
(3) Represents $33.3 million principal amount of Subordinated Notes which
bear interest at 13.5%, are payable in equal annual installments of
approximately $8.3 million and are finally due July 1997. These notes are
secured by a secondary position in substantially the same assets which
collateralize the Secured Notes.
(4) The Lending Facility bears interest at a fluctuating rate (8.75% at
September 30, 1993) based on the prime rate. The Lending Facility provides
for revolving credit loans and guarantees of letters of credit of up to $20.0
million and matures on August 24, 1995. Borrowings under the Lending Facility
are secured by a lien on substantially all of the Company's domestic cash and
accounts receivable.
(5) See Note I of the Notes to Consolidated Financial Statements for December
31, 1992, included elsewhere in this Prospectus, for a description of the
Company's other debt.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands except per share amounts and employees)
Selected Financial Data (1)
Nine Months
Ended As of and for the Year Ended December 31,
September 30,
1993 1992 1991 1990 1989 1988
Summary of Operations (2)
Net Sales $519,510 $523,355 $784,194$1,023,178 $790,903 $343,721
Income (loss)
from operations (18,368) (4,125)$(36,200) $44,386 $39,397 $21,994
Net income (loss)(45,095) (51,175) (29,786) 6,053 17,772 13,418
Net income (loss)
per share (3) (4.53) (5.75) (3.00) 0.61 1.82 1.20
Ratio of
earnings to
fixed charges (4) (5) (5) (5) 1.1x 1.4x 2.0x
Working Capital
Current assets $267,589 $319,235 $361,945 $434,533 $483,736 $254,595
Current
liabilities 187,539 222,014 244,301 240,310 306,731 95,410
Working capital 80,050 97,221 117,644 194,223 177,005 159,185
Current ratio 1.4 1.4 1.5 1.8 1.6 2.7
Property, Plant and Equipment
Net property,
plant and
equipment $101,543 $116,279 $129,560 $170,592 $179,016 $27,312
Capital
expenditures 8,529 5,382 4,098 8,707 2,934 3,263
Depreciation 11,615 7,074 11,028 10,930 7,728 3,686
Total Assets $402,576 $477,356 $617,203 $745,065 $833,338 $287,864
Capitalization (6)
Long-term debt
and notes payable,
including current
maturities $229,115 $217,605 $216,085 $305,858 $309,796 $109,858
Stockholders'
investment (57,868) (6,168) 59,881 101,257 80,248 66,912
Book value
per share (3) $(5.81) $(0.62) $6.03 $10.24 $8.24 $6.89
Dividends
per share (3) --- --- $0.06 $0.05 $0.04 ---
Return on
average
stockholders'
investment --- --- (37.0)% 6.7%24.2%23.6%
Shares
outstanding at
period-end (3) 9,953 9,949 9,923 9,893 9,743 9,713
Employees 3,150 3,056 6,980 8,000 9,406 2,585
(1) Certain prior year financial information has been adjusted to conform to
the 1992 classification and restated as further discussed in Note B --
"Restatements" to the Consolidated Financial Statements for December 31, 1992.
As explained in Note B of the Notes to Consolidated Financial Statements for
December 31, 1992 and Note F of the Notes to Condensed Consolidated Financial
Statements for September 30, 1993, the financial statements and, accordingly,
the summary financial information presented herein, are presented giving effect
to the deconsolidation of Fruehauf as of January 1, 1992.
(2) The Selected Financial Data includes the results of operations of the
businesses acquired from the date of their respective acquisitions. See a
further discussion of acquisitions in Note C -- "Acquisitions" and Note D --
"Investment in Fruehauf Trailer Corporation" in the Notes to Consolidated
Financial Statements for December 31, 1992.
(3) The net income (loss) per share, book value per share, dividends per
share, and shares outstanding at period-end for all periods shown above reflect
the May 1990 five-for-four stock split.
(4) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before income taxes,
minority interest, extraordinary items and fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issuance costs and
rental expense representative of the interest factor.
(5) The ratio of earnings to fixed charges is less than 1.0 for these periods.
The deficiency amounts are $44,225 for the nine months ended September 30,
1993, $22,130 for 1992 and $50,890 for 1991.
(6) See "The Company -- Recent Developments" and "Capitalization" for a
description of the Preferred Stock and Warrants issued in December 1993 and
presentation of resulting pro forma capitalization.
Unaudited Quarterly Financial Data
Summarized quarterly financial data for the first nine months of 1993 and for
1992 and 1991 are as follows (in thousands, except per share amounts):
1993
Third Second First
Net sales $164,052 $172,261 $183,197
Gross profit 12,339 14,321 17,599
Net income (loss) (15,046) (17,650) (12,399)
Net income (loss) per
share $(1.51) $(1.77) $(1.25)
1992
Fourth Third Second First
Net sales $210,101 $145,421 $82,843 $84,990
Gross profit 25,011 12,572 6,901 9,526
Net income (loss) (18,564) (19,856) (13,605) (5,110)
Net income (loss) per
share $(1.87) $(2.00) $(1.37) $(0.51)
1991
Fourth Third Second First
Net sales $200,556 $187,430 $216,609 $179,599
Gross profit 18,502 25,611 24,390 25,378
Net income (loss) (15,821) 8,979 (10,932) (12,012)
Net income (loss) per
share $(1.59) $0.91 $(1.10) $(1.21)
The accompanying unaudited quarterly financial data of the Company has been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
considered necessary for a fair presentation have been made and were of a
normal recurring nature except for those discussed below.
As disclosed in Note B -- "Restatements" to the Consolidated Financial
Statements for December 31, 1992, and in Note F -- "Investment in Fruehauf" to
the Condensed Consolidated Financial Statements for the nine months ended
September 30, 1993, the financial statements have been restated to give effect
to the deconsolidation of Fruehuaf as of January 1, 1992. As disclosed in Note
B -- "Restatements" to the Consolidated Financial Statements for December 31,
1992, the prior year financial statements have also been restated. The
quarterly financial data shown above reflect these restatements.
The following is a reconciliation of originally recorded financial results to
the restated results:
1993
Third Second First
Net Income (Loss)
As originally reported $65,954 $(83,116) $(27,635)
Deconsolidation adjustment (81,000) 65,466 15,236
Restated net income (loss) $(15,046) $(17,650) $(12,399)
Net Income (Loss) Per Share
As originally reported $6.63 $(8.35) $(2.78)
Deconsolidation adjustment (8.14) 6.58 1.53
Restated net income (loss)
per share $(1.51) $(1.77) $(1.25)
1992
Fourth Third Second First
Net Income (Loss)
As originally reported $(22,477) $(20,304) $(10,919) $(5,463)
Restatement adjustment --- 408 (2,686) 353
Deconsolidation adjustment 3,913 --- --- ---
Restated net income (loss) $(18,564) $(19,896) $(13,605) $(5,110)
Net Income (Loss) Per Share
As originally reported $(2.26) $(2.04) $(1.10) $(0.55)
Restatement adjustment --- 0.04 (0.27) 0.04
Deconsolidation adjustment 0.39 --- --- ---
Restated net income (loss)
per share $(1.87) $(2.00) $(1.37) $(0.51)
1991
Fourth Third Second First
Net Income (Loss)
As originally reported $(15,717) $6,203 $(11,410) $(12,489)
Restatement adjustment (104) 2,776 478 477
Restated net income (loss) $(15,821) $8,979 $(10,932) $(12,012)
Net Income (Loss) Per Share
As originally reported $(1.58) $0.63 $(1.15) $(1.26)
Restatement adjustment (0.01) 0.28 0.05 0.05
Restated net income (loss)
per share $(1.59) $0.91 $(1.10) $(1.21)
In conjunction with the initial public offering of 4,000,000 shares of Fruehauf
common stock in 1991 (the "Fruehauf IPO"), the Company contemplated related
exchange transactions between certain stockholders and warrantholders of the
Company and Fruehauf. In determining the Company's net gain in 1991 on the
Fruehauf IPO, the Company considered the impact of these related exchange
transactions. The estimated impact of these exchange transactions was a loss
of approximately $7.7 million. The loss was recorded as a reduction of the
gain on the sale of Fruehauf, and a net gain of $15.0 million was recorded in
1991. During the fourth quarter of 1992, the agreements governing the exchange
transactions expired and management and the parties to the exchange concluded
that the exchange transactions originally contemplated were no longer in the
best interests of the Terex and Fruehauf stockholders. Accordingly, the $7.7
million reserve for the estimated impacts of the exchange transactions was
recorded into income in the fourth quarter of 1992. The impact of this
transaction is recorded as a component of Other Income in the Consolidated
Statement of Income for December 31, 1992.
During the fourth quarter of 1991, Fruehauf recorded restructuring costs of
$15.8 million. This charge related to the anticipated costs of implementing a
restructuring of Fruehauf's distribution system, and included other costs
related to streamlining Fruehauf's manufacturing operations.
As described in Note D -- "Investment in Fruehauf Trailer Corporation" in the
Notes to Consolidated Financial Statements for December 31, 1992, the Company
consolidated Fruehauf's financial results with those of the Company for
financial reporting purposes during 1991 and, as a result of the termination of
the voting trust during 1992, presently accounts for its investment in Fruehauf
using the equity method. The Company's consolidated financial statements
contained in this Prospectus, and the above summary information, are presented
giving effect to the deconsolidation of Fruehauf as of January 1, 1992.
See the Company's Consolidated Financial Statements for December 31, 1992
included elsewhere in this Prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company operates in two industry segments: Heavy Equipment and Material
Handling. Prior to 1992, the Company operated in two industry segments: Heavy
Equipment and Trailer (Fruehauf). The Material Handling Segment principally
represents the operations of Clark Material Handling Company ("CMHC") and
certain affiliated companies (together with CMHC, "Clark"). On July 31, 1992,
the Company acquired the common stock of CMHC and certain affiliates (the
"Clark Acquisition") from Clark Equipment Company (see Note C -- "Acquisitions"
to the Consolidated Financial Statements for December 31, 1992). Clark
designs, manufactures and markets internal combustion and electric lift trucks,
electric walkies, tow tractors and related parts and equipment. The Clark
Acquisition was accounted for using the purchase method, therefore, the Clark
operating results have been included in the Company's consolidated results of
operations since August 1, 1992. As described in "Business -- Fruehauf Trailer
Corporation," the Company presently accounts for its investment in Fruehauf
using the equity method and the Company's consolidated financial statements are
presented giving effect to the deconsolidation of Fruehauf as of January 1,
1992.
Nine Months Ended September 30, 1993
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses and loss from operations, by segment, for
the nine months ended September 30, 1993 and 1992. Amounts shown for the
Material Handling Segment for 1992 represent activity for two months subsequent
to the Clark Acquisition.
Nine Months Ended
September 30 Increase
19931992 (Decrease)
(in millions of dollars)
NET SALES
Heavy Equipment $205.5 $224.9 $(19.4)
Material Handling 314.0 88.4 225.6
Total $519.5 $313.3 $206.2
GROSS PROFIT
Heavy Equipment $24.7 $22.3 $2.4
Material Handling 19.6 6.7 12.9
Total $44.3 $29.0 $15.3
ENGINEERING, SELLING AND ADMINISTRATIVE
EXPENSES
Heavy Equipment $22.5 $28.4 $(5.9)
Material Handling 37.5 8.7 28.8
General/Corporate 2.6 0.5 2.1
Total $62.6 $37.6 $25.0
INCOME (LOSS) FROM OPERATIONS
Heavy Equipment $2.2 $(6.1) $8.3
Material Handling (17.9) (2.0) (15.9)
General/Corporate (2.6) (0.5) (2.1)
Total $(18.3) $(8.6) $9.7
Net Sales
Sales increased $206.2 million, or approximately 66%, for the nine months ended
September 30, 1993 over the comparable 1992 period.
Heavy Equipment Segment sales decreased $19.4 million during the nine months
ended September 30, 1993 compared to the nine months ended September 30, 1992.
This decrease reflects the effects during the first half of 1993 of worldwide
economic conditions on the construction and mining industries, the Heavy
Equipment Segment's principal markets. Machines and contract sales represented
$15.8 million of the decrease and parts sales represented $3.6 million of the
decrease, as the sales mix changed to 38% parts in 1993 from 36% parts in 1992.
The Unit Rig division ("Unit Rig"), the Heavy Equipment Segment division that
principally serves the mining industry, experienced a decrease in sales of
$10.3 million to $47.0 million for the nine months ended September 30, 1993
from $57.3 million in the nine months ended September 30, 1992. This decrease
was primarily a result of reduced sales in the first half of 1993 due to
continued low bookings in the second half of 1992 as the mining industry
continued to operate at reduced levels. Several completed trucks in inventory
as of September 30, 1993 were not shipped due to delays in completion of final
purchaser financing arrangements, also contributing to the decrease. Koehring
Cranes and Excavators ("Koehring"), the Heavy Equipment Segment division that
serves the construction market, experienced a decrease in sales of $12.8
million to $57.9 million for the nine months ended September 30, 1993 from
$70.7 million for the first nine months of 1992. Koehring sales in 1992 were
higher due to sales of slow moving inventory and product lines at low margins
to reduce inventory and more effectively utilize working capital. The
decreased sales at Koehring and Unit Rig were partially offset by a $3.4
million increase in sales by the Company's Terex division and TEL, to $99.7
million for the nine months ended September 30, 1993.
Heavy Equipment Segment bookings during the first nine months of 1993 were
$209.6 million, a decrease of $10.9 million, or 5% from the same period in
1992. Booking for parts sales, from which the Company realizes higher margins
than machine sales, increased $1.7 million or 2% for the first nine months of
1993 over the year earlier period. Machine and contract bookings decreased
$12.6 million or 9%, reflecting continuing weakness in the Segment's principal
markets during the first half of 1993 as well as more aggressive pricing and
financing by the Company's competitors. The slow recovery in the construction
industry has also made the Koehring and Terex division distributor networks
more cautious in their acquisition of new equipment, especially for machines to
be used in the rental market. Heavy Equipment Segment backlog was $89.0
million at September 30, 1993 compared to $85.4 million at December 31, 1992
and $47.7 million at September 30, 1992.
Material Handling Segment sales were $314.0 million for the nine months ended
September 30, 1993 compared to $88.4 million for August and September 1992, an
increase of $225.6 million. On a pro forma basis, giving effect to the Clark
Acquisition as of January 1, 1992, sales decreased $62.9 million for the nine
months ended September 30, 1993 from $376.9 million for the nine months ended
September 30, 1992. Management believes that Material Handling Segment dealers
increased orders during the fourth quarter of 1992 to ensure adequate inventory
levels during the first quarter of 1993 while the company transferred certain
Material Handling Segment production from Korea to the U.S. and Germany,
resulting in lower sales in the first quarter of 1993. This transfer of
production continued during 1993, but was not completed by September due to
delays in establishing replacement lines of credit similar to those previously
existing in Korea. In addition, the Material Handling Segment experienced
working capital constraints during the third quarter of 1993 which have limited
the Company's ability to obtain materials and maintain production, adversely
affecting sales. Management expects Material Handling Segment sales volume to
remain at third quarter levels during the fourth quarter of 1993 until
completion of the working capital equity infusion as discussed below under
"Liquidity and Capital Resources." Bookings have remained strong because of
improved demand in the North American forklift industry. As a result of these
factors, the Material Handling Segment backlog was $127.0 million at September
30, 1993 compared to $83.2 million at December 31, 1992 and $80.8 million at
the July 31, 1992 acquisition date.
Gross Profit
Gross profit for the nine months ended September 30, 1993 increased $15.3
million compared to the nine months ended September 30, 1992. The Material
Handling Segment contributed gross profit of $19.6 million for the nine months
ended September 30, 1993 compared to $6.7 million for August and September
1992, an increase of $12.9 million.
The Heavy Equipment Segment's gross profit increased $2.4 million to $24.7
million in the first nine months of 1993 compared to $22.3 million in the year
earlier period. Improved gross profit from machines and contract sales
accounted for substantially all of the increase, reflecting the positive
effects of cost reduction initiatives implemented in 1992 and throughout 1993.
Gross profit for the 1993 period includes a $2.2 million provision for
write-down of certain inventory at Koehring in connection with management's
decision to cease new machine production for certain products. The gross
profit percentage in the Heavy Equipment Segment increased to 12.0% for the
nine months ended September 30, 1993 compared to 10.0% for the nine months
ended September 30, 1992 reflecting the increased percentage of parts sales,
from which the Company realizes higher margins, and improved manufacturing
efficiency.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $62.6 million for
the nine months ended September 30, 1993 from $37.6 million for the nine months
ended September 30, 1992. The Material Handling Segment engineering, selling
and administrative expenses totaled $37.5 million for the nine months ended
September 30, 1993 compared to $8.7 million for August and September, 1992 and
compared to $36.6 million for the nine months ended September 30, 1992 on a pro
forma basis. Heavy Equipment Segment engineering, selling and administrative
expenses decreased from $28.4 million for the nine months ended September 30,
1992 to $22.5 million for the nine months ended September 30, 1993 as a result
of cost reduction initiatives including headcount reductions and the
consolidation of certain administrative functions into the Heavy Equipment
Segment's administrative offices in Tulsa, Oklahoma. Corporate expenses
increased $2.1 million primarily as a result of increased legal and accounting
expenses.
Income (Loss) from Operations
The Heavy Equipment Segment income from operations increased $8.3 million from
a $6.1 million loss in the 1992 period to $2.2 million income in the 1993
period. This improvement resulted from the increase in gross profit and the
decrease in engineering, selling and administrative expenses, offset by the
$2.2 million provision for write-down of inventory. Except for the Koehring
division, the businesses comprising the Heavy Equipment Segment reported income
from operations for the nine months ended September 30, 1993. The losses at
Koehring have been reduced as a result of continuing cost reductions,
improvements in inventory management and elimination of certain low-volume
products, and the Company continues to consider additional actions necessary to
return that operation to consistent profitability, including a continuing
evaluation of facilities, products and inventories. In addition, in March 1992
the Company sold Benton Harbor Engineering ("Benton Harbor"), which had
experienced a loss from operations in the first quarter of 1992.
The Material Handling Segment incurred a loss from operations of $17.9 million
for the nine months ended September 30, 1993, compared to an operating loss of
$2.0 million for August and September, 1992 and compared to an operating loss
of $12.3 million for the nine months ended September 30, 1992 on a pro forma
basis, primarily as a result of decreased sales.
On a consolidated basis, the Company experienced an operating loss of $18.3
million for the nine months ended September 30, 1993, compared to an operating
loss of $8.6 million for the nine months ended September 30, 1992.
Income (loss) from operations before depreciation is as follows:
Nine Months Ended September 30,
1993 1992
(in millions of dollars)
INCOME (LOSS) FROM OPERATIONS
BEFORE DEPRECIATION
Heavy Equipment $ 5.1 $(4.3)
Material Handling (9.3) (0.6)
General/Corporate (2.5) (0.6)
Total $(6.7) $(5.5)
Other Income (Expense)
Interest expense on a consolidated basis was $23.8 million for the nine months
ended September 30, 1993 compared to $15.6 million for the nine months ended
September 30, 1992. Terex sold $160 million principal amount of the Secured
Notes on July 31, 1992. The proceeds of the Secured Notes were used for the
cash portion of the Clark Acquisition ($85 million), the payment of all amounts
outstanding under Terex's previous credit and letter of credit agreement ($58
million), and for working capital and transaction costs. The increase in Terex
interest expense for the nine months ended September 30, 1993 over the nine
months ended September 30, 1992 is primarily the result of incremental
borrowings to finance the Clark Acquisition (incremental interest expense of
approximately $6.7 million) and higher interest rates on new borrowings used to
refinance the previous credit and letter of credit agreement, as well as
additional costs related to establishing and utilizing a new credit and letter
of credit agreement.
The Company recognized equity in the net loss of Fruehauf of $0.7 million for
the nine months ended September 30, 1993 compared to equity in the net loss of
Fruehauf of $14.6 million for the nine months ended September 30, 1992. As
described in Note F of the Notes to Condensed Consolidated Financial Statements
for September 30, 1993, the Company does not expect to recognize any
significant additional losses with respect to its investment in Fruehauf.
The provision for income taxes generally represents taxes withheld on foreign
royalties and dividends. As such, any fluctuation in the provision for income
tax is due to fluctuations in these items. The Company adopted SFAS No. 109,
"Accounting for Income Taxes" on January 1, 1993. The new pronouncement
retains the basic concepts of SFAS No. 96, but generally simplifies its
application. The adoption of this new pronouncement did not have a material
impact on the Company's operating results and financial position. See "Recent
Pronouncements" below.
Extraordinary Item
In connection with terminating its previous bank lending agreement as described
below under "Liquidity and Capital Resources," the Company recognized a charge
of approximately $2.0 million in the second quarter of 1993 to write off
unamortized debt issuance costs.
1992 Compared with 1991
The table below is a comparison of net sales, gross profit, engineering,
selling and administrative expenses and income (loss) from operations, by
segment, for the years ended December 31, 1992 and 1991:
Year Ended
December 31, Increase
1992 1991 (Decrease)
(in millions of dollars)
NET SALES
Heavy Equipment $282.4 $271.5 $10.9
Material Handling 241.0 --- 241.0
Trailer --- 512.7 (512.7)
Total $523.4 $784.2 $(260.8)
GROSS PROFIT
Heavy Equipment $29.6 $26.3 $3.3
Material Handling 24.4 --- 24.4
Trailer --- 67.6 (67.6)
Total $54.0 $93.9 $(39.9)
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Heavy Equipment $35.6 $37.6 $(2.0)
Material Handling 22.2 --- 22.2
Trailer --- 90.8 (90.8)
General/Corporate 0.3 1.7 (1.4)
Total $58.1 $130.1 $(72.0)
INCOME (LOSS) FROM OPERATIONS
Heavy Equipment $(6.0) $(11.3) $5.3
Material Handling 2.2 --- 2.2
Trailer --- (23.2) 23.2
General/Corporate (0.3) (1.7) 1.4
Total $(4.1) $(36.2) $32.1
Operating Results
Net Sales
Sales decreased $260.8 million or approximately 33%, during 1992 compared to
1991. Material Handling Segment sales were $241.0 million for the year ended
December 31, 1992 representing the Clark sales since the acquisition date.
Trailer Segment sales were $512.7 million in 1991. Heavy Equipment Segment
sales increased $10.9 million during 1992 compared to the 1991 period. Mark
Industries ("Mark"), an operating unit of the Heavy Equipment Segment, was
acquired in December 1991. Excluding Mark, Heavy Equipment Segment fiscal 1992
sales decreased $9.4 million in relation to the comparable 1991 period. This
decrease reflects the continuing effects of the worldwide recession on the
construction and mining industries, the Heavy Equipment Segment's principal
markets. Heavy Equipment Segment bookings during 1992 were $315.9 million, an
increase of $56 million, or 22% over 1991. The majority of this increase
occurred in the fourth quarter. Fourth quarter 1992 Heavy Equipment Segment
bookings were $95.4 million, an increase of $43 million over the comparable
1991 period. Heavy Equipment Segment backlog was $85.4 million at December 31,
1992, an increase of $33.4 million over the comparable amount at December 31,
1991.
The overall Heavy Equipment Segment sales mix of equipment sales as a
percentage of total net sales increased slightly during 1992 in relation to
1991. Equipment sales represented 61% of total Heavy Equipment Segment sales
in 1992, while equipment sales represented 57% of total Heavy Equipment Segment
sales in 1991. This relationship is consistent with the relationship of Heavy
Equipment Segment bookings for 1992 in relation to 1991. Generally, the Heavy
Equipment Segment realizes lower gross margin percentages on new equipment than
its other revenue, principally parts.
The Material Handling Segment backlog was $83.2 million at December 31, 1992
compared to backlog at the July 31, 1992 acquisition date of $80.8 million. On
September 2, 1992, the Company announced that certain of its production of its
2,000 and 10,000 lb. capacity trucks would be brought back to the U.S. and
Germany beginning in the fourth quarter of 1992. Management believes that
Material Handling Segment dealers increased order activity during the fourth
quarter to ensure adequate inventory levels during the repatriation. The
increased fourth quarter 1992 sales volume will result in somewhat lower sales
volume throughout the first quarter of 1993 as the Material Handling Segment
completes the final stages of the repatriation of production of its light IC to
the U.S. during the second quarter of 1993.
Gross Profit
Gross profit for the year ended December 31, 1992 decreased $39.9 million over
1991. The Material Handling Segment contributed gross profit of $24.4 million
to the 1992 gross profit of $94.7 million. Heavy Equipment Segment 1992 gross
profit increased $3.3 million over the comparable 1991 period. Mark 1992 gross
profit represented $1.4 million of the Heavy Equipment Segment increase. The
Trailer Segment gross profit was $40.7 million in 1991.
Excluding Mark, the Heavy Equipment Segment's gross profit increased $1.9
million over 1991. Gross profit percentage increased to 10.8% in 1992 from
9.7% in 1991. Gross profit from parts sales decreased $2.5 million as a result
of the change in sales mix from parts to machines. Gross profit from machines
and other sales increased $4.4 million, principally as a result of cost
reduction initiatives implemented in the latter part of 1991 and throughout
1992 to reduce the fixed overhead cost base and as a result of a reduced
provision for inventory obsolescence in 1992. The cost reduction initiatives
accounted for approximately $2.4 million of the increase in gross profit and
included headcount reductions primarily at Koehring and consolidation of
manufacturing operations to reduce excess capacity at TEL. The reduced
provision for inventory obsolescence accounted for approximately $2.0 million
of the increase in gross profit and resulted from improvements in inventory
management which have reduced the amount of inventory entering the excess and
obsolete classification. During the second quarter of 1992, the Company
substantially reduced inventory to more effectively utilize working capital.
However, this reduction occurred at gross margins which were lower than
normally achieved in routine sales of such products, and, as a result, the
incremental sales had only a minor impact on gross profit. The sale of the
Benton Harbor operation in March 1992 also contributed to the improvement in
gross profit from machines and other sales. Benton Harbor incurred a loss at
the gross profit line of $0.8 million in 1991 on sales of $8.5 million.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses decreased to $58.1 million in
1992 from $114.3 million in 1991. The Material Handling Segment engineering,
selling and administrative expenses totaled $22.2 million for the five months
ended December 31, 1992. These incremental engineering, selling and
administrative expenses were offset by reduced Heavy Equipment Segment and
corporate engineering, selling and administrative expenses of $3.4 million
resulting from cost reduction initiatives including headcount reductions and
the consolidation of certain administrative functions into the Heavy Equipment
Segment's administrative offices in Tulsa, Oklahoma.
Trailer Segment engineering, selling and administrative expenses were $90.8
million in 1991, including restructuring costs of $15.8 million representing
provisions for the anticipated future costs of implementing a restructuring of
Fruehauf's distribution system and other non-recurring costs, as more fully
described in Note D of the Notes to Consolidated Financial Statements for
December 31, 1992.
Income (Loss) From Operations
On a consolidated basis, the Company experienced an operating loss of $4.1
million for the year ended December 31, 1992, compared to an operating loss of
$36.2 million for the year ended December 31, 1991. The improvement resulted
from, among other items, the contribution of operating profit of $2.2 million
by the Material Handling Segment for the five months ended December 31, 1992
(since its acquisition), the positive impact of cost reduction and cost
containment initiatives implemented in the latter part of 1991 and throughout
1992, and the sale of Benton Harbor in March 1992 which experienced an
operating loss in the 1991 period. The Trailer Segment's operating loss was
$23.2 million for 1991.
Income (loss) from operations before depreciation is as follows:
Year Ended December 31,
1992 1991
(in millions of dollars)
INCOME (LOSS) FROM OPERATIONS
BEFORE DEPRECIATION
Heavy Equipment $(2.7) $(7.2)
Material Handling 5.9 ---
Trailer --- (16.3)
General/Corporate (0.3) (1.7)
Total $2.9 $(25.2)
Other Income (Expense)
Interest expense decreased on a consolidated basis from $31.2 million in 1991
to $23.3 million in 1992. Interest expense related to Fruehauf debt totaled
$17.6 million in 1991. Interest expense related to Terex debt increased $9.8
million in 1992.
As discussed further under the caption "Liquidity and Capital Resources," Terex
sold $160 million principal amount of the Secured Notes on July 31, 1992. The
proceeds of the Secured Notes were used for the cash portion of the Clark
Acquisition ($85 million), the payment of all amounts outstanding under Terex's
previous credit and letter of credit agreement ($58 million), and for working
capital and transaction costs. The increase in Terex interest expense over
1991 is primarily the result of (a) incremental borrowings to finance the Clark
Acquisition (incremental interest expense of approximately $4.6 million), (b)
higher interest rates on new borrowings used to refinance the previous credit
and letter of credit agreement, as well as additional costs related to
establishing and utilizing a new credit and letter of credit agreement, and (c)
a $2.7 million amendment and renewal fee charged by Terex's previous bank
consortium prior to the refinancing.
As described in "Business -- Fruehauf Trailer Corporation," the Company
presently accounts for its investment in Fruehauf using the equity method. The
Company recognized an equity loss of $35.0 million in 1992 from its investment
in Fruehauf. Fruehauf reported a loss of $65.2 million for 1992 as a result of
reduced sales because of the closure or conversion of 26 sales and service
branches as part of Fruehauf's branch restructuring program, a change in
Fruehauf's sales mix to lower-margin new trailer and fleet sales and
unfavorable manufacturing variances and lost sales of used trailers and parts
because of the effects of liquidity problems experienced by Fruehauf during
1992 and which continued into 1993.
In conjunction with the Fruehauf IPO, the Company contemplated related exchange
transactions between certain stockholders and warrantholders of the Company and
Fruehauf. In determining the Company's net gain in 1991 on the Fruehauf IPO,
the Company considered the impact of these related exchange transactions. The
estimated impact of these exchange transactions was a loss of approximately
$7.7 million. The loss was recorded as a reduction of the gain on the sale of
Fruehauf of $22.7 million, for a net gain of $15.0 million in 1991. During the
fourth quarter of 1992, the exchange agreement expired and management and the
parties to the exchange concluded that the exchange transactions originally
contemplated were no longer in the best interests of the Terex and Fruehauf
stockholders. Accordingly, the $7.7 million reserve for the estimated impacts
of the exchange transactions was recorded into income in the fourth quarter of
1992. The impact of this transaction is recorded as a component of Other
Income in the Consolidated Statement of Income for December 31, 1992.
In 1991, Fruehauf recognized equity in net income of affiliated companies of
$4.2 million and a $7.5 million gain on the sale of excess assets, including a
$6.6 million gain on the sale of Coast Engineering and Manufacturing Company's
("CEMCO") operating assets.
Other income (expense) in 1992 included foreign exchange losses of $2.4 million
and other miscellaneous items. Other income (expense) in 1991 included a $3.3
million loss on the sale by Fruehauf of stock in Societe Europeene de
Semi-Remorques S.A. ("SESR"), Europe's largest trailer manufacturer.
1991 Compared with 1990
The table below is a comparison of net sales, gross profit and income (loss)
from operations for the years ended December 31, 1991 and 1990 and reflect the
restatements as described in Note B -- "Restatement of Prior Period Results" to
the Consolidated Financial Statements for December 31, 1992:
Year Ended
December 31, Increase
1991 1990 (Decrease)
(in millions of dollars)
NET SALES
Heavy Equipment $271.5 $433.7 $(162.2)
Trailer 512.7 589.5 (76.8)
Total $784.2 $1,023.2 $(239.0)
GROSS PROFIT
Heavy Equipment $26.3 $72.2 $(45.9)
Trailer 67.6 93.9 (26.3)
Total $93.9 $166.1 $(72.2)
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Heavy Equipment $37.6 $48.9 $(11.3)
Trailer 90.8 74.6 16.2
General/Corporate 1.7 (1.8) 3.5
Total $130.1 $121.7 $8.4
INCOME (LOSS) FROM OPERATIONS
Heavy Equipment $(11.3) $23.3 $(34.6)
Trailer (23.2) 19.3 (42.5)
General/Corporate (1.7) 1.8 (3.5)
Total $(36.2) $44.4 $(80.6)
Net Sales
Net sales were $239.0 million lower in 1991 than in 1990. This 23.4% decrease
is largely attributable to the overall economic slowdown and weakness of
industry demand faced both domestically and abroad in the Heavy Equipment and
Trailer Segments principal markets.
Gross Profit
The gross profit percentage of the Heavy Equipment Segment decreased from 16.6%
in 1990 to 9.7% in 1991. The decrease in gross profit and the related gross
profit percentage was the result of the lower sales volume which resulted in
substantially underutilized manufacturing capacity. In addition, the provision
for excess and obsolete inventory increased approximately $1.7 million over the
1990 provision of $9.7 million. The principal factors contributing to the
increased provision are a decline in net realizable value of certain excess
finished goods inventory, as well as certain parts inventory. The reserve for
excess and obsolete inventory as a percentage of gross inventory increased to
10.5% at December 31, 1991 as compared to 7.3% at December 31, 1990. This
increase as a percentage of gross inventory is a result of the following
factors: (i) management efforts to reduce working capital employed to finance
inventory levels, (ii) higher reserve requirements resulting from reduced net
realizable values to facilitate the movement of certain excess finished goods
inventory and (iii) an increased aging of parts inventory. First, management
focused its efforts during 1991 to improve inventory turns as a means to
improve working capital utilization. Inventory minimization continued to be a
high priority of management into 1992. Second, the significant economic
downturn faced by the Company resulted in lower sales volume as discussed
previously. In addition, the Company experienced a substantial increase in
certain finished goods inventory. As part of management's ongoing evaluation
of potentially excess and obsolete inventory including current and future
market and economic factors, together with working capital utilization
objectives, provisions to record the excess finished goods inventory at net
realizable value were required. Lastly, the Company has experienced an
increased aging of parts inventory due to declining sales volume and the
consequent decline in machine populations in the field. As part of
management's ongoing evaluation of parts excess and obsolete reserve
requirements, management evaluated current part inventory quantities in
comparison to current and future market and economic conditions. The
evaluation indicated an impairment of the net realizable value of certain
quantities of parts inventory. Machine population is expected to decline over
the next several years and, as a result, management plans to focus substantial
attention on the parts inventory control.
The Trailer Segment's gross margin percentage decreased to 13.2% in 1991 from
15.9% in 1990. The decrease was a result of lower new trailer demand and
substantially underutilized manufacturing capacity. Sales mix was virtually
unchanged from 1990 to 1991, and therefore did not impact the overall gross
margin percentage comparison. Due to the underutilized manufacturing capacity
in the domestic trailer manufacturing industry and reduced demand for new
trailers, price competition was severe on new trailers. As a result, the gross
profit percentage realized on new trailer sales was much lower than that on
used trailers, replacement parts and service.
Unit sales of new truck trailers in the United States have historically
experienced significant short-term fluctuations due to changing economic
conditions. However, over the longer term, new truck trailer unit sales have
exhibited growth generally in line with increases in the U.S. gross national
product. Due to the poor economic conditions in the United States during 1990
and 1991, unit sales of new truck trailers were at their lowest levels since
1983 and in 1991 were approximately 32% below unit sales in 1988, the last full
year before the Fruehauf acquisition.
The Trailer Segment's provision for excess and obsolete inventory increased by
approximately $3.9 million over 1990. The principal factor contributing to the
increased provision was the decline in the net realizable value of certain new
and used trailer inventory, as well as certain parts inventory. The used
trailer market continued to soften in the latter part of 1991, resulting in
market prices falling below Fruehauf's carrying value of the related used
trailers. In other cases certain used trailers remained in inventory for
extended periods of time and aged by one model year. This aging adversely
impacted the net realizable value of such trailers. Additionally, Fruehauf
increased its reserves for replacement parts inventory. Due to the existence
of quantities of seasonal products and truck equipment that were over one
model-year old, a provision to record the reduction of the parts inventory to
its lower net realizable value was required.
Income (Loss) From Operations
Operating earnings (losses) for the Heavy Equipment Segment were ($11.3)
million in 1991, as compared to $23.3 million in 1990 for the Heavy Equipment
Segment. While engineering, selling, and administrative expenses decreased for
the Heavy Equipment Segment from 1990 to 1991, the aforementioned reductions in
sales and gross profit led to the operating profit decline.
Fruehauf's operating income was $19.3 million for the year ended December 31,
1990. During 1991, Fruehauf had an operating loss of $23.2 million. While
engineering, selling, and administrative expenses remained stable from 1990 to
1991, the aforementioned reductions in sales and gross profit led to the
operating profit decline. Additionally, a nonrecurring restructuring charge of
$15.8 million recorded in the fourth quarter of 1991 contributed significantly
to the decline in operating profit. These restructuring costs represented
provisions for the anticipated future cost of implementing a restructuring of
Fruehauf's distribution system and other nonrecurring costs related to
streamlining Fruehauf's manufacturing operations.
Other Income (Expense)
Interest income decreased $1.6 million in 1991 as compared to 1990 due to
reduced average cash balances in 1991 and lower interest rates throughout the
year. The lower cash balances resulted largely from the repayment of debt.
Interest expense decreased $16.4 million in 1991 as compared to 1990, primarily
as a result of lower debt outstanding and reduced interest rates on the
borrowings. The reduction in debt outstanding was achieved by generation of
cash from operations, continued efforts to dispose of excess facilities and
assets held for sale, as well as from proceeds of the Fruehauf IPO. The lower
interest rates were achieved by modification of some of the Company's debt
facilities in September 1990 and elimination of certain debt facilities with
high rates in conjunction with the aforementioned public offering.
The Company's share of earnings from unconsolidated affiliates was $4.2
million in 1991, down from $7.5 million in 1990. Royalty income earned during
the year from licensees of Fruehauf totaled $3.2 million in 1991 as compared to
$5.2 million in 1990. The decrease in the earnings from unconsolidated
affiliates and royalty income is largely due to the worldwide economic slowdown
faced by the trailer segment's licensees and affiliates as well as a sale of a
portion of the Company's share of its largest unconsolidated affiliate in mid
1991. The decrease in royalty income was also due to a new trademark and
licensing agreement entered into in the second quarter of 1991.
The Company recorded a $15.0 million gain as a result of the Fruehauf IPO and
the completion of certain of Fruehauf's recapitalization transactions.
The Company recognized a $7.2 million gain in 1991 on the sale of excess
assets, including a $6.6 million gain on the sale of CEMCO's operating assets.
Other expense of $2.4 million and $0.4 million for 1991 and 1990, respectively,
includes the loss on sale of affiliate stock in 1991 and various other
immaterial items.
The Company's provision for income taxes generally represents taxes withheld on
foreign royalties. As such, any fluctuation in the provision for income tax is
due to fluctuations in foreign royalties.
Minority interest is reflected as a result of the July 1991 Fruehauf IPO and
certain recapitalization transactions.
On September 30, 1990, Fruehauf refinanced the majority of its then outstanding
long-term debt. A onetime extraordinary loss of $2.2 million was recorded to
write-off the unamortized debt issue costs relating to the refinanced debt.
Liquidity and Capital Resources
Terex owns approximately 22.6% of the outstanding common stock of Fruehauf and
presently accounts for its investment using the equity method (see Note A --
"Significant Accounting Policies" and Note D -- "Investment in Fruehauf Trailer
Corporation" to the Consolidated Financial Statements for December 31, 1992).
By the terms of debt agreements of both companies, neither company may
participate in the debt service of the other. Generally, funds cannot be
transferred between the companies except for the reimbursement of reasonable
expenses incurred on the other's behalf.
On May 20, 1993, Terex entered into the Lending Facility with Foothill. An
interim facility provided for cash advances to the Company of up to $17.5
million. A permanent facility became effective as of August 24, 1993 which
provides for up to $20 million of cash advances and guarantees of bank letters
of credit and is secured by substantially all domestic cash and receivables of
the Material Handling and Heavy Equipment Segments. The balance outstanding
under the Lending Facility was $18.7 million as of September 30, 1993. As of
July 31, 1993, the Company was not in compliance with the tangible net worth
covenant under the Lending Facility. Following the closing on August 20, 1993
of Fruehauf's restructuring and financing transactions described in "Business -
Fruehauf Trailer Corporation," Foothill agreed that the Company's noncompliance
with the tangible net worth covenant under the Lending Facility was no longer
continuing. Foothill also waived the noncompliance. The Company believes,
based on management's current estimates, that it will be in compliance with
such covenant over the next twelve months.
In addition to the Lending Facility, the Company has arranged similar financing
for TEL, in the form of a pd28.0 million ($42.0 million) credit facility
including up to pd13.0 million ($19.5 million) non-recourse discounting of TEL
accounts receivable which meet certain credit criteria plus additional
facilities for tender and performance bonds and foreign exchange contracts.
During the second half of 1993, the Company experienced liquidity constraints,
primarily because of continuing operating losses. During this period, a
significant amount of accounts payable were aged 60 days or more and certain
vendors required COD or advance cash payments before shipping materials. As a
result, the Company's manufacturing facilities operated at less than optimal
levels, and the availability of inventory for parts sales, on which the Company
generally realizes higher gross margins, was adversely affected.
On December 20, 1993, in order to provide additional liquidity to the Company,
the Company completed the private placement of 1,200,000 shares of the
Preferred Stock and 1,300,000 Warrants for aggregate net proceeds to the
Company of $27.2 million. The proceeds of such private placement are being
used by the Company for additional working capital. The Company is also
generating cash through the sale of excess inventory in the Heavy Equipment
Segment, deferring certain capital expenditures, selling certain real estate
and other assets and continuing corporate wide cost containment efforts.
Management believes that the Lending Facility together with these additional
financing and cash generating activities will allow the Company to meet its
operating payment obligations, including payments to vendors, on a timely
basis which will improve the Company's ability to take advantage of improved
market conditions, especially in the Material Handling Segment.
In December 1993, the Company repurchased $5.0 million principal amount of the
Secured Notes for approximately $4.5 million, including accrued interest. In
addition, the Company sold 1,000,000 shares of Fruehauf common stock for
aggregate proceeds of approximately $3.0 million and will repurchase
approximately $3.0 million of the Secured Notes in the second quarter of 1994,
as required by the indenture for the Secured Notes. See "The Company - Recent
Developments." In addition to such repurchase obligation and approximately
$27.6 million of interest on the Secured Notes, Subordinated Notes and Lending
Facility (of which approximately $12.9 million has been paid as of February 1),
the Company's debt service requirements for 1994 include approximately $14.4
million in July 1994 for a required sinking fund payment on the Subordinated
Notes and the maturity of a note issued to the seller in connection with the
Clark Acquisition. Management believes that selling certain real estate and
other assets and other cash generating activities discussed above will allow
the Company to meet these requirements as they come due. Management is also
considering other actions, including the sale of certain non-strategic
businesses and additional sales of other assets, which may be necessary for the
Company to meet its operating and debt service obligations.
The indentures governing the Notes require among other things that the Company
maintain the Net Worth Covenants and Collateral Covenant. In the event that
the Company's net worth is not in excess of the amount required under the Net
Worth Covenants for any two consecutive quarters, the Company must offer to
repurchase, at par plus accrued interest, 20% of the outstanding principal
amount of the Notes. In the event the Company is not in compliance with the
Collateral Covenant at the end of any calendar quarter, the Company must offer
to repurchase, at par plus accrued interest, $16.0 million principal amount of
the Secured Notes or such greater amount as would be necessary to bring the
Company into compliance with the Collateral Covenant. As of September 30,
1993, the Company's tangible net worth as defined in the Note indentures was
less than the $15 million minimum set forth in the indentures. Management
believes that the Company was in compliance with the Net Worth and Collateral
Covenants at December 31, 1993. If the Company continues to sustain losses
from operations, it may not be in compliance with the Net Worth Covenants in
the future. If any offer to repurchase Notes were required to be made, it is
likely that the Company would require additional funding to complete the offer,
and if such funding were unavailable to it, the Company would be unable to
comply with the terms of the Notes and the maturity of the Notes may be
accelerated. Such circumstances would result in a material adverse impact on
the Company and its financial position.
Terex cash and cash equivalents, including restricted cash and investments,
totaled $13.5 million and $37.2 million at September 30, 1993 and December 31,
1992, respectively. Certain provisions of the Company's previous lending
arrangement with a commercial bank (the "Bank Lending Agreement") required
specified amounts of cash to be deposited in a cash collateral account when
certain conditions exist. Restricted cash and investments held in such
collateral accounts totaled $11.5 million at December 31, 1992, which are
presented as "Restricted Cash" in the Condensed Consolidated Balance Sheet for
December 31, 1992. Terex has entered into the new Lending Facility which
replaced the Bank Lending Agreement. In connection therewith, Terex will
continue to utilize letters of credit previously issued under the former Bank
Lending Agreement until their expiration. At September 30, 1993 the unexpired
letters of credit are cash collateralized by a total of $4.6 million in a cash
collateral account. These cash balances will be made available to the Company
as the underlying letters of credit expire.
Terex used cash for operating activities of $28.0 million during the nine
months ended September 30, 1993, and generated cash from operating activities
of $22.7 million in 1992. Such cash was principally used to fund operating
losses, interest payments and costs of restructuring the Material Handling
Segment's operations partially offset by reductions in receivables and
inventory. The reductions in receivables and inventory result from the
Company's focused efforts to more effectively utilize working capital.
Management expects to continue the Company's efforts to reduce receivables and
inventory during 1994 as part of the Company's cash generating activities
discussed above. In particular, management believes that required inventory
levels in the Material Handling Segment have been reduced as a result of return
of certain production to the United States and Germany from Korea during 1993
because the Company will no longer experience the significant lead times
associated with the shipping of product from Korea.
Net cash provided by Terex from investing activities of $0.9 million during the
nine months ended September 30, 1993 principally reflects the sale of surplus
assets in Germany offset by cash used to finance capital expenditures. Net
cash used by Terex for investing activities of $94.8 million in 1992
principally reflects cash used to finance the Clark Acquisition, net of cash
acquired, and capital expenditures. Cash flow from investing activities in
1992 also included $4.6 million of payments on behalf of and advances to
Fruehauf. Proceeds from the sale of surplus assets in Germany in 1993 were
approximately $10.1 million. Capital expenditures were $8.5 million during the
nine months ended September 30, 1993, including approximately $5.3 million to
prepare production lines in the U.S. and Germany for the production of lift
trucks formerly produced in Korea, and $5.4 million during 1992. The purchase
price of the Clark Acquisition was approximately $91.1 million, which was
funded by $85 million in cash and a $6.1 million seller note. In connection
with the Clark Acquisition, the Company established reserves for restructuring
costs expected to be incurred in connection with the Company's plans to
reorganize the operations of Clark by consolidating manufacturing and
distribution operations. As of December 31, 1992, the remaining reserves
totalled approximately $30.0 million, substantially all of which has been
expended during 1993.
Terex generated cash of $10.7 million and $89.3 million from financing
activities during the nine months ended September 30, 1993 and the year ended
December 31, 1992, respectively. As described above, the Company entered into
the Lending Facility in May 1993 and had borrowed $18.7 million under this
facility as of September 30, 1993. In conjunction with the Clark Acquisition
in 1992, the Company refinanced a major component of its previously outstanding
bank debt (the "Refinancing"). The Refinancing included the issuance of the
Secured Notes and establishment of the $60 million Bank Lending Agreement.
Proceeds from the issuance of the Secured Notes were used for the cash portion
of the Clark Acquisition purchase price ($85 million), for the settlement of
all amounts outstanding under its previous credit facility ($58 million), and
for working capital and transaction costs. The Secured Notes are secured by
substantially all inventory and property, plant and equipment of the Company's
Material Handling and Heavy Equipment Segments, as well as the Company's
investment in Fruehauf common stock. The Subordinated Notes holders have a
secondary secured position in certain of the Company's assets.
In connection with the sale of the Secured Notes and obtaining the consent of
the holders of the Company's existing Subordinated Notes to modification of the
Subordinated Notes, the Company issued 658,409 common stock appreciation
rights ("SAR's"). As of September 30, 1993 there were 543,794 SAR's
outstanding. Of the outstanding SAR's, 461,385 may be exercised at the option
of the holder thereof at any time on or after January 27, 1993, but not later
than July 31, 1996, and the remaining 82,409 SAR's may be exercised not later
than July 1, 1997. The SAR's entitle the holder to receive, in cash, an amount
equal to the market appreciation in the Company's Common Stock between $11 per
share, subject to adjustment, and the average price per share for the 30
consecutive trading days prior to the date of exercise.
In addition to the financial covenants discussed above, the indentures
governing the Notes limit, among other things, Terex's ability to incur
additional indebtedness, consummate mergers and acquisitions, pay dividends,
sell business segments and enter into transactions with affiliates, as well as
place limitations on change in control of Terex.
Contingencies and Uncertainties
In their opinion on the Company's Consolidated Financial Statements for
December 31, 1992 included in this Prospectus, the Company's independent
accountants have indicated that there are matters, including recurring losses
from operations and a net capital deficiency, lack of availability of
additional borrowings under the Company's Bank Lending Agreements and
uncertainties with respect to future compliance with covenants of certain other
debt agreements, which raise substantial doubt about the Company's ability to
continue as a going concern. As described above under "Liquidity and Capital
Resources," the Company has entered into the Lending Facility which provides up
to $20 million in revolving credit loans and guarantees of letters of credit,
and has arranged similar financing for TEL. The Company also completed the
private placement of Preferred Stock and Warrants, which provided aggregate net
proceeds to the Company of $27.2 million for working capital. The Company is
also generating cash through the sale of excess inventory in the Heavy
Equipment Segment, deferring capital expenditures, selling certain real estate
and other assets and continuing corporate wide cost containment efforts.
Management believes that the Lending Facility and other financing and cash
generating activities will allow the Company to meet its obligations on a
timely basis.
Terex has facilities at numerous geographic locations, which are subject to a
range of federal, state, local and foreign environmental laws and regulations.
Compliance with these laws has, and will, require expenditures on a continuing
basis. See "Business -- Environmental Considerations."
As described in "Business -- Environmental Considerations," Fruehauf has
identified environmental exposures at a number of Superfund and other sites,
and is currently participating in administrative or court proceedings involving
a number of these sites. Many of the proceedings are at a preliminary stage,
and the total cost of remediation, the timing and extent of remedial actions
which may be required, and the amount of Fruehauf's liability, if any, with
respect to these sites can not presently be estimated. The Company believes
that it could have contingent responsibility for certain of Fruehauf's
liabilities with respect to Fruehauf's environmental matters if Fruehauf fails
to discharge its obligations, but only to the extent that such liabilities
arose during the time period during which Terex was the controlling stockholder
of Fruehauf. The Company believes that Fruehauf's significant environmental
liabilities predate Terex's acquisition of Fruehauf, and therefore any
contingent responsibility of the Company is not expected to have a material
adverse effect on the Company.
Foreign Operations
The Heavy Equipment Segment of the Company operates its TEL subsidiary in
Motherwell, Scotland. Equipment manufactured by TEL is distributed in the
United States and around the world. Unit Rig maintains nine owned or leased
locations outside of the United States for parts distribution. The Heavy
Equipment Segment also imports certain new equipment from Japan for sale in the
U.S.
The Material Handling Segment operates divisions in Mulheim, Germany and Seoul,
Korea. The German facility manufactures forklifts for sale in the European
market. The Seoul facility primarily manufactures light IC transaxles which
are shipped to the Lexington, Kentucky facility, completed and sold in the U.S.
Fruehauf's international operations include affiliates and licensees located
worldwide.
Export sales from the Company's domestic operations were $92.3 million, $83.3
million, and $117.3 million in 1992, 1991, and 1990, respectively. See Note P
- -- "Business Segment Information" in the Company's Consolidated Financial
Statements for December 31, 1992.
Recent Pronouncements
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This pronouncement establishes accounting and
reporting for the estimated cost of benefits provided by an employer to former
or inactive employees after employment but before retirement. In most cases,
the Company believes that it already accounts for such benefits on an accrual
basis. Therefore, the impact of adoption is not anticipated to have a
significant effect on the Company's financial position or results of
operations. The Company will adopt this standard during the first quarter of
1994.
BUSINESS
General
Terex is a global provider of capital goods and equipment used in the mining,
commercial building, infrastructure, manufacturing and construction industries.
Through its Heavy Equipment Segment, the Company designs, manufactures and
markets heavy-duty, off-highway earthmoving, construction, lifting, material
handling and aerial lift equipment, and related components and replacement
parts. Such products are used primarily by construction, mining, logging,
industrial and government customers in the building of roads, dams and
commercial and residential buildings; supplying coal, minerals, sand and
gravel; and the handling of materials in the scrap, refuse and lumber
industries.
Through its Material Handling Segment, the Company is engaged in designing,
manufacturing and marketing a complete line of internal combustion and
electric lift trucks, electric walkies, automated pallet trucks, industrial tow
tractors and related replacement parts. Material Handling Segment products are
used in material handling applications in a broad array of manufacturing,
distribution and transportation industries. The Material Handling Segment
consists of CMHC and certain affiliate companies which were acquired by the
Company on July 31, 1992 from Clark Equipment Company pursuant to the Clark
Acquisition.
Terex also owns an approximate 22.6% equity interest in Fruehauf. Fruehauf
designs, manufactures and markets truck trailers, making a wide range of van,
refrigerated, platform, tank, dump trailer and other models, and related parts
and accessories. Such products are used principally in the trucking and
transport industries. This business was acquired in 1989.
For financial information about the Company's industry and geographic segments,
see Note P -- "Business Segment Information" of the Company's Consolidated
Financial Statements for December 31, 1992 as well as "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The Company's long-term strategy has been, and continues to be, to seek out
acquisitions in the capital goods industry where aggressive management can
achieve substantial improvements in profitability and cash flow.
In an effort to reduce costs and facilitate administrative functions, the
Company's administrative office in Green Bay, Wisconsin was closed during the
second quarter of 1993 and relocated to offices in Westport, Connecticut.
Material Handling Segment
Clark was acquired by the Company on July 31, 1992. Clark is a leading North
American and European designer, manufacturer and marketer of a complete line of
IC and electric lift trucks, electric walkies, automated pallet trucks,
industrial tow tractors and related replacement parts. Clark's U.S. operations
are located in Lexington, Kentucky, Danville, Kentucky and Horsham,
Pennsylvania. Clark's international operations are located in Mulheim-Ruhr,
Germany and Seoul, Korea. Clark also owns a state-of-the-art training and
research center in Lexington, Kentucky. Clark's products are distributed
through an established global dealer network which includes more than 440
locations. Clark has what management believes is the largest installed fleet
in North America, with over 250,000 units. It is estimated that in excess of
320,000 Clark trucks are presently in operation worldwide. Historically, 80%
of Clark's revenues have been derived from new product sales and 20% of
revenues have been derived from supplying replacement parts to the lift truck
aftermarket. Clark and its independent dealers sell to a diversified base of
customers in a variety of industries. Clark has 108 independent North
American dealers who operate 252 outlets, with all 252 dealer outlets providing
both sales and servicing. Clark's European distribution network consists of
106 independent dealers and three company-owned dealers operating in 52
countries.
Clark products are sold through a system which enables customers to design a
truck which meets their particular materials handling needs. Customers can add
attachments such as container handlers, side shifters, roll clamps, block
handlers, carton clamps, push-pulls (slip-sheet) and fork positioners. Clark
also offers advanced electronics and software which enables on-line inventory
control and instantaneous truck diagnosis. Clark and its dealers sell to a
diversified customer base with no single customer accounting for more than 2%
of Clark's revenues.
Clark currently offers 116 basic truck designs within six major product lines:
light IC trucks (1.0 to 5.0 tons), heavy IC trucks (5.5 to 47.5 tons),
narrow-aisle and very narrow-aisle trucks, electric counterbalanced trucks (1.3
to 6.0 tons), electric walkies and tow tractors.
Light IC trucks are used for general warehousing needs and are generally
powered by liquid propane and well suited for manufacturing and distribution
applications which require a high degree of maneuverability. Heavy IC trucks
are specialty products designed for use in more demanding situations such as
heavy manufacturing or container handling applications. Narrow-aisle and very
narrow-aisle trucks provide solutions for high density storage needs and
operate in six-to-eight foot aisles and reach heights of more than 30 feet.
Electric counterbalanced trucks are designed for indoor use in warehousing,
manufacturing, distribution and other applications and are powered by a
rechargeable electric battery. For environmental reasons, electric trucks are
becoming more popular. Electric walkies are generally used in transporting and
order-selecting. Tow tractors are units designed to pull one or more trailers.
The largest market for tow tractors is for airport baggage handling.
The CLARK tradename is the leading North American brand of IC and electric lift
trucks, with major competitive brands offered by Hyster-Yale, Toyota,
Caterpillar, Crown and Raymond. Clark's major European competitors are Linde
Group, Toyota, Fiat, Jungheinrich, Hyster-Yale and Caterpillar.
Clark's major suppliers include Samsung, Prime Mover, Mitsubishi, Hydroelectric
Lift Truck, General Electric, Kurdziel Iron and Lufkin Industries. Current and
potential suppliers are evaluated on a regular basis on their ability to meet
Clark requirements and standards.
Following the Clark Acquisition in July 1992, Clark began implementing
initiatives intended to reduce its manufacturing and operating costs. These
initiatives have included and will continue to include consolidation of
engineering, manufacturing and parts facilities. Clark transferred production
of its light IC lift truck chassis from Korea to Lexington, Kentucky during
1993.
Heavy Equipment Segment
Terex Division and Terex Equipment Limited
The historical business of Terex Division and TEL evolved during more than 25
years of ownership by General Motors Corporation prior to 1981. The Terex
Division and TEL are jointly hereinafter referred to as the "Terex Business."
Terex Division's marketing efforts in the United States serve the needs of
North, Central and South America, while TEL serves the remainder of the
international market. TEL manufactures the products of the Terex Business.
There are three principal product lines of the Terex Business: off-highway
rigid and articulated haulers, scrapers and wheel loaders. A "hauler" is an
off-road dump truck with a capacity in excess of 25 tons. Haulers produced in
the Terex Business have capacities up to 120 tons. A "scraper" is an off-road
vehicle, commonly referred to as an "earth mover," that loads, moves and
unloads large quantities of soil for site preparations, including roadbeds. A
"wheel loader" is a vehicle that loads materials onto trucks, conveyors and
similar equipment. These products perform a wide range of earthmoving
functions in open pit mining and in many types of heavy construction, including
highway, dam and waterway construction; commercial and industrial site
preparation; general land improvement and real estate development; and
structural renovation and replacement. The Terex Business's main competitors
are Caterpillar, VME Group, Komatsu and Dresser.
The Company has substantially restructured the Terex Business operations by:
(i) eliminating all manufacturing operations at the Hudson, Ohio facility that
it formerly leased; (ii) consolidating virtually all manufacturing operations
into TEL's manufacturing facility in Motherwell, Scotland; and (iii) selling
excess inventory. The Company has increased production of the Terex Business
since its acquisition in 1987 without expanding the Motherwell facility or
significantly increasing administrative costs.
In 1987, TEL entered into a joint venture agreement with Second Inner Mongolia
Machinery Company for the production of haulers in China. The joint venture
company, North Hauler Limited Liability Company, manufactures heavy trucks,
principally used in mining, at a facility in Baotou, Inner Mongolia, People's
Republic of China. The joint venture began producing units in late 1990.
Unit Rig
On July 15, 1988, the Company purchased certain domestic and foreign assets and
operations of Unit Rig & Equipment Co. ("URECO"), primarily through Unit Rig,
Inc., a wholly-owned subsidiary of the Company. Unit Rig, Inc. was
subsequently merged into Terex, and now operates as the Unit Rig Division.
Unit Rig is headquartered in Tulsa, Oklahoma.
URECO pioneered the development of the diesel electric drive, rear dump hauling
truck for use in open pit mining operations. Extensive experience acquired in
applications of high horsepower diesel engines and electric machinery on
drilling rigs encouraged URECO to develop a new line of mining trucks. The
trucks' power came from a diesel engine driving a generator which, in turn,
provided power for individual electric motors in each of the rear wheels. The
prototype truck was completed in 1960 and the first production models entered
service in 1963. The truck gained market share steadily because of its greater
capacity and reliability over conventional mechanical power-train trucks.
While mechanical trucks were limited by the capacity of their transmissions and
axles to loads of 65 tons, Unit Rig's trucks could at that time carry loads up
to 85 tons. Unit Rig's current LECTRA HAUL product line consists of a series
of rear dump hauler trucks, with current payload capacities ranging from 100 to
240 tons, and bottom dump haulers with capacities of 180 to 270 tons.
In 1984, URECO purchased the Dart line of wheel loaders and mechanical drive
haulers. This product line consists of the Dart 600C mechanical drive wheel
loader which has a bucket capacity up to 23 cubic yards and rear dump trucks
ranging in capacity from 85 to 130 tons. The Dart line also includes a
tractor-trailer bottom dump hauler with capacities from 120 to 160 tons.
The present principal markets for Unit Rig products are copper, gold, coal and
iron mines. Currently, Unit Rig's major customers are mining companies in
North and South America, Africa, Australia and other countries overseas, with
Unit Rig's foreign sales, including those in Canada, accounting for over 70% of
its revenues.
Unit Rig's largest competitors are Caterpillar, Komatsu and Dresser.
Koehring Cranes & Excavators
Koehring Cranes & Excavators, Inc. was established as a wholly-owned subsidiary
of the Company to acquire certain assets and operations included in the
construction equipment group of AMCA International Limited. This subsidiary
was merged into Terex and now operates as the Koehring Cranes & Excavators
Division. Koehring, headquartered in Waverly, Iowa, designs, manufactures and
markets a broad line of hydraulic excavators and hydraulic telescoping cranes
sold under the well recognized trade names of KOEHRING and LORAIN. Koehring's
hydraulic excavators are used for certain sewer, water and underground
excavation applications, as well as certain specialty applications in the
logging and scrap industries. Hydraulic telescoping cranes are primarily used
for construction and industrial applications.
Koehring's largest competitors in the hydraulic excavator market are Komatsu
and Caterpillar. Koehring has two principal competitors in the hydraulic crane
market -- Grove Manufacturing and PPM Cranes.
Mark Industries
On December 10, 1991, the Company acquired substantially all operating assets
of Mark Industries. Mark is engaged in the manufacture and sale of aerial lift
equipment: scissor lifts, boom lifts and a full line of replacement parts.
Scissor lifts and boom lifts are used for repair, maintenance and construction
of buildings, manufacturing facilities and equipment. These lifts are used for
a wide spectrum of industrial applications, such as installation and repair of
electrical and plumbing fixtures, drywall and ceiling installation, cleaning,
repair and painting of production equipment, refineries, chemical plants and
aircraft maintenance, in addition to common construction tasks such as siding,
insulation and structural member installation.
Mark was subsequently merged into Terex and operates as a division of Terex.
Mark was relocated to the Koehring facilities in Waverly, Iowa during 1992 in
order to more effectively utilize existing capabilities and manufacturing
facilities at the Waverly location.
Mark's largest competitor in the aerial lift industry is JLG Industries.
Northwest Engineering Company
The Company's Northwest Engineering Company ("Northwest Engineering"), is
located in Waverly, Iowa, and is operated by Koehring. The Company continues
to sell the products that established it in the construction machinery industry
over 70 years ago. Northwest Engineering's products are considered
"duty-cycle" machines, designed and constructed for constant heavy-duty
operation under demanding conditions in applications such as scrap processing,
material handling, dredging and aggregate mining, using magnets, clam shell
buckets and drag bucket options. Dragline operations usually consist of a
large scoop type bucket being dragged across the bottom of a pit to load the
bucket with sand, gravel or other material. The material is then either
stockpiled for later use or sale or loaded for transportation. Clamshell
operations consist of a large bucket with two halves that can be opened or
closed with use of a cable. Material can be mined, moved to or from a
stockpile, or loaded to or from transportation utilizing a clamshell. The sale
of replacement parts for Northwest Engineering products constitutes an
important part of the Northwest Engineering business. Because of the
durability and relatively high cost of replacing such machines, many users seek
to repair rather than replace them.
Northwest Engineering's competitors include Link Belt, American and Manitowoc.
BCP Construction Products
The Company's BCP Construction Products Division, located in Waverly, Iowa and
operated by Koehring, is engaged in the sale of replacement parts for
construction machinery formerly produced by Bucyrus-Erie Company
("Bucyrus-Erie"). A significant portion of the Company's acquisition of
certain assets of the Construction Machinery Division of Bucyrus-Erie (the
"Bucyrus Acquisition") related to this replacement parts business. For many
years, Bucyrus-Erie produced a variety of construction machinery products,
including hydraulic truck cranes, draglines, clamshells and other products
which continue in active use today.
Additionally, the Company acquired the right to produce the DYNAHOE in the
Bucyrus Acquisition. The DYNAHOE models 290K and 490K backhoe / loader will
dig up to 19 feet, which is the deepest in the industry. The DYNAHOE is used
primarily for underground excavation in connection with water, sewer and
electrical utility installations. The DYNAHOE offers a major benefit in large
metropolitan markets because, as opposed to excavators, it operates without a
tail swing, the absence of which permits the DYNAHOE to operate in restricted
space. Similar, although smaller, excavating units are produced by
competitors such as J. I. Case Company (a subsidiary of Tenneco), John Deere
and Caterpillar.
Fruehauf Trailer Corporation
On July 14, 1989, the Company, through Fruehauf, acquired certain assets and
assumed certain liabilities related to the trailer and maritime businesses of
Fruehauf Corporation. Fruehauf is a Delaware corporation which, prior to July
1991, was wholly-owned by Terex Holdings Corporation ("Terex Holdings"), a
Delaware corporation which, in turn, was wholly-owned by the Company. In July
1991, Fruehauf completed a recapitalization and consummated the Fruehauf IPO.
Because Terex Holdings and Fruehauf were wholly-owned prior to the Fruehauf
IPO, the Company consolidated the financial results of Fruehauf in its
financial statements. Following the Fruehauf IPO and as of December 31, 1991,
the Company owned approximately 42% of the outstanding Fruehauf common stock,
and retained voting control of more than 50% of Fruehauf's outstanding common
stock through a voting trust with the Company's principal stockholder and
certain individuals, who together owned approximately 21% of Fruehauf's
outstanding common stock. As a result, the Company consolidated Fruehauf's
financial results with those of the Company for financial reporting purposes
during 1991, and the financial interests of Fruehauf's minority stockholders
were reflected on the financial statements of the Company. The voting trust
terminated during 1992 and, as a result of the Fruehauf Restructuring described
below, the Company's direct ownership of Fruehauf was reduced to approximately
26% and, accordingly, the Company presently accounts for its ownership interest
in Fruehauf using the equity method. The Company's consolidated financial
statements contained in this Prospectus are presented giving effect to the
deconsolidation of Fruehauf as of January 1, 1992.
Fruehauf is headquartered in Southfield, Michigan and is a United States
manufacturer and marketer of truck trailers and related parts and has an
international presence through its foreign license arrangements and export
sales. Fruehauf currently markets its products through a distribution network
of 32 company-owned branches dedicated to new trailer and replacement part
sales, purchasing and selling used trailers, and performing maintenance and
repair services, and a network of approximately 250 independent dealers. In
addition, Fruehauf currently owns various interests in foreign trailer
manufacturers, including an equity interest in SESR, Europe's largest trailer
manufacturer, as well as interests in trailer manufacturers in Japan, South
Africa and Mexico. Fruehauf generates royalty income from licensing trademark
and patent rights to foreign trailer manufacturers, including those in which
Fruehauf has an equity interest.
On August 20, 1993, Fruehauf entered into agreements with its existing lenders,
a new lender and a number of investors which resulted in a restructuring of
existing debt, and provided for a new $25 million credit facility and $20.5
million of new equity (the "Fruehauf Restructuring"). The $25 million of new
credit is in the form of an inventory and receivables revolving credit facility
provided by Congress Financial Corporation. The $20.5 million of new equity
arose from the private placement of approximately 7,841,000 shares of Fruehauf
common stock at $1.50 per share and approximately $8,783,000 of convertible
subordinated debt. The convertible subordinated debt has since been converted
into approximately 5,855,000 additional shares of Fruehauf common stock. As
part of the restructuring, Terex agreed with Fruehauf to accept approximately
2,251,000 shares of Fruehauf common stock in satisfaction of approximately
$13.5 million of indebtedness of Fruehauf owed to Terex, which shares were
issued to the Company on December 23, 1993. As a result of the restructuring
and financing transactions, Terex's ownership of Fruehauf decreased to
approximately 26%. In December 1993 the Company sold 1,000,000 shares of
Fruehauf common stock, reducing its ownership of Fruehauf to approximately
22.6%. The net proceeds of such sale, approximately $3.0 million, will be used
by the Company to offer to purchase Secured Notes in the second quarter of 1994
pursuant to the indenture for the Secured Notes.
The Fruehauf Restructuring was completed following a period of severe liquidity
constraints which adversely affected Fruehauf's operations. The Fruehauf
Restructuring was consummated to fund its turnaround plan (the "Turnaround
Plan"). Key elements of the Turnaround Plan which Fruehauf is implementing
include reductions of fixed costs to lower Fruehauf's break-even levels,
obtaining access to sufficient working capital and vendor credit and
restructuring of bank credit facilities. Actions contemplated by the
Turnaround Plan include further reduction of excess manufacturing capacity,
deemphasis of vertical integration and rationalization of Fruehauf's management
infrastructure to levels more appropriate for Fruehauf's current business
volume.
Environmental Considerations
The Company generates hazardous and nonhazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of
federal, state, local and foreign environmental laws and regulations that (i)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for hazardous and nonhazardous wastes, and (ii) impose liability for the costs
of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous substances. Compliance with such laws
and regulations has, and will, require expenditures by the Company on a
continuing basis.
Fruehauf is contingently liable for portions of remedial costs at numerous
off-site waste disposal sites including those previously used by operations of
Fruehauf's predecessor. Fruehauf has received notice that it is considered a
"Potentially Responsible Party" under the Comprehensive Environmental Response,
Compensation, and Liability Act or other similar state laws at approximately 20
Superfund sites and has also identified environmental exposures at
approximately 26 other sites not designated as Superfund sites. The Company
believes that it could have contingent responsibility for certain of Fruehauf's
liabilities with respect to Fruehauf's environmental matters if Fruehauf fails
to discharge its obligations, to the extent that such liabilities arose during
the time period during which Terex was the controlling stockholder of Fruehauf.
The Company believes that Fruehauf's significant environmental liabilities
predate Terex's acquisition of Fruehauf, and therefore any contingent
responsibility of the Company is not expected to have a material adverse effect
on the Company.
Research and Development
The Company maintains an engineering staff at several of its locations which
designs new products and improvements in existing product lines. Such costs
incurred in the development of new products or significant improvements to
existing products amounted to $11.8 million, $6.7 million and $4.0 million in
1993, 1992 and 1991, respectively.
Materials
Principal materials used by the Company in its various manufacturing processes
include steel, castings, engines, tires, electric controls and motors, and a
variety of other fabricated or manufactured items. In the absence of labor
strikes or other unusual circumstances, substantially all such materials are
normally available from multiple suppliers.
Seasonal Factors
Given that the Company markets a large portion of its products in North America
and Europe, its sales of heavy equipment during the fourth quarter of each
year (i.e., October through December) to the construction industry are usually
lower than sales of such equipment during each of the first three quarters of
the year because of the adverse effect of inclement winter weather. However,
sales of heavy equipment to the mining industry, as well as sales of lift
trucks, are generally less affected by such seasonal factors.
Distribution
The Heavy Equipment Segment, other than Unit Rig, markets its products, both
original equipment and repair parts, generally through a worldwide dealership
network. Unit Rig distributes its products and services directly to customers
through its own distribution system.
The Company's heavy equipment dealers are independent businesses which
generally serve the construction, mining, timber and/or scrap industries.
Although these dealers carry products of a variety of manufacturers, and may or
may not carry more than one of the Company's products, each dealer generally
carries only one manufacturer's "brand" of each particular type of product.
The Company employs sales representatives who service these dealers from
offices located throughout the world.
Clark markets both original equipment and parts through a worldwide dealer
network. Clark dealers generally market the full Clark product line and
maintain comprehensive service capabilities. Clark dealers do not offer
products competitive with any Clark product. Clark operates a dealer service
organization designed to coordinate sales and promotional activities, provide
ongoing dealer training and facilitate dealer communications.
Backlog
The Company's backlog as of December 31, 1993 and 1992 was as follows:
December 31,
1993 1992
(in millions of dollars)
Heavy Equipment $ 80.7 $ 85.4
Material Handling 152.7 83.2
Total $ 233.4 $ 168.6
As described above under "Material Handling Segment," Clark was acquired by the
Company on July 31, 1992.
Substantially all of the Company's backlog orders are expected to be filled
within one year, although there can be no assurance that all such backlog
orders will be filled within that time period. The Company's backlog orders
pertain primarily to new equipment orders. Parts orders are primarily filled
on an as-ordered basis.
Competition
The Company is recognized as a significant competitor in the market for cranes,
scrapers, large capacity haulers, and aerial lift equipment, but the Company is
not a dominant manufacturer in the heavy equipment industry. The heavy
equipment industry is dominated in most segments by large, diversified firms
with much broader product lines and greater financial resources such as
Caterpillar, Dresser Industries and Komatsu. The Company also competes with a
number of specialty firms. The products of such specialty firms generally
compete directly with one or more of the Company's product lines.
Clark produces the leading lift truck brand in North America, although the
brand names of Hyster and Yale combined produce more lift trucks annually.
Other major North American competitors include Toyota, Caterpillar and Komatsu
in both IC and electric riders, and Crown and Raymond in electric riders alone.
In Europe, Clark competes with Linde Group, the European market leader, as
well as Hyster-Yale, Toyota and Fiat. Clark also competes with a number of
specialty firms.
Patents, Licenses and Trademarks
Several of the trademarks and trade names of the Company, in particular the
TEREX, KOEHRING, LORAIN, UNIT RIG, MARKLIFT, DYNAHOE, CLARK, DREXEL, and
POWRWORKER trademarks, are important to the business of the Company. The
Company owns and maintains trademark registrations in countries where it
conducts business, and monitors the status of its trademark registrations to
maintain them in force and to renew them as required. The Company also takes
steps, including legal action, to protect its trademark and trade name rights
when circumstances warrant such action.
Employees
As of December 31, 1993, the Company had approximately 2,930 employees.
Approximately 40% of the Company's employees are represented by labor unions
which have entered into various separate collective bargaining agreements with
the Company. Although the Company has experienced labor strikes in the past,
the Company considers its relations with its personnel to be good.
Financial Information about Industry and Geographic Segments, Export Sales and
Major Customers
Information regarding foreign and domestic operations, export sales, segment
information and major customers is included in Note P -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements for December
31, 1992.
Properties
The following table outlines the principal manufacturing, warehouse and office
facilities owned or leased by the Company and its subsidiaries:
Entity Facility Location Type and Size of Facility
The Heavy Equipment Segment
Terex
(Distribution
Center) Southaven, Mississippi * Warehouse and light manufacturing
505,000 sq. ft.
Unit Rig ** Tulsa, Oklahoma Manufacturing and office
325,000 sq. ft.
Koehring Waverly, Iowa Manufacturing, warehouse and
office 383,000 sq. ft.
Koehring Waterloo, Iowa Manufacturing and office
66,000 sq. ft.
TEL Motherwell, Scotland Manufacturing, warehouse and
office 714,000 sq. ft.
The Material Handling Segment
CMHC Lexington, Kentucky * Manufacturing, warehouse and
office 372,600 sq. ft.
CMHC Lexington, Kentucky Training and research and
development 43,000 sq. ft.
CMHC Danville, Kentucky Manufacturing, utility and
office 84,800 sq. ft.
Drexel
Industries *** Horsham, Pennsylvania Manufacturing 55,000 sq. ft.
CMHC Lexington, Kentucky* Office 64,600 sq. ft.
CMHC Lexington, Kentucky* Office 1,900 sq. ft.
CMHC Lexington, Kentucky* Warehouse 59,500 sq. ft.
CMHC Chicago, Illinois* Warehouse and office 11,100 sq.
ft.
Clark Germany Mulheim-Ruhr, Germany Manufacturing, engineering, power
generation, maintenance and office
255,430 sq. ft.
Clark Germany Saarn, Germany Warehouse 430,000 sq. ft.
Clark Forklift
Korea
Incorporated Seoul, South Korea Manufacturing and office
13,764 sq. ft.
Clark Forklift
Korea
Incorporated Banwael, Korea Manufacturing and office
40,000 sq. ft.
* This facility is either leased or subleased by the indicated entity.
** Unit Rig also has 10 owned or leased locations for parts distribution
and rebuilding of components, of which two are in the United States, two are in
Canada and six are abroad.
*** Drexel Industries, Inc. is an indirect subsidiary of Terex and an
affiliate of CMHC.
Clark also operates seven sales and service branch locations, all of which are
leased. The branch facilities consist of office and service space and
generally range in size from 1,500 to 3,100 square feet per facility. Such
branch facilities are suitable and adequate for Clark's use.
The properties listed above are suitable and adequate for the Company's use.
The Company has determined that certain of its properties exceed its
requirements. Such properties may be sold, leased or utilized in another
manner and have been excluded from the above list.
Legal Proceedings
In October 1992, a Class Action complaint was filed purportedly on behalf of
all persons who purchased Terex Common Stock during the period from January 2,
1990 through October 5, 1992 (the "Period") against the Company and its
Chairman. This suit sought unspecified compensatory and punitive damages and
alleged, among other things, that (i) the Company engaged in fraudulent
accounting practices, improper reporting of taxes and the illegal manufacture
of missile launchers for Iraq and (ii) the Company's Annual Report to
Shareholders and its Commission reports on Forms 10-K and 10-Q issued during
the Period contained materially false figures for assets, liabilities and/or
shareholders' equity. A motion to dismiss the action filed by the Company was
granted in September 1993. The plaintiff was granted an extension of time to
file an amended complaint; however, the plaintiff determined not to proceed
with the action. As a result, this action is no longer pending.
In December 1992, a separate Class Action complaint was filed purportedly on
behalf of all persons who purchased Fruehauf common stock during the period
from June 28, 1991 through December 4, 1992 against Fruehauf, the Company,
certain of Fruehauf's officers and directors, namely, Randolph W. Lenz,
Marvin B. Rosenberg, Arthur E. Rowe, G. Chris Andersen and Raymond J. Dempsey,
and certain of the underwriters of the Fruehauf IPO, namely, Paine Webber
Incorporated, Alex. Brown & Sons, Incorporated and Wertheim Schroeder & Co.,
Incorporated, in the United States District Court, Eastern District of
Michigan, Southern Division, seeking unspecified compensatory and punitive
damages. The complaint alleges, among other things, that, in connection with
the Fruehauf IPO, the defendants misrepresented Fruehauf's liquidity and the
status of compliance with Fruehauf's credit facilities at the time of the
Fruehauf IPO. This action is at a very early stage; however, the Company
believes that the claims are without merit and that they have valid defenses to
the claims made. The Company has not recorded any loss provision for this
litigation.
The Company is involved in other various legal proceedings, including product
liability and workers' compensation liability matters, which have arisen in the
normal course of its operations. Management believes that the final outcome of
such matters will not have a material adverse effect on the Company's
consolidated financial position.
MANAGEMENT
Executive Officers and Directors
The following individuals are currently directors of the Company:
Positions and First Year
Name Age Offices with Company Elected Director
Randolph W. Lenz 47 Chairman of the Board, 1983
Chief Executive Officer
and Director
Ronald M. DeFeo 41 President, Chief Operating 1993
Officer and Director
Marvin B. Rosenberg 53 Senior Vice President, 1992
General Counsel,
Secretary and Director
G. Chris Andersen 55 Director 1992
Bruce I. Raben 40 Director 1992
David A. Sachs 34 Director 1992
Adam E. Wolf 79 Director 1983
Mr. Lenz joined the Company as Chairman of the Board and a director in 1983.
Mr. Lenz also served as Chairman of the Board and a director of Fruehauf from
its acquisition in 1989 until August 1993. He joined Terex's predecessor,
Northwest Engineering, as Chairman of the Board and a director in 1983 and
continues to serve in such capacities with Terex. In addition, Mr. Lenz has
also been the Chairman of the Board and a director of CBC Bancorp, Inc., a bank
holding company, since 1992.
Ronald M. DeFeo became a director of the Company in 1993 and was appointed
President and Chief Operating Officer of the Company on October 4, 1993. He
has also served as the President of Clark since May 1993. Prior to joining
Terex on May 1, 1992 and serving as President of Terex's Heavy Equipment
Segment, Mr. DeFeo was a Senior Vice President of J.I. Case Company, the farm
and construction equipment division of Tenneco Inc., and also served as a
Managing Director of Case Construction Equipment throughout Europe. While at
J.I. Case, Mr. DeFeo was also a Vice President of North American Construction
Equipment Sales and General Manager of Retail Operations.
Mr. Rosenberg was appointed a director of the Company in 1992 and was appointed
as Senior Vice President of the Company effective January 1, 1994. He has
served as Secretary and General Counsel of the Company since 1987. Mr.
Rosenberg was also appointed a director of Fruehauf in 1992 and served as
Secretary of Fruehauf since it was organized in March 1989 until August 1993.
Since 1987, he has also been General Counsel of KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), an entity that, until December 31,
1993, provided administrative, financial, marketing, technical, real estate and
legal services to the Company and its subsidiaries. Previously, for 15 years,
he had been General Counsel for, and a partner of, Cambridge Research and
Development Group, a company engaged in the commercialization of new technology
and the acquisition and operation of industrial companies.
Mr. Andersen was appointed director of the Company in 1992 and served as a
director of Fruehauf from July 1991 until August 1993. Mr. Andersen has been
Vice Chairman of PaineWebber Incorporated ("PaineWebber") since March 1990.
Prior to joining PaineWebber, Mr. Andersen was Managing Director for nine years
of Drexel Burnham Lambert Incorporated ("Drexel Burnham"), an investment
banking firm which filed for protection under Chapter 11 of the United States
Bankruptcy Code in 1990. Mr. Andersen is a director of Sunshine Mining
Company.
Mr. Raben was appointed director of the Company in 1992. Since 1990, Mr. Raben
has been an Executive Vice President and Co-Head of the Corporate Finance
Department at Jefferies. Mr. Raben was employed by Drexel Burnham from 1978 to
1990 where he served in various capacities including Managing Director.
Mr. Sachs was appointed director of the Company in 1992 and served as a
director of Fruehauf from November 1992 to March 1993. Mr. Sachs is employed
at TMT-FW, Inc., an affiliate of Taylor & Co., a private investment firm based
in Fort Worth, Texas. TMT-FW, Inc. is one of two general partners of EBD,
L.P., which is the sole general partner of The Airlie Group L.P. ("Airlie").
At TMT-FW, Inc., Mr. Sachs is engaged in the investment activities of both
Airlie and Taylor & Co. Prior to joining TMT-FW, Inc. in 1990, Mr. Sachs was
employed by Columbia Savings and Loan Association from 1984 to 1990 where he
served in various capacities, including Executive Vice President.
Mr. Wolf became a director of the Company in 1983. Mr. Wolf has been
principally self-employed as an attorney throughout his career.
The following table sets forth, as of January 1, 1994, the respective names and
ages of the Company's executive officers indicating all positions and offices
held by each such person.
Name Age Positions and Offices Held
Randolph W. Lenz 47 Chairman of the Board and
Chief Executive Officer
Ronald M. DeFeo 41 President and Chief Operating
Officer
David J. Langevin 42 Executive Vice President
Marvin B. Rosenberg 53 Senior Vice President, General
Counsel and Secretary
Ralph T. Brandifino 48 Senior Vice President and Chief
Financial Officer
For information regarding Messrs. Lenz, DeFeo and Rosenberg, refer to the table
listing directors above.
David J. Langevin became Executive Vice President of the Company effective
January 1, 1994 and had been appointed Acting Chief Financial Officer of the
Company on March 9, 1993. He has been employed as a Vice President of KCS
since 1988. Prior to KCS, Mr. Langevin was an employee of Ernst & Whinney
(currently Ernst & Young) where he became a partner in 1986.
Ralph T. Brandifino was appointed to the position of Senior Vice President and
Chief Financial Officer on December 6, 1993. Mr. Brandifino was previously the
Chief Financial Officer at the Long Island Lighting Company from 1987 through
1993, previous to which he served as Chief Financial Officer at Chicago
Pneumatic Tool Company, a capital goods manufacturer.
Executive Compensation
Summary Compensation Table
The Summary Compensation Table below shows the compensation for the past three
fiscal years of the Company's Chief Executive Officer and its executive
officers with 1993 earned qualifying compensation in excess of $100,000.
Long-Term
Name and Year Salary Bonus Other Options/SARS All Other
Principal ($) ($) ($) (#) Compensation
Position ($)
Randolph W. 1993 483,508 - - - -
Lenz, Chairman 1992 486,000 - - - -
of the Board 1991 473,262 - - - -
and Chief
Executive
Officer(1)
Ronald M. 1993 237,500 60,000 214,604(5) - 3,148(6)
DeFeo, 1992 135,385 66,666 - 20,000 -
President and 1991 - - - - -
Chief Operating
Officer(2)
Ralph T. 1993 16,913 - 648(7) - -
Brandifino, 1992 - - - - -
Senior Vice 1991 - - - - -
President and
Chief Financial
Officer(3)
Gary D. Bello, 1993 125,000 - - - 284,664(8)
President, 1992 122,500 125,100 - - 710(6)
Material 1991 - - - - -
Handling
Segment(4)
(1) In conjunction with the proposed termination of the Company's management
agreement with KCS, Mr. Lenz, together with Messrs. Langevin and Rosenberg (who
became employees of the Company on January 1, 1994), will receive certain
securities of the Company, subject to the approval of the Company's
stockholders. See "Certain Transactions."
(2) Mr. DeFeo joined Terex on May 1, 1992.
(3) Mr. Brandifino joined Terex on December 6, 1993.
(4) Mr. Bello joined Terex as an executive officer on July 31, 1992 when the
Company completed the Clark Acquisition. Mr. Bello terminated his service with
the Company effective May 7, 1993. CMHC and Mr. Bello entered into a
termination agreement which provided for a lump sum termination payment to Mr.
Bello by CMHC of $300,000 and which provided Mr. Bello with certain benefits,
including medical benefits, life insurance coverage, use of an automobile and
outplacement services, through May 7, 1994.
(5) Relocation payments.
(6) Company's matching contribution to defined contribution plan account.
(7) Automobile allowance.
(8) Includes $281,538 termination payment (net of certain reimbursements to
the Company) and $3,126 Company's matching contributions to defined
contribution plan account.
Option Grants in 1993
The table below summarizes options granted during 1993 to the named executive
officers listed in the Summary Compensation Table.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Individual Grants Price Appreciation
for Option Term
Name Options % of Total Exercise Expiration 5%($) 10%($)
Granted Options Price Date
(#) Granted to
Employees
Randolph W. - - - - - -
Lenz
Ronald M. 10,000 42% $8.375 11/30/03 52,670 133,476
DeFeo
Ralph T. - - - - - -
Brandifino
Gary D. Bello - - - - - -
In May 1986, the stockholders approved an incentive stock option plan covering
key management employees. As further amended by action of the stockholders and
the Board of Directors, 395,354 shares of the Company's Common Stock were
available for purchase pursuant to options granted or to be granted under the
plan. The exercise price approximates the current market price at the time of
the grant. Employees vest in options granted ratably over three years from the
date of grant.
Aggregated Option Exercises in 1993 and Year-End Option Values
The table below summarizes options exercised during 1993 and year-end option
values of the named executive officers listed in the Summary Compensation
Table.
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Year-end (#) Year-end ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized($) Unexercisable Unexercisable
Randolph W. Lenz - - - -
Ronald M. DeFeo - - 6,667/23,333 - / -
Ralph T. - - - -
Brandifino
Gary D. Bello - - - -
Pension Plans
The Company maintains numerous defined benefit pension plans covering most
domestic employees, including certain officers of the Company. Retirement
benefits for the plans covering the salaried employees are based primarily on
years of service and employees' qualifying compensation during the final years
of employment.
Mr. Lenz and Mr. DeFeo participate in the Terex Corporation Salaried Employees'
Retirement Plan (the "Plan"). Mr. Brandifino does not participate because
participation in the Plan was frozen as of May 7, 1993, prior to Mr.
Brandifino's employment with the Company. Mr. Bello, as an employee of Clark,
a subsidiary of the Company, was not a participant in the Plan nor is any other
employee of Clark. Clark employees do not participate in a defined benefit
retirement plan.
Participants of the Plan with five or more years of eligible service are fully
vested and entitled to annual pension benefits beginning at age 65. Retirement
benefits under the Plan are determined based on 1.02% of final average earnings
plus .71% of such compensation in excess of amounts shown on the applicable
Social Security Integration Table for participants born prior to 1938. For
participants born during 1938-1954, the formula is modified by replacing the
1.02% and .71% figures with 1.08% and .65%, respectively. For participants
born after 1954, the formula is modified by replacing the 1.02% and .71%
figures with 1.13% and .60%, respectively. Service in excess of 25 years is
not recognized. There is no offset for primary Social Security.
Participation in the Plan was frozen as of May 7, 1993, and no participants,
including Mr. Lenz and Mr. DeFeo, will be credited with service following such
date, except that participants not fully vested, including Mr. DeFeo, will be
credited with service for purposes of determining vesting only. Mr. Lenz is
already fully vested. The annual retirement benefits payable at normal
retirement age under the Plan will be $31,530 for Mr. Lenz and $4,503 for Mr.
DeFeo (assuming full vesting).
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock by each person known by the Company to own
beneficially more than 5% of the Company's Common Stock, each director and
executive officer of the Company, and all directors and executive officers as a
group, as of January 1, 1994.
Amount Percent
Name and Address Beneficially of
of Beneficial Owner Owned Class
Randolph W. Lenz(1) 5,061,537 (3) 49.13%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
The Airlie Group L.P.(2) 965,000 (4) 9.29%
201 Main Street
Fort Worth, TX 76102
Dort A. Cameron, III(2) 971,000 (4) 9.34%
c/o The Airlie Group, L.P.
201 Main Street
Fort Worth, TX 76102
Thomas M. Taylor(2) 1,270,500 (4) 12.22%
c/o The Airlie Group, L.P.
201 Main Street
Fort Worth, TX 76102
EBD L.P. (2) 965,000 (4) 9.29%
c/o The Airlie Group, L.P.
201 Main Street
Forth Worth, TX 76102
TMT-FW, Inc. (2) 965,000 (4) 9.29%
c/o The Airlie Group, L.P.
201 Main Street
Forth Worth, TX 76102
G. Chris Andersen 0 *
1285 Avenue of the Americas
New York, NY 10019
Ronald M. DeFeo 9,667 (5) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Bruce I. Raben 11,000 *
11100 Santa Monica Boulevard
Suite 1000
Los Angeles, CA 90025
Marvin B. Rosenberg 0 *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
David A. Sachs 10,000 *
201 Main Street
Suite 3200
Fort Worth, TX 76102
Adam E. Wolf 7,400 *
875 East Donges Lane
Milwaukee, WI 53217
David J. Langevin 5,400 *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Ralph T. Brandifino 0 *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
All directors and officers 5,105,004 (5) 49.55%
as a group (9 persons)
* Amount owned does not exceed one percent (1%) of the class so owned.
(1) Mr. Lenz currently pledges, and intends to pledge in the future, shares of
the Common Stock owned by him as collateral for loans. If Mr. Lenz does not
pay such loans when due, the pledgee may have the right to sell the shares of
the Common Stock pledged to it in satisfaction of Mr. Lenz's obligations. The
sale of a significant amount of such pledged shares could result in a change of
control of the Company and may require the Company to make an offer to purchase
certain of its outstanding debt instruments.
(2) Dort A. Cameron, III and TMT-FW, Inc., a Texas corporation, are general
partners of EBD L.P., a Delaware limited partnership which is the sole general
partner of Airlie. Thomas M. Taylor is the President, sole director and sole
stockholder of TMT-FW, Inc. By reason of such relationships, Messrs. Cameron
and Taylor may each be deemed the beneficial owner of the shares deemed
beneficially owned by Airlie. On December 22, 1993, each of the indicated
individuals, together with certain other persons, filed Amendment No. 9 to a
Schedule 13D Statement filed pursuant to Section 13(d) of the Exchange Act
reflecting the ownership of an aggregate of 1,255,5000 shares of Common Stock,
40,000 shares of Preferred Stock and 40,000 Warrants, or approximately 13.7% to
14.4% of all outstanding Common Stock, assuming the conversion of such shares
of Preferred Stock and the exercise of such Warrants (but not the conversion of
any Preferred Stock or the exercise of any Warrants by any other holder).
Except as otherwise reflected in this table or the footnotes thereto, each of
the indicated individuals disclaims the beneficial ownership of any shares held
by any other party to such Schedule 13D filing.
(3) Mr. Lenz is the direct owner of 4,984,337 shares of Common Stock,
representing approximately 48.38% of the outstanding Common Stock. In
addition, Mr. Lenz is the indirect beneficial owner of 77,200 shares of Common
Stock through a corporation that he indirectly owns and controls.
(4) For each of Airlie, Dort A. Cameron, III, Thomas M. Taylor, EBD L.P. and
TMT-TW, Inc., the amount shown assumes the conversion of the shares of
Preferred Stock owned by such beneficial owner (but not by any other holder of
Preferred Stock), but does not assume the exercise of any Warrants owned by
such beneficial owner, since the Warrants are not currently exercisable.
(5) Includes 6,667 shares issuable upon the exercise of currently exercisable
options held by Mr. DeFeo. See "Management -- Executive Compensation."
SELLING SECURITY HOLDERS
The following table sets forth certain information, as of January 19, 1994,
regarding the Warrants held by the Selling Security Holders covered by this
Prospectus. Until the occurrence of the Warrant Ratio Determination Date, the
Warrants are not exercisable for Warrant Shares and the number of Warrant
Shares issuable upon exercise of a Warrant is not determinable. Because the
Selling Security Holders may offer all or some part of the Warrants and Warrant
Shares which they hold from time to time pursuant to the offering contemplated
by this Prospectus, and because this offering is not being underwritten on a
firm commitment basis, no estimate can be given as to the amount of Warrants or
Warrant Shares that will be held by the Selling Security Holders upon
termination of this offering. See "Plan of Distribution."
Name of Selling Number of
Security Holder Warrants Held
Atwell & Co. 40,000
Auer & Co. 25,000
The Bond Fund For Growth 20,000
Cerberus International 20,000
Elliott Associates, L.P. 90,000
FAMCO Income Partners, L.P. 80,000
Gamcan Limited 1,400
Gerlach & Co. 400,000
Hare & Co. 40,000
Institutional Partners, L.P. 14,100
JEFCO 210,000
Landmark American Fund 30,000
Paresco, Inc. 40,000
SC Fundamental
Value Fund, L.P. 40,000
SP Investors International NV 23,000
Steinhardt Overseas Fund, Ltd. 25,500
Steinhardt Partners, L.P. 16,000
Strome Offshore, Ltd. 90,000
Strome Susskind
Hedgecap Fund, L.P. 80,000
Taft Securities 5,000
The Value Realization
Fund, L.P. 10,000
The Warrants and Warrant Shares are being registered for resale solely for the
account of the Selling Security Holders. None of the Selling Security Holders
and none of their respective officers, directors or stockholders has had any
material relationship with the Company within the past three years, except as
set forth in "Certain Transactions."
It is anticipated that each of the Selling Security Holders named herein will
offer and sell the Warrants which may be sold by such person hereunder from
time to time in ordinary transactions to or through one or more brokers or
dealers in the over-the-counter market or in private transactions at such
prices as may be obtainable. Any such person may be deemed to be an
"underwriter" as that term is defined by the Securities Act. However, the
Company and such persons disclaim that any such person is an underwriter of the
Warrants.
CERTAIN TRANSACTIONS
Under a contract dated July 1, 1987, KCS, principally owned by Randolph W.
Lenz, Chairman of the Board and Chief Executive Officer of the Company, until
December 31, 1993 provided administrative, financial, marketing, technical,
real estate and legal services to the Company and its subsidiaries. KCS also
provided assistance in the evaluation, negotiation and consummation of
potential acquisitions of other companies, products and processes, as well as
the development of new areas of business for the Company.
For the services of KCS, the Company paid KCS an annual fee plus the
reimbursement for all out-of-pocket expenses incurred by KCS in fulfilling the
contract, including travel and similar expenses and fees for professional and
other services provided by third parties. Each year the contract was in
effect, the annual fee increased by the greater of 10% or the increase in the
Consumer Price Index, subject to limitations imposed by the Company's debt
agreements. During 1993, the Company made payments to KCS for fees and
out-of-pocket expenses of $2.9 million and $0.1 million respectively.
During 1993, the Board of Directors of the Company concluded that it would be
in the Company's best interest to terminate the Company's contract with KCS and
integrate the management services of KCS directly into the Company. Pursuant
to an agreement between the Company and KCS, the contract between the Company
and KCS was suspended as of the close of business on December 31, 1993, with
the contract to be terminated upon the consent of the Company's stockholders to
a proposed issuance of securities to certain executives of KCS, as discussed
below. David J. Langevin and Marvin B. Rosenberg, employees of KCS, became
salaried employees of the Company effective January 1, 1994, with the titles of
Executive Vice President and Senior Vice President, respectively. In addition,
in consideration of the proposed termination of the contract, the Company has
agreed, subject to the approval of the stockholders of the Company, to issue
89,800 shares of the Company's Series B Cumulative Redeemable Convertible
Preferred Stock and 89,800 common stock purchase warrants to certain executives
of KCS, the terms of which will be substantially similar to the terms of the
Preferred Stock and the Warrants, respectively. Of such amounts, Messrs.
Langevin and Rosenberg would each receive 25,500 shares of preferred stock and
warrants and Mr. Lenz would receive 38,800 shares of preferred stock and
warrants. Upon stockholder approval, the contract will terminate and such
securities will be issued to Messrs. Langevin, Rosenberg and Lenz. Absent such
stockholder approval, the suspension will terminate and the contract will be
restored in full force and effect, although the Company will continue to
endeavor to achieve an alternate agreement with KCS to terminate the contract.
The Company, certain directors and executives of the Company, and KCS are named
parties in various legal proceedings. During 1993, the Company incurred $0.4
million of legal fees and expenses on behalf of the Company, directors and
executives of the Company, and KCS named in the lawsuits.
David A. Sachs, a director of the Company, is affiliated with Airlie, a limited
partnership which owns approximately 9.29% of the Company's Common Stock
(including Common Stock issuable upon conversion of Preferred Stock) and 40,000
Warrants. Mr. Sachs is an employee of the investment firm of TMT-FW, Inc.
which is one of two general partners of the general partner of Airlie. On
December 20, 1993, Airlie purchased 40,000 Warrants and 40,000 shares of
Preferred Stock from the Company as part of the Company's private placement.
Prior to 1992, the Company charged Fruehauf for management services and for
interest on amounts owed to Terex. As of January 1, 1992, the Company no
longer charges Fruehauf for management expenses and interest on amounts due the
Company. However, the Company and Fruehauf continue to charge one another for
payments made on each other's behalf in the normal course of business. The
outstanding balance owed by Fruehauf to the Company was $13.6 million at
September 30, 1993, $12.9 million at December 31, 1992 and $10.2 million at
December 31, 1991. As part of the Fruehauf Restructuring, the Company accepted
in December 1993 approximately 2,251,000 shares of Fruehauf common stock in
satisfaction of approximately $13.5 million of indebtedness of Fruehauf to the
Company.
As part of the Fruehauf Restructuring, the Company agreed to vote its shares of
Fruehauf common stock in favor of, or consent to, an amendment to Fruehauf's
Certificate of Incorporation to authorize additional shares of Fruehauf capital
stock and the issuance of a portion of such stock to purchasers of Fruehauf's
convertible subordinated notes and to the Company, in satisfaction of
Fruehauf's indebtedness to the Company. The Company also agreed, for a period
of 18 months beginning July 26, 1993, generally to vote its shares of Fruehauf
common stock in any other matter in such proportion as the other stockholders
of Fruehauf entitled to vote on such matter shall vote their shares of Fruehauf
common stock. In addition, at the time of the Fruehauf Restructuring, the
Company entered into an agreement with IBJ Schroder Bank & Trust Company ("IBJ
Schroder"), on behalf of a group of commercial bank lenders, pursuant to which
the Company is obligated to pay a fee of $1,000,000 on or before December 31,
1994 in consideration of the assistance of the banks in evaluating the
feasibility of Fruehauf's proposed Turnaround Plan and to induce the banks to
consent to certain requests by the Company. Mr. Lenz pledged certain of his
shares of Common Stock to IBJ Schroder, as agent for such lenders, as security
for the payment of such amount by the Company.
On January 25, 1993, Terex entered into an agreement whereby KCS borrowed $1.7
million from Terex (the "KCS/Terex Note"). The KCS/Terex Note bore interest at
prime. The loan represented by the KCS/Terex Note may have constituted a
default under the Secured Notes, the Subordinated Notes and the Bank Lending
Agreement. The entire balance was repaid to Terex on February 1, 1993, six
days after the initial borrowing, thereby curing any default which may have
occurred.
The Company's Board of Directors approved a program to consolidate Fruehauf's
parts warehousing and administration functions with the Company. During the
fourth quarter of 1992, Fruehauf announced its intention to close its parts
warehouse in Westerville, Ohio and transfer its replacement parts inventory to
the Terex distribution center near Memphis, Tennessee. As a result of the
Fruehauf Restructuring, the proposed arrangement will not be effectuated. In
November 1992, in contemplation of this agreement, Terex had transferred $2.0
million to Fruehauf. The $2.0 million transfer constituted a default
("November Default") under the Secured Notes, the Subordinated Notes and the
Bank Lending Agreement. Subsequently in May 1993, Terex entered into an
agreement with an operating unit of Fruehauf, whereby such operating unit will
provide products and manufacturing services to Terex. This agreement required
Terex to make a $2.0 million payment to such operating unit, which Terex
effected on May 11, 1993 by instructing Fruehauf to transfer the $2.0 million
Fruehauf owed to Terex directly to such operating unit. This transfer also
satisfied Fruehauf's $2.0 million obligation to Terex so that the events which
gave rise to the November Default no longer exist. The Company is in
discussions with Fruehauf concerning the satisfaction of Fruehauf's obligations
under the May 1993 agreement.
In August 1992, Clark purchased certain assets of a subsidiary of Fruehauf for
$0.8 million. This constituted a default under the Secured Notes, the
Subordinated Notes and the Bank Lending Agreement because the purchase did not
have prior approval of the independent members of the Company's Board of
Directors. The approval was subsequently obtained; therefore, the events which
gave rise to such default no longer exist.
In conjunction with the Clark Acquisition, the Company financed the acquisition
and refinanced a major component of its previously outstanding bank debt
through a private placement of Secured Notes and SAR's, and the establishment
of a revolving credit facility with a commercial bank. Mr. Raben, a director
of the Company, is an employee and officer of Jefferies, the investment banking
firm which acted as an exclusive placement agent for the Company in the
offering of the Secured Notes and SAR's. Jefferies was paid in total fees of
$6.5 million in 1992 for services performed as placement agent. Jefferies was
also the Company's placement agent for the December 1993 sale of the Preferred
Stock and Warrants for which Jefferies received fees totalling $2.5 million in
1993. Jefferies was also the agent for the Company for certain sales by the
Company of its common stock of Fruehauf in 1993. Jefferies is also the holder
of 210,000 Warrants and 180,000 shares of Preferred Stock, which Jefferies
acquired from the Company in connection with the Company's private placement on
December 20, 1993.
During 1993, Fruehauf retained PaineWebber as a financial advisor to explore
opportunities to maximize stockholder value in Fruehauf. G. Chris Andersen, a
member of the Company's Board of Directors, is an executive with PaineWebber.
The Company intends that all transactions with affiliates are on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board will be advised in advance of any such proposed
transaction or agreement and will utilize such procedures in evaluating their
terms and provisions as are appropriate in light of the Board's fiduciary
duties under Delaware law. In addition, the Company has an Audit Committee
consisting solely of independent directors. One of the responsibilities of the
Audit Committee is to review related party transactions.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 40,000,000 shares of capital
stock, $.01 par value, consisting of 30,000,000 shares of Common Stock and
10,000,000 shares of preferred stock. As of January 1, 1994, 10,303,067 shares
of Common Stock and 1,200,000 shares of preferred stock were issued and
outstanding.
Common Stock
Each outstanding share of Common Stock entitles the holder to one vote, either
in person or by proxy, on all matters submitted to a vote of stockholders,
including the election of directors. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the directors then standing
for election. Subject to preferences which may be applicable to any
outstanding shares of preferred stock, holders of Common Stock have equal
ratable rights to such dividends as may be declared from time to time by the
Board of Directors out of funds legally available thereof. See "Market for
Common Stock and Dividend Policy."
Holders of Common Stock have no conversion, redemption or preemptive rights to
subscribe to any securities of the Company. All outstanding shares of Common
Stock are fully paid and nonassessable. In the event of any liquidation,
dissolution or winding-up of the affairs of the Company, holders of Common
Stock will be entitled to share ratably in the assets of the Company remaining
after provision for payment of liabilities to creditors and preferences
applicable to outstanding shares of preferred stock. The rights, preferences
and privileges of holders of Common Stock are subject to the rights of the
holders of any outstanding shares of preferred stock. See "-- Preferred
Stock."
The Certificate of Incorporation provides that directors of the Company shall
not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duties as a director except to the extent
otherwise required by Delaware law. The by-laws of the Company provide for
indemnification of the officers and directors of the Company to the fullest
extent permitted by Delaware law.
The transfer agent and registrar for the Common Stock is Mellon Securities
Transfer Services, 111 Founders Plaza, Suite 1100, East Hartford, Connecticut
06108.
Warrants
The following summary of the terms and provisions of the Warrants does not
purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Warrants and the Warrant Agreement, the forms of
which are filed as exhibits to the Registration Statement.
Term. Each Warrant may be exercised by the registered holder thereof at any
time in whole and from time to time in part, at the option of the holder,
commencing at the opening of business on the day following the Warrant Ratio
Determination Date until 5:00 p.m. New York time on December 31, 2000 (the
"Expiration Date"). "Warrant Ratio Determination Date" means the date
designated as such by the Board of Directors of the Company pursuant to a duly
adopted resolution of the Board, which date shall be a trading day during the
12 month period beginning on the Issue Date or, if no such date is designated,
the last day of such 12 month period; provided, that if the Board of Directors
has not yet designated a Warrant Ratio Determination Date and the Current
Market Price (as hereinafter defined) of a share of Common Stock equals or
exceeds $18.00 per share on any date during such 12 month period, the "Warrant
Ratio Determination Date" will be such date.
A Warrant may be exercised upon (i) surrender of the Warrant certificate at the
principal office of the Warrant Agent, with the form of election to purchase on
the reverse thereof duly completed and signed and (ii) payment of the Exercise
Price with respect to the Warrant Shares being purchased, payable by certified
or bank check to the order of the Company.
Warrant Ratio. Upon the exercise or redemption (see "--Redemption" below) of a
Warrant, the holder thereof shall be entitled to receive the number of Warrant
Shares and other consideration, if any (the "Warrant Ratio"), equal to (a) 3.0
shares of Common Stock if the Current Market Price of a share of Common Stock
on the Warrant Ratio Determination Date is $5.00 or less; (b) a number of
Warrant Shares which decreases from 3.0 shares to 1.0 share with the increase
in such Current Market Price per share from $5.00 to $18.00, if such Current
Market Price per share is greater than $5.00 but less than $18.00, as set forth
in the schedule below; and (c) 1.0 Warrant Share if such Current Market Price
per share is $18.00 or more.
Current Market Price Warrant Ratio
$ 5.00 or less 3.00
$ 5.50 2.75
$ 6.00 2.53
$ 6.50 2.36
$ 7.00 2.20
$ 7.50 2.07
$ 8.00 1.95
$ 8.50 1.85
$ 9.00 1.76
$ 9.50 1.68
$10.00 1.60
$10.50 1.54
$11.00 1.48
$11.50 1.42
$12.00 1.37
$12.50 1.33
$13.00 1.28
$13.50 1.24
$14.00 1.21
$14.50 1.17
$15.00 1.14
$15.50 1.11
$16.00 1.08
$16.50 1.06
$17.00 1.03
$17.50 1.01
$18.00 or more 1.00
"Current Market Price" per share of Common Stock on any day means the average
of the daily closing prices with respect to the Common Stock for the 30
consecutive trading days ending on such date (or, if such date is not a trading
day, on the trading day immediately preceding such date); provided, that if the
Common Stock is not publicly traded, the Current Market Price per share shall
be determined by a nationally recognized investment banking firm selected by
the Board of Directors of the Company.
In the event that (i) the shelf Registration Statement of which this Prospectus
is a part shall not have become effective on or prior to the 90th day following
the Issue Date, or (ii) prior to the end of the period during which a
registration statement relating to the Warrants is required to be maintained
effective pursuant to the Warrant Registration Rights Agreement, the Commission
shall have issued a stop order suspending the effectiveness of the shelf
Registration Statement, then for each 30 consecutive day period (without
duplication) during which either of the foregoing events has occurred and is
continuing, the Warrant Ratio will increase by 0.5%.
Exercise Price. The Warrants are exercisable for $.01 per Warrant Share in the
case of Common Stock and in the case of all other securities issuable upon
exercise of the Warrants, for the lowest exercise price permitted by law.
Redemption. The Warrants may be redeemed by the Company in whole, but not in
part, in exchange for Warrant Shares at any time on or after the Warrant Ratio
Determination Date; provided, that concurrently with such redemption the
Company redeems all then outstanding shares of Preferred Stock. Each Warrant
will be redeemable for a number of Warrant Shares equal to the Warrant Ratio on
the date of redemption.
Notice of redemption of the Warrants shall be sent by or on behalf of the
Company to the holders not less than 30 days nor more than 60 days prior to the
date fixed for redemption (i) notifying the holders of the election of the
Company to redeem the Warrants and of the date of redemption, (ii) stating the
place or places at which the Warrants shall, upon presentation and surrender of
certificates evidencing such Warrants, be redeemed, and the number of Warrant
Shares deliverable upon the redemption thereof, and (iii) stating the name and
address of the Warrant Agent and the redemption agent.
Adjustments. The Warrants contain certain provisions that, commencing with the
occurrence of the Warrant Ratio Determination Date, protect the holders thereof
against dilution by adjustment of the Warrant Ratio in the event of (i)
dividends or other distributions of Common Stock, (ii) subdivisions and
combinations of outstanding shares of Common Stock, (iii) dividends or other
distributions of rights or warrants entitling the holders thereof to subscribe
for or purchase, during a period not exceeding 45 days from the date of such
dividend or other distribution, shares of Common Stock at a price per share
less than the Current Market Price per share of Common Stock, or (iv) issuances
by the Company of any Common Stock (or securities convertible into or
exercisable for Common Stock) for a consideration per share less than the
Current Market Price of the Common Stock on the date of such issuance, subject
to certain exceptions.
In addition, if the Company shall declare a dividend or other distribution on
its Common Stock that would not cause such an adjustment consisting of (i)
securities other than Common Stock, (ii) evidences of its indebtedness, or
(iii) assets (including cash dividends or distributions) (collectively,
"Assets"), then in each such case adequate provision shall be made so that each
holder of Warrants shall receive, without charge, concurrently with the making
of such dividend or distribution, the amount and kind of such Assets that such
holder would have received if such holder had, immediately prior to the
relevant record date, exercised its Warrants.
On or prior to each day on which the Warrant Ratio is adjusted, the Company
shall promptly direct the Warrant Agent, and the Warrant Agent shall send to
each holder, notice of such adjustment and shall deliver to the Warrant Agent a
certificate of a firm of independent public accountants selected by the Board
of Directors (who may be the regular accountants employed by the Company)
setting forth the Warrant Shares purchasable upon the exercise of each Warrant
and the Warrant Ratio after such adjustment, a brief statement of the facts
requiring such adjustment, and the computation by which such adjustment was
made.
Reorganizations. In case of (a) any consolidation or merger of the Company
with or into another corporation, (b) the occurrence of any other transaction
or event pursuant to which all or substantially all of the Common Stock is
exchanged for, converted into, or acquired for, or constitutes solely the right
to receive, cash securities, property or other assets (whether by exchange
offer, liquidation, tender offer or otherwise) or (c) the sale, lease or other
transfer of all or substantially all of the assets of the Company, there shall
thereafter be deliverable upon exercise of each Warrant (in lieu of the Warrant
Shares theretofore deliverable), at the lowest exercise price permitted by law,
the number of shares of stock or other securities or property to which a holder
of the Warrant Shares that would otherwise have been deliverable upon the
exercise of such Warrant would have been entitled upon such transaction if such
Warrant had been exercised in full immediately prior to such transaction.
No Rights as Stockholders. Nothing contained in the Warrant Agreement or in
any of the Warrants confers upon the holders thereof or their transferees the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company.
Transfer. The Warrants shall be transferable only on the Warrant register
maintained by the Warrant Agent, upon delivery thereof, accompanied by a
written instrument or instruments of transfer in form reasonably acceptable to
the Warrant Agent, duly executed by the registered holder or holders thereof or
by the duly appointed legal representative thereof or by a duly authorized
attorney. Upon any registration of transfer, the Warrant Agent shall (a)
countersign and deliver a new Warrant certificate evidencing the Warrant or
Warrants to the persons entitled thereto and (b) cancel the surrendered Warrant
certificate.
Reservation of Shares; Governmental Approvals and Stock Exchange Listings. The
Company shall reserve at all times so long as any Warrants remain outstanding,
free from preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the exercise of the Warrants, sufficient Warrant Shares to provide
for the exercise of all outstanding Warrants, and take all necessary action so
that all Warrant Shares that are issued upon exercise of the Warrants will,
upon issuance, be duly and validly issued, fully paid and nonassessable.
The Company will use its best efforts to (a) obtain and keep effective any and
all permits, consents and approvals of governmental agencies and authorities
and to make securities acts filing under federal and state laws, that are
required in connection with the issuance, sale, transfer and delivery of the
Warrant certificates, the exercise or conversion of the Warrants, and the
issuance, sale, transfer and delivery of the Warrant Shares issued upon
exercise or conversion of the Warrants, and (b) have the Warrant Shares,
immediately upon their issuance, listed on such securities exchange on which
the Common Stock is then listed.
The Warrant Agent for the Warrants is Mellon Securities Trust Company, 111
Founders Plaza, Suite 1100, East Hartford, Connecticut 06108.
Preferred Stock
The Board of Directors of the Company is authorized to issue up to 10,000,000
shares of preferred stock, par value $.01 per share, in one or more series,
with such designations, powers, preferences and rights of such series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, the fixing of dividend rights, dividend rates, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences, in each case, if
any, as the Board of Directors of the Company may by resolution determine,
without any further vote or action by the Company's stockholders.
By resolution adopted December 17, 1993, the Board of Directors of the Company
authorized the issuance of a series of preferred stock consisting of 1,200,000
shares, designated Series A Cumulative Redeemable Convertible Preferred Stock,
par value $.01 per share, and fixed the terms of such Preferred Stock. The
following summary of the terms and provisions of the Preferred Stock does not
purport to be complete and is qualified in its entirety by reference to the
relevant sections of the Company's Restated Certificate of Incorporation, a
copy of which is filed as an exhibit to the Registration Statement.
The registrar and transfer agent for the Preferred Stock is Mellon Securities
Trust Company.
Liquidation Preference. In the event of the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company (a
"Liquidation"), subject to the prior preferences and other rights of any stock
ranking senior to the Preferred Stock in respect of the right to receive assets
upon liquidation, but before any distribution or payment shall be made to the
holders of Common Stock or any other stock ranking junior to the Preferred
Stock upon liquidation, the holders of the Preferred Stock shall be entitled to
be paid, out of the assets of the Company available for distribution to its
stockholders, a liquidation preference, initially equal to $25.00 per share,
plus all accrued and unpaid dividends thereon to such date, in cash. During
the period commencing on the Issue Date and ending on the Dividend Payment Date
(as defined below) immediately preceding the first Dividend Payment Date on
which the Company is permitted to declare and pay cash dividends on the
Preferred Stock under the indentures and loan agreements of the Company as in
effect on December 20, 1993 (the "Accretion Termination Date"), the Liquidation
Preference will accrete at the rate of 13% per annum, compounded quarterly,
until December 20, 1998, and at the rate of 18% per annum, compounded
quarterly, thereafter.
Dividends. Subject to the prior preferences and other rights of any stock
ranking senior to the Preferred Stock with respect to the payment of dividends,
holders of shares of the Preferred Stock are entitled to receive, when and as
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative cash dividends that will accrue from the
Accretion Termination Date at the rate of (a) 13% per annum from the Accretion
Termination Date through December 20, 1998 and (b) 18% per annum thereafter.
In the event that (i) the Company does not file a shelf registration statement
with respect to the Preferred Stock on or prior to the 60th day following the
Issue Date, (ii) such registration statement does not become effective on or
prior to the 150th day following the Issue Date or (iii) prior to the end of
the period during which a registration statement relating to the shares of
Preferred Stock and Common Stock issuable upon conversion of the Preferred
Stock is required to be maintained effective pursuant to the Preferred Stock
Registration Rights Agreement, the Commission issues a stop order suspending
the effectiveness of the shelf registration statement, then for each day on
which any of the foregoing events occurred and are continuing, the dividend
rate will increase by (a) 0.25% per annum if such day is on or prior to the
180th day following the Issue Date and (b) 0.50% per annum if such day is after
the 180th day following the Issue Date. Such dividends are cumulative and
shall be payable in cash, quarterly, in arrears, when and as declared by the
Board of Directors, on March 31, June 30, September 30 and December 31 of each
year (each, a "Dividend Payment Date") commencing on the first Dividend Payment
Date following the Accretion Termination Date. Each such dividend shall be
paid to the holders of record of the Preferred Stock as their names appear on
the share register of the Company at the close of business on the applicable
record date, which shall be the 15th day of the calendar month in which the
applicable Dividend Payment Date falls or such other record date designated by
the Board of Directors of the Company with respect to the dividend payable on
such respective Dividend Payment Date.
If full cash dividends are not paid or made available to the holders of all
outstanding shares of Preferred Stock and of any stock ranking on a parity with
the Preferred Stock in respect of the right to receive dividends, and funds
available are insufficient to permit payment in full in cash to all such
holders of the preferential amounts to which they are then entitled, the entire
amount available for payment of cash dividends shall be distributed among the
holders of the Preferred Stock and of any such parity stock, ratably in
proportion to the full amount to which they would otherwise be respectively
entitled, and any remainder not paid in cash to the holders of the Preferred
Stock shall cumulate, whether or not earned or declared, with additional
dividends thereon for each succeeding full quarterly dividend period during
which such dividends shall remain unpaid. Unpaid dividends for any period less
than a full quarterly dividend period shall cumulate on a day-to-day basis and
shall be computed on the basis of a 360-day year.
So long as any shares of Preferred Stock shall be outstanding, the Company
shall not declare or pay on any stock ranking junior to the Preferred Stock in
respect of the right to receive dividends any dividend whatsoever, whether in
cash, property or otherwise (other than dividends payable in shares of the
class or series upon which such dividends are declared or paid), nor shall the
Company make any distribution on any such junior stock, nor shall any such
junior stock be purchased or redeemed by the Company or any subsidiary of the
Company, nor shall any monies be paid or made available for a sinking fund for
the purchase or redemption of any such junior stock; provided that from and
after the Accretion Termination Date, the Company may declare and pay cash
dividends on such junior stock so long as (i) all dividends to which the
holders of Preferred Stock shall have been entitled for all previous dividend
periods shall have been declared and paid and (ii) on or prior to the later of
(x) the first anniversary of the Accretion Termination Date and (y) the third
anniversary of the Issue Date, the Company will not pay dividends on the Common
Stock during any 12 month period exceeding 4% of the Current Market Price per
share of the Common Stock on the trading day immediately prior to the
declaration of any cash dividend.
Redemption. Prior to December 31, 1994, the Preferred Stock may be redeemed in
whole, but not in part, at a per share redemption price equal to the
Liquidation Preference per share on the date of redemption plus all accrued but
unpaid dividends thereon to and including the date of redemption; provided,
that concurrently with such redemption the Corporation redeems all Warrants
then outstanding. See "--Warrants."
On and after December 31, 1994, the Preferred Stock may be redeemed by the
Company at any time in whole or (except as noted below) from time to time, in
part, at the option of the Company, at a per share redemption price equal to
the Liquidation Preference per share on the date of redemption plus all accrued
but unpaid dividends thereon to and including the date of redemption. If less
than all of the outstanding shares of Preferred Stock are to be redeemed, such
shares shall be redeemed pro rata or by lot as determined by the Board of
Directors in its sole discretion. The Company shall not redeem less than all
of the outstanding shares of Preferred Stock unless all cumulative dividends on
the Preferred Stock for all previous dividend periods have been paid or
declared and funds therefor set apart for payment.
The Company shall redeem all then outstanding shares of Preferred Stock on or
prior to December 31, 2000 at a per share redemption price equal to the
Liquidation Preference per share on the date of redemption plus all accrued but
unpaid dividends thereon to and including the date of redemption.
Notice of every proposed redemption of Preferred Stock shall be sent by or on
behalf of the Company, by first class mail, postage prepaid, to the holders of
record of the shares of Preferred Stock so to be redeemed at their respective
addresses as they shall appear on the records of the Company, not less than
thirty (30) days nor more than sixty (60) days prior to the date fixed for
redemption (the "Redemption Date") (i) notifying such holders of the election
or obligation of the Company to redeem such shares of Preferred Stock and of
the Redemption Date, (ii) stating the place or places at which the shares of
Preferred Stock called for redemption shall, upon presentation and surrender of
the certificates evidencing such shares of Preferred Stock, be redeemed, and
the redemption price therefor, and (iii) stating the name and address of any
redemption agent selected by the Company and the name and address of the
Corporation's transfer agent for the Preferred Stock.
Voting. Except as set forth below or as otherwise required by law, the holders
of the issued and outstanding shares of Preferred Stock shall have no voting
rights.
So long as any Preferred Stock is outstanding, the Company, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the then outstanding shares of Preferred Stock, voting
separately as a class, will not: (i) amend or repeal any provision of, or add
any provision to, the Company's Certificate of Incorporation or By-laws if such
action would alter adversely or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, any Preferred
Stock, or increase or decrease the number of shares of Preferred Stock
authorized; (ii) authorize or issue shares of any class or series of stock
ranking senior to the Preferred Stock (or, prior to the Warrant Ratio
Determination Date, any stock ranking on a parity with the Preferred Stock) in
respect of the right to receive dividends or assets upon liquidation; (iii)
reclassify any class or series of any junior stock into such parity stock or
senior stock or reclassify any series of parity stock into senior stock; (iv)
authorize, enter into, or consummate any transaction that would constitute a
deemed dividend to holders of the Preferred Stock under United States Federal
tax laws; or (v) consolidate with or merge with or into another corporation,
other than in a transaction in which the Company is the surviving corporation.
From and after the Accretion Termination Date, (i) if and whenever the Company
fails to declare and pay in cash the full amount of dividends payable on the
Preferred Stock on any two Dividend Payment Dates, then the holders of the
Preferred Stock, voting separately as a class, will be entitled at the next
annual meeting of the stockholders of the Company or at any special meeting to
elect one director, and (ii) if and whenever the Company shall have failed to
declare and pay in cash the full amount of dividends payable on the Preferred
Stock on any four Dividend Payment Dates, then the holders of the Preferred
Stock, voting separately as a class, will be entitled at the next annual
meeting of the stockholders of the Company or at any special meeting to elect
two directors. Upon election, such directors will become additional directors
of the Company and the authorized number of directors of the Company will
thereupon be automatically increased by such number of directors. Such right
of the holders of Preferred Stock to elect directors may be exercised until all
dividends in default on the Preferred Stock have been paid in full, and
dividends for the current dividend period declared and funds therefor set apart
or paid, and when so paid and set apart or paid, the right of the holders of
Preferred Stock to elect such number of directors shall cease and the term of
such directors shall terminate, but subject always to the same provisions for
the vesting of such special voting rights in the case of any such future
dividend default or defaults.
Conversion Right. Each holder of shares of Preferred Stock has the right, at
such holder's option, at any time or from time to time, to convert any of such
shares of Preferred Stock into the number fully paid and nonassessable shares
of Common Stock determined by dividing (i) $25.00 by (ii) the Conversion Price,
initially $11.11 and subject to adjustment as set forth below, in effect on the
date of conversion. The Conversion Price is subject to adjustment to prevent
dilution in the event of (i) dividends or other distributions of Common Stock,
(ii) subdivision and combinations of outstanding shares of Common Stock, (iii)
dividends or other distributions of rights or warrants entitling the holders
thereof to subscribe for or purchase, during a period not exceeding 45 days
from the date of such dividend or other distribution, Common Stock at a price
per share less than the Current Market Price of the Common Stock, (iv)
dividends or other distributions of other securities, evidences of its
indebtedness or other assets, excluding any cash dividend or cash distribution
payable out of earned surplus of the Company if the per share amount of such
dividend or distribution, together with the aggregate per share amount of all
other cash dividends and cash distributions declared or paid during the one
year period ending on the date such dividend is declared (the "Declaration
Date") does not exceed 4% of the Current Market Price per share of Common Stock
on the trading day immediately prior to the Declaration Date, or (v) issuances
by the Company of any Common Stock (or securities convertible into or
exercisable for Common Stock) for a consideration per share less than the
Current Market Price per share of Common Stock on the date of such issuance,
subject to certain exceptions.
Reorganizations. In case of (a) any consolidation with or merger of the
Company with or into another corporation, (b) the occurrence of any other
transaction or event pursuant to which all or substantially all of the Common
Stock is exchanged for, converted into, or acquired for, or constitutes solely
the right to receive, cash securities, property or other assets (whether by
exchange offer, liquidation, tender offer or otherwise) or (c) the sale, lease
or other transfer of all or substantially all of the assets of the Company,
each share of Preferred Stock shall after the date of such transaction be
convertible into the number of shares of stock or other securities or property
(including cash) to which the Common Stock issuable (at the time of such
transaction) upon conversion of such share of Preferred Stock would have been
entitled upon such transaction.
Reservation of Shares; Valid Issuance; Approvals. The Company shall (i)
reserve at all times so long as any shares of Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock (if
applicable) or its authorized but unissued shares of Common Stock, or both,
solely for the purpose of effecting the conversion of the shares of Preferred
Stock, sufficient shares of Common Stock to provide for the conversion of all
outstanding shares of Preferred Stock, (ii) take all necessary action so that
all shares of Common Stock that are issued upon conversion of the shares of the
Preferred Stock will, upon issuance, be duly and validly issued, fully paid and
nonassessable, and (iii) take no action which will cause a contrary result
(including, without limitation, any action that would cause the Conversion
Price to be less than the par value, if any, of the Common Stock).
If any shares of Common Stock reserved for the purpose of conversion of shares
of Preferred Stock require registration with or approval of any governmental
authority under any Federal or state law before such shares may be validly
issued or delivered upon conversion, then the Corporation will in good faith
and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be. If, and so long as, any Common Stock into which
the shares of Preferred Stock are then convertible is listed on any national
securities exchange, the Corporation will, if permitted by the rules of such
exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon conversion.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain Federal income tax consequences to
the initial holders of the Warrants and Warrant Shares under existing Federal
income tax law, which is subject to change, possibly retroactively. This
summary does not discuss all aspects of Federal income taxation that may be
relevant to a particular investor in light of his personal investment
circumstances or to certain types of investors subject to special treatment
under the Federal income tax laws (for example, financial institutions,
insurance companies, tax-exempt organizations, broker-dealers, foreign
taxpayers, and taxpayers subject to the "straddle" rules of the Internal
Revenue Code of 1986, as amended (the "Code")) and it does not discuss any
aspect of state, local or foreign tax law. This summary assumes that investors
will hold their Warrants and Warrant Shares as "capital assets" (generally,
property held for investment) under the Code. Holders are advised to consult
their tax advisors as to the specific tax consequences of holding and disposing
of the Warrants and Warrant Shares, including the application and effect of
Federal, state, local and foreign income and other tax laws.
Upon the exercise of a Warrant, a holder will not recognize gain or loss and
will have a tax basis in the Warrant Shares received equal to the tax basis in
such holder's Warrant plus the exercise price thereof. Because the Warrants
have a minimal exercise price, it is not certain whether a holder will be
treated as owning a Warrant or the shares of Common Stock underlying the
Warrant for Federal income tax purposes. Holders are urged to consult their
tax advisors regarding such possibility. If the Warrants are treated as
warrants for Federal income tax purposes, the holding period for the Warrant
Shares purchased pursuant to the exercise of a Warrant will begin on the day
following the date of exercise and will not include the period that the holder
held his Warrant. On the other hand, if the Warrants are treated as Common
Stock, the holding period for the Warrant Shares purchased pursuant to the
exercise of a Warrant will include the period during which the Warrant was held
by the holder. The holding period for the Warrants began on the day following
the day they were acquired.
Upon a sale or other disposition of Warrants or Warrant Shares, a holder will
recognize capital gain or loss in an amount equal to the difference between the
amount realized and the holder's tax basis in such Warrants or Warrant Shares.
Such a gain or loss will be long-term if the holding period is more than one
year. In the event that a Warrant lapses unexercised, a holder will recognize
a capital loss in an amount equal to his tax basis in the Warrant. Such loss
will be long term if the Warrant has been held for more than one year.
An adjustment in the exercise price of the Warrants to reflect distributions to
holders of Common Stock may, in certain circumstances, be treated as a
constructive distribution to holders of Warrants subject to tax as a dividend
pursuant to Section 305 of the Code. Although the matter is not entirely free
from doubt, adjustments to the Warrant Ratio should not be treated as a
constructive distribution.
PLAN OF DISTRIBUTION
The Company will issue Warrant Shares upon the exercise of Warrants by Selling
Security Holders from time to time through the Expiration Date pursuant to the
terms of the Warrants and the Warrant Agreement. See "Description of
Securities -- Warrants." The Company will receive proceeds of $.01 per Warrant
Share issued upon the exercise of the Warrants. The Company will receive no
proceeds from the resale of the Warrants and the Warrant Shaes by the Selling
Security Holders pursuant to this offering. The Warrants and Warrant Shares
offered for resale hereby may be sold from time to time by the Selling Security
Holders. Any such distribution of the Warrants or Warrant Shares by the
Selling Security Holders, or by transferees or other successors-in-interest of
the Selling Security Holders, may be effected from time to time in one or more
transactions (which may involve block transactions) on the NYSE or in the
over-the-counter market (to the extent that such securities are listed or
traded on such markets), in negotiated transactions or in a combination of such
methods of sale, at fixed prices, at market prices prevailing at the time of
sale, at prices relating to prevailing market prices or at negotiated prices.
The Selling Security Holders may effect such transactions directly to
purchasers or to or through broker-dealers which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Security
Holders and/or the purchasers of Warrants and Warrant Shares for which
broker-dealers may act as agent or to whom they may sell as principal or both
(which compensation as to a particular broker-dealer may be less than or in
excess of customary commissions). In addition, any Common Stock covered by
this Prospectus that subsequently qualifies for sale pursuant to Rule 144 of
the Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
The Warrants were issued to the original purchasers on December 20, 1993 in a
private placement. Pursuant to the Warrant Registration Rights Agreement, the
Company agreed to file the Registration Statement of which this Prospectus
forms a part with the Commission, and to keep the Registration Statement
effective until all of the Warrants and Warrant Shares are sold pursuant to an
effective registration statement or Rule 144 under the Securities Act. There
is no established trading market for the Warrants. The Company does not intend
to list the Warrants on any securities exchange or to seek approval for
quotation through any automated quotation system. There is no dealer which is
obligated to make a market in the Warrants and, if any dealer or dealers should
do so, they may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of any trading market for the
Warrants.
As of the date of this Prospectus, the Company understands that the Selling
Security Holders do not have any agreement, arrangement or understanding
concerning the distribution of the Warrants and Warrant Shares offered hereby.
At the time a particular offer of Warrants or Warrant Shares is made, a
Prospectus Supplement, to the extent required, will be distributed which will
set forth the aggregate amount of Warrants or Warrant Shares being offered, the
names of the selling security holders, the purchase price, the amount of
expenses of the offering and the terms of the offering, including the name or
names of any underwriters, dealers or agents, any discounts, commissions and
other items constituting compensation from such selling security holders and
any discounts, commissions or concessions allowed or reallowed or paid to
dealers.
To comply with certain states' securities laws, if applicable, the Warrants and
Warrant Shares will be sold in such states only through brokers or dealers. In
addition, in certain states the Warrants and Warrant Shares may not be sold
unless they have been registered or qualify for sale in such states or an
exemption from registration or qualification is available and is complied with.
The Company is obligated pursuant to the Warrant Registration Rights Agreement
to use its best efforts to register or qualify the Warrants and Warrant Shares
under the securities or blue sky laws of such jurisdictions as any Selling
Security Holder reasonably requests.
The Selling Security Holders and any broker-dealers who participate in a sale
of their Warrants and Warrant Shares may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions
received by them, and proceeds of any such sales as principal, may be deemed to
be underwriting discounts and commissions under the Securities Act.
Since the Selling Security Holders will be subject to the antimanipulation
rules promulgated under the Exchange Act, including Rule 10b-2, 10b-6 and
10b-7, in connection with transactions in the Warrants and Warrant Shares
during the effectiveness of the Registration Statement of which this Prospectus
is a part, the Company advises the Selling Security Holders to consult
competent securities counsel prior to initiating any such transaction.
Pursuant to the Warrant Registration Rights Agreement, the Company has paid or
will pay any and all expenses incident to the performance of such agreement
including filing fees, fees and expenses incurred in connection with compliance
with the securities or blue sky laws of the applicable states, and fees and
disbursements of counsel and independent public accounts for the Company and
the reasonable fees and disbursements of one counsel retained by the Selling
Security Holders in connection with the Registration Statement. Such expenses
are estimated to be approximately $____________. As and when the Company is
required to update this Prospectus, it may incur additional expenses in excess
of this estimated amount. Normal commission expenses and brokerage fees, as
well as any applicable underwriting discounts or transfer taxes, are payable
individually by the Selling Security Holders.
In the Warrant Registration Rights Agreement, the Company agreed to indemnify
and hold harmless, to the extent permitted by law, the Selling Security
Holders, the officers, directors, shareholders, agents, affiliates and partners
of the Selling Security Holders, any person who participates as an underwriter
in the offering and sale of the Warrants and Warrant Shares and any person who
controls any of such sellers or any of such underwriters against losses, claims
and expenses arising out of any false or misleading statements contained in
this Prospectus or the Registration Statement of which it is a part. The
Selling Security Holders have agreed to indemnify the Company against certain
liabilities and expenses arising out of statements made by them for reliance by
the Company in connection with the Registration Statement or this Prospectus.
LEGAL MATTERS
Certain legal matters in connection with the sale of the Warrants and the
Warrant Shares offered hereby will be passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman, 1290 Avenue of the Americas, New York, New
York 10104.
AUDITORS
The Consolidated Financial Statements of the Company as of December 31, 1992
and for the year then ended included in this Prospectus and the related
financial statement schedules included elsewhere in the Registration Statement
of which this Prospectus is a part have been audited by Price Waterhouse.
Their report, dated April 14, 1993, except as to Notes I and O, which are as of
May 11, 1993, contains an explanatory paragraph that certain matters identified
raise substantial doubt about the Company's ability to continue as a going
concern, an explanatory paragraph that in their determination of the Company's
compliance with the covenants in the agreements governing the Secured Notes and
the Subordinated Notes, and the resultant classification of such obligations as
long term, legal opinions were obtained supporting the Company's interpretation
of certain covenants related to the maintenance of net worth and curing of any
defaults which may have existed, and an explanatory paragraph that makes
reference to the contingent liabilities discussed in Notes D and N in the Notes
to the Company's Consolidated Financial Statements. However, Price Waterhouse
has advised the Company that they are unable to issue an updated accountants
report until Deloitte & Touche, which was dismissed as the Company's and
Fruehauf's auditors on October 2, 1992, is able to issue an updated accountants
report as described below. Accordingly, this Prospectus does not include a
copy of Price Waterhouse's audit report on the Company's Consolidated Financial
Statements and the Registration Statement of which this Prospectus is a part
does not include a consent of Price Waterhouse.
The combined financial statements of the Business Acquired from Clark Equipment
Company by Terex Corporation as of December 31, 1991 and for each of the two
years in the period ended December 31, 1991 included in this Prospectus have
been audited by Price Waterhouse. Their report, dated September 25, 1992, was
unqualified. However, Price Waterhouse has advised the Company that they are
unable to issue an updated accountants report until Deloitte & Touche is able
to issue an updated accountants report as described below. Accordingly, this
Prospectus does not include a copy of Price Waterhouse's audit report on the
combined financial statements of the Business Acquired from Clark Equipment
Company by Terex Corporation and the Registration Statement of which this
Prospectus is a part does not include a consent of Price Waterhouse.
The Consolidated Financial Statements of Fruehauf Trailer Corporation as of
December 31, 1992 and for the year then ended included in this Prospectus and
the related financial statement schedules included elsewhere in the
Registration Statement of which this Prospectus is a part have been audited by
Price Waterhouse. Their report, dated April 14, 1993, contains an explanatory
paragraph that certain matters identified raise substantial doubt about the
Company's ability to continue as a going concern, and an explanatory paragraph
that makes reference to the contingent liabilities discussed in Note L in the
Notes to the Company's Consolidated Financial Statements. However, Price
Waterhouse has advised the Company that they are unable to issue an updated
accountants report until Deloitte & Touche is able to issue an updated
accountants report as described below. Accordingly, this Prospectus does not
include a copy of Price Waterhouse's audit report on Fruehauf's Consolidated
Financial Statements and the Registration Statement of which this Prospectus is
a part does not include a consent of Price Waterhouse.
The Consolidated Financial Statements of the Company as of December 31, 1991
and for each of the two years in the period ended December 31, 1991 included in
this Prospectus and the related financial statement schedules included
elsewhere in the Registration Statement of which this Prospectus is a part have
been audited by Deloitte & Touche. Their report, dated March 30, 1992 (April
14, 1993 as to Note B and the first and second paragraphs of Note N), expressed
an unqualified opinion and include explanatory paragraphs relating to the
restatement of prior period financial statements and an uncertainty relating to
the outcome of certain litigation. However, Deloitte & Touche has advised
the Company that they are currently unable to issue an updated accountants
report until they complete their consideration of certain items which may
affect the financial statements of Fruehauf and, as a result, may also affect
the financial statements of the Company. Accordingly, this Prospectus does not
include a copy of Deloitte & Touche's audit report on the Company's
Consolidated Financial Statements and the Registration Statement of which this
Prospectus is a part does not include a consent of Deloitte & Touche.
The Consolidated Financial Statements of Fruehauf Trailer Corporation as of
December 31, 1991 and for each of the two years in the period ended December
31, 1991 included in this Prospectus and the related financial statement
schedules included elsewhere in the Registration Statement of which this
Prospectus is a part have been audited by Deloitte & Touche. Their report,
dated March 20, 1992 (April 14, 1993 as to Note P and the ninth paragraph of
Note L), expressed an unqualified opinion and include explanatory paragraphs
relating to the restatement of prior period financial statements and an
uncertainty relating to the outcome of certain litigation. However, Deloitte
& Touche has advised the Company that they are currently unable to issue an
updated accountants report until they complete their consideration of certain
items which may affect the financial statements of Fruehauf. Accordingly, this
Prospectus does not include a copy of Deloitte & Touche's audit report on
Fruehauf's Consolidated Financial Statements and the Registration Statement of
which this Prospectus is a part does not include a consent of Deloitte &
Touche.
At this time, the Company does not know when Deloitte & Touche and, therefore,
Price Waterhouse will be in a position to issue their updated accountants
reports, and there can be no assurances that they will reissue any or all such
reports in their original form. In the opinion of the Company, all significant
transactions, subsequent events and other matters have been properly disclosed
pursuant to relevant reporting requirements in the Company's financial
statements and elsewhere in this Prospectus and the Registration Statement of
which this Prospectus is a part.
Until the Company is furnished with updated audit reports manually signed by
Deloitte & Touche and by Price Waterhouse and files such reports with the
Commission along with consents of Deloitte & Touche and Price Waterhouse , the
Company will not request that the Commission declare the Registration Statement
effective.
With the concurrence of its Audit Committee, the Company engaged Price
Waterhouse as its independent accountants effective October 1992. Prior to
that date, Deloitte & Touche had been the Company's independent accountants.
The change in independent accountants was reported on Form 8-K, dated October
8, 1992. The following is an excerpt from Deloitte & Touche's response to the
Form 8-K, as included in the Company's Form 8 dated October 23, 1992:
"On August 24 and 28, 1992, a representative of Deloitte &
Touche discussed with the Company's Chief Financial
Officer the relationship between Deloitte & Touche and the
Company. On September 14 and 17, 1992, representatives of
Deloitte & Touche had further discussions with Company
officials, including its Chairman, Chief Financial
Officer, and Secretary, regarding the auditor-client
relationship. These discussions focused on certain
changes that Deloitte & Touche believed needed to occur in
order for Deloitte & Touche to be willing to continue to
serve as the Company's auditor. The matters discussed
included changes requested by Deloitte & Touche relating
to the financial reporting process and the role of the
Audit Committee in overseeing that process, performance of
timely quarterly reviews by Deloitte & Touche and timely
discussions with Deloitte & Touche of proposed significant
transactions. Deloitte & Touche believed, based on those
discussions, that the Company was in agreement with the
matters discussed, which was the basis for Deloitte &
Touche agreeing to continue as the Company's independent
auditor. On October 2, 1992, we were advised by the
Company's Chief Financial Officer that we were dismissed
as auditors."
In connection with its audits for the years ended December 31, 1991 and 1990
and through the date of this Prospectus, there have been no disagreements with
Deloitte & Touche on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Deloitte & Touche would
have caused them to make a reference thereto in their report on the financial
statements for such years. The reports of Deloitte & Touche on the
aforementioned financial statements contained no adverse opinion or disclaimer
of opinion and were not qualified as to audit scope or accounting principle.
There have been no disagreements with Price Waterhouse on accounting or
financial disclosure.
TEREX CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
TEREX CORPORATION (REGISTRANT)
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1992
AND 1991 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1992
Reports of independent accountants F - 3 **
Consolidated statement of income F - 5
Consolidated balance sheet F - 6
Consolidated statement of stockholders' investment F - 7
Consolidated statement of cash flows F - 8
Notes to consolidated financial statements F - 9
TEREX CORPORATION (REGISTRANT)
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1993 AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1993 AND 1992
Condensed consolidated statement of income F - 36
Condensed consolidated balance sheet F - 37
Condensed consolidated statement of cash flows F - 39
Notes to condensed consolidated financial statements F - 40
BUSINESS ACQUIRED FROM CLARK EQUIPMENT COMPANY
BY TEREX CORPORATION
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1991
AND FOR EACH OF THE TWO YEARS IN THE PERIOD ENDED DECEMBER 31, 1991
Report of independent accountants F - 45 **
Combined statement of operating revenues and expenses F - 46
Combined statement of assets and liabilities F - 47
Combined statement of cash flows F - 48
Notes to combined financial statements F - 49
BUSINESS ACQUIRED FROM CLARK EQUIPMENT COMPANY
BY TEREX CORPORATION
UNAUDITED COMBINED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1992
Combined statement of operating revenues and expenses F - 56
Combined statement of cash flows F - 57
Notes to combined financial statements F - 58
PRO FORMA FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT FOR
THE YEAR ENDED DECEMBER 31, 1992 F - 59
FRUEHAUF TRAILER CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1992
AND 1991 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1992
Reports of independent accountants F - 62 **
Consolidated statement of income F - 64
Consolidated balance sheet F - 65
Consolidated statement of stockholders' investment F - 67
Consolidated statement of cash flows F - 68
Notes to consolidated financial statements F - 69
FRUEHAUF TRAILER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1993 AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1993 AND 1992
Condensed consolidated statement of income F - 87
Condensed consolidated balance sheet F - 88
Condensed consolidated statement of cash flows F - 89
Notes to condensed consolidated financial statements F - 90
** To be filed by amendment.
REPORT OF INDEPENDENT ACCOUNTANTS
To be filed by amendment.
REPORT OF INDEPENDENT ACCOUNTANTS
To be filed by amendment.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share amounts)
Year Ended December 31,
1992 * 1991 * 1990 *
NET SALES $523,355 $ 784,194 $ 1,023,178
COST OF GOODS SOLD 469,345 690,313 857,119
Gross profit 54,010 93,881 166,059
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Third parties 55,287 108,425 116,354
Related parties 2,848 5,831 5,319
58,135 114,256 121,673
RESTRUCTURING COSTS --- 15,825 ---
Income (loss) from operations (4,125) (36,200) 44,386
OTHER INCOME (EXPENSE)
Interest income 1,666 2,862 4,412
Interest expense to third parties (23,320) (27,422) (42,112)
Interest expense to related parties --- (3,743) (5,495)
Equity in net income (loss)
of affiliate companies (35,045) 4,209 7,480
Royalty income from affiliates --- 2,518 4,221
Royalty income from third parties 67 654 938
Gain on sale of subsidiary stock
and related recapitalization 7,759 15,017 ---
Gain (loss) on sale of property,
plant and equipment --- 7,150 1,163
Amortization / write-off of
debt issuance costs (1,694) (1,304) (3,954)
Other expense -net (2,416) (2,381) (433)
Income (loss) before income taxes,
minority interest and extraordinary loss (57,108) (38,640) 10,606
PROVISION FOR INCOME TAXES 67 868 2,361
MINORITY INTEREST IN NET LOSS OF SUBSIDIARY --- 9,722 ---
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS (57,175) (29,786) 8,245
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT --- --- (2,192)
NET INCOME (LOSS) $(57,175) $(29,786) $ 6,053
NET INCOME (LOSS) PER SHARE
Income (loss) before extraordinary loss $(5.75) $(3.00) $.83
Extraordinary loss on retirement of debt --- --- (.22)
Net income (loss) per share $(5.75) $(3.00) $.61
DIVIDENDS PER COMMON SHARE $--- $0.06 $0.05
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES CONSIDERED OUTSTANDING
IN PER SHARE CALCULATION 9,945 9,914 9,889
* Results of Fruehauf consolidated for the years ended December 31, 1991 and
1990 and deconsolidated for the year ended December 31, 1992. See Note D.
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
December 31,
1992* 1991*
CURRENT ASSETS
Cash and cash equivalents $ 25,671 $ 13,877
Restricted cash 11,479 ---
Marketable securities --- 1,080
Trade receivables
(less allowance of $6,348 in 1992
and $4,142 in 1991) 78,277 91,624
Net inventories 197,136 252,574
Other current assets 6,672 2,790
Total Current Assets 319,235 361,945
LONG-TERM ASSETS
Other assets 36,971 42,251
Assets held for sale 1,000 43,301
Investment in affiliate companies 3,871 40,146
Property, plant and equipment - net 116,279 129,560
TOTAL ASSETS $ 477,356 $ 617,203
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Notes payable $ 1,573 $ ---
Trade accounts payable 91,268 90,649
Accrued compensation and benefits 9,594 29,290
Accrued warranties and product liability 32,431 18,965
Accrued interest 11,819 5,285
Accrued income taxes 2,043 902
Restructuring reserve 30,600 21,252
Other current liabilities 31,143 54,322
Current portion of long-term debt 11,543 23,636
Total Current Liabilities 222,014 244,301
LONG-TERM LIABILITIES
Long-term debt, less current portion 204,489 184,952
Long-term debt, less current portion
- related party --- 7,497
Accrued warranties and product liability
- long-term 35,910 19,160
Postretirement health benefits --- 34,939
Other long-term liabilities 21,111 40,271
MINORITY INTEREST --- 26,202
COMMITMENTS AND CONTINGENCIES (Note N)
STOCKHOLDERS' INVESTMENT
Common Stock, $0.01 par value
--authorized 20,000 shares in 1992 and 1991;
issued and outstanding 9,949 in 1992
and 9,923 in 1991 99 99
Additional paid-in capital 37,770 37,496
Retained earnings (deficit) (36,231) 20,944
Pension liability adjustment (4,452) (8,233)
Foreign currency translation adjustment (3,354) 9,575
Total Stockholders' Investment (6,168) 59,881
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 477,356 $ 617,203
* Fruehauf consolidated at December 31, 1991 and deconsolidated at December 31,
1992. See Note D.
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(in thousands)
Additional Retained Pension Cumulative
Common Paid-in Earnings Liability Translation
Stock Capital (Deficit) Adjustment Adjustment Total
BALANCE AT DECEMBER 31,
1989
As previously reported $ 98 $ 36,188 $48,361 $ --- $ (1,782) $82,865
Prior period
adjustment (Note B) --- --- (2,617) --- --- (2,617)
As restated 98 36,188 45,744 --- (1,782) 80,248
Exercise of stock
options 1 730 --- --- --- 731
Redemption of
stock warrants --- 320 --- --- --- 320
Cash dividend --- --- (472) --- --- (472)
Net income --- --- 6,053 --- --- 6,053
Pension liability
adjustment --- --- --- (6,960) --- (6,960)
Translation adjustment --- --- --- --- 21,337 21,337
BALANCE AT DECEMBER 31,
1990 99 37,238 51,325 (6,960) 19,555 101,257
Exercise of stock
options --- 258 --- --- --- 258
Cash dividend --- --- (595) --- --- (595)
Net loss --- --- (29,786) --- --- (29,786)
Pension liability
adjustment --- --- --- (1,273) --- (1,273)
Translation adjustment --- --- --- --- (9,980) (9,980)
BALANCE AT DECEMBER 31,
1991 99 37,496 20,944 (8,233) 9,575 59,881
Exercise of stock
options --- 274 --- --- --- 274
Net loss --- --- (57,175) --- --- (57,175)
Pension liability
adjustment --- --- --- 3,781 --- 3,781
Translation adjustment --- --- --- --- (12,929) (12,929)
BALANCE AT DECEMBER 31,
1992 $ 99 $ 37,770 $(36,231) $(4,452) $(3,354) $ (6,168)
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
1992* 1991* 1990 *
OPERATING ACTIVITIES
Net income (loss) $(57,175) $(29,786) $6,053
Adjustments to reconcile net income
(loss) to net cash from (used in)
operating activities:
Depreciation 7,074 11,028 10,930
Amortization and write-off
of deferred costs 2,619 2,440 10,139
Noncash extraordinary loss --- --- 2,192
Unremitted (earnings) loss
from equity affiliates 35,045 (2,528) (6,748)
Loss on sale of affiliate stock --- 3,312 ---
Gain on sale of subsidiary stock (7,759) (15,017) ---
Minority interest --- (9,722) ---
Interest paid-in-kind --- 3,302 5,657
Gain on sale of property, plant
and equipment (363) (7,584) (1,163)
Noncash restructuring costs --- 15,825 ---
Other noncash charges 1,796 1,492 1,130
Increase (decrease) in cash due to
changes in operating assets and
liabilities net of the effects of
acquisitions of businesses:
Trade receivables 18,806 30,314 9,173
Net inventories 49,176 46,297 23,285
Other current assets (455) 8,207 (3,323)
Trade accounts payable 7,187 10,309 2,112
Accrued compensation and benefits (6,821) 206 (5,939)
Accrued interest 7,763 (623) (3,348)
Accrued warranties and
product liabilities 4,590 (2,153) 363
Accrued income taxes 940 29 813
Other assets (19,280) 4,664 (579)
Other liabilities (20,443) (62,717) (64,709)
Net cash from (used in)
operating activities 22,700 7,295 (13,962)
INVESTING ACTIVITIES
Acquisitions of businesses,
net of cash acquired (86,544) (5,865) ---
Capital expenditures (5,382) (4,098) (8,707)
Advances to equity affiliates (4,646) --- ---
Proceeds from sale of excess assets 1,513 40,156 20,503
Proceeds from sale of affiliate stock --- 8,739 ---
(Increase) decrease in marketable securities 42 (558) 7,274
Other 206 462 ---
Net cash from (used in)
investing activities (94,811) 38,836 19,070
FINANCING ACTIVITIES
Net repayments under revolving line
of credit agreements (55,753) (195) (3,968)
Principal repayments of long-term debt (9,109) (96,726)(136,454)
Proceeds from issuance of long-term debt 151,890 16,285 122,055
Proceeds from sale of minority interest
in subsidiary --- 41,040 ---
Other 2,258 (1,091) (2,165)
Net cash from (used in)
financing activities 89,286 (40,687) (20,532)
Effect of exchange rate changes on
cash and cash equivalents (2,396) (521) (135)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 14,779 4,923 (15,559)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 13,877 8,954 24,513
LESS: FRUEHAUF CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR (2,985) --- ---
CASH AND CASH EQUIVALENTS AT END OF YEAR $25,671 $13,877 $8,954
* Results of Fruehauf consolidated for the years ended December 31, 1991 and
1990, and deconsolidated for the year ended December 31, 1992. See Note D.
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1992
(dollar amounts in thousands, unless otherwise noted,
except per share amounts)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include the
accounts of Terex Corporation and its majority controlled subsidiaries ("Terex"
or the "Company"). All intercompany balances, transactions and profits have
been eliminated. The equity method is used to account for investments in
affiliates in which the Company has an ownership interest between 20% and 50%,
with the exception of the Company's 42% investment in the outstanding common
stock of Fruehauf Trailer Corporation ("Fruehauf"). Because of the existence
of a voting trust among Terex and certain individuals, the Company continued to
have voting control of Fruehauf after Fruehauf's initial public offering
("IPO") and, accordingly, continued to account for Fruehauf as a consolidated
subsidiary in 1991. The voting trust terminated during 1992 and, accordingly,
the Company presently accounts for its 42% ownership interest in Fruehauf using
the equity method. The Company's consolidated financial statements are
presented giving effect to the deconsolidation of Fruehauf as of January 1,
1992 (see Note D -- "Investment in Fruehauf Trailer Corporation"). The cost
method is used to account for investments in affiliates in which the Company
has an ownership interest of less than 20%.
Cash and Cash Equivalents. All short-term investments, which consist of highly
liquid investments with original maturities of three months or less, are
considered to be cash equivalents. The carrying amount of cash and cash
equivalents approximates fair value because of the short maturity of those
instruments.
Restricted Cash. The Company has classified as restricted, certain cash and
cash equivalents that are not fully available for use in its operations.
Provisions of certain of the Company's lending agreements require that amounts
be deposited in a cash collateral account when specified conditions exist.
Access by the Company to such amounts is restricted by the terms of the lending
agreement. Restricted cash at December 31, 1992 and 1991 totaled $11,479 and
$0, respectively. The balance at December 31, 1992 represented the highest
amount required to be deposited in the cash collateral account during 1992.
Inventories. Inventories are stated at the lower of cost or market value.
Cost is determined by the last-in, first-out ("LIFO") method for certain
domestic inventories and by the first-in, first-out ("FIFO") method for
inventories of foreign subsidiaries and certain domestic inventories.
Approximately 52% and 49% of consolidated inventories at December 31, 1992 and
1991, respectively are accounted for under the LIFO method.
Debt Issuance Costs. Debt issuance costs represent costs associated with
securing the Company's financing arrangements. Such amounts are presented as a
component of Other Assets in the Consolidated Balance Sheet. Capitalized debt
issuance costs are amortized over the life of the respective debt agreement.
Unamortized debt issuance costs totaled $10,614 and $5,077 at December 31, 1992
and 1991, respectively. During 1992, 1991 and 1990, the Company amortized
$1,694, $1,304 and $2,814, respectively, of capitalized debt issuance costs.
Intangible Assets. Intangible assets include the excess of purchase price over
the fair value of identifiable net assets of acquired companies and are being
amortized on a straight-line basis over periods ranging from 12-15 years.
Other intangible assets include costs allocated to patents, trademarks and
other specifically identifiable assets arising from business combinations.
Such amounts are amortized on a straight-line basis over the respective
estimated useful lives not exceeding seven years. Included as a component of
Other Assets in the Consolidated Balance Sheet at December 31, 1992 and 1991,
are unamortized intangible assets of $10,938 and $1,120, respectively.
Accumulated amortization at December 31, 1992 and 1991 was $599 and $0,
respectively. Amortization of intangible assets was $599, $0 and $0 in 1992,
1991 and 1990, respectively.
Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred.
Plant and equipment are depreciated over the estimated useful lives of the
assets under the straight-line method of depreciation for financial reporting
purposes and both straight-line and other methods for tax purposes. Certain
property, plant and equipment held for sale is included in Assets Held For Sale
(see Note H -- "Assets and Business Held for Sale"), and is carried at the
lower of cost or net realizable value. The cost of assets and the related
amounts of accumulated depreciation are eliminated from the accounts when the
assets are retired or sold.
Revenue Recognition. Revenue and costs are generally recorded when products
are shipped and invoiced to either independently owned and operated dealers or
customers. Certain new units may be invoiced prior to the time customers
take physical possession. Revenue is recognized in such cases only when the
customer has a fixed commitment to purchase the units, the units have been
completed, tested and made available to the customer for pickup or delivery,
and the customer has requested that the Company hold the units for pickup or
delivery at a time (generally within two weeks) specified by the customer at
the time the customer is notified that the unit is completed or specified in
the sales agreement. In such cases, the units are invoiced under the Company's
customary billing terms, title to the units and risks of ownership passes to
the customer upon invoicing, the units are segregated from the Company's
inventory and identified as belonging to the customer and the Company has no
further obligations under the order.
Accrued Warranties and Product Liability. The Company's financial statements
reflect accruals for potential warranty and product liability claims based on
the Company's claim experience. Warranty costs are accrued at the time revenue
is recognized. The Company provides self-insurance reserves for estimated
product liability experience on known claims and for claims anticipated to have
been incurred which have not yet been reported. Certain of the Company's
product liability accruals, principally related to the forklift business
acquired during 1992 (see Note C -- "Acquisitions"), are presented on a
discounted basis. The related discount of $8,567 at December 31, 1992,
computed at 8.0%, is recorded as a direct reduction of gross product liability
claims and is amortized using the effective interest rate method. Interest
expense attributable to the amortization of the discount aggregated $1,250 in
1992. The remainder of the Company's product liability accruals are presented
on a gross settlement basis.
Foreign Currency Translation. The majority of the assets and liabilities of
the Company's international operations are translated at year-end exchange
rates; income and expenses are translated at average exchange rates prevailing
during the year. For operations whose functional currency is the local
currency, translation adjustments are accumulated in the Cumulative Translation
Adjustment component of Stockholders' Investment. Gains or losses resulting
from foreign currency transactions are included in Other Expense. Net foreign
exchange losses were $2,413, $211 and $173 in 1992, 1991 and 1990,
respectively.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized. Expenditures relating to
conditions caused by past operations that do not contribute to current or
future revenue generation are expensed. Liabilities are recorded when
environmental assessments and/or remedial actions are probable, and the costs
can be reasonably estimated. Generally, the timing of these accruals coincides
with completion of a feasibility study or the Company's commitment to a formal
plan of action.
Research and Development Costs. Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or
significant improvements to existing products amounted to $3,814 in 1992,
$4,034 in 1991, and $7,982 in 1990.
Income Taxes. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 96, "Accounting For
Income Taxes" (see Note K -- "Income Taxes"), which requires the Company to
follow the liability method. The liability method provides that deferred tax
assets and liabilities be recorded based upon the difference between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Stock Split. The Company's Board of Directors declared a five-for-four stock
split of the Company's common stock on May 24, 1990 to shareholders of record
on May 11, 1990. Except as otherwise stated, all reference to numbers of
shares and to per share information in the consolidated financial statements
have been adjusted to reflect the stock split on a retroactive basis.
Issuance of Stock by a Subsidiary. The Company accounts for increases and
decreases in its proportionate share of a subsidiary's equity arising from the
issuance of stock by the subsidiary and related transactions as gains and
losses in the Consolidated Statement of Income (see Note D -- "Investment in
Fruehauf Trailer Corporation").
Net Income (Loss) Per Share. Net income (loss) per share is based on the
weighted average number of common and common equivalent shares outstanding
during the year. The dilutive effect of common stock equivalents (if
applicable) is calculated using the treasury stock method.
Reclassifications. Certain amounts shown for 1990 and 1991 have been
reclassified to conform to the 1992 presentation.
Recent Pronouncements. In December 1990, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", which covers health care and other welfare
benefits provided to retirees. The statement, among other things, requires an
accrual of the obligation to provide future benefits to employees during the
years that the employees provide service. The Company will adopt this
standard during the first quarter of 1993 using the delayed recognition method
provided for in SFAS 106. The Company's Heavy Equipment Segment has an
estimated unfunded accumulated postretirement transition obligation ranging
from $4 million to $5 million. No change in the Company's current practice of
funding these benefits on a pay-as-you-go basis is currently anticipated.
In February, 1992, the FASB issued SFAS No. 109, "Accounting For Income Taxes"
to supersede SFAS No. 96, "Accounting For Income Taxes". The Company has
reflected its tax provisions and liabilities using the principles of SFAS No.
96. The new pronouncement retains certain concepts of SFAS No. 96, but
generally simplifies its application. The Company will adopt this standard
during the first quarter of 1993. The impact of adoption is not anticipated to
have a significant effect on the Company's financial position or results of
operations.
In November, 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". This pronouncement establishes accounting and
reporting for the estimated cost of benefits provided by an employer to former
or inactive employees after employment but before retirement. For the most
part, the Company already accounts for such benefits on an accrual basis.
Therefore, the impact of adoption is not anticipated to have a significant
effect on the Company's financial position or results of operations. The
Company will adopt this standard during the first quarter of 1994.
NOTE B -- RESTATEMENTS
The accompanying financial statements reflect restatement for current year and
prior years activity and transactions as described below:
Restatement of the year ended December 31, 1992.
As described in Note D - "Investment in Fruehauf Trailer Corporation," after
an initial public offering of Fruehauf common stock in July 1991 the Company
owned approximately 42% of the outstanding common stock of Fruehauf. Due to
additional control factors, including shares owned by certain officers of
Terex, the presence of three Terex directors on Fruehauf's board, the service
of two Terex executive officers as executive officers of Fruehauf, and the
existence of a voting trust among Terex and certain individuals, the Company
concluded it had a controlling financial interest in Fruehauf. Accordingly, in
the Company's Annual Report on Form 10-K for the year ended December 31, 1992
as originally filed, Fruehauf's results were included in the Company's
consolidated financial statements for the years ended December 31, 1991 and
1992.
After consultation with the Securities and Exchange Commission staff,
management subsequently decided that despite the control factors described
above, assurance of strict numerical voting control of Fruehauf by Terex was
eliminated as a result of the termination of the voting trust between Terex and
certain individuals in July 1992 and, therefore, Terex should not consolidate
Fruehauf in its 1992 financial statements. Accordingly, management has
restated the financial statements for the year ended December 31, 1992 to
account for the Company's investment in Fruehauf on the equity method effective
January 1, 1992.
The following table sets forth selected information as originally reported and
as restated for the year ended December 31, 1992:
Year Ended
December 31,
1992
Net Sales
As Originally Reported 1,012,253
As Restated 523,355
Net Income (Loss)
As Originally Reported (61,088)
As Restated (57,175)
Net Income (Loss) Per Share
As Originally Reported (6.14)
As Restated (5.75)
Average Number of Common and
Common Equivalent Shares Outstanding 9,945
Restatement of the years ended December 31, 1987 through 1991
As a result of inquiries by its current independent accountants, the Company
reviewed its accounting treatment for certain prior year transactions and
concluded that the financial statements for the years ended December 31, 1987
through 1991 required restatement with respect to the accounting for the
refinancing of debt, detachable warrants issued with debt, certain property,
plant and equipment transactions and other miscellaneous items.
Terex Corporation
The Company issued debt with detachable warrants in 1987. A nominal value was
initially assigned to the warrants and the incremental cost of redeeming the
warrants over the initial value assigned was originally classified as a
deferred charge and was to be amortized over the life of the debt agreement.
In 1992, management concluded that the initial value assigned to the warrants
at the date of issuance did not reflect fair value. Management obtained an
estimate of the fair value of the warrants at the date of issuance and
concluded that the fair value of the warrants at date of issuance should have
been recorded as debt discount and amortized to interest expense over the life
of the debt and that the cost of redeeming the warrants in excess of the
revised value of the warrants at the time of issuance should be charged to
retained earnings. Retained earnings as of December 31, 1989 was reduced by
$1,432 to reflect this revised accounting. Income before extraordinary items
and net income were increased by $146 in 1990 and net income was increased by
$100 in 1991.
In 1992, management concluded that the carrying value of certain properties
were adjusted to amounts in excess of lower of cost or market during 1990 and
1991 by $6,403 and $434, respectively. Therefore, management has restated its
financial statements for the years ended December 31, 1990 and 1991 to
appropriately account for the property, plant and equipment.
The impact of the revised accounting for the Fruehauf debt transaction and the
Fruehauf warrants, as discussed below, resulted in an incremental gain of
$2,453 in 1991 related to the initial public offering of Fruehauf common stock
and related recapitalization.
Fruehauf Trailer Corporation
Fruehauf issued debt with detachable warrants in 1989. A nominal value was
initially assigned to the warrants and the incremental cost of redeeming the
warrants over the initial value assigned was originally classified as a
deferred charge and was to be amortized over the life of the debt agreement.
In 1992, management concluded that the initial value assigned to the warrants
at the date of issuance did not reflect fair value. Management obtained an
estimate of the fair value of the warrants at the date of issuance and
concluded that the fair value should have been recorded as debt discount. In
addition, management concluded that the cost of redeeming the warrants in
excess of the revised value of the warrants at the time of issuance should be
charged to earnings as interest cost.
In 1990, Fruehauf accounted for a debt transaction as a modification to an
existing debt instrument as opposed to an extinguishment of debt and the
issuance of new debt. In accounting for the transaction as a modification,
Fruehauf continued to defer and amortize the existing deferred debt issuance
costs over the life of the modified debt instrument. Had Fruehauf accounted
for the transaction as an extinguishment of debt, all unamortized debt issuance
costs would have been written off at that time as an extraordinary charge to
earnings. Management concluded after review, that it was not appropriate for
Fruehauf to continue to defer debt issuance costs associated with the
previously outstanding long-term debt upon the refinancing and, therefore, has
restated its financial statements for the years ended December 31, 1990 and
1991 to reflect the revised accounting treatment for the debt issuance costs.
The revised accounting treatment for the Fruehauf warrants and debt issuance
costs resulted in a reduction of retained earnings as of December 31, 1989 of
$1,185, a reduction in income before extraordinary items of $2,308 and a
reduction in net income of $4,500 in 1990, and an increase to net income of
$815 in 1991. A one-time extraordinary loss of $2,192, or $(.22) per share,
has been recorded in 1990 to write-off the unamortized debt issuance costs
relating to the refinanced debt.
The following table sets forth selected information as originally reported and
as restated for the years ended December 31, 1991 and 1990:
Year Ended December 31,
1991 1990
Income (Loss) Before Extraordinary Loss
As Originally Reported (33,413) 15,483
As Restated (29,786) 8,245
Net Income (Loss)
As Originally Reported (33,413) 15,483
As Restated (29,786) 6,053
Income (Loss) Per Share Before Extraordinary Loss
As Originally Reported (3.37) 1.57
As Restated (3.00) .83
Net Income (Loss) Per Share
As Originally Reported (3.37) 1.57
As Restated (3.00) .61
Average Number of Common and Common
Equivalent Shares Outstanding 9,914 9,889
NOTE C -- ACQUISITIONS
Clark Material Handling Company - On July 31, 1992, the Company completed the
acquisition of the common stock of Clark Material Handling Company and certain
affiliate companies ("Clark") from Clark Equipment Company (the "Clark
Acquisition"). Clark is engaged in the design, manufacture and marketing of
internal combustion and electric forklift and lift trucks and related parts and
equipment. The purchase price of the Clark Acquisition was $91,090, which was
funded by $85,000 of cash and a $6,090 seller note.
The acquisition was accounted for using the purchase method with the purchase
price of the acquisition allocated to assets acquired and liabilities assumed
based upon their respective estimated fair value at the date of the
acquisition. Purchase price allocations were based on evaluations,
estimations, appraisals, actuarial studies and other studies performed by the
Company. The excess of purchase price over the net assets acquired ($3,090)
is included in other assets and is being amortized on a straight-line basis
over 15 years.
The estimated fair values of assets and liabilities acquired on July 31, 1992,
net of cash acquired of $4,546, are summarized as follows:
Accounts receivable $ 47,291
Inventories 100,450
Other current assets 2,519
Property, plant and equipment 95,284
Other assets 22,568
Goodwill 3,090
Accounts payable and other
current liabilities (139,063)
Noncurrent liabilities (45,595)
$ 86,544
The operating results of this acquisition are included in the Company's
consolidated results of operations since August 1, 1992. The following
unaudited pro forma summary presents the consolidated results of operations as
though the Company completed the Clark Acquisition on January 1, 1991, after
giving effect to certain adjustments, including amortization of goodwill and
intangible assets, increased depreciation resulting from the revaluation of
property, plant and equipment, interest expense and amortization of debt
issuance costs on the acquisition debt, and reduced operating costs related to
recurring cost savings which are directly attributable to the Clark
Acquisition.
Pro Forma
For the Year
Ended December 31,
1992 1991
Net sales $811,859 $1,286,942
Loss from operations (14,452) (62,888)
Net loss (76,513) (70,309)
Net loss per share $(7.69) $(7.09)
The unaudited pro forma consolidated results do not represent actual operating
results. The pro forma amounts were prepared by management and should not be
interpreted as predictive of the Company's future results of operations. The
Company is actively reorganizing the operations of Clark by consolidating
manufacturing and distribution operations. Consequently, management does not
view the combination of the historical financial results of the Company and
Clark as a meaningful representation of the Company's future operations.
Mark Industries - In December 1991, the Company purchased substantially all
operating assets of Mark Industries ("Mark"), a leader in the manufacture and
sale of aerial lift equipment, for $5,865. The fair values of the assets
acquired, net of liabilities assumed, was approximately $315. The Company
continues to use the purchased assets for the manufacture and sale of aerial
lift equipment. The results of operations of Mark since December 31, 1991 have
been included in the accompanying consolidated financial statements.
The acquisition was accounted for using the purchase method with the purchase
price of the acquisition allocated to assets acquired and liabilities assumed
based upon their respective estimated fair value at the date of the
acquisition. Purchase price allocations were based on evaluations, estimations
and other studies performed by the Company. The final allocation of the Mark
purchase price allocation was completed in 1992. The excess of the purchase
price over the net assets acquired ($5,550) is included in Other Assets and is
being amortized on a straight-line basis over 12 years.
NOTE D-- INVESTMENT IN FRUEHAUF TRAILER CORPORATION
Initial Public Offering and Recapitalization
On July 8, 1991, Fruehauf completed an initial public offering ("IPO") of
4,000,000 shares of Fruehauf common stock at a price of $11 per share.
Fruehauf applied all of the net proceeds of the offering to repay indebtedness.
In conjunction with Fruehauf's IPO, the Company contemplated related exchange
transactions between certain stockholders and warrantholders of the Company and
Fruehauf. In determining the Company's net gain in 1991 on the Fruehauf IPO,
the Company considered the impact of these related exchange transactions. The
estimated impact of these exchange transactions was a loss of approximately
$7,759. The loss was recorded as a reduction of the gain on the sale of
Fruehauf of $22,776, for a net gain of $15,017 in 1991. During the fourth
quarter of 1992, the exchange agreement expired and management and the parties
to the exchange concluded that the exchange transactions originally
contemplated were no longer in the best interests of the Terex and Fruehauf
stockholders. Accordingly, the $7,759 reserve for the estimated impacts of the
exchange transactions was recorded into income in the fourth quarter of 1992.
The impact of this transaction is recorded as a component of Other Income in
the Consolidated Statement of Income. Prior to the IPO, Fruehauf was a
wholly-owned subsidiary of the Company. Following the IPO and as of December
31, 1992, the Company owns approximately 42% of the outstanding common stock of
Fruehauf. Pending the consummation of the exchange transactions, Terex's
principal shareholder and certain other individuals placed 956,000 shares of
Fruehauf common stock in a voting trust to enable the Company to retain voting
control of more than 50% of Fruehauf's outstanding common stock. Because the
voting trust allowed the Company to retain a controlling financial interest in
Fruehauf, the Company included Fruehauf in its consolidated financial
statements for 1991. The voting trust terminated during 1992 and, accordingly,
the Company presently accounts for its 42% ownership interest in Fruehauf using
the equity method. The Company's consolidated financial statements are
presented giving effect to the deconsolidation of Fruehauf as of January 1,
1992.
Minority interest, representing other stockholders' interest in Fruehauf, is
classified between noncurrent liabilities and stockholders' investment in the
Consolidated Balance Sheet. The minority interest share in the net loss of
Fruehauf's operations was $9,722 in 1991.
Unaudited pro forma consolidated results of operations for 1991 and 1990, as
though the Company completed the Fruehauf IPO, recapitalization, and related
transactions on January 1, 1990 and excluding the nonrecurring gain of $15,017
recorded by the Company in 1991, are as follows:
Year Ended December 31,
1991 1990
Net sales $784,194 $1,023,178
Income (loss) from operations (36,200) 44,386
Net income (loss) before extraordinary loss (36,594) 12,811
Net income (loss) (36,594) 10,619
Net income (loss) per share $(3.69) $1.07
These unaudited pro forma consolidated results have been prepared pursuant to
Article 11 of Securities and Exchange Commission Regulation S-X and are not
necessarily representative of the operating results or financial position the
Company would have achieved had the events reflected therein occurred at the
dates assumed. Additionally, these financial statements are not representative
of the future results or financial position that the Company will record.
These pro forma consolidated results should be read in conjunction with the
audited historical consolidated financial statements of the Company and the
notes thereto.
Restructuring Costs
During 1991, Fruehauf recorded the impact of a restructuring plan designed to
increase the overall profitability of Fruehauf by closing or selling certain
operations that have not met profitability expectations. Restructuring costs
of $15,825 represent provisions for the anticipated future cost of implementing
a restructuring of Fruehauf's distribution system and other nonrecurring costs
related to streamlining Fruehauf's manufacturing operations. The components of
the restructuring costs are as follows:
Branch conversion costs $ 5,700
During 1992, Fruehauf recorded additional restructuring costs of $15,500,
representing revisions of the estimates relating to the restructuring plan in
1991, which are included in determining the Company's equity in the net loss of
Fruehauf for 1992.
Plan of Restructuring and Refinancing
In the fourth quarter of 1991, Fruehauf had taken significant actions to reduce
its overall cost structure and improve liquidity. As discussed above, Fruehauf
implemented a restructuring program affecting its distribution system and
certain of its manufacturing operations. This program continued through 1992
with additional actions, including, among others, temporary plant shutdowns,
salary reductions and reductions in fringe benefits.
As a result of the continuing losses, which have continued through the first
quarter of 1993, Fruehauf was not in compliance with certain financial
covenants at December 31, 1992. On March 15, 1993, Fruehauf and its lenders
amended the terms of its Bank Credit Facility. Fruehauf is attempting to
secure alternative financing which would provide incremental borrowing and
enable it to extinguish all amounts owed under the Bank Credit Facility.
Additionally, the Company and Fruehauf announced on January 12, 1993 that a
number of unsolicited inquiries had been received from qualified parties
expressing an interest in purchasing the Fruehauf business. As a result of
this interest, a financial advisor was retained to explore opportunities for
maximizing Fruehauf's stockholder value. Given the uncertainty of the
transaction, the Company has not recorded the Fruehauf operating results in
accordance with Accounting Principles Board Opinion No. 30 "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". The impact of any consummated transactions will be recorded at
the time the transaction is completed.
Summary Financial Information
Assets of the Fruehauf operation totaled $276,658 at December 31, 1992
consisting of current assets of $102,715 and noncurrent assets of $173,943.
Current assets consist primarily of cash, receivables, inventories and prepaid
expenses which management believes will be disposed in the normal business
cycle, while noncurrent assets consist primarily of property, plant and
equipment, investments in affiliates, assets held for sale, a facility leased
to a Fruehauf affiliate and certain other noncurrent assets. Liabilities of
the Fruehauf operation are $294,176 at December 31, 1992 consisting of current
liabilities of $196,641 and noncurrent liabilities (exclusive of a $14,890
long-term payable to Terex) of $82,645. Current liabilities include trade
payables, accrued compensation and benefits, the current portion of long-term
debt and other accruals. Noncurrent liabilities include the noncurrent portion
of postretirement health care costs, product liability, environmental
obligations and other long-term reserve requirements. Sales of Fruehauf were
$489 million, $513 million and $589 million in 1992, 1991 and 1990,
respectively, and net loss (100% basis) of the Fruehauf operation was $65,160,
$28,876 and $2,176 in 1992, 1991 and 1990, respectively.
Because Fruehauf has experienced significant losses since 1991 and continues to
have a stockholders' deficit after the new equity investment, Terex's carrying
value for its investment in Fruehauf has been reduced to zero. Terex has also
recognized a contingent obligation of approximately $3 million, with respect to
guaranties by Terex of certain obligations of Fruehauf. Until such time as
Fruehauf returns to profitability and achieves a positive net worth, the
Company does not expect to recognize any additional losses or income with
respect to its investment in Fruehauf.
NOTE E -- INVESTMENTS IN AFFILIATE COMPANIES
The Company has a less than 50% investment in North Hauler Limited Liability
Company ("North Hauler") which was acquired in 1987. North Hauler, located in
Baotou, Inner Mongolia, People's Republic of China, is engaged in the
manufacturing and marketing of off-highway trucks for use in mining, road
construction and other heavy industries. The carrying value of this investment
is $-0- at December 31, 1992.
In March 1992, the Company sold an 80% interest in Benton Harbor Engineering,
Inc. for a purchase price of $4,300. No gain or loss was recorded on the
disposal. The Company financed the sale through the issuance of a $4,300
seller note ("BHE Note"). The note is payable in annual installments on
December 31, 1993 and December 31, 1994 and semiannually thereafter through
June 2003. The interest rate is initially at the rate of prime plus 2%, with
such rate increasing by one percent on each anniversary of the date the first
interest payment is due to a maximum of five percent over the then prime rate.
The note is secured by the purchased assets, as well as all assets subsequently
acquired. There is no quoted market value for this note, therefore, a precise
estimate of the fair value could not be made without incurring excessive costs.
However, given that the note originated in March 1992, management believes that
the carrying value approximates fair value. The carrying value of this
investment is $3,871 at December 31, 1992.
Fruehauf has less than 50% investments in three foreign corporations engaged in
the design, manufacture and marketing of truck trailers. Fruehauf's investment
in Societe Europeenne de Semi-Remorques, S.A. ("SESR"), Europe's leading
trailer manufacturer, is the largest equity investment with a recorded value at
December 31, 1991 of $30,072. The book value of Fruehauf's investment in SESR
exceeds Fruehauf's proportionate share of the underlying equity in net assets.
The related excess purchase price of $8,010 at December 31, 1991, is being
amortized on a straight-line basis over 20 years. During 1991, Fruehauf sold a
portion of its investment in SESR, which was in turn sold to SESR, reducing its
ownership from approximately one-third to approximately 23%. In addition to
the $8,739 of cash received upon the sale of SESR shares, 1) certain litigation
between SESR and Fruehauf was settled, 2) Fruehauf shares of SESR and related
accumulated dividends previously held in escrow as a result of the
aforementioned litigation were released to Fruehauf, 3) Fruehauf
representatives to the SESR Board of Directors were reinstated, 4) and expiring
royalty and trademark and license agreements between SESR and Fruehauf were
renegotiated. As a net result of these transactions, Fruehauf recorded a loss
of $3,312.
The carrying value of Fruehauf's other affiliate accounted for under the equity
method is $7,557 at December 31, 1991. The carrying value of Fruehauf's two
affiliates accounted for under the cost method is $2,516 at December 31, 1991.
Summarized financial data (100% basis) for Fruehauf's affiliates accounted for
under the equity method is as follows:
Year Ended December 31,
1991 1990
Net sales $822,045 $831,372
Gross profit 133,190 139,600
Net income (loss) 15,238 24,594
December 31,
1991 1990
Current assets $424,405 $401,483
Noncurrent assets 212,428 182,118
Current liabilities 283,690 246,141
Noncurrent liabilities and deferred taxes 190,013 169,665
Fruehauf's share of the net income (loss) of affiliate companies accounted for
using the equity method was $4,209 and $7,480 for the years ended December 31,
1991 and 1990, respectively. Dividends received from such companies totaled
$1,681 for 1991, and $732 for 1990. Dividends received from affiliated
companies accounted for under the equity method are applied as a reduction of
the carrying value of the investments.
Fruehauf received dividends from its affiliates accounted for using the cost
method totaling $130 and $146 in 1991 and 1990, respectively. Such dividends
are included in Other income (expense) in the Consolidated Statement of Income.
Fruehauf sold material to its less than 50% equity affiliates totaling
approximately $5,688 and $6,761 for the years ended December 31, 1991 and 1990,
respectively. Such sales were made on the same terms and conditions as with
other customers. In addition, Fruehauf received amounts pursuant to royalty
and trademark and license agreements from its less than 50% owned equity
affiliates totaling $2,518 and $4,221 for the years ended December 31, 1991 and
1990, respectively. Amounts receivable from such affiliates at December 31,
1991 and 1990 totaled $2,040 and $2,352, respectively.
NOTE F -- INVENTORIES
Inventories consist of the following:
December 31,
1992 1991
New equipment $50,689 $64,875
Used equipment 1,495 19,761
Work-in-process and finished parts 83,090 99,879
Raw materials and supplies 67,014 63,078
Long-term contract costs in excess of
customer advances of $0 in 1992 and
$4,749 in 1991 --- 3,422
Gross inventories 202,288 251,015
Add: Excess of LIFO inventory value
over (under) FIFO costs (5,152) 1,559
Net inventories $197,136 $252,574
Adequate provisions have been recorded for all inventory determined to be
surplus or obsolete. That determination incorporates management's best
estimate of the Company's future operations and the economic conditions in the
industries served by the Company.
NOTE G -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at:
December 31,
1992 1991
Property $14,434 $35,897
Plant 54,662
59,716
Equipment 73,021 77,250
142,117 172,863
Less: Accumulated depreciation 25,838 43,303
Net property, plant and equipment $116,279 $129,560
NOTE H -- ASSETS AND BUSINESS HELD FOR SALE
Fruehauf is holding for sale certain excess real estate, facilities and other
assets, as well as the Decatur Business, which are included in the December 31,
1991 consolidated balance sheet under the caption "Assets Held for Sale."
The Decatur Business consists of Fruehauf's wholly-owned aluminum extrusion
business and a 50% equity interest in Decatur Aluminum Company, a corporation
engaged in the production of aluminum sheeting. The Decatur Business supplies
aluminum sheeting and extrusions to Fruehauf's trailer manufacturing plants.
Fruehauf acquired the Decatur Business as part of the Fruehauf acquisition and
has announced its intention to divest this business. The Decatur Business is
included in the Consolidated Balance Sheet for ($1,077) at December 31, 1991.
Changes in the carrying value of the Decatur Business result from the net cash
used in (generated from ) the Decatur Business. The operating results of the
Decatur Business are not included in the Consolidated Statement of Income.
The Decatur Business experienced losses of approximately $900, and $800 in 1991
and 1990, respectively, which were excluded from the Consolidated Statement of
Income. Reserves were established at the Fruehauf acquisition to absorb
operating results until the Decatur Business is divested. Revenues from the
Decatur Business (on a 100% basis) were $62,538 in 1992, $55,055 in 1991, and
$57,204 in 1990. The majority of these revenues were intercompany sales which
would have been eliminated in consolidation.
Fruehauf previously announced its intention to divest Jacksonville, its
wholly-owned ship repair subsidiary, at the time of the Fruehauf acquisition in
1989. Jacksonville's primary floating dry-docks were sold in September, 1991
for $28,750, and the proceeds were applied against the repayment of
Jacksonville's $29,600 of Industrial Development Revenue Bonds. Substantially
all remaining operations at Jacksonville ceased in 1992, and a program was
implemented to liquidate the remaining assets, consisting primarily of real
estate and receivables. Fruehauf recorded a $11,551 charge in 1992, relating
to the closure and liquidation of Jacksonville, which is included in
determining the Company's equity in the net loss of Fruehauf for 1992.
The results of Jacksonville are not included in the Consolidated Statement of
Income. Jacksonville revenues were $40,700 in 1991 and $31,400 in 1990 and
losses were $3,400 in 1991 and $2,500 in 1990. Jacksonville's assets and
liabilities are included in the December 31, 1991 Consolidated Balance Sheet
under the respective captions.
In December 1991, Fruehauf sold substantially all the operating assets of CEMCO
for $6,150 and recorded a gain of $6,599. CEMCO had been in the business of
manufacturing cranes. The net proceeds of the sale were used to reduce
Fruehauf's outstanding indebtedness. The remaining assets and liabilities of
CEMCO, consisting primarily of receivables and warranties, are included in the
December 31, 1991 Consolidated Balance Sheet. The operating results of CEMCO
are not included in the Consolidated Statement of Income because reserves were
established at the time of the Fruehauf acquisition to absorb such operating
losses.
In addition to the Decatur Business and Jacksonville's real estate, Fruehauf
holds for sale other idle facilities. As a result of manufacturing and
distribution restructuring programs, certain facilities were added to the
Assets Held for Sale in 1991. Fruehauf is actively marketing all excess
properties, and in certain instances, is leasing them in order to generate
funds to help cover holding costs. These nonoperating properties are carried
on a lower of cost or market basis. In the opinion of management, adequate
reserves have been established to absorb holding costs until disposition. As
previously discussed in Note D -- "Investment in Fruehauf Trailer Corporation",
Fruehauf wrote-down certain assets held for sale and recorded provisions for
related holding costs in 1991.
Excluding the proceeds generated from the sale of CEMCO's operating assets and
Jacksonville's floating dry-docks, Fruehauf generated proceeds from the sale of
excess assets of $4,785 and $18,919 in the years ended December 31, 1991 and
1990, respectively. All proceeds generated from the sale of excess Fruehauf
assets are required to be applied against the outstanding indebtedness under
Fruehauf's Bank Credit Facility (see Note I -- "Long-Term Obligations").
NOTE I -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
1992 1991
Terex and Clark Debt:
Senior Secured Notes bearing interest at 13%,
due August 1, 1996 $158,895 $ ---
Secured Senior Subordinated Notes bearing
interest at 13.5% payable in equal annual
principal installments, due July, 1997 40,725 48,700
Secured promissory note bearing interest
at prime rate, due July 31, 1994 6,090 ---
Unsecured term note bearing interest at 9.0%
payable in equal semiannual installments
from August, 1994 to February, 1998 757 935
Unsecured term notes bearing interest at prime
rate plus 0.5%, due June, 1993 --- 20,000
Unsecured term notes bearing interest from
6.5% - 7.0%, due June, 1993 --- 42,000
Unsecured noninterest bearing term note with
an imputed interest rate of 10.3% payable
in equal annual installments of $2,000 from
January, 1990 to January, 1992 --- 1,991
Other 123 ---
Capital lease obligations (Note J) 9,442 5,455
Total Terex and Clark 216,032 119,081
Fruehauf debt:
Secured Bank Credit Agreement bearing interest
at prime plus 2.25% in 1993, prime plus 2.0%
in 1992, prime plus 1.5% prior thereto,
due June, 1993 --- 85,128
Mortgage note bearing interest at 9.625%
collateralized by an idle plant,
due September, 2001 --- 4,379
Unsecured promissory note held by a related
party bearing interest at 14% in 1992 and
12% in 1991, due March, 1996 --- 7,497
Total Fruehauf debt 0 97,004
Total long-term debt 216,032 216,085
Current portion of long-term debt 11,543 23,636
Long-term debt, less current portion $204,489 $192,449
In conjunction with the Clark Acquisition, the Company refinanced a major
component of its previously outstanding bank debt (the "Refinancing"). The
Refinancing included the issuance of $160 million, 13% senior secured notes,
due August 1, 1996 (the "Senior Secured Notes"), establishment of a $60 million
credit agreement with a commercial bank (the "Bank Lending Agreement") and
amendments to its existing $50 million Secured Senior Subordinated Notes (the
"Subordinated Notes"). Proceeds from the issuance of the Senior Secured Notes
were used for the cash portion of the Clark Acquisition purchase price ($85
million), for the settlement of all amounts outstanding under its previous
credit facility ($58 million), and for working capital and transaction costs.
Terex and Clark Debt
Senior Secured Notes and Subordinated Notes
In connection with the sale of the Senior Secured Notes and obtaining the
consent of the holders of the Company's existing $50 million, 13.5%
Subordinated Notes due July 1, 1997 to modification of the Subordinated Notes,
the Company issued 658,409 common stock appreciation rights ("SAR's"). As of
December 31, 1992 there were 639,794 SAR's outstanding. Of the outstanding
SAR's, 557,385 may be exercised at the option of the holder thereof at any time
on or after January 27, 1993, but not later than July 31, 1996. The remaining
82,409 SAR's may be exercised through July 1, 1997. The SAR's entitle the
holder to receive, in cash, an amount equal to the market appreciation in the
Company's common stock between $11 per share, subject to adjustment, and the
average price per share for the 30 consecutive trading days prior to the date
of exercise. The Company also amended its Subordinated Notes by granting the
holders of the notes a secondary secured position in certain of the Company's
assets.
The provisions of the Senior Secured Notes agreement required that the Company
register the notes with the Securities and Exchange Commission by November 30,
1992 which registration was to become effective no later than March 1, 1993.
As of May 12, 1993, Terex has not completed the required filing with the
Securities and Exchange Commission. As a result, Terex is incurring liquidated
damages of $8 per week for the first thirteen weeks and $16 per week thereafter
until such filing becomes effective. Interest on the Senior Secured Notes is
due semiannually on February 1 and August 1.
In June 1987, the Company initially issued the $50 million unsecured
Subordinated Notes for net proceeds of $48,801. The notes, due in 1997, have
annual sinking fund requirements of $8,333 due July 1 which commenced in 1992.
Interest on the Subordinated Notes is due semiannually on January 2 and July 1.
As discussed above, the holders were granted a secondary secured position in
certain of the Company's assets during 1992. Also, the Company agreed to
repurchase $7.5 million of Subordinated Notes on May 28, 1993, approximately 30
days in advance of the date of the required sinking fund payment of $8.3
million and to apply those notes against the sinking fund payment. The Company
expects to have adequate liquidity to effect such repurchase. However, without
the consummation of the Lending Facilities (see the Lending Facilities
discussion below), the Company would have difficulty in meeting its debt
obligations on May 28, 1993 without taking steps which might impair its
business. If the Lending Facilities are not consummated by May 28, 1993,
management may conclude that the best interests of the Company may be served by
not effecting its debt repurchase obligations on May 28, 1993. In such event,
the Company will be exposed to legal action by the holders of the Subordinated
Notes to be repurchased for any losses they incur.
The Senior Secured Notes are secured by substantially all inventory and
property, plant and equipment of the Company's Material Handling and Heavy
Equipment Segments, as well as the Company's investment in Fruehauf common
stock. The Subordinated Notes holders have a secondary secured position in
certain of the Company's assets. The indentures governing the Senior Secured
Notes and the Subordinated Notes require, among other things, that the Company
maintain certain levels of tangible net worth and collateral coverage. In the
event that the Company is not in compliance with its tangible net worth
covenant for two consecutive quarters or its collateral coverage covenant, the
Company must offer to repurchase, at par plus accrued interest, specified
portions of the principal amount of long-term debt.
The Company believes that, based on management's current estimates, it will be
in compliance with its covenants with respect to its Senior Secured Notes and
Subordinated Notes throughout 1993. However, certain future events could
affect the Company's continuing compliance with such covenants. In particular,
in computing tangible net worth under the covenants of the Senior Secured Notes
and the Subordinated Notes, the Company is allowed to maintain a defined value
for its investment in Fruehauf. At December 31, 1992, the defined value
approximated $51.0 million. At December 31, 1992, the market value of the
Company's investment in Fruehauf was $24.4 million. As discussed in Note D -
"Investment in Fruehauf Trailer Corporation" to the Consolidated Financial
Statements, the Company is evaluating alternatives relating to its investment
in Fruehauf, including selling Terex's shares of Fruehauf common stock. If, as
a result of any transactions affecting its investment in Fruehauf, or any other
reason, the Company is not in compliance with certain of its covenants, the
Company may be required to offer to repurchase 20% of the outstanding notes.
If such offer were to be made, it is likely that the Company would require
additional funding to complete the offer, and if such funding were unavailable
to it, the Company would be unable to comply with the terms of the notes and
the notes may be accelerated. Such circumstances could result in a material
adverse impact on the Company and its financial position.
In addition to the financial covenants discussed above, the indentures
governing the Senior Secured Notes and Subordinated Notes limit, among other
things, Terex's ability to incur additional indebtedness, consummate mergers
and acquisitions, pay dividends, sell business segments and enter into
transactions with affiliates, as well as place limitations on change of
control.
Certain defaults under the Bank Lending Agreement, the Senior Secured Notes and
the Subordinated Notes, which existed at December 31, 1992 have been waived or
cured as of May 11, 1993.
Bank Lending Agreement
Immediately following the Clark Acquisition and Refinancing and through May 12,
1993, no cash amounts were outstanding under the Bank Lending Agreement. The
Bank Lending Agreement is currently utilized only for outstanding letters of
credit. The Bank Lending Agreement is secured by all cash and receivables of
the Company's Material Handling and Heavy Equipment Segments. The Bank Lending
Agreement originally provided for cash advances or for the issuance of bank
letters of credit up to the $60 million commitment subject to the available
collateral.
The Bank Lending Agreement provided for adjustments to the $60 million
commitment amount based upon Terex's compliance with base financial ratios. On
December 31, 1992, Terex's financial ratios (based upon November 30, 1992
financial data) did not meet the base financial ratios; as a result, the
commitment amount under the Bank Lending Agreement was reduced to $33,762. At
December 31, 1992, the revolving credit facility was limited to the lesser of
the commitment amount ($33,762) or the available borrowing base. The total
borrowing base available under the Bank Lending Agreement is based upon the
application of prescribed advance ratios against eligible receivable balances.
Available borrowing base ranged from $26,135 to $38,332 since the inception of
the Bank Lending Agreement on July 31, 1992 through December 31, 1992. At
December 31, 1992, the available borrowing base was $27,444. There were no
cash advances under the Bank Lending Agreement at December 31, 1992;
outstanding letters of credit under the Bank Lending Agreement totaled $38,923
at December 31, 1992. Given that outstanding letters of credit were in excess
of the lender determined available borrowing base, Terex was required to
maintain, in its operating account, a minimum balance equal to the difference
between the balance of outstanding letters of credit and available borrowing
base. Such amount is presented as Restricted Cash on the Consolidated Balance
Sheet.
The Bank Lending Agreement, among other things, requires that the Company
maintain certain financial covenants contained in the agreement. Such
covenants relate to minimum profitability ratios and levels of tangible net
worth, as well as maximum levels of leverage and capital expenditures. In
addition to the financial covenants, the Bank Lending Agreement limits, among
other things, Terex's ability to incur additional indebtedness, consummate
mergers and acquisitions, pay dividends, and enter into transactions with
affiliates as well as places limitations on change in control. The Bank
Lending Agreement defines "a material adverse change or an event which would
have a material adverse effect" as an event of default.
The Company was not in compliance with certain financial covenants in the Bank
Lending Agreement at December 31, 1992. Terex has since received waivers for
the noncompliance and the financial covenants in the Bank Lending Agreement
have been revised. The revised lending agreement allows no cash borrowing
availability and states that beginning April 21, 1993, the Company must
commence increasing the amount of the cash collateral at specified increments
such that by June 30, 1993 all letters of credit are cash collateralized. The
Company is attempting to secure alternative financing which would provide
adequate liquidity and working capital for the Company's future needs. The
Company has received preliminary credit approval from a financial institution
to provide short-term financing ("Short-term Agreement") by about May 21, 1993,
and a permanent financing facility ("Permanent Lending Agreement") shortly
thereafter (together "The Lending Facilities"). The Short-term Agreement only
provides cash advances of $15 million and will be secured by all domestic
receivables of the Company. The Permanent Lending Agreement is expected to
replace the Short-term Agreement and provide up to $45 million for cash
advances and guarantees of bank letters of credit and will be secured by all
domestic receivables of the Company. The Company believes that the Short-term
and Permanent Lending Agreements can be completed in sufficient time to allow
the Company to meet all of its debt service and debt payment obligations on a
timely basis. However, if such financing is not available or if it is
significantly delayed, the Company may not be able to meet its debt and other
obligations on a timely basis. If such event were to occur, the Company would
be in a payment default which would give the holders of such obligations the
right to accelerate their indebtedness which could result in a material adverse
effect on the Company. As of April 15, 1993, the noncash collateralized
letters of credit were $5.9 million, while accounts receivable remained
substantially unchanged from the December 31, 1992 balance of $78.3 million.
Other Long-Term Obligations
A portion of the Clark purchase price was financed through a seller note in the
amount of $6,090 due July 31, 1994. Interest accrues at prime rate and is due
quarterly. The seller note is secured by certain property, plant and
equipment.
TEL entered into a revolving credit facility with a group of banks in January,
1989. The facility is secured by a letter of credit from the Bank Lending
Agreement and provides for up to approximately $4.6 million of multi-currency
loans on a revolving basis. The interest rates vary depending on the currency.
There were no amounts outstanding under the facility at December 31, 1992 and
1991.
Fruehauf Debt
As more fully described in Note D - "Investment in Fruehauf Trailer
Corporation," the Company presently accounts for its 42% ownership interest in
Fruehauf using the equity method, and the consolidated financial statements are
presented giving effect to the deconsolidation of Fruehauf as of January 1,
1992. By the terms of debt agreements of both companies, neither company is
obligated for, or may participate in, the debt service of the other. Fruehauf
debt as described below is included in the consolidated balance sheet at
December 31, 1991.
Fruehauf Secured Bank Credit Agreement
The Secured Bank Credit Agreement (the "Bank Credit Facility") constitutes
Fruehauf's primary lending facility and is secured by substantially all of the
assets of Fruehauf. The Bank Credit Facility provides both a term loan and a
revolving credit facility. Amounts outstanding under the term loan were
$70,128 at December 31, 1991. At December 31, 1991, the revolving credit
facility was limited to the lesser of $45,000 or the available borrowing base,
and the maximum cash advance availability was $20,000. The available borrowing
base is calculated by applying prescribed advance ratios against eligible
receivable and inventory balances, in accordance with the Bank Credit Facility.
Outstanding cash advances totaled $15,000 at December 31, 1991. Outstanding
letters of credit totaled $20,520 at December 31, 1991.
All proceeds from the sale of collateralized assets must be applied against the
outstanding Bank Credit Facility indebtedness, including proceeds from the sale
of most of the properties included in noncurrent Assets Held for Sale on the
Consolidated Balance Sheet. As a result, Fruehauf cannot sell excess
properties for the purpose of generating working capital.
A commitment fee of 1/2 of 1% per annum is payable on any unused portion of the
revolving credit and letter of credit facility. Total unused credit under the
revolving credit facility was $9,480 at December 31, 1991. The actual
borrowing rate was 8.0% at December 31, 1991.
The Bank Credit Facility restricts the payment of dividends and requires, among
other things, that Fruehauf maintain certain levels of tangible net worth and
working capital, meet certain current and debt to equity ratios, and achieve
certain levels of operating performance and interest coverage. While Fruehauf
remained current in all of its payment obligations under the Bank Credit
Facility, Fruehauf was not in compliance with certain financial covenants at
December 31, 1991.
In September, 1990, Fruehauf entered into the Bank Credit Facility and
refinanced the majority of its then outstanding long-term debt. A one-time
extraordinary loss of $2,192, or ($.22) per share, was recorded to write-off
the unamortized debt issuance costs relating to the refinanced debt. The
income tax provision (benefit) on the extraordinary loss was zero. See Note B
- -- "Restatement of Prior Period Results".
Mortgage Note
The mortgage collateralized by an idle plant (the "Fresno Mortgage") was
assumed in the Fruehauf acquisition. The Fresno Mortgage is collateralized by
Fruehauf's Fresno, California manufacturing plant, which was closed in early
1992. The interest rate on the Fresno Mortgage is 9.625%, and combined
principal and interest payments of $345 are payable semiannually until
September, 2001. Fruehauf is actively attempting to sell the former Fresno
manufacturing plant, and is required to extinguish the Fresno Mortgage with
such proceeds.
Unsecured Promissory Note Held by a Related Party
In conjunction with the Fruehauf initial public offering and recapitalization
in 1991, Fruehauf extinguished all of its then outstanding Series B Promissory
Notes and all but $7,497 of the Series A Promissory Notes. The $7,497 of
Series A Notes not extinguished were held by The Airlie Group L.P. and Trailer
Partners (collectively "Airlie") and were exchanged for Fruehauf Notes totaling
$7,497. The Fruehauf Notes initially bore interest at the rate of 12% per
annum, and matured July 1, 1992. The Fruehauf Notes are subordinated to the
Bank Credit Facility. Payment of the Fruehauf Notes can only be accelerated in
the event that the indebtedness under the Bank Credit Agreement has been
accelerated or extinguished.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1992
in the successive five-year period are summarized below:
1993$ 8,333
1994 14,518
1995 8,522
1996 167,417
1997 7,582
Thereafter 218
Total $206,590
Amounts shown are exclusive of minimum lease payments disclosed in Note J --
"Lease Commitments".
The Company believes that the carrying value of its borrowings approximates
fair market value. Such fair values were estimated by discounting future cash
flows using rates currently available for debt of similar terms and remaining
maturities.
The Company paid $15,602, $26,591, and $39,572 of interest in 1992, 1991 and
1990, respectively.
NOTE J -- LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and vehicles
with varying terms. Under most leasing arrangements, the Company pays the
property taxes, insurance, maintenance and expenses related to the leased
property. Certain of the equipment leases are classified as capital leases and
the related assets have been included in Property, Plant and Equipment in Note
G -- "Property, Plant and Equipment". Net assets under capital leases were
$6,777 and $5,229 at December 31, 1992 and 1991, respectively. Those assets
are net of accumulated amortization of $2,721 and $2,353 at December 31, 1992
and 1991, respectively. Such amortization is included in Accumulated
Depreciation in Note G -- "Property, Plant and Equipment".
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1992 are as
follows:
Capital Operating
Leases Leases
1993 $3,854 $6,232
1994 2,759 4,056
1995 1,987 3,462
1996 1,402 2,744
1997 1,074 2,023
Thereafter 678 2,103
Total minimum obligations $11,754 $20,620
Less amount representing interest 2,312
Present value of net minimum obligations 9,442
Less current portion 3,210
Long-term obligations $6,232
Noncash investing and financing activities include capital lease obligations of
$2,150, $2,705, and $841 incurred in 1992, 1991, and 1990, respectively, when
the Company entered into leases for new equipment.
Most of the Company's operating leases provide the Company with the option to
renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases based upon the fair
rental values at the date of expiration of the initial lease.
Total rental expense under operating leases was $6,601, $9,443, and $7,819 in
1992, 1991, and 1990, respectively.
The Company's Material Handling Segment also routinely enters into
sale-leaseback arrangements with regards to certain equipment, which is later
sold to third-party customers under sales-type lease agreements. The Company
maintains a net investment in these leases, represented by the present value of
payments due under the leases of $8,888 of which $2,263 is current at December
31, 1992. The net investment is included in Other Assets in the Consolidated
Balance Sheet. The total lease payments related to the net investment is
$10,294 at December 31, 1992.
In connection with the original sale-leaseback arrangements underlying the
customer leasing program, the Company has an outstanding rental installment
obligation. Consistent with the nature of the capital leases, the obligation
reflects the present value of minimum payments due under the leases. The
current portion of this obligation is included in Current Portion of Long-term
Debt in the Consolidated Balance Sheet.
NOTE K -- INCOME TAXES
The components of Income (Loss) Before Income Taxes, Minority Interest and
Extraordinary Loss are as follows:
Year ended December 31,
1992 1991 1990
United States $(59,921)$(34,874) $11,633
Foreign 2,813 (3,766) (1,027)
Income (loss) before income taxes,
minority interest and extraordinary loss $(57,108)$(38,640) $10,606
The major components of the Company's provision for income taxes is summarized
below:
Year ended December 31,
1992 1991 1990
Current:
Federal $--- $--- $820
State --- --- 573
Foreign 167 868 865
Current income tax provision 167 868 2,258
Deferred:
Federal (100) --- 103
State --- --- ---
Foreign --- --- ---
Deferred income tax provision (benefit) (100) --- 103
Total provision for income taxes $67 $868 $2,361
The Company's Provision for Income Taxes is different from the amount which
would be provided by applying the statutory federal income tax rate to the
Company's Income (Loss) Before Income Taxes, Minority Interest and
Extraordinary Loss. The reasons for the difference are summarized below:
Year ended December 31,
1992 1991 1990
% $ % $ % $
Statutory federal income
tax rate (34)% $(19,417)(34)% $(13,138) 34% $3,606
Future potential benefit from
current NOL 35 20,274 31 11,858 --- ---
Federal alternative minimum tax --- --- --- --- 3 337
Foreign tax differential on
income/losses of foreign
subsidiaries (1) (856) 4 1,432 1 145
Utilization of federal net
operating loss carryforwards --- --- --- --- (18) (1,842)
State income tax net of
federal benefit --- --- --- --- 3 378
Other --- 66 1 716 (1) (263)
Provision for income taxes 0% $67 2% $868 22% $2,361
At December 31, 1992, the Company had domestic federal tax basis net operating
loss and tax credit carryforwards of $151,003 and $369, respectively.
Approximately $93,000 of the remaining net operating loss carryforwards and all
of tax credit carryforwards are attributed to Terex prior to its 1986
acquisition by Northwest Engineering Company ("Northwest" - Now called Terex).
These net operating loss and tax credit carryforwards have special limitations
placed on them under the Internal Revenue Code. In accordance with SFAS No.
96, "Accounting for Income Taxes", the tax benefits of the unused net operating
loss and tax credit carryforwards have not been recognized in the Consolidated
Financial Statements, except by reducing deferred taxes, as the recognition of
these benefits is dependent on future taxable income.
The tax basis net operating loss and tax credit carryforwards expire as
follows:
Tax Basis Net
Operating Loss Tax
Carryforwards Credits
1993 $--- $69
1994 --- 140
1995 24,041 63
1996 45,231 29
1997 8,004 38
1998 11,908 17
1999 --- 13
2000 4,581 ---
2006 20,689 ---
2007 36,549 ---
Total $151,003 $369
Additionally, the Company has an alternative minimum tax credit carryforward of
$580 available to offset future regular income taxes.
The Company also has various state net operating loss and tax credit
carryforwards expiring at various dates through 2007 available to reduce future
state taxable income and income taxes, respectively. In addition, the
Company's foreign subsidiaries have approximately $52,657 of tax basis loss
carryforwards which may be available to offset future foreign taxable income,
$4,735 expiring in the years 1993 through 1997, and the remainder generally
remain available without expiration dates.
The Company made income tax payments of $66, $731 and $1,491 in 1992, 1991 and
1990, respectively.
NOTE L -- STOCKHOLDERS' INVESTMENT
Stock Options. The Company maintains a qualified stock option plan ("ISO")
covering certain officers and key employees. The exercise price of the ISO
stock option is the fair market value of the shares at the date of grant. The
ISO allows the holder to purchase shares of common stock, commencing one year
after grant. ISO options expire after ten years. At December 31, 1992, 52,312
of the 395,354 stock options were available for grant.
The following table is a summary of stock options:
Number Exercise Price
of Options per Option
Outstanding at December 31, 1989 199,500 $4.00 to 18.50
Granted 18,000 20.50
Exercised (118,292) 4.00 to 16.25
Canceled or expired (2,000) 12.75
Five-for-four stock split adjustment 34,542 ---
Outstanding at December 31, 1990 131,750 $6.40 to 20.50
Granted 6,000 10.00 to 12.75
Exercised (29,917) 6.40 to 10.60
Canceled or expired (29,250) 6.40 to 20.50
Outstanding at December 31, 1991 78,583 $6.40 to 14.80
Granted 20,000 13.25
Exercised (25,917) 6.40 to 14.80
Canceled or expired (13,000) 10.20 to 14.80
Outstanding at December 31, 1992 59,666 $6.40 to 14.80
Exercisable at December 31, 1992 37,666 $6.40 to 14.80
Stock Appreciation Rights. In connection with the sale of the Senior Secured
Notes and obtaining the consent of the holders of the Company's existing
Subordinated Notes to modify the Subordinated Notes, the Company issued 658,409
common stock appreciation rights. As of December 31, 1992, there were 639,794
SAR's outstanding. The SAR's entitle the holder to receive the market
appreciation in the Company's common stock between $11 per share, subject to
adjustment, and the average price per share for the 30 consecutive trading days
prior to the date of exercise. At December 31, 1992, there was no reserve
requirement necessary as the Company's common stock price was below $11 per
share.
Stock Split. In May 1990, the Company declared a five-for-four stock split in
the form of a stock dividend. All option data subsequent to this date has been
adjusted to properly reflect the split.
Dividends. No dividends were declared or paid in 1992. In 1991 and 1990, the
Company declared and paid an annual dividend of six cents and five cents per
share, respectively, on its outstanding common stock at each record date. As
discussed in Note I -- "Long-Term Obligations", certain of the Company's debt
agreements contain restrictions as to the payment of cash dividends. Under the
most restrictive of these agreements, no retained earnings were available for
dividends at December 31, 1992.
NOTE M -- RETIREMENT PLANS
The Company maintains numerous defined benefit pension plans covering most
domestic employees. The benefits for the plans covering the salaried employees
are based primarily on years of service and employees' qualifying compensation
during the final years of employment. The benefits for the plans covering the
hourly employees are based primarily on years of service and a flat dollar
amount per year of service. It is the Company's policy to fund these plans
based on the minimum requirements of the Employee Retirement Income Security
Act of 1974 (ERISA). Plan assets consist primarily of common stocks, bonds,
and short-term cash equivalent funds.
Pension expense includes the following components for 1992, 1991, and 1990:
Year Ended December 31,
1992 1991 1990
Service cost for benefits earned
during period $499 $1,399 $2,150
Interest cost on projected benefit
obligation 2,378 7,377 7,009
Actual (return) loss on plan assets (3,052) (12,680) 14,827
Net amortization and deferral 1,870 6,140 (22,966)
Curtailment loss 58 17 207
Net pension expense $1,753 $2,253 $1,227
The following table sets forth the plans' funded status and the amounts
recognized in the Company's financial statements at December 31:
1992 1991
Underfunded Overfunded Underfunded
Plans Plans Plans
Actuarial present value of:
Vested benefits $27,249 $69,587 $26,331
Accumulated benefits $27,637 $70,705 $26,858
Projected benefits $29,602 $70,705 $29,163
Fair value of plan assets 19,929 73,744 13,919
Projected benefit obligation
(in excess of) less than
plan assets (9,673) 3,039 (15,244)
Unrecognized net loss from past
experience different than assumed 6,328 11,756 7,963
Unrecognized prior service cost 920 (5,691) 1,121
Unrecognized transition (asset) (324) --- (450)
Adjustment to recognize minimum
liability (4,988) --- (9,354)
Pension asset (liability)
recognized in the balance sheet $(7,737) $9,104 $(15,964)
The expected long-term rate of return on plan assets was 9% for the periods
presented. The discount rate assumption was 8.25% for 1992, 8.5% for 1991 and
9.0% in 1990. The assumption for the rate of compensation increase if
applicable per plan provisions, was 5.5% for each year presented.
In accordance with the provisions of the SFAS No. 87, "Employers' Accounting
for Pensions", the Company has recorded an adjustment to recognize a minimum
pension liability of $4,988 and $9,354 at December 31, 1992 and 1991,
respectively. This liability is offset by an intangible asset of $536 and
$1,121 and a direct reduction of shareholders' equity of $4,452 and $8,233 at
December 31, 1992 and 1991, respectively.
Clark's German employees are also covered by a defined benefit pension plan as
required by German law. At December 31, 1992, the Company has accrued
approximately $11.2 million related to the benefits earned by active and
retired participants as of that date. The plan is unfunded. Pension expense
relating to this plan was approximately $636 for the five months ended December
31, 1992.
In addition to providing pension benefits, the Company provides health care and
life insurance benefits for certain former domestic employees who retired prior
to December 31, 1990. The majority of the cost of retiree health care is
charged against reserves previously established in purchase accounting for
business combinations. Retiree health payments totaled $235, $3,919, and
$3,439 for the years ended December 31, 1992, 1991, and 1990, respectively.
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
contributes to certain of these plans.
NOTE N -- LITIGATION AND CONTINGENCIES
General
In October 1992, a Class Action complaint was filed against the Company and its
Chairman, alleging, among other things, violation of certain provisions of the
federal securities laws. This suit seeks unspecified compensatory and punitive
damages and is pending in the United States District Court, District of
Connecticut. This action is at a very early stage; however, the Company
believes that the claims asserted are without merit and that it has valid
defenses to the claims made. A motion to dismiss the action has been filed by
the Company, and this motion is currently pending. The Company has not
recorded any loss provision for this litigation.
In December 1992, a separate Class Action complaint was filed against Fruehauf,
the Company and certain of Fruehauf's officers, directors and investment
bankers, in the United States District Court, Eastern District of Michigan,
Southern Division, alleging, among other things, violations of certain
provisions of the federal securities laws, and seeking unspecified compensatory
and punitive damages. This action is at a very early stage; however, Fruehauf
and the Company believe that the claims asserted are without merit and that
they have valid defenses to the claims made. Fruehauf and the Company have
not recorded any loss provision for this litigation.
Terex has facilities at numerous geographic locations, which are subject to a
range of federal, state and local environmental laws and regulations.
Compliance with these laws has, and will, require expenditures on a continuing
basis.
Fruehauf has been identified as a "Potentially Responsible Party" at
approximately 19 multi-party Superfund sites, and has also identified
environmental exposures at approximately 21 other sites not designated as
superfund sites. The Company believes that it could have contingent
responsibility for certain of Fruehauf's liabilities with respect to Fruehauf's
environmental matters if Fruehauf fails to discharge its obligations, but only
to the extent that such liabilities arose during the period during which Terex
was the controlling stockholder of Fruehauf. The Company believes that
Fruehauf's significant environmental liabilities predate Terex's acquisition of
Fruehauf, and therefore any contingent responsibility is not expected to have a
material adverse effect on the Company.
As disclosed in Note I -- "Long-Term Obligations", Terex's outstanding letters
of credit totaled $38,923 at December 31, 1992. The letters of credit
generally serve as collateral for certain liabilities included in the
Consolidated Balance Sheet. Certain of the letters of credit serve as
collateral guaranteeing the Company's performance under contracts.
In the Company's lines of business, but primarily in the Material Handling
Segment, numerous suits have been filed alleging damages for injuries or deaths
from accidents involving the Company's products that have arisen in the normal
course of operations. As part of the acquisition of Clark, the Company and
Clark assumed both the outstanding and future product liability exposures
related to such operations. As of December 31, 1992, Clark had approximately
170 lawsuits outstanding alleging damages for injuries or deaths arising from
accidents involving Clark products. Most of the foregoing suits are in various
stages of pretrial completion, and certain plaintiffs are seeking punitive as
well as compensatory damages. In the aggregate, these claims could be material
to the Company. With respect to these product liability exposures, as well as
for certain exposures related to general, workers compensation and automobile
liability, the Company is self-insured up to certain limits. Insurance
coverage is obtained for catastrophic losses as well as those risks required to
be insured by law or contract. The Company has recorded and maintains an
estimated liability, based in part upon actuarial determinations, for such
uninsured risks and claims incurred, in the amount of management's estimate of
the Company's aggregate exposure for self-insured risks.
The Company is involved in various other legal proceedings which have arisen
in the normal course of its operations. The Company has recorded provisions
for estimated losses in circumstances where a loss is probable and the amount
or range of possible amounts of the loss is estimable.
The Internal Revenue Service is currently in various stages of examination of
the Company's Federal tax returns. Liability, if any, resulting from the
examinations cannot be determined at present. The Company believes it that its
positions for issues raised in these audits are correct and that it would
prevail if the taxing authorities were to propose adjustments. In any event,
management believes that the outcome of these examinations will not have a
material impact on the consolidated financial statements because the Company
has significant net operating loss carryovers. No accruals have been made for
any taxes which might result from these examinations.
The Company is contingently liable as a guarantor for certain customers' floor
plan obligations with financial institutions. As a guarantor, the Company is
obligated to purchase equipment which has been repossessed by the financial
institution based upon the unamortized principal balance outstanding. The
Company records the repossessed inventory at its estimated net realizable
value. Any resultant losses are charged against related reserves. The related
inventory is presented as a component of used equipment in Note F -
Inventories. The guarantee under such floor plans aggregated $19.2 million at
December 31, 1992. Adequate reserves, giving consideration to the collateral
related to the contingent liabilities, have been recorded for potential losses
arising from these guarantees. Losses, if any, under these arrangements are
not expected to be significant.
Clark has also given guarantees arising out of the ordinary conduct of its
business. These guarantees are to financial institutions and generally relate
to capital loans, residual guarantees and other dealer and customer
obligations, and approximated $44.9 million at December 31, 1992. Potential
losses on such guarantees are accrued as a component of the Allowance for
Doubtful Accounts.
To enhance its marketing effort and ensure continuity of its dealer network,
Clark has also agreed as part of its dealer sales agreements to repurchase
certain new and unused products and parts inventory and certain products used
as dealer rental assets in the event of a dealer termination. Through this
arrangement, Clark has been able to maintain dealer networks based on
operational standards and marketing requirements. Repurchase agreements
included in operating agreements with an independent financial institution have
been patterned after those included in the dealer sales agreements. Dealer
inventory and rental asset financing of approximately $253.9 million at
December 31, 1992 are covered by those operating agreements. It is not
practicable to determine the additional amount subject to repurchase solely
under the dealer sales agreements. Under these agreements, when dealer
terminations do occur, a newly selected dealer generally assumes the assets of
the prior dealer and any related financial obligations. Historically, Clark
has incurred only immaterial losses relating to these arrangements. For the
five months ended December 31, 1992, one dealer was terminated and the related
losses were negligible.
Terex has agreed to indemnify certain outside parties for losses related to
Fruehauf's worker compensation obligations. Some of the claims for which Terex
is contingently obligated are also covered by bonds issued by an insurance
company. Management is unable to estimate the amount or timing of losses, if
any, which might arise from claims for which Terex might be contingently
liable, and, accordingly, is unable to conclude that the amount would not be
material to the Company. As of December 31, 1992, in accordance with
Accounting Principles Board Opinion 18, Terex has recognized liabilities for
these contingent obligations in the aggregate amount of $3.0 million,
representing management's estimate of the maximum potential losses which the
Company might incur.
NOTE O -- RELATED PARTY TRANSACTIONS
KCS
The Company's Chairman and President is the controlling shareholder of KCS
Industries, Inc. ("KCS"), a corporation which provides legal, financial and
management services to the Company and Fruehauf under management contracts.
Pursuant to certain restrictions in Fruehauf's Bank Credit Facility, Fruehauf
was prohibited from paying management fees to KCS in excess of $2,300 in 1992
and is prohibited from making any payments in 1993 until all indebtedness under
the Bank Credit Facility is repaid. Payments to KCS by Terex and Fruehauf for
services rendered and for out-of-pocket expenses amounted to $5,148 in 1992 and
$5,831 in 1991, and $5,319 in 1990.
In addition to the 42% of the outstanding common stock of Fruehauf owned by the
Company, KCS and its shareholders own approximately 21.5% of Fruehauf's
outstanding common stock.
In conjunction with the Fruehauf acquisition, KCS purchased $7,500 of the
Series A Notes and $4,500 of the Series B Notes. During 1991, as part of the
recapitalization of Fruehauf in connection with its IPO, the warrants acquired
by KCS with the Series A Notes were exercised for Fruehauf common stock and the
Series B Notes were exchanged for Fruehauf common stock. At December 31, 1991,
Fruehauf no longer had debt payable to KCS. Interest and other expenses on
debt issued to KCS aggregated $1,651 and $2,746 in 1991 and 1990, respectively.
On January 25, 1993, Terex entered into an agreement whereby KCS borrowed $1.7
from Terex ("the KCS/Terex Note"). The KCS/Terex Note bore interest at prime.
The loan represented by the KCS/Terex Note may have constituted a default under
the Senior Secured Notes, the Subordinated Notes and the Bank Lending
Agreement. The entire balance was repaid to Terex on February 1, 1993, six
days after the initial borrowing, thereby curing any default which may have
occurred.
Fruehauf Trailer Corporation
Three members of the Company's Board of Directors also serve as directors for
Fruehauf Trailer Corporation.
Fruehauf has filed a consent solicitation with the Securities and Exchange
Commission to authorize the issuance of up to 2,500,000 shares of preferred
stock. A portion of these shares would be issued to the Company in exchange
for $11,587 of the long-term payable to the Company. The proposed transaction
would require ratification by the Fruehauf's stockholders prior to completion.
The consent solicitation was pending at December 31, 1992. The completion of
this transaction is uncertain.
The Company's Board of Directors approved a program to consolidate Fruehauf's
parts warehousing and administration functions with the Company. During the
fourth quarter of 1992, Fruehauf announced its intention to close its parts
warehouse in Westerville, Ohio and transfer its replacement parts inventory to
the Terex distribution center near Memphis, Tennessee. Under the proposed
arrangement, Terex will perform purchasing and warehousing functions for
Fruehauf in exchange for monthly parts warehousing fees. This relocation has
not yet been implemented and is dependent upon the eventual outcome of the
Fruehauf restructuring plan. In November 1992, in contemplation of this
agreement, Terex transferred $2,000 to Fruehauf. The $2,000 transfer
constituted a default ("November Default") under the Senior Secured Notes, the
Subordinated Notes and the Bank Lending Agreement. Subsequently in May 1993,
Terex entered into an agreement with Delphos Axle Corporation ("Delphos"), an
operating unit of Fruehauf, whereby Delphos will provide products and
manufacturing services to Terex. The agreement with Delphos required Terex to
make a $2,000 payment to Delphos, which Terex effected on May 11, 1993 by
instructing Fruehauf to transfer the $2,000 Fruehauf owed to Terex directly to
Delphos. This transfer also satisfied Fruehauf's $2,000 obligation to Terex so
that the events which gave rise to the November Default no longer exist.
In August, 1992, Clark purchased certain assets of a subsidiary of Fruehauf for
$790. This constituted a default under the Senior Secured Notes, the
Subordinated Notes and the Bank Lending Agreement because the purchase did not
have prior approval of the independent members of the Company's Board of
Directors. The approval was subsequently obtained; therefore, the events which
gave rise to such default no longer exist.
Terex Corporation Master Retirement Plan Trust
In conjunction with the financing of the Clark Acquisition and the refinancing
of certain of the existing debt, $4,000 of the Senior Secured Notes were issued
to the Trust. The Trust later purchased an additional $2,002 of the Senior
Secured Notes. At December 31, 1992, debt payable to the Trust was $6,002.
Interest on debt issued to the Trust aggregated $232 in 1992.
Other
A director of the Company is affiliated with Airlie, and one director was
formerly affiliated with Airlie, a limited partnership which owns approximately
9% of the Company's common stock. An additional 3.6% of the Company's Common
Stock is owned by individuals related to Airlie. In addition, Airlie owned
approximately 3.3% of Fruehauf's outstanding common stock. In conjunction with
the Fruehauf Acquisition, $7,497 of the Series A Notes and $4,500 of the Series
B Notes were issued to Airlie. During 1991, as a part of the Fruehauf
recapitalization, the Series A Notes were exchanged for the Fruehauf Notes
bearing an interest rate of 12% and the Series B Notes were exchanged for
Fruehauf common stock (see Note I -- "Long-Term Obligations"). Debt payable to
Airlie of $7,497 is included in the Consolidated balance sheet at December 31,
1991. Interest and other expenses on debt issued to Airlie of $2,092 and
$2,749 in 1991 and 1990, respectively, is included in the Consolidated
Statement of Income. Assuming Airlie exercised the Fruehauf Warrant it
received with the Fruehauf Notes in the Recapitalization, it would own
approximately 18.2% of Fruehauf's common stock.
Fruehauf owns a manufacturing facility in Germany that it leases to SESR
pursuant to a lease agreement assumed in the Fruehauf acquisition. The carrying
value of this asset was $18,955 at December 31, 1991. The facility is reported
as a component of Other Assets in the December 31, 1991 Consolidated Balance
Sheet. Fruehauf received rental revenue of $657 and $665 from SESR in 1991 and
1990, respectively. Rental revenue is recorded as other income in the
Consolidated Statement of Income and is reduced by depreciation expense on the
facility. SESR is responsible for paying the property taxes, insurance,
maintenance and expenses related to the leased property.
NOTE P -- BUSINESS SEGMENT INFORMATION
The Company's operations are structured into two industry segments, heavy
equipment and material handling. Prior to 1992, the Company's operations were
structured into two industry segments; trailer and heavy equipment. The
Material Handling Segment principally represents the operations of Clark which
was acquired during 1992 (see "Note C -- Acquisitions").
The Company's Heavy Equipment Segment includes operations engaged in the
design, manufacture and marketing of heavy-duty, off-highway earthmoving and
lifting equipment. Products include haulers, scrapers, loaders, crawlers,
cranes, excavators, draglines and aerial lifts. The Heavy Equipment Segment
also manufactures and markets a wide range of accessories and replacement parts
for its products. The principal markets served by the Heavy Equipment Segment
include the construction, mining, and industrial markets.
The Company's Material Handling Segment is engaged in the design, manufacture
and marketing of internal combustion and electric forklifts and related parts
and equipment. The principal markets served by the Material Handling Segment
include distribution and manufacturing operations and the food, canning and
bottling industry.
Through its former consolidated subsidiary, Fruehauf, the Company was also
engaged in the design, manufacture and marketing of truck trailers, including
vans, refrigerated vans, dump trailers, platform trailers, liquid and bulk
tanks, and components (the "Trailer Segment") from 1989 through 1991. In
addition, the Trailer Segment sold used trailers, some of which had been
accepted as trade-ins in connection with the sale of its new trailers. The
Trailer Segment also performed service work on trailers and markets trailer
parts and equipment. The principal markets served by the Trailer Segment were
the trucking and transport industries. As explained in Note D -- "Investment
in Fruehauf Trailer Corporation," the Company accounts for Fruehauf using the
equity method as of January 1, 1992.
Industry segment information is presented below:
1992 1991 1990
Sales
Material Handling $240,940 $--- $---
Trailer --- 512,689 589,441
Heavy Equipment 282,415 271,505 433,737
Total $523,355 $784,194 $1,023,178
Income (Loss) From Operations
Material Handling $2,177 $--- $---
Trailer --- (23,153) 19,274
Heavy Equipment (5,929) (11,279) 23,287
General/Corporate (373) (1,768) 1,825
Total $(4,125) $(36,200) $44,386
Depreciation and Amortization
Material Handling $4,042 $--- $---
Trailer --- 8,449 15,037
Heavy Equipment 5,610 3,575 4,628
General/Corporate 41 1,444 1,404
Total $9,693 $13,468 $21,069
Capital Expenditures
Material Handling $3,129 $--- $---
Trailer --- 2,510 3,565
Heavy Equipment 2,238 1,554 5,130
General/Corporate 15 34 12
Total $5,382 $4,098 $8,707
Identifiable Assets
Material Handling $247,813 $--- $---
Trailer --- 359,928 458,001
Heavy Equipment 229,042 256,071 286,384
General/Corporate 501 1,204 680
Total $477,356 $617,203 $745,065
Geographical segment information is presented below:
1992 1991 1990
Sales
North America $369,394 $708,854 $906,981
Europe 149,970 84,680 143,980
All other 30,780 23,070 29,011
Eliminations (26,789) (32,410) (56,794)
Total $523,355 $784,194 $1,023,178
Income (Loss) From Operations
North America $(11,968) $(35,456) $40,595
Europe 5,453 (2,131) 4,365
All other 1,351 392 284
Eliminations 1,039 995 (858)
Total $(4,125) $(36,200) $44,386
Identifiable Assets
North America $363,252 $556,165 $674,591
Europe 122,877 105,090 112,808
All other 8,664 2,226 4,659
Eliminations (17,437) (46,278) (46,993)
Total $477,356 $617,203 $745,065
Intersegment sales were immaterial in all years presented. Sales between
geographic areas are generally priced to recover costs plus a reasonable markup
for profit. Operating income equals net sales less direct and allocated
operating expenses, excluding interest and other nonoperating items. Corporate
assets are principally cash, marketable securities and administration
facilities.
The majority of the Material Handling Segment operations market their product
through independent distributors. The majority of the Heavy Equipment Segment
operations market their products through independent distributors, while
certain other operations market their products directly to the end user.
Trailers and related service, parts and accessories were marketed through
Fruehauf's sales and service branches, as well as through an existing
nationwide dealership network which consists of over 200 independent businesses
which generally serve the trucking and transport industries.
The Company is not dependent upon any single customer. No single customer
accounted for more than 10% of 1992, 1991 or 1990 consolidated net sales.
Export sales from U.S. operations were $92,347, $83,324 and $117,320 in 1992,
1991 and 1990, respectively.
NOTE Q - LIQUIDITY AND REFINANCING PLANS
As a result of significant operating losses which have continued through the
first quarter of 1993, and cash flow difficulties, the Company has taken
significant actions to reduce its overall cost structure and improve liquidity.
The Company intends to augment its top management during 1993, with the
addition of a new Chief Executive Officer and a Chief Financial Officer. In
addition, the Company has announced that it is formulating a plan to integrate
the management services of KCS into the Company. These changes will allow the
Company to deal more efficiently with its increased complexity and
globalization due to the July, 1992 acquisition of Clark.
The Company was not in compliance with certain financial covenants in the Bank
Lending Agreement at December 31, 1992. Terex has since received waivers for
the noncompliance and the financial covenants in the Bank Lending Agreement
have been revised. The revised lending agreement allows no cash borrowing
availability and states that beginning April 21, 1993, the Company must
commence increasing the amount of the cash collateral at specified increments
such that by June 30, 1993 all letters of credit are cash collateralized. The
Company is attempting to secure alternative financing which would provide
adequate liquidity and working capital for the Company's future needs. The
Company has received preliminary credit approval from a financial institution
to provide short-term financing by about May 21, 1993, and a permanent
financing facility shortly thereafter. The Short-term Agreement only provides
cash advances of $15 million and will be secured by all domestic receivables of
the Company. The Permanent Lending Agreement is expected to replace the
Short-term Agreement and provide up to $45 million for cash advances and
guarantees of bank letters of credit and will be secured by all domestic
receivables of the Company. The Company believes that the Short-term and
Permanent Lending Agreements can be completed in sufficient time to allow the
Company to meet all of its debt service and debt payment obligations on a
timely basis. However, if such financing is not available or if it is
significantly delayed, the Company may not be able to meet its debt and other
obligations on a timely basis. If such event were to occur, the Company would
be in a payment default which would give the holders of such obligations the
right to accelerate their indebtedness which could result in a material adverse
effect on the Company. As of April 15, 1993, the noncash collateralized
letters of credit were $5.9 million, while accounts receivable remained
substantially unchanged from the December 31, 1992 balance of $78.3 million.
The Company believes that, based on management's current estimates, it will be
in compliance with its covenants with respect to its Senior Secured Notes and
Subordinated Notes throughout 1993. However, certain future events could
affect the Company's continuing compliance with such covenants. In particular,
in computing tangible net worth under the covenants of the Senior Secured Notes
and the Subordinated Notes, the Company is allowed to maintain a defined value
for its investment in Fruehauf. At December 31, 1992, the defined value
approximated $51.0 million. At December 31, 1992, the market value of the
Company's investment in Fruehauf was $24.4 million. As discussed in Note D -
"Investment in Fruehauf Trailer Corporation" to the Consolidated Financial
Statements, the Company is evaluating alternatives relating to its investment
in Fruehauf, including selling Terex's shares of Fruehauf common stock. If, as
a result of any transactions affecting its investment in Fruehauf, or any other
reason, the Company is not in compliance with certain of its covenants, the
Company may be required to offer to repurchase 20% of the outstanding notes.
If such offer were to be made, it is likely that the Company would require
additional funding to complete the offer, and if such funding were unavailable
to it, the Company would be unable to comply with the terms of the notes and
the notes may be accelerated. Such circumstances could result in a material
adverse impact on the Company and its financial position.
In addition to its refinancing efforts, the Company is generating cash through
the sale of excess inventory in the Heavy Equipment and Material Handling
Segments, eliminating nonessential capital expenditures, and continuing
corporate wide cost containment efforts. Also, during 1992, the Heavy
Equipment Segment significantly reduced its engineering, selling and
administrative expenses through headcount reductions and consolidation of
certain administrative functions.
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
For the Nine Months
Ended September 30,
1993 1992
Net Sales $519,510 $313,254
Cost of goods sold 475,251 284,255
Gross profit 44,259 28,999
Engineering, selling and administrative expenses:
Third parties 60,313 35,661
Related parties 2,314 1,973
Total engineering, selling and
administrative expenses 62,627 37,634
Loss from operations (18,368) (8,635)
Other income (expense):
Interest income 945 1,973
Interest expense (23,849) (15,575)
Equity in net loss of Fruehauf (Note F) (677) (14,631)
Other income (expense) (950) (1,741)
Loss before income taxes and
extraordinary item (42,899) (38,609)
Provision for income taxes 193 2
Loss before extraordinary item $(43,092) $(38,611)
Exraordinary item - loss on
extinguishment of debt (Note E) (2,003) ---
Net loss $(45,095) $(38,611)
Net loss per share:
Loss before extraordinary item $ (4.33) $(3.88)
Extraordinary item (.20) ---
Net loss $(4.53) $(3.88)
Dividends per share $ --- $ ---
Weighted average common shares outstanding
including dilutive options and warrants
(see Exhibit 11.1) 9,952 9,944
@Body Single@
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
September 30,
1993
ASSETS
Current assets
Cash and cash equivalents $ 8,887
Restricted cash 4,633
Net receivables 78,645
Net inventories 168,446
Other current assets 6,978
Total current assets 267,589
Property, plant and equipment
Property, plant and equipment 137,765
Less - accumulated depreciation 36,222
Net property, plant and equipment 101,543
Investments in affiliate companies 3,343
Other assets 30,101
Total assets $ 402,576
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(in thousands)
September 30,
1993
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities
Notes payable $ 2,476
Trade accounts payable 83,323
Accrued compensation and benefits 10,937
Accrued warranties and product liability 28,288
Accrued interest 4,811
Accrued income taxes 1,582
Restructuring reserve 14,097
Other current liabilities 24,234
Current portion of long-term debt 17,791
Total current liabilities 187,539
Long-term debt less current portion 208,848
Accrued warranties and product liability
- long-term 39,850
Accrued pension 16,984
Postretirement health benefits (Note B) 428
Other long-term liabilities 6,795
Stockholders' investment
Common stock, $.01 par value
- authorized 20,000 shares;
issued and outstanding 9,953 shares 100
Additional paid-in capital 37,808
Accumulated deficit (81,326)
Pension liability adjustment (4,452)
Foreign currency translation adjustment (9,998)
Total stockholders' investment (57,868)
Total liabilities and stockholders' investment $ 402,576
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
For the Nine Months
Ended September 30,
1993 1992
OPERATING ACTIVITIES
Net loss $(45,095) $(38,611)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation 11,615 3,102
Amortization 5,979 2,939
(Gain) loss on sale of property,
plant and equipment (2,029) (36)
Unremitted (earnings) loss from
equity affiliates (Fruehauf) 677 14,631
Other (221) 1,693
Changes in operating assets and liabilities:
Restricted cash 6,846 ---
Net receivables (782) 18,270
Net inventories 28,223 29,834
Trade accounts payable (8,340) 885
Accrued compensation and benefits (229) 1,785
Accrued warranties and product liability(3,835) 3,393
Accrued interest (7,008) 1,342
Accrued income taxes (441) 333
Restructuring reserve (16,503) (2,500)
Other 3,135 (14,529)
Net cash from (used in)
operating activities (28,008) 22,531
INVESTING ACTIVITIES
Acquisition of Business --- (80,454)
Capital expenditures, net of dispositions (8,529) (2,513)
Advances to Fruehauf (622) (2,802)
Proceeds from sale of property,
plant and equipment 10,377 ---
Other (337) (352)
Net cash from (used in) investing
activities 889 (86,121)
FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements 674 (62,161)
Proceeds from long-term debt 18,650 158,800
Principal repayments of long-term debt (8,175) (10,333)
Other (443) (4,427)
Net cash from (used in)
financing activities 10,706 81,879
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (371) 503
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (16,784) 18,792
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 25,671 10,892
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,887 $29,684
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, unless otherwise denoted)
September 30, 1993
NOTE A - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Terex
Corporation and Subsidiaries (the "Company") as of September 30, 1993 and for
the nine month periods ended September 30, 1993 and 1992 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for annual reporting.
The condensed consolidated financial statements include the accounts of Terex
Corporation and its majority controlled subsidiaries. All intercompany
balances, transactions and profits have been eliminated. The equity method is
used to account for investments in affiliates in which the Company has an
ownership interest between 20% and 50%, including Fruehauf Trailer Corporation
("Fruehauf"). The cost method is used to account for investments in
affiliates in which the Company has an ownership interest of less than 20%.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a
normal recurring nature, except for the impact of the accounting changes
discussed in Note B -- "Accounting Changes". Operating results for the nine
months ended September 30, 1993 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1993. For further
information, refer to the consolidated financial statements for the year ended
December 31, 1992.
NOTE B - ACCOUNTING CHANGES
Employers' Accounting for Postretirement Benefits Other than Pensions
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions" on
January 1, 1993. This statement requires accrual of postretirement benefits
(such as health care benefits) during the years an employee provides service.
The Company provides postretirement benefits to certain former salaried and
hourly employees and certain hourly employees covered by bargaining unit
contracts that provide such benefits.
Terex adopted the provisions of SFAS No. 106 using the delayed recognition
method, whereby the amount of the unrecognized transition obligation at January
1, 1993 is recognized prospectively as a component of future years' net
periodic postretirement benefit expense. The unrecognized transition
obligation at January 1, 1993 was approximately $4,476. Terex is amortizing
this transition obligation over 12 years, the average remaining life expectancy
of the participants.
Currently, the Company's postretirement benefit obligations are not funded.
The liability of the Company, as of January 1, 1993, was as follows:
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $ 4,476
Active participants ---
Total accumulated postretirement
benefit obligation 4,476
Unamortized transition obligation (4,476)
Liability recognized in the balance sheet -0-
Less: Current portion -0-
Accumulated postretirement
benefit obligation - long term $-0-
Health care trend rates used in the actuarial assumptions range from 12.3% to
13.5%. These rates decrease to 6.75% over a period of 9 to 11 years. The
effect of a one percentage-point change in the health care cost trend rates
would change the accumulated postretirement benefit obligation approximately
5%. The discount rate used in determining the accumulated postretirement
benefit obligation is 8.25%.
Net periodic postretirement benefit expense for the nine month period ended
September 30, 1993 includes the following components:
Service cost $ 0
Interest cost
277
Net amortization 280
$ 557
The difference between Terex's net periodic postretirement benefit expense on a
cash basis versus accrual basis was approximately $387 for the nine months
ended September 30, 1993.
Accounting for Income Taxes
The Company adopted SFAS No. 109, "Accounting for Income Taxes" on January 1,
1993. The new pronouncement retains the basic concepts of SFAS No. 96, but
generally simplifies its application. The adoption of this new pronouncement
did not have a material impact on the Company's operating results and financial
position.
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. The tax
effects of the basis differences and net operating loss carryforwards on
January 1, 1993 are summarized below for major balance sheet captions:
Net inventories $(1,623)
Fixed assets and assets held for sale (23,635)
Other assets and deferred charges 664
Other current and long-term liabilities 44,497
All other items (173)
Benefit of net operating
loss carryforward 76,200
Valuation allowance (93,930)
Total deferred tax liability $ 0
At December 31, 1992, the Company had domestic federal tax basis net operating
loss carryforwards of approximately $151,000 and foreign net operating loss
carryforwards of approximately $ 52,000. Certain of the domestic net operating
loss carryforwards have limitations placed on them under the Internal Revenue
Code. The Internal Revenue Service is currently in various stages of
examination of the Company's federal tax returns. The results of such audits
could change the availability of the net operating loss carryforwards.
In accordance with SFAS No. 109, "Accounting for Income Taxes", the tax
benefits of the unused net operating loss carryforwards have been recognized in
the Consolidated Financial Statements. As further required by SFAS No. 109,
the Company has recorded a valuation allowance for deferred tax assets
including the benefits of net operating loss carryforwards because their
realization is dependent on future taxable income.
NOTE C - ACQUISITIONS
On July 31, 1992, the Company completed the acquisition of the common stock of
Clark Material Handling Company and certain affiliate companies ("Clark") from
Clark Equipment Company (the "Clark Acquisition"). Clark is engaged in the
design, manufacture and marketing of internal combustion and electric lift
trucks and related parts and equipment.
The operating results of this acquisition are included in the Company's
consolidated results of operations since August 1, 1992. The following
unaudited pro forma summary presents the consolidated results of operations for
the nine months ended September 30, 1992 as though the Company completed the
Clark Acquisition on January 1, 1992, after giving effect to certain
adjustments, including amortization of goodwill and intangible assets,
increased depreciation resulting from the revaluation of property, plant and
equipment, interest expense and amortization of debt issuance costs on the
acquisition debt, and reduced operating costs related to recurring cost savings
which are directly attributable to the Clark Acquisition.
Pro Forma
For the Nine Months
Ended September 30, 1992
Net sales $ 601,758
Loss from operations (18,962)
Net loss (57,949)
Net loss per share $ (5.83)
The unaudited pro forma consolidated results do not represent actual operating
results. The pro forma amounts were prepared by management and should not be
interpreted as predictive of the Company's future results of operations. The
Company is actively reorganizing the operations of Clark by consolidating
manufacturing and distribution operations. Consequently, management does not
view the combination of the historical financial results of the Company and
Clark as a meaningful representation of the Company's future operations.
NOTE D - INVENTORIES
The components of net inventories consist of the following at September 30,
1993:
New equipment $ 36,580
Used equipment 1,552
Work-in-process and finished parts 86,634
Raw materials and supplies 47,498
Gross inventories 172,264
Less: Excess of FIFO costs
over LIFO inventory value (3,818)
Net inventories $ 168,446
NOTE E - LONG TERM DEBT
Covenant Compliance
The indentures governing the Company's Senior Secured Notes and Subordinated
Notes (together, the "Notes") require, among other things, that the Company
maintain certain levels of tangible net worth and collateral coverage. As of
September 30, 1993, the Company's tangible net worth as defined in the Note
indentures was less than the $15 million minimum required by the indentures.
Based on management's current estimates, the Company is expected to continue to
experience losses from operations subsequent to September 30, 1993. As a
result, absent a capital infusion, the Company's tangible net worth will be
less than required under the tangible net worth covenants as of December 31,
1993. In the event the Company's tangible net worth is not in excess of the
amount required under the tangible net worth covenants for two consecutive
quarters, the Company must offer to repurchase, at par plus accrued interest,
20% of the outstanding principal amount of the Notes. If such an offer were to
be made, it is likely that the Company would require additional funding to
complete the offer, and if such funding were unavailable to it, the Company
would be unable to comply with the terms of the Notes and the Notes may be
accelerated. Such circumstances could result in a material adverse impact on
the Company and its financial position. In an effort to raise additional
capital and increase the Company's net worth, the Company is currently seeking
to effect the sale of preferred stock in a private placement. Management is
also considering other actions, including the sale of assets such as a portion
of the Company's stock holdings and investments, which, at any time, may be
necessary for the Company to remain in compliance with the tangible net worth
and collateral coverage covenants.
Permanent Facility
On May 20, 1993, Terex entered into an agreement with a financial institution
which initially provided short-term financing ("Interim Facility"), and
currently provides permanent financing ("Permanent Facility") (together the
"Lending Facilities"). The Interim Facility provided for cash advances to the
Company of up to $17.5 million. The Permanent Facility became effective and
replaced the Interim Facility as of August 24, 1993 and provides for up to $20
million of cash advances and guarantees of bank letters of credit and is
secured by all domestic receivables of the Material Handling and Heavy
Equipment Segments.
Borrowings under the permanent facility mature in two years from the August 24,
1993 effective date. Accordingly, all such borrowings, including former short
term interim facility borrowings outstanding at the effective date, are
classified as Long Term Debt in the accompanying Balance Sheet.
Extraordinary Item
In connection with entering into the Lending Facilities, the Company terminated
its previous bank lending agreement with a commercial bank. The Company
recognized, as an extraordinary item, a charge of approximately $2.0 million in
the second quarter of 1993 to write off unamortized debt issuance costs.
NOTE F - INVESTMENT IN FRUEHAUF
Following an initial public offering of 4,000,000 shares of Fruehauf common
stock in July 1991, the Company owned approximately 42% of the outstanding
common stock of Fruehauf. The Company presently accounts for its investment in
Fruehauf using the equity method. On August 20, 1993, Fruehauf entered into
agreements with its existing lenders, a new lender and a number of investors
which resulted in a restructuring of existing debt, and provided for a new $25
million credit facility and $20.5 million of new equity (the "Fruehauf
Restructuring"). The $25 million of new credit is in the form of an inventory
and receivables revolving credit facility provided by Congress Financial
Corporation. The $20.5 million of new equity arose from the private placement
of approximately 7,841,000 shares of Fruehauf common stock at $1.50 per share
and approximately $8,783,000 of convertible subordinated debt. The convertible
subordinated debt will be converted into approximately 5,855,000 additional
shares of Fruehauf common stock as soon as Fruehauf's Certificate of
Incorporation is amended to increase the number of shares authorized following
appropriate Fruehauf stockholder approval and approval of such shares for
listing on the New York Stock Exchange. As part of the restructuring, Terex
agreed with Fruehauf to accept approximately 2,251,000 shares of Fruehauf
common stock in satisfaction of approximately $13.5 million of indebtedness of
Fruehauf owed to Terex. As a result of the restructuring and financing
transactions, Terex's ownership of Fruehauf decreased to approximately 26%.
Because Fruehauf has experienced significant losses since 1991 and continues to
have a stockholders' deficit after the new equity investment, Terex's carrying
value for its investment in Fruehauf has been reduced to zero. Terex has also
recognized a contingent obligation of approximately $3 million with respect to
guaranties by Terex of certain obligations of Fruehauf. Until such time as
Fruehauf returns to profitability and achieves a positive net worth, the
Company does not expect to recognize any additional losses or income with
respect to its investment in Fruehauf.
Summarized income statement information of Fruehauf for the first nine months
of 1993 and 1992 is as follows:
1993 1992
Net sales $196,994 $ 388,552
Gross profit 10,498 38,196
Net loss (93,104) (34,635)
Restatement of financial statements for the period ended September 30, 1993
As described above, after an initial public offering of Fruehauf common stock
in July 1991 the Company owned approximately 42% of the outstanding common
stock of Fruehauf. Due to additional control factors, including shares owned
by certain officers of Terex, the presence of three Terex directors on
Fruehauf's board, the service of two Terex executive officers as executive
officers of Fruehauf, and the existence of a voting trust among Terex and
certain individuals, the Company concluded it had a controlling financial
interest in Fruehauf until the closing of the Fruehauf Restructuring.
Accordingly, in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993 as originally filed, Fruehauf's results were included
in the Company's consolidated financial statements on a consolidated basis for
the periods ended September 30, 1992 and deconsolidated as of January 1, 1993.
After consultation with the Securities and Exchange Commission staff,
management subsequently decided that despite the control factors described
above, assurance of strict numerical voting control of Fruehauf by Terex was
eliminated as a result of the termination of the voting trust between Terex and
certain individuals in July 1992 and, therefore, Terex should not consolidate
Fruehauf in its 1992 financial statements. Accordingly, management has
restated the financial statements for the periods ended September 30, 1993 and
1992 to account for the Company's investment in Fruehauf on the equity method
effective January 1, 1992.
The following table sets forth selected information as originally reported and
as restated for the nine months ended September 30, 1993 and 1992:
Nine Months Ended Nine Months Ended
September 30, 1993September 30, 1992
Net Sales
As Originally Reported $519,510 $701,806
As Restated 519,510 313,254
Net Income (Loss)
As Originally Reported (44,797) (38,611)
As Restated (45,095) (38,611)
Net Income (Loss) Per Share
As Originally Reported (4.50) (3.88)
As Restated (4.53) (3.88)
Average Number of Common and
Common Equivalent Shares Outstanding 9,952 9,944
NOTE G - CONTINGENCIES AND UNCERTAINTIES
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
effect on the Company. When it is probable that a loss has been incurred and
possible to make reasonable estimates of the Company's liability with respect
to such matters, a provision is recorded for the amount of such estimate or for
the minimum amount of a range of estimates when it is not possible to estimate
the amount within the range that is most likely to occur.
Fruehauf has identified environmental exposures at a number of Superfund and
other sites, and is currently participating in administrative or court
proceedings involving a number of these sites. Many of the proceedings are at
a preliminary stage, and the total cost of remediation, the timing and extent
of remedial actions which may be required, and the amount of Fruehauf's
liability, if any, with respect to these sites cannot presently be estimated.
The Company believes that it could have contingent responsibility for certain
of Fruehauf's liabilities with respect to Fruehauf's environmental matters if
Fruehauf fails to discharge its obligations, but only to the extent that such
liabilities arose during the time period during which Terex was the controlling
stockholder of Fruehauf. The Company believes that Fruehauf's significant
environmental liabilities predate Terex's acquisition of Fruehauf, and
therefore any contingent responsibility of the Company is not expected to have
a material adverse effect on the Company.
BUSINESS ACQUIRED FROM CLARK
EQUIPMENT COMPANY BY TEREX CORPORATION
COMBINED STATEMENT OF OPERATING
REVENUES AND EXPENSES
(amounts in thousands)
Year Ended December 31,
1991 1990
NET SALES $502,748 $632,733
COST OF GOODS SOLD 472,175 550,985
Gross profit 30,573 81,748
ENGINEERING, SELLING AND ADMINISTRATIVE
EXPENSES 60,553 64,112
RESTRUCTURING CHARGE 7,180 ---
Income (loss) from operations (37,160) 17,636
INTEREST EXPENSE (1,660) (1,961)
OTHER INCOME - NET 1,100 1,386
EQUITY IN NET INCOME (LOSS) OF DEALERSHIPS 70 (70)
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING(37,650) 16,991
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING - POSTRETIREMENT BENEFITS
(SEE NOTE G) (8,532) ---
INCOME (LOSS), EXCLUSIVE OF TAXES $(46,182) $16,991
The accompanying notes are an integral part of these financial statements.
BUSINESS ACQUIRED FROM CLARK
EQUIPMENT COMPANY BY TEREX CORPORATION
COMBINED STATEMENT OF ASSETS AND LIABILITIES
(amounts in thousands)
December 31, 1991
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,629
Trade and notes receivable, less allowance of $3,568 42,244
Accounts due from related parties 1,678
Net inventories 75,445
Other current assets 4,712
Total current assets 125,708
LONG-TERM ASSETS
Property 4,750
Plant 49,824
Equipment 62,708
117,282
Less-Accumulated depreciation (67,234)
Net property, plant and equipment 50,048
Goodwill, net of amortization of $796 18,728
Investment in dealerships 1,995
Other assets 11,697
Total assets 208,176
LIABILITIES
CURRENT LIABILITIES
Trade accounts payable 42,955
Accounts due to related parties 2,479
Other current liabilities 49,621
Total current liabilities 95,055
RENTAL INSTALLMENT OBLIGATIONS 5,817
OTHER LONG-TERM LIABILITIES 49,886
Total liabilities 150,758
NET ASSETS OF BUSINESS ACQUIRED $57,418
The accompanying notes are an integral part of these financial statements.
BUSINESS ACQUIRED FROM CLARK
EQUIPMENT COMPANY BY TEREX CORPORATION
COMBINED STATEMENT OF CASH FLOWS
(amounts in thousands)
Year Ended December 31,
1991 1990
OPERATING ACTIVITIES
Income (loss), exclusive of taxes $(46,182) $16,991
Adjustments to reconcile loss, exclusive of taxes,
to net cash from (used in) operating activities:
Depreciation 8,410 7,991
Amortization and write-off of
deferred costs 478 318
Noncash restructuring charge 7,180 ---
Effect of accounting change 8,532 ---
Equity (income) loss (70) 70
Increase (decrease) in cash due to changes in operating
assets and liabilities, net of the effects of
business acquisitions:
Trade receivables 1,974 6,598
Accounts due from related parties (982) 14
Net inventories 17,144 (5,865)
Other current assets 405 (180)
Trade accounts payable (4,098) (11,277)
Accounts due to related parties (1,402) (3,250)
Accrued warranties and product
liabilities 2,370 2,440
Other current liabilities 7,531 1,507
Other assets (1,016) (227)
Other liabilities 167 (3,608)
Net cash from (used in) operating
activities 441 11,522
INVESTING ACTIVITIES
Acquisition of business, net of cash acquired --- (19,810)
Sale of properties 1,202 131
Capital expenditures (8,640) (9,881)
Other (1,352) (958)
Net cash used in investing activities (8,790) (30,518)
FINANCING ACTIVITIES
Net borrowings from parent 8,261 19,729
Decrease in rental obligations (528) (120)
Net cash from (used in) financing
activities 7,733 19,609
EFFECT OF EXCHANGE RATE CHANGES ON CASH 968 (101)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 352 512
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,277 765
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,629 $1,277
The accompanying notes are an integral part of these financial statements.
BUSINESS ACQUIRED FROM CLARK
EQUIPMENT COMPANY BY TEREX CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1991
(dollar amounts in thousands, unless otherwise denoted)
NOTE A--REPORTING ENTITY AND BASIS OF PRESENTATION
On July 31, 1992, Terex Corporation ("Terex") completed the acquisition of
the common stock of Clark Material Handling Company and certain sister
companies (herein referred to as the "Business") from Clark Equipment Company
("CECO" or the "Seller") (the "Clark Acquisition"). The purchase price of the
common stock acquired was approximately $90.0 million.
The combined financial statements include the combined accounts of the
Business acquired. The Combined Statement of Operating Revenues and Expenses
include revenues and expenses directly related to the Business and exclude
income taxes.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination - All material intercompany balances, transactions
and profits have been eliminated. The equity method is used to account for
investments in which the Business has an ownership interest between 20% and
50%. All majority-owned subsidiaries have been consolidated.
Foreign Currency Translation - Financial statements of subsidiaries operating
outside of the United States are translated into U.S. dollar equivalents in
accordance with FAS No. 52. Foreign currency translation adjustments are
generally excluded from the Combined Statement of Operating Revenues and
Expenses. Such adjustments are inherently included as a component of Net Assets
of Business Acquired in the Combined Statement of Assets and Liabilities.
Foreign currency exchange losses, resulting primarily from foreign currency
transactions, of $0.8 million and $0.5 million in 1991 and 1990, respectively,
are included in Other Income.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market. The
last-in-first out (LIFO) method is used to value substantially all U.S.
inventories. All other inventories are valued using the first-in, first-out
(FIFO) method.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Plant and equipment are depreciated over the estimated useful lives of
the assets, ranging from three years for certain equipment to a maximum of 50
years for some buildings, under the straight-line method of depreciation for
financial reporting purposes. Depreciation expense reflected in these
financial statements for 1991 and 1990 approximated $8.4 million and $8.0
million, respectively. Expenditures for maintenance and repairs not expected
to extend the useful life of an asset beyond its normal useful life are charged
to expense as incurred. The cost of assets and related accumulated deprecation
that are retired or sold are removed from the accounts, with corresponding
gains or losses on disposal included in income.
Costs and Expenses - Provisions are made for the estimated future costs that
will be incurred under product warranty claims based on the Company's claims
experience. Such costs are accrued at the time revenue is recognized.
Research and Development Costs - Research and development costs are expensed
as incurred. Such costs incurred in the development of new products or
significant improvements to existing products amounted to $11.2 million in
1991 and 12.4 million in 1990.
Restructuring Charge - During 1991, the Business recorded the impact of a
restructuring plan designed to increase the overall profitability of the
Business by streamlining and consolidating certain operations. Restructuring
costs of $7.2 million represent provisions for the anticipated future costs of
implementing reductions in both domestic and foreign manufacturing capacity, as
well as streamlining manufacturing processes. The restructuring charge
included the following items:
Employment Reduction Costs $ 4,680
Plant Consolidation and
Rationalization 2,500
$ 7,180
Income Taxes - Prior to the acquisition, the Business was included in the
consolidated federal tax return of CECO. Given the complexity of segregating
the tax attributes of the Business from Consolidated CECO and the cumulative
operating losses incurred by the Business in recent years, the presentation of
tax accounts for the Business would not be meaningful. Accordingly, the
combined financial statements exclude income tax effects.
The Seller has agreed to idemnify Terex for any costs arising in future
periods related to income tax effects of the Business's operations prior to the
acquisition.
Guarantees and Contingencies - Guarantees and other contingencies are accrued
when a loss is considered probable and the amount is reasonably measurable.
NOTE C--ACQUISITION ACTIVITIES
On April 30, 1990, the Business acquired the common stock of Drexel
Industries, Inc. ("Drexel") for approximately $20 million in cash. The
acquisition was accounted for using the purchase method; accordingly, the
assets acquired and the liabilities assumed were recorded at their estimated
fair value at the date of acquisition. The excess of purchase price over the
estimated value of the net assets acquired of approximately $19.5 million is
being amortized on a straight-line basis over 40 years. Drexel operations have
been included in the Combined Statement of Operating Revenues and Expenses
since the date of acquisition.
Unaudited pro forma combined sales and income before taxes for 1990, assuming
the Business completed the Drexel acquisition on January 1, 1990, would have
increased by approximately $4.0 million and $0.5 million, respectively. The
pro forma combined results do not represent actual operating results. The
Business is actively reorganizing all its operations, including the integration
of Drexel operations with existing manufacturing operations, and adjusting
production capacity to meet actual demand in the marketplace. Consequently,
management does not view pro forma information as a meaningful representation
of the Business's future operations.
NOTE D--INVENTORIES
Inventories, net of valuation reserves of $7.5 million consist of the
following:
December 31,
1991
Finished products $ 29,405
Work-in-process and finished parts 29,511
Raw material and supplies` 43,386
102,302
Less: Excess of FIFO costs
over stated LIFO value 26,857
$ 75,445
Inventories valued using the LIFO method represented approximately 60% of
combined inventories at December 31, 1991. In 1991 and 1990, certain inventory
quantities were reduced, resulting in liquidations of LIFO inventory quantities
carried at lower costs prevailing in prior years. The effect was to decrease
cost of goods sold by $4.2 million and $0.7 million in 1991 and 1990,
respectively.
NOTE E--BALANCE SHEET AND INCOME STATEMENT INFORMATION
Other current liabilities include the following:
December 31, 1991
Accrued payroll and related taxes $ 7,076
Accrued product liability 9,700
Accrued warranties 8,531
Accrued product discounts 5,025
Accrued restructuring costs 8,708
Other 10,581
$ 49,621
Other long-term liabilities include the following:
December 31, 1991
Accrued pension $ 11,141
Accrued product liability 36,423
Other 2,322
$ 49,886
Supplementary income statement information
Year Ended December 31,
1991 1990
Maintenance and repairs $ 2,557 $ 2,349
Rent 4,192 4,560
Advertising costs 4,200 4,226
NOTE F--PENSION COSTS
Essentially all of the Business's U.S. employees were covered by a defined
benefit pension plan sponsored by the previous employer. The Seller has
retained the responsibility after the Clark Acquisition for this plan and
another plan covering retirees. Therefore, the impacts of these plans have not
been included in the Combined Statement of Assets and Liabilities. The
operating expense impact of pension programs related to former operations of
the Business which were not acquired by Terex have been eliminated from the
Combined Statement of Operating Revenues and Expenses. Provisions related to
active employees, however, have been included inasmuch as it is anticipated
that the Business will maintain a similar plan after the sale. Pension expense
related to active employees was $1.5 million in 1991 and $1.3 million in 1990.
CECO also sponsored defined contribution plans in the United States and
Korea. Costs associated with these plans were $0.7 million in 1991 and $0.6
million in 1990.
The Business's German employees are covered by a defined benefit pension
plan. At December 31, 1991, the Business has accrued approximately $11.1
million related to the benefits earned by active and retired participants as of
that date. The plan is unfunded. Annual pension expense relating to this plan
approximated $0.8 million in 1991 and $1.0 million in 1990.
NOTE G--POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
CECO provided certain health care and life insurance benefits for retired
employees of the Business. Substantially all U.S. employees of the Business
became eligible for these benefits upon retirement. Contributory requirements
for retirees under the Plan varied based upon the actual retirement date.
Effective January 1, 1991, CECO changed its method of accounting for
postretirement benefits by adopting the accrual method, as prescribed by
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." In making this change, the
Business gave immediate recognition to a $72.2 million provision to accrue the
total estimated amount of the Accumulated Postretirement Benefit Obligation
related to current and former operations of the Business. This charge was
recorded as a cumulative effect of an accounting change.
Under terms of the agreement between CECO and Terex related to the
acquisition of the Business, CECO maintains responsibility for the obligations
due under the above referenced plan. Therefore, the impacts of the related
obligations have not been reflected in the Combined Statement of Assets and
Liabilities. Virtually all operating expense impacts, including both the
annual provisions expensed on a pay-as-you-go basis prior to the change in
accounting and the cumulative effect of the change in accounting, have also
been eliminated from the Combined Statement of Operating Revenues and Expenses.
These impacts have been removed inasmuch as the related provisions related
almost entirely to former operations of the Business which were not acquired by
Terex. The remaining portion of the cumulative effect of the change in
accounting of $8.5 million included in the Combined Statement of Operating
Revenues and Expenses represents the charge associated with active employees
and retirees of the Business acquired.
In terms of future periods, Terex has no benefit program which provides
retiree health or life insurance benefits to retirees of the Business.
NOTE H--PRODUCT LIABILITY AND OTHER INSURANCE COSTS
Domestically, the Business is self-insured up to certain limits for product
liability exposures. The Business provides self-insurance reserves for
estimated losses on known claims and for claims anticipated to have been
incurred which have not yet been reported. Reserves for product liability
losses are generally of a long-term nature and are presented on a projected
gross settlement basis.
The Business has suits pending alleging damages for injuries or deaths from
accidents involving the Business's products that have arisen in the normal
course of its operations. Although the ultimate exposure to the Company from
these and any similar subsequent suits, relating to accidents which have
occurred, is subject to a high degree of estimation and cannot be determined
with complete precision, the Business believes that potential damages are
adequately provided for by insurance and product liability reserves.
The Business is also self-insured with respect to various other risks,
including workers' compensation, general, and automobile liability. Insurance
coverage for product liability and these other risks is obtained for
catastrophic losses as well as those risks required to be insured by law or
contract. The Business has recorded an estimated liability, based upon
actuarial determination, for all uninsured risks and claims incurred. However,
future periods could be affected if uninsured losses in excess of amounts
provided were incurred.
NOTE I--GUARANTEES AND REPURCHASE ARRANGEMENTS
The Business has given guarantees arising out of the ordinary conduct of its
business. These guarantees generally relate to financial institutions for the
collectibility of certain third party receivables. These normally relate to
capital loans and other dealer and customer obligations, and approximated $37
million at December 31, 1991. Potential losses on such guarantees are accrued
as a component of the Allowance for Doubtful Accounts.
To enhance its marketing efforts and ensure continuity of its dealer network,
the Business has also agreed as part of its dealer sales agreements to
repurchase certain new and unused products and parts inventory and certain
products used as dealer rental assets in the event of a dealer termination.
Through this arrangement, the Business has been able to maintain its dealer
network based on operational standards and marketing requirements. Repurchase
agreements included in operating agreements with an independent financial
institution have been patterned after those included in the dealer sales
agreements. Dealer inventory and rental asset financings approximately $235
million at December 31, 1991, are covered by those operating agreements. It is
not practicable to determine the additional amount subject to repurchase solely
under the dealer sales agreements. Under these arrangements, when dealer
terminations do occur, a newly selected dealer generally assumes the assets of
the prior dealer and any related financial obligations. Accordingly, the risk
of loss to the Business is minimal, and historically it has incurred only
immaterial losses relating to these arrangements. In 1991, four dealers were
terminated and the related losses incurred were negligible.
NOTE J--LEASE COMMITMENTS
The Business leases certain office and manufacturing facilities as well as
certain other equipment. Future rental commitments relating to leases with a
term in excess of one year are as follows:
1992 $ 3,256
1993 2,648
1994 2,065
1995 1,295
1996 1,058
Thereafter 957
$ 11,279
The Business also routinely enters into sales-leaseback arrangements with
regards to certain equipment, which is later sold to third-party customers
under sales-type lease agreements. The Business maintains a net investment in
these leases, represented by the present value of payments due under the
leases, which is included in the Other Current Asset and Other Asset captions
of the Combined Statement of Assets and Liabilities. The total net investment
in such leases approximated $8.2 million at December 31, 1991.
In connection with the original sale-leaseback arrangements underlying the
customer leasing program, the Business has an outstanding rental installment
obligation. Consistent with the nature of the capital leases, the obligation
reflects the present value of the minimum payments due under the leases. The
current portion of this obligation is included in Other Current Liabilities in
the Combined Statement of Assets and Liabilities.
The average term of each of the leasing arrangements outlined above is five
years. Additional information related to both the net investment in leases and
the rental obligation are as follows:
Investment Rental
In Leases Obligation
Total minimum obligations $9,688 $8,516
Less amount representing
interest 1,440 1,256
Present value of net
minimum obligations 8,248 7,260
Less current portion 1,625 1,443
Long-term obligations $6,623 $5,817
Pursuant to the terms of the Stock Purchase Agreement between CECO and Terex,
CECO has agreed to fully reimburse Terex for the present value of all payments
due under the rental installment obligation as of the date of acquisition.
NOTE K--SEGMENT INFORMATION
The Business operates in one industry segment, that being the design,
manufacture and sale of forklift trucks. There was no single customer from
which 10% or more of total revenue was derived during the years 1989-1991.
Export sales of U.S. manufactured products and parts sold to customers and
dealers located outside of the United States were $34.8 million and $38.3
million in 1991 and 1990. These sales were principally to Europe and Canada.
Sales to the U.S. government accounted for less than 2% of total sales in each
year.
In 1989, the Business began producing transaxle components in Korea for use
in forklift trucks produced in conjunction with a joint-venture with Samsung
Heavy Industries (See Note L - Related Party Transactions). Transfers of
transaxle components to the joint-venture are not reflected as sales for
financial reporting purposes. As these components are included in the finished
products supplied by the venture, the sales are recognized upon sale of the
forklift trucks to third party customers.
For geographic segment reporting, sales and operating profit (loss) reflect
amounts sourced from the identified geographic area. Information on geographic
segments is as follows:
December 31,
1991 1990
Amounts in millions
Sales:
North America $326.8 $422.1
Europe 173.1 209.8
Pacific Rim 2.8 .8
Transfers between areas:
North America 11.5 10.1
Europe 8.3 5.4
Pacific Rim 3.2 .1
Eliminations (23.0) (15.6)
Total $502.7 $632.7
Operating profit (loss):
North America $(23.6) $9.5
Europe (11.5) 10.5
Pacific Rim (1.0) (.9)
(36.1) 19.1
Interest expense (1.7) (2.0)
Combined operations (37.8) 17.1
Equity investments .1 (.1)
Total $(37.7) $17.0
December 31,
1991 1990
Amounts in millions
Identifiable assets:
North America $105.9 $106.2
Europe 81.8 102.1
Pacific Rim 18.5 19.6
Combined operations 206.2 227.9
Equity investments 2.0 1.9
Total $208.2 $229.8
NOTE L--RELATED PARTY TRANSACTIONS
The Business, as a part of CECO, had entered into transactions with CECO
affiliates. While certain of the transactions may continue for a period of
time subsequent to the Clark Acquisition, such transactions are not related
party transactions of Terex. A discussion of major transactions follows.
Service Arrangements
The Business has entered into service arrangements with various operations of
CECO. Under one such arrangement, Clark Distribution Services (CDS), a
wholly-owned subsidiary of CECO, provides warehousing and shipping services
related to the Business's North American after-market parts business. Fees
relating to this operation were based on negotiated contracts and approximated
$7.5 million in 1991 and $7.4 million in 1990. CDS continues to provide
services under the terms of the most recent contract subsequent to the
acquisition by Terex. The Business provides a similar service for the
distribution of parts for other business units of CECO in Europe. Service
revenues under this arrangement included in these financial statements
approximated $2.5 million in 1991 and $2.5 million in 1990. This arrangement
is based on negotiated contracts with indefinite terms, which can be cancelled
with 12 months written notice. The Business also contracted with an operation
of CECO which provided its data processing resources for its North American
operations. Fees of approximately $1.5 million in 1991 and $2.2 million in
1990 were charged under this arrangement. Pursuant to the terms of the Stock
Purchase Agreement between Terex and CECO, CECO will continue to provide such
data processing services through December 31, 1992.
Purchases from CECO Affiliates
The Business purchased forklift truck componentry from Clark-Hurth Components
(CHC), a business unit of CECO. The pricing of such purchases were determined
as nearly as possible on the basis of normal commercial relationships.
Aggregate purchases from CHC were $20.9 million in 1991 and $46.8 million in
1990. Net accounts payable to CHC were $0.9 million in 1991, and are reflected
in Accounts Due From Related Parties in these financial statements.
Joint Venture with Samsung Heavy Industries
The Business has a cooperative agreement with Samsung Heavy Industries (SHI)
which began in 1987. The agreement requires that SHI manufacture product
based upon the engineering technology provided by the Business. Purchases from
SHI were $84.9 million in 1991 and $108.0 million in 1990. Accounts payable to
SHI were $16.3 million at December 31, 1991, and are reflected in Trade
Payables in these financial statements
The Business has an agreement to purchase a specified number of internal
combustion lift-trucks from SHI. If this commitment is not honored, the
Business may be subject to a penalty. On September 2, 1992, the Business
announced that certain of its production of its 2,000 to 10,000 lb. capacity
trucks will be brought back to the U.S. and Germany beginning in the fourth
quarter of 1992. Negotiations related to the future supplier relationship,
including the manufacturing of certain I.C. trucks and uprights, are continuing
at the current time. Management believes that continuing supplier relations
will negate any penalty.
BUSINESS ACQUIRED FROM CLARK
EQUIPMENT COMPANY BY TEREX CORPORATION
UNAUDITED COMBINED STATEMENT OF OPERATING
REVENUES AND EXPENSES
(amounts in thousands)
For the Six Months
Ended
June 30,
1992
NET SALES $ 249,539
COST OF GOODS SOLD 237,180
Gross profit 12,359
ENGINEERING, SELLING AND ADMINISTRATIVE
EXPENSES 25,750
Loss from operations (13,391)
OTHER INCOME (EXPENSE)
Interest expense (601)
Other expense, net (494)
LOSS, EXCLUSIVE OF TAXES $(14,486)
The accompanying notes are an integral part of these financial statements.
BUSINESS ACQUIRED FROM CLARK
EQUIPMENT COMPANY BY TEREX CORPORATION
UNAUDITED COMBINED STATEMENT OF CASH FLOWS
(amounts in thousands)
For the Six Months
Ended
June 30,
1992
OPERATING ACTIVITIES
Loss, exclusive of taxes $(14,486)
Adjustments to reconcile loss, exclusive of taxes,
to net cash from (used in) operating activities:
Depreciation 4,522
Amortization and write-off of deferred costs 237
Noncash restructuring charge 582
Increase (decrease) in cash due to changes in operating
assets and liabilities, net of the effects of
business acquisitions:
Trade receivables (1,433)
Accounts due from related parties 537
Net inventories (2,783)
Other current assets 171
Trade accounts payable 6,548
Accounts due to related parties (505)
Accrued warranties and product liabilities 3,673
Other current liabilities (2,416)
Other assets (563)
Other liabilities 146
Net cash from (used in) operating activities(5,770)
INVESTING ACTIVITIES
Sale of properties 26
Capital expenditures (1,783)
Other (98)
Net cash used in investing activities (1,855)
FINANCING ACTIVITIES
Net borrowings (repayments) to parent 6,110
Decrease in rental obligations 602
Net cash from (used in) financing activities 6,712
EFFECT OF EXCHANGE RATE CHANGES ON CASH (72)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (985)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,629
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 644
The accompanying notes are an integral part of these financial statements.
BUSINESS ACQUIRED FROM CLARK EQUIPMENT COMPANY
by TEREX CORPORATION
NOTES TO UNAUDITED COMBINED STATEMENT OF
OPERATING REVENUES AND EXPENSES
June 30, 1992
(Amounts in thousands)
Note 1 - Basis of Presentation
Terex completed the Clark Acquisition on July 31, 1992 and, accordingly,
financial statements of the Business Acquired from Clark Equipment Company by
Terex Corporation (the "Business") do not exist as of September 30, 1992 The
accompanying unaudited Combined Statement of Operating Revenues and Expenses
is presented for the six months ended June 30, 1992.
The Combined Statement of Operating Revenues and Expenses has been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, it does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been made. Operating results for the six months ended June
30, 1992, are not necessarily indicative of the results that may be expected
for the year ended December 31, 1992. For further information, refer to the
audited combined financial statements and footnotes thereto of the Business
Acquired from Clark Equipment Company by Terex Corporation for the years ended
December 31, 1991, 1990 and 1989.
The Combined Statement of Operating Revenues and Expenses includes revenues and
expenses directly related to the Business and excludes income taxes. In light
of the nature of operations of the Business presented herein, a statement of
cash flows has not been presented as such information would not be meaningful.
TEREX CORPORATION
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated income statement of
the Company gives effect to the Clark acquisition on July 31, 1992 (as
described in Note C - Acquisitions, of the Notes to Consolidated Financial
Statements for the year ended December 31, 1992 included in this Prospectus).
The pro forma information is based on the historical income statement of the
Company for the period ended December 31, 1992, giving effect to the Clark
acquisition and financing transactions and adjustments as reflected in the
accompanying notes.
On July 31, 1992, the Company completed the Clark acquisition. A private
placement of $160 million of the Secured Notes and a seller note due Clark
Equipment Company (the "Seller Note") of approximately $6.1 million provided
the financing for the aggregate purchase price of approximately $91.1 million.
Proceeds of the Secured Notes also provided funds for the refinancing of
certain existing Company debt (the "Refinancing"), for transaction and
acquisition costs and for working capital purposes. The Company financed the
entire purchase price of the Clark acquisition through proceeds of debt.
The acquisition was accounted for using the purchase method, with the purchase
price of the Clark acquisition allocated to the assets acquired and liabilities
assumed based upon their respective estimated fair values at the date of
acquisition. Purchase price allocations were based on evaluations,
estimations, appraisals, actuarial studies and other studies performed by the
Company.
The unaudited pro forma consolidated results do not represent actual operating
results. The pro forma amounts were prepared by management of the Company and
should not be interpreted as predictive of the Company's future results of
operations. The Company is actively reorganizing the operations of Clark by
consolidating manufacturing and distribution operations. Consequently,
management does not view the combination of historical financial results as a
meaningful representation of the Company's future operations.
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(in thousands except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and BusinessAcquisition Refinancing
Subsidiaries AcquiredAdjustments Adjustments Pro Forma
NET SALES $523,355 $288,504 $0 $0 $811,859
COST OF GOODS SOLD 469,345 275,065 (4,124) (3b,c,d) 0 740,286
Gross Profit 54,010 13,439 4,124 0 71,573
ENGINEERING, SELLING
AND ADMINISTRATIVE
EXPENSES 58,135 29,873 (1,983) (3d) 0 86,025
Loss from
operations (4,125) (16,434) 6,107 0 (14,452)
OTHER INCOME (EXPENSE):
Interest income 1,666 0 0 0 1,666
Interest expense (23,320) (689) (6,752) (3a) (435) (3a) (31,196)
Equity income
(loss) (35,045) 0 0 0 (35,045)
Royalty income 67 0 0 0 67
Gain on sale of
subsidiary stock
and related
recapitalization 7,759 0 0 0 7,759
Other - net (4,110) (537) (1,033) (3a) (915) (3a) (6,595)
Loss before income
taxes (57,108) (17,660) (1,678) (1,350) (77,796)
PROVISION FOR INCOME
TAXES 67 0 0 0 67
Net loss $(57,175)$(17,660) $(1,678) $(1,350) $(77,863)
NET LOSS PER SHARE $(6.14) $(8.22)
AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT
SHARES CONSIDERED
OUTSTANDING IN PER
SHARE CALCULATION 9,945 9,945
TEREX CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED INCOME STATEMENT
1) The unaudited pro forma condensed consolidated income statement is
presented for the year ended December 31, 1992. The pro forma statement
reflects the operations of the Company combined with those of the acquired
business assuming the Clark acquisition and the related refinancings were
consummated on January 1, 1992.
2) For purposes of preparing the unaudited pro forma condensed consolidated
income statement of the Company, all financial information of foreign
operations has been translated into U.S. dollars in accordance with Statement
of Financial Accounting Standards No. 52.
3) The pro forma income statement adjustments are summarized as follows:
a) The Secured Notes and the Seller Note provided the funds to finance the
Clark acquisition, as well as funds to refinance certain existing Company debt
and pay refinancing and acquisition costs. The Secured Notes bear interest at
13% and are due August 1, 1996. The Seller Note bears interest at the prime
rate as defined in the related agreement and is due July 31, 1994.
Pro forma interest expense increased $6.8 million and $0.4 million due to
acquisition and refinancing pro forma adjustments, respectively, for the year
ended December 31, 1992.
Pro forma adjustment to Other - Net represents amortization of debt issuance
costs of $1.9 million for the year ended December 31, 1992.
b) Depreciation expense increases on a pro forma basis by $1.6 million for the
year ended December 31, 1992. The adjustments are due to the revaluation of
plant and equipment in connection with the Clark acquisition in accordance with
APB 16.
c) Pro forma adjustments reflect the intangible assets amortization expense of
$1.3 million for the year ended December 31, 1992.
d) Pro forma adjustments reflect reduced cost of goods sold of $7.0 million
and reduced engineering, selling and administrative expenses of $2.0 million
for the year ended December 31, 1992. The reduced expenses relate to recurring
cost savings to be derived which are directly attributable to the Clark
acquisition.
Report of Independent Accountants
To the Board of Directors and
Stockholders of Fruehauf Trailer Corporation
In our opinion, the consolidated financial statements of Fruehauf Trailer
Corporation and Subsidiaries listed in the Index to Consolidated Financial
Statements on page F-1 and the financial statement schedules referred to under
Item 16 present fairly, in all material respects, the financial position of
Fruehauf Trailer Corporation and its subsidiaries at December 31, 1992, and the
results of their operations and their cash flows for the year 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 audit. We
conducted our audit 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 audit provides a reasonable basis for the opinion expressed above.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Notes G and Q to the financial
statements, the Company has suffered recurring losses from operations, has a
net capital deficiency, and a lender has changed the maturity of the obligation
under its Credit Agreement. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note Q. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note L to the financial statements, the Company is currently
subject to several contingent liabilities. The ultimate outcome of these
contingencies cannot be determined at present; however, the Company has
provided reserves for its best estimate of losses related to certain of these
contingencies.
Price Waterhouse
Milwaukee, Wisconsin
April 14, 1993
Report of Independent Accountants
Board of Directors and Stockholders of
Fruehauf Trailer Corporation
Southfield, Michigan
We have audited the accompanying consolidated balance sheet of Fruehauf Trailer
Corporation (formerly a wholly owned subsidiary of Terex Corporation) and
subsidiaries as of December 31, 1991, and the related consolidated statements
of income, stockholders' investment, and cash flows for each of the two years
in the period ended December 31, 1991. Our audits also included the financial
statement schedules for the years ended December 31, 1991 and 1990 listed under
Item 16. These financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Fruehauf Trailer Corporation and
subsidiaries as of December 31, 1991, and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1991 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules for the years ended December 31,
1991 and 1990, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note P to the consolidated financial statements, the
Corporation has restated its 1991 and 1990 financial statements.
As discussed in Note L to the financial statements, the Corporation is a
defendant in a class action lawsuit alleging violation of certain provisions of
the federal securities law. The ultimate outcome of the litigation cannot
presently be determined. Accordingly, no provision for any loss that may
result upon resolution of this matter has been made in the accompanying
financial statements.
Deloitte & Touche
Detroit, Michigan
March 30, 1992 (April 14, 1993 as to
Note P and the ninth paragraph of Note L)
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
Year ended December 31,
1992 1991 1990
NET SALES $488,898 $512,689 $589,452
COST OF GOODS SOLD 448,215 445,040 495,599
Gross margin 40,683 67,649 93,853
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Third parties 60,562 69,412 68,757
Parent company - 1,932 2,500
Other related party 2,300 3,633 3,322
Total 62,862 74,977 74,579
RESTRUCTURING COSTS 15,500 15,825 -
Income (loss) from operations (37,679) (23,153) 19,274
OTHER INCOME (EXPENSE)
Interest income 1,201 1,294 2,824
Interest expense - third parties (9,261) (12,283) (24,035)
Interest expense - parent company - (1,612) (1,562)
Interest expense - other related parties (975) (3,743) (5,495)
Equity in net income (loss) of affiliates (5,714) 4,209 7,480
Royalty income - third parties 342 638 939
Royalty income - affiliates 2,557 2,518 4,221
Gain (loss) on sale of excess assets (22) 7,484 -
Amortization/write-off of debt issue costs (4,967) (867) (3,329)
Adjustments of estimated realizable
value of Jacksonville (11,551) - -
Other income (expense) - net (2,241) (2,495) 678
Income (loss) before income taxes (68,310) (28,010) 995
PROVISION (BENEFIT) FOR INCOME TAXES (3,150) 866 979
NET INCOME (LOSS) BEFORE EXTRAORDINARY LOSS (65,160) (28,876) 16
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT - - (2,192)
NET LOSS $(65,160)$(28,876) $ (2,176)
NET INCOME (LOSS) PER SHARE
Net income (loss) before
extraordinary loss $(5.36) $(3.50) $0.00
Extraordinary loss on retirement of debt - - (0.47)
Net loss per share $(5.36) $(3.50) $(0.47)
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 12,159 8,260 4,590
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
ASSETS
December 31,
1992 1991
CURRENT ASSETS
Cash and cash equivalents $3,023 $2,985
Marketable securities - 1,038
Trade receivables (less allowance of $2,048
in 1992 and $2,210 in 1991) 39,387 35,716
Net inventories 54,893 98,570
Note receivable from related party 1,622 -
Other current assets 3,790 1,187
Total Current Assets 102,715 139,496
LONG-TERM ASSETS
Prepaid pension cost 7,795 9,104
Facility leased to affiliate 14,000 18,955
Investment in affiliate companies 33,745 40,145
Assets held for sale 50,772 43,301
Other assets 1,364 6,049
PROPERTY, PLANT AND EQUIPMENT
Property 17,265 35,281
Plant 26,287 39,910
Equipment 40,296 45,914
83,848 121,105
Less - Accumulated depreciation (17,581) (18,227)
Net Property, Plant and Equipment 66,267 102,878
TOTAL ASSETS $276,658 $359,928
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
December 31,
1992 1991
CURRENT LIABILITIES
Notes payable $2,963 $ -
Trade accounts payable 47,373 50,033
Accrued compensation and benefits 12,389 16,245
Accrued warranties 7,417 7,439
Accrued workers compensation 5,670 9,207
Accrued cost of facility realignment 6,548 16,701
Other current liabilities 16,990 28,767
Current portion of long-term debt to
related party 7,497 -
Current portion of long-term debt to
third parties 89,794 12,177
Total Current Liabilities 196,641 140,569
LONG-TERM LIABILITIES
Long-term debt to third parties,
less current portion 3,798 77,330
Long-term debt to related party,
less current portion - 7,497
Postretirement health benefits 38,885 34,939
Long-term payable to parent 14,890 10,244
Other long-term liabilities 39,962 40,944
STOCKHOLDERS' INVESTMENT
Common stock, $0.01 par value
-authorized 20,000 shares;
issued and outstanding 12,159 shares 122 122
Additional paid-in capital 71,881 71,881
Retained deficit (96,403) (31,243)
Foreign currency translation adjustment 6,882 7,645
Total Stockholders' Investment (17,518) 48,405
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT $276,658 $359,928
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(in thousands)
Retained Foreign
Additional Earnings Currency
Common Paid-in (Accumulated Translation
Stock Capital Deficit) Adjustment Total
BALANCE AT DECEMBER 31,
1989
As previously reported $46 $9,959 $994 $340 $11,339
Restatement (Note P) - - (1,185) - (1,185)
AS RESTATED - DECEMBER 31,
1989 46 9,959 (191) 340 10,154
Net loss - - (2,176) - (2,176)
Translation adjustment - - - 13,989 13,989
BALANCE AT DECEMBER 31,
1990 46 9,959 (2,367) 14,329 21,967
Net loss - - (28,876) - (28,876)
Translation adjustment - - - (6,684) (6,684)
Net effect of
recapitalization 36 22,462 - - 22,498
Issuance of common stock in
initial public offering 40 39,460 - - 39,500
BALANCE AT DECEMBER 31,
1991 122 71,881 (31,243) 7,645 48,405
Net loss - - (65,160) - (65,160)
Translation adjustment - - - (763) (763)
BALANCE AT DECEMBER 31,
1992 $122 $71,881 $(96,403) $6,882 $(17,518)
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year ended December 31,
1992 1991 1990
OPERATING ACTIVITIES
Net loss $(65,160) $(28,876) $(2,176)
Adjustments to reconcile net loss
to net cash from (used in)
operating activities:
Depreciation 4,071 6,882 6,336
Amortization and write-off of
deferred costs 4,967 1,567 8,701
Non-cash extraordinary loss - - 2,192
Unremitted (earnings) loss from
affiliate companies 6,862 (2,528) (6,748)
Loss on sale of affiliate stock - 3,312 -
Interest paid-in-kind - 4,128 7,036
(Gain) loss on sale of excess assets 22 (7,484) -
Non-cash restructuring costs 15,500 15,825 -
Non-cash liquidation costs of
Jacksonville 11,551 - -
Other non-cash charges 8,120 - -
Increase (decrease) in cash due to
changes in operating assets and liabilities:
Trade receivables (3,671) 12,359 13,492
Net inventories 43,677 20,309 20,717
Other current assets (836) 8,758 (5,586)
Trade accounts payable (2,660) 10,521 2,765
Long-term payable to parent 4,646 3,932 5,931
Accrued compensation and benefits (3,856) (5,156) (6,044)
Accrued warranties (22) 123 (2,103)
Other liabilities (34,278) (56,498) (59,711)
Other assets (1,895) 73 (8,108)
Net cash used in operating
activities (12,962) (12,753) (23,306)
INVESTING ACTIVITIES
Capital expenditures (1,937) (2,510) (3,565)
Proceeds from sale of excess assets 10,174 39,685 18,919
Proceeds from sale of affiliate stock - 8,739 -
Proceeds from sale of marketable
securities 1,038 - 7,975
Purchase of marketable securities - (538) (970)
Other - 462 -
Net cash from investing activities 9,275 45,838 22,359
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 13,000 15,000 120,000
Proceeds from issuance of notes payable 2,963 - -
Principal repayments of long-term debt (12,177) (89,748) (134,161)
Proceeds from issuance of common stock - 41,040 -
Other (38) (660) (1,135)
Net Cash from (used in)
financing activities 3,748 (34,368) (15,296)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (23) (186) (89)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 38 (1,469) (16,332)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,985 4,454 20,786
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,023 $2,985 $4,454
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
(dollar amounts in thousands, except per share data)
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The Consolidated Financial Statements include the
accounts of Fruehauf Trailer Corporation and its majority-owned subsidiaries
("Fruehauf" or the "Company"). The Company was incorporated in 1989 for the
purpose of acquiring certain assets and assuming certain liabilities of
Fruehauf Corporation (the "Fruehauf Acquisition"). The Company is consolidated
with Terex Corporation ("Terex") for financial reporting purposes.
All intercompany balances, transactions and profits have been eliminated. The
equity method is used to account for investments in affiliates in which
Fruehauf has an ownership interest between 20% and 50%. The cost method is
used to account for investments in affiliates in which Fruehauf has an
ownership interest of less than 20%.
Cash and Cash Equivalents: The Company considers all highly liquid marketable
securities with original maturities of 30 days or less to be cash equivalents.
Marketable Securities: Marketable securities include investments in equity
securities, commercial paper, notes and bonds. Marketable equity securities
and other marketable securities are carried at the lower of cost or market
value. The Company held no marketable equity securities at December 31, 1992
and 1991. Net realized gains and losses on security transactions are
determined on a specific identification basis.
Inventories: Inventories are stated at the lower of cost or market.
Substantially all inventories are valued on the last-in, first-out ("LIFO")
method.
Debt Issuance Costs: Costs incurred upon the issuance of debt are deferred in
the Consolidated Balance Sheet and amortized over the life of the underlying
debt.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Plant and equipment are depreciated over the estimated useful lives of
the assets under the straight-line method of depreciation for financial
reporting purposes and both straight-line and other methods for tax purposes.
Expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are expensed. The cost of assets and the
related amounts of accumulated depreciation are eliminated from the accounts
when the assets are retired or sold. Certain property, plant and equipment
held for sale are included in Assets Held for Sale (see Note F - "Assets and
Businesses Held For Sale"), and are carried at the lower of cost or net
realizable value.
Revenue Recognition: Revenues and costs are generally recognized as the
related products are shipped or picked-up. New trailers may be invoiced prior
to the time customers take physical possession. Revenue is recognized in such
cases only when the customer has a fixed commitment to purchase the units, the
units have been completed, tested and made available to the customer for pickup
or delivery, and the customer has requested that the Company hold the units for
pickup or delivery at a time (generally within two weeks) specified by the
customer at the time the customer is notified that the unit is completed or as
specified in the sales agreement. In such cases, the units are invoiced under
the Company's customary billing terms, title to the units and risk of ownership
passes to the customer upon invoicing, the units are segregated from the
Company's inventory and identified as belonging to the customer and the Company
has no further obligation under the order.
Accrued Warranties: The Consolidated Financial Statements reflect accruals for
potential product liability and warranty claims based on the Company's claim
experience.
Foreign Currency Translation: Foreign currency translation adjustments are
generally excluded from the Consolidated Statement of Income and are included
in Foreign Currency Translation Adjustment in the Consolidated Balance Sheet.
Gains or losses resulting from foreign currency transactions are included in
Other Income (Expense).
Research and Development Costs: Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or
significant improvements to existing products totalled approximately $1,827,
$1,422 and $2,078 during 1992, 1991 and 1990, respectively.
Income Taxes: The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 96, "Accounting For
Income Taxes" (see Note I - "Income Taxes").
Net Income (Loss) Per Common Share: Net income (loss) per share is based on
the weighted average number of common and common equivalent shares outstanding
during the year. The dilutive effect of common stock equivalents (if
applicable) is calculated using the treasury stock method.
Environmental Policies: Environmental expenditures that relate to current
operations are either expensed or capitalized. Expenditures relating to
conditions caused by past operations that do not contribute to current or
future revenue generation are expensed. Liabilities are recorded when
environmental assessments and/or remedial actions are probable, and the costs
can be reasonably estimated. Generally, the timing of these accruals coincides
with completion of a feasibility study or the Company's commitment to a formal
plan of action.
Reclassifications: Certain amounts shown for 1990 and 1991 have been
reclassified to conform to the 1992 presentation. As discussed in Note F -
"Assets and Businesses Held for Sale", the Company ceased all operations at
Jacksonville Shipyards, Inc. and Coast Engineering & Manufacturing Company in
1992 and 1991, respectively. The remaining assets and liabilities of these
operations are included in the Consolidated Balance Sheet in the respective
captions.
Recent Pronouncements: In December 1990, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". This statement requires accrual of
postretirement benefits (such as health care benefits) during the years an
employee provides services. The Company does not anticipate that its planned
January 1, 1993 implementation of this pronouncement will have a significant
effect on operating results or financial position. For further information,
refer to Note K - "Retirement Plans."
In February, 1992, the FASB issued SFAS No. 109, "Accounting for Income Taxes"
to supersede SFAS No. 96, "Accounting for Income Taxes". The Company has
reflected its deferred taxes using the principles of SFAS No. 96. The new
pronouncement retains the basic concepts of SFAS No. 96, but generally
simplifies its application. Based upon preliminary analysis, the Company does
not expect the future implementation of this pronouncement to have a
significant effect on its operating results or financial position. The Company
intends to adopt this Standard on January 1, 1993.
In November, 1992 the FASB issued SFAS No. 112 "Employers' Accounting for
Postemployment Benefits". This pronouncement establishes accounting and
reporting for the estimated cost of benefits provided by an employer to former
or inactive employees after employment but before retirement. For the most
part, the Company already accounts for such benefits on an accrual basis.
Therefore, the impact of adoption is not anticipated to have a material effect
on the Company's financial position or results of operations.
NOTE B - INITIAL PUBLIC OFFERING AND RECAPITALIZATION
On July 8, 1991, the Company (formerly wholly-owned by Terex Holdings
Corporation ("Terex Holdings"), in turn a wholly-owned subsidiary of Terex)
completed an initial public offering ("IPO") of 4,000,000 shares of common
stock at a price of $11.00 per share. Fruehauf common stock is traded on the
New York Stock Exchange under the symbol "FTC".
To prepare the Company for public ownership, Fruehauf's certificate of
incorporation was amended to increase the authorized number of shares of common
stock to 20,000,000 and to reduce the par value per share from $1.00 to $0.01.
The Terex Holdings Warrant (see Note J - "Stockholders' Investment") issued in
the Fruehauf Acquisition to KCS Industries, Inc. ("KCS") was exercised in full
by KCS for 245,000 shares of Terex Holdings common stock. KCS applied the
$7,497 outstanding principal balance of its initial Series A Note in payment of
the exercise price of the Terex Holdings Warrant. Immediately thereafter,
Terex Holdings was merged (the "Merger") into Fruehauf, with Fruehauf
continuing as the surviving corporation. In the Merger, (i) each outstanding
share of Terex Holdings common stock was converted into nine shares of Fruehauf
common stock, (ii) Series A Notes in the aggregate principal amount of $7,497
held by The Airlie Group L.P. and Trailer Partners (collectively "Airlie") were
exchanged for notes from the Company (the "Fruehauf Notes") in the same
principal amount as the Series A Notes surrendered by Airlie, and the Terex
Holdings Warrant issued to Airlie in the Fruehauf Acquisition was also
exchanged for a new warrant (the "Fruehauf Warrant") to purchase up to an
aggregate 2,205,000 shares of the Company's common stock at an exercise price
of $3.40 per share, and (iii) the Preferred Stock of the Company, which was
previously held by Terex Holdings, was canceled (the foregoing transactions
being collectively referred to as the "Recapitalization"). Terex, KCS, and
Airlie then exchanged the $15,000 of Series B Notes purchased by them in the
Fruehauf Acquisition for 1,363,637 shares of the Company's common stock.
The net proceeds received by the Company in connection with the IPO were
$41,040. Of this amount, approximately $25,673 was used to reduce Fruehauf's
outstanding borrowings under its primary credit facility and approximately
$13,827 was used to pay the remaining balance and accrued interest on the
Series A and Series B Notes. After the application of the net proceeds of the
IPO and the completion of the Recapitalization, the Company's debt was reduced
by $61,998.
Unaudited pro forma consolidated results of operations for 1991 and 1990, as
though the Company completed the IPO, Merger, Recapitalization, and related
transactions on January 1, 1990, is as follows:
Year ended December 31,
1991 1990
Net sales $512,689 $589,452
Income (loss) from operations (23,153) 19,274
Net income (loss) before extraordinary loss (23,154) 11,337
Extraordinary loss on retirement of debt - (2,192)
Net income (loss) (23,154) 9,145
Net income (loss) per common share
before extraordinary loss $(1.90) $0.85
Extraordinary loss per common share - (0.15)
Net income (loss) per common share $(1.90) $0.70
These unaudited pro forma consolidated results have been prepared pursuant to
Article 11 of the SEC Regulation S-X and are not necessarily representative of
the actual operating results or financial position the Company would have
achieved had the events reflected therein occurred at the dates assumed. These
financial statements are not representative of the future results or financial
position that the Company will record. These unaudited pro forma consolidated
results should be read in conjunction with the audited historical Consolidated
Financial Statements of the Company and the notes thereto.
NOTE C - INVESTMENTS IN AFFILIATE COMPANIES
The Company has less than 50% equity investments in three foreign corporations
engaged in the design, manufacture and marketing of truck trailers.
The Company's investment in Societe Europeenne de Semi-Remorques, S.A. ("SESR")
is the largest equity investment with a carrying value of $23,296 and $30,072
at December 31, 1992 and 1991, respectively. SESR is Europe's largest trailer
manufacturer. The book value of the Company's investment in SESR exceeds the
Company's proportionate share of SESR's underlying equity. The related excess
purchase price of $7,640 and $8,010 at December 31, 1992 and 1991, respectively
is being amortized on a straight-line basis over 20 years.
During 1991 the Company sold a portion of its investment in SESR, which was in
turn sold to SESR, thereby reducing the Company's ownership from approximately
one-third to approximately 23%. In addition to the $8,739 of cash received
upon the sale of the SESR shares, 1) certain litigation between the Company and
SESR was settled, 2) Company shares of SESR and related accumulated dividends
previously held in escrow as a result of the litigation were released to the
Company, 3) Company representatives to the SESR Board of Directors were
reinstated and 4) the expiring royalty and trademark and license agreements
between the Company and SESR were renegotiated. As a net result of these
transactions, the Company recorded a loss of $3,312.
The carrying value of the Company's other affiliate accounted for under the
equity method, Henred Fruehauf Trailers Pty. Ltd., is $7,933 at December 31,
1992 and $7,557 at December 31, 1991. The carrying value of the Company's
affiliate accounted for under the cost method, Nippon Fruehauf Company, Ltd.,
is $2,516 at both December 31, 1992 and 1991.
Summarized financial data (100% basis) for the Company's two affiliates
accounted for under the equity method is as follows:
Years ended December 31,
1992 1991 1990
Net sales $915,622 $822,045 $831,372
Gross profit 129,473 133,190 139,600
Net income (loss) (22,674) 15,238 24,594
Current assets 347,236 424,405 401,483
Noncurrent assets 193,417 212,428 182,118
Current liabilities 249,133 283,690 246,141
Noncurrent liabilities & deferred taxes 208,603 190,013 169,665
The Company's share of the net income (loss) of affiliate companies, accounted
for using the equity method, was ($5,714), $4,209 and $7,480 for the years
ended December 31, 1992, 1991 and 1990, respectively. Dividends received from
such companies totalled $1,148 in 1992, $1,681 in 1991 and $732 in 1990.
Dividends received from affiliates that are accounted for using the equity
method are applied as a reduction of the carrying value of the investments.
The Company received dividends from its affiliate accounted for using the cost
method totalling $143, $130 and $146 in 1992, 1991 and 1990, respectively.
Such dividends are included in Other Income (expense) in the Consolidated
Statement of Income.
Trailer components sold by the Company to its less than 50% equity affiliates
totalled $2,808, $5,688 and $6,761 in 1992, 1991 and 1990, respectively. Such
sales were made on the same terms and conditions as with other customers. In
addition, the Company received amounts pursuant to royalty and trademark and
license agreements from its less than 50% owned equity affiliates totalling
$2,557, $2,518 and $4,221 in 1992, 1991 and 1990, respectively. Amounts
receivable from such affiliates at December 31, 1992, 1991 and 1990 totalled
$1,384, $2,040 and $2,352, respectively.
NOTE D - RESTRUCTURING COSTS
The Company recorded a $15,825 charge in 1991 to accrue for a restructuring
program designed to improve profitability. The restructuring provision
represented the estimated cost of restructuring the Company's distribution
system and consolidating certain of the Company's manufacturing operations.
During 1992, the Company recorded additional restructuring costs of $15,500
representing revisions of the estimates relating to the restructuring plan in
1991. The cost of restructuring the Company's distribution system by
converting company-owned sales and service branches to independent dealers
exceeded original estimates. Additionally, due to continuing poor economic and
commercial real estate market conditions, excess asset sales have not occurred
as rapidly as expected and the proceeds have been lower than anticipated. As a
result, the Company recorded the 1992 restructuring provision to absorb such
additional costs and valuation adjustments. The idled facilities are included
in the Consolidated Balance Sheet in Assets Held for Sale, and are carried on a
lower of cost or net realizable value basis, including costs through the date
of expected disposition.
The components of the restructuring costs are as follows:
Year ended December 31,
1992 1991
Branch conversion costs $7,800 $5,700
Plant closing costs - 900
Excess asset valuation adjustment 5,100 5,500
Idle facility holding costs 2,600 3,725
Total $15,500 $15,825
NOTE E - INVENTORIES
Inventories consist of the following:
December 31,
1992 1991
Used trailers $ 4,385 $18,520
New trailers 12,993 25,055
Work-in-process and finished parts 17,366 25,421
Raw materials and supplies 18,013 24,335
Gross inventories 52,757 93,331
Excess of LIFO inventory value over
FIFO costs 2,136 5,239
Net inventories $54,893 $98,570
NOTE F - ASSETS AND BUSINESSES HELD FOR SALE
The Company is holding for sale certain excess real estate, facilities and
other assets, as well as the Decatur Business.
The Decatur Business consists of the Company's wholly-owned aluminum extrusion
operation and a 50% equity interest in Decatur Aluminum Company, a corporation
engaged in the production of aluminum sheeting. The Decatur Business supplies
aluminum sheeting and extrusions to the Company's trailer manufacturing plants.
The Company has previously announced its intention to divest the Decatur
Business. The Decatur Business is included in the Consolidated Balance Sheet
for $3,578 and ($1,077) at December 31, 1992 and 1991, respectively. Changes
in the carrying value of the Decatur Business result from the net cash used in
(generated from) the Decatur Business. The operating results of the Decatur
Business are not included in the Consolidated Statement of Income. The Decatur
Business experienced losses of $1,500, $900 and $800 in 1992, 1991 and 1990,
respectively, which were excluded from the Consolidated Statement of Income.
Reserves were established at the Fruehauf Acquisition to absorb operating
results until the Decatur Business is divested. Revenues of the Decatur
Business (on a 100% basis) were $62,538 in 1992, $55,055 in 1991 and $57,204 in
1990. The majority of these revenues were intercompany sales which would have
been eliminated in consolidation. The Decatur Business' total assets were
approximately $12,746 at December 31, 1992.
The Company announced its intentions to divest Jacksonville Shipyards, Inc.
("Jacksonville"), its wholly-owned ship repair subsidiary at the time of the
Fruehauf Acquisition in 1989. Jacksonville's primary floating drydocks were
sold in September 1991 for $28,750, and the proceeds were applied against the
repayment of Jacksonville's $29,600 of Industrial Development Revenue Bonds.
Substantially all remaining operations at Jacksonville ceased in 1992, and a
program was implemented to liquidate the remaining assets, consisting primarily
of real estate and receivables. The Company recorded a $11,551 charge in 1992
relating to the closure, liquidation and future costs of Jacksonville.
The components of the adjustment to the net realizable value of Jacksonville
are summarized as follows:
Revision of pre-disposition operating
results and shutdown $ 5.3
Environmental obligations 2.4
Employee related liabilities 1.8
Revision of net realizable value
of fixed assets 1.1
Other 1.0
$11.6
The results of Jacksonville are not included in the Consolidated Statement of
Income, other than the $11,551 charge recorded in 1992. Jacksonville revenues
were $16,700 in 1992, $40,700 in 1991 and $31,400 in 1990. Jacksonville
experienced losses of $1,200, $3,400 and $2,500 in 1992, 1991 and 1990,
respectively, which were excluded from the Consolidated Statement of Income.
Jacksonville's assets and liabilities are included in the Consolidated Balance
Sheet in the respective captions.
In December of 1991, the Company sold substantially all of the operating assets
of Coast Engineering & Manufacturing Company ("CEMCO") for $6,150 and recorded
a gain of $6,599. CEMCO had been in the business of manufacturing cranes. The
proceeds from this sale were used to reduce the Company's outstanding
indebtedness. The remaining assets and liabilities of CEMCO, consisting
primarily of receivables and warranties, are included in the Consolidated
Balance Sheet. The operating results of CEMCO are not included in the
Consolidated Statement of Income as reserves were established at acquisition to
absorb such operating losses.
In addition to the Decatur Business and Jacksonville's real estate, the Company
holds for sale other idle facilities. As a result of manufacturing and
distribution restructuring programs, certain facilities were added to Assets
Held for Sale in 1991 and 1992. The Company is actively marketing all excess
properties, and in certain instances, is leasing them in order to generate
funds to help cover holding costs. These non-operating properties are included
in the Consolidated Balance Sheet in Assets Held for Sale, and are carried on a
lower of cost or market basis. Adequate reserves have been established to
absorb holding costs until disposition. As previously discussed in Note D -
"Restructuring Costs", the Company recorded writedowns on certain assets held
for sale and provisions for related holding costs in 1991 and 1992.
Excluding the proceeds generated from the sale of CEMCO's operating assets and
Jacksonville's floating drydocks, the Company generated proceeds from the sale
of excess assets of $10,174, $4,785 and $18,919 in the years ended December 31,
1992, 1991 and 1990, respectively. All proceeds generated from the sale of
excess assets are required to be applied against the outstanding indebtedness
under the Company's Credit Agreement (See Note G - "Long-term Debt").
The U.S. Environmental Protection Agency (the "EPA") placed a lien in excess of
$15,000 on the Company's former manufacturing facility in Harrisburg,
Pennsylvania. The facility is included in Assets Held for Sale for $8,250 at
December 31, 1992. A small portion of the excess land at this facility
contains a landfill established by the Army Air Corp when the property was part
of a former military base. The Department of Defense has acknowledged
responsibility for the landfill and has appropriated funds for remedial
actions. The Company did not operate or contribute any waste to the landfill.
The Company believes it may have an "innocent landowner" defense to any claim
for remedial action. The Company has repeatedly requested the EPA to remove
the lien on this property, which the Company believes was filed improperly
without a hearing or an opportunity for the Company to contest it. To date,
the Company has had no success in obtaining a lien release. Without a release,
the Company will be unable to sell the facility and use the proceeds to reduce
outstanding indebtedness. However, the Company is leasing out a portion of
this facility on a short-term basis to enhance cash flow. The Company believes
it will be successful in obtaining a release for the lien, although no
assurances can be given.
NOTE G - LONG-TERM DEBT
Long-term debt is summarized as follows:
December 31,
1992 1991
Secured bank credit agreement bearing interest
at prime plus 2.25% in 1993, prime plus 2.0%
in 1992, prime plus 1.5% prior thereto,
due June, 1993 $86,228 $85,128
Mortgage note bearing interest at 9.625%
collateralized by an idle plant,
due September, 2001 4,102 4,379
Unsecured promissory notes held by a related party
bearing interest at 14% in 1992 and 12% in 1991,
due March, 1996 7,497 7,497
Other 3,262 -
Total long-term debt 101,089 97,004
Less: Current portion of long-term debt to
related party 7,497 -
Less: Current portion of long-term debt
to third party 89,794 12,177
Long-term debt, less current portion $ 3,798 $84,827
The secured bank credit agreement (the "Credit Agreement") is secured by
substantially all of the assets of the Company. The Credit Agreement provides
for both a term loan and a revolving credit facility. Amounts outstanding
under the term loan were $58,228 and $70,128 at December 31, 1992 and 1991,
respectively. As of December 31, 1992, the revolving credit facility was
limited to the lesser of $45,000 or the available borrowing base, which absent
the covenant violations discussed below, could have been used in any
combination of cash advances or bank letters of credit. At December 31, 1991,
the revolving credit facility was limited to the lesser of $45,000 or the
available borrowing base, and the maximum cash advance availability was
$20,000. The available borrowing base is calculated by applying prescribed
advance ratios against eligible receivable and inventory balances, in
accordance with the terms of the Credit Agreement. Outstanding cash advances
totalled $28,000 and $15,000 at December 31, 1992 and December 31, 1991,
respectively. Outstanding letters of credit totalled $11,322 at December 31,
1992 and $20,520 at December 31, 1991.
All proceeds from the sale of collateralized assets are to be applied against
outstanding Credit Agreement indebtedness, including proceeds from the sale of
the properties included in Assets Held For Sale on the Consolidated Balance
Sheet. As a result, the Company cannot sell excess properties for the purpose
of generating working capital.
A commitment fee of 0.5% per annum is payable on any unused portion of the
revolving credit facility. Total unused credit under the revolving credit
facility was zero at December 31, 1992 and $9,480 at December 31, 1991. The
actual borrowing rate under the Credit Agreement was 8.0% at both December 31,
1992 and 1991.
The Credit Agreement restricts the payment of dividends and requires, among
other things, that the Company maintain certain levels of tangible net worth
and working capital, meet certain current and debt to equity ratios, and
achieve certain levels of operating performance and interest coverage. While
the Company has remained current in all of its payment obligations under the
Credit Agreement through December 31, 1992, it was not in compliance with
certain financial covenants at December 31, 1992 or 1991.
As described in Note Q - "Plan of Restructuring and Refinancing", the Company
and its lenders amended the terms of the Credit Agreement on March 15, 1993.
The amendment provides an additional $6.6 million of borrowing availability to
the Company, waives past covenant violations, increases the interest rate to
prime plus 2.25% effective January 1, 1993 and changes the maturity of the debt
from December 31, 1995 to June 30, 1993. The Company has included all
outstanding loans under the Credit Agreement in current liabilities in the
Consolidated Balance Sheet to reflect the new maturity date. The Company is
attempting to secure alternative financing which would provide incremental
borrowing and enable it to extinguish all amounts owed under the Credit
Agreement. The Company wrote off the remaining $3,942 of capitalized debt
issuance costs relating to the Credit Agreement in the fourth quarter of 1992.
The mortgage collateralized by the idle plant (the "Fresno Mortgage") was
assumed in the Fruehauf Acquisition. The Fresno Mortgage is collateralized by
the Company's Fresno, California manufacturing plant, which was closed in early
1992. The interest rate on the Fresno Mortgage is 9.625%, and combined
principal and interest payments of $345 are payable semiannually until
September, 2001. The Company is actively attempting to sell the former Fresno
manufacturing plant, and is required to extinguish the Fresno Mortgage with
such proceeds.
As discussed in Note B - "Initial Public Offering and Recapitalization," the
Company extinguished all of its then-outstanding Series B Promissory Notes and
all but $7,497 of the Series A Promissory Notes in 1991 in the Recapitalization
and with funds generated from the IPO. The $7,497 of Series A Notes not
extinguished were held by Airlie and were exchanged for Fruehauf Notes
totalling $7,497. The Fruehauf Notes initially bore interest at the rate of
12% per annum, and matured July 1, 1992. However, the Company extended the
maturity to March 31, 1996 in exchange for a $56 fee and an increase in the
annual interest rate from 12% to 14%.
The Fruehauf Notes are subordinated to the Credit Agreement. Payment of the
Fruehauf Notes can only be accelerated in the event that the indebtedness under
the Credit Agreement has been accelerated or extinguished. The Fruehauf Notes
have been classified as a current liability at December 31, 1992 as a result of
the change in the maturity of the obligations under the Credit Agreement to
June 30, 1993. In accordance with the terms of the Credit Agreement, the
Company is not allowed to make interest payments on the Fruehauf Notes while in
violation of its covenants under the Credit Agreement. Therefore, the Company
did not make the scheduled semiannual interest payment on December 31, 1992 on
the Fruehauf Notes. The interest accrued on such debt at December 31, 1992
totalled $528, and is included in Other Current Liabilities in the Consolidated
Balance Sheet.
The Company's Mexican subsidiary borrowed $2,963 in 1992. Such short term
notes payable are secured by certain of the subsidiary's assets.
The following table sets forth the scheduled annual maturities of the long-term
debt outstanding at December 31, 1992, after giving effect to the Credit
Agreement modifications discussed above.
1993 $ 89,794
1994 334
1995 367
1996 7,900
1997 442
Thereafter 2,252
Total $101,089
Amounts shown are exclusive of minimum lease payments disclosed in Note H -
"Operating Lease Commitments".
The Company paid $10,166, $11,353 and $23,804 of interest in 1992, 1991 and
1990, respectively.
The Company believes that the carrying value of its borrowings approximates
fair market value. Such fair values were estimated by discounting future cash
flows using rates currently available for debt of similar terms and remaining
maturities.
In September, 1990, the Company entered into the Credit Agreement and
refinanced the majority of its then-outstanding long-term debt. A one-time
extraordinary loss of $2,192, or $(0.47) per share, was recorded to write-off
the unamortized debt issuance costs relating to the refinanced debt. The
income tax provision (benefit) on the extraordinary loss was zero. See Note P
- - "Restatement of Prior Year Results" for further information.
NOTE H - OPERATING LEASE COMMITMENTS
The Company leases certain facilities, vehicles, machinery and equipment with
varying terms. Under most arrangements, the Company pays the property taxes,
insurance, maintenance and expenses related to the leased property. Fruehauf
has no capital leases.
Future obligations on non-cancelable operating leases in effect at December 31,
1992 are:
1993 $ 4,975
1994 3,498
1995 3,188
1996 2,246
1997 1,392
Thereafter 9,627
Total $24,926
The majority of the Company's operating leases provide the Company with the
option to renew the leases for varying periods after the initial lease terms.
These renewal options enable the Company to renew the leases based upon the
fair rental values at the date of expiration of the initial lease.
Total rental expense under operating leases was $3,930, $4,163 and $2,802 for
the years ended December 31, 1992, 1991 and 1990, respectively.
NOTE I - INCOME TAXES
The components of Income (loss) Before Income Taxes are as follows:
Year ended December 31,
1992 1991 1990
United States $(70,502) $(29,336) $(921)
Foreign 2,192 1,326 1,916
Income (loss) before income taxes $(68,310) $(28,010) $995
Foreign income tax provisions totalled $950 in 1992, $866 in 1991 and $879 in
1990, the majority of which were taxes withheld on royalty and dividend
payments to the Company. In 1990, the Company had a deferred federal tax
provision of $100. In 1992, the Company recorded a $4,100 income tax benefit
relating to the reversal of federal deferred tax liabilities no longer required
due to continued losses.
The Company's Provision (benefit) for Income Taxes is different from the amount
which would be provided by applying the statutory federal income tax rate to
the Company's Income (loss) Before Income Taxes. The reasons for the
difference are summarized below:
Year ended December 31,
1992 1991 1990
% $ % $ % $
Statutory federal income tax rate (34)$(23,225) (34)$(9,523) 34 $338
Future potential benefit
from current NOL 29 19,870 36 9,974 - -
Foreign tax differential
on income/losses of
foreign subsidiaries (1) (516) (1) (301) (56) (561)
Other 1 721 2 716 120 1,202
Provision (benefit) for
income taxes (5%) $(3,150) 3% $866 98% $979
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. The tax
effects of the basis differences are summarized below for major balance sheet
captions:
December 31,
1992 1991 1990
Net inventories $(9,030)$(19,528) $(24,302)
Assets held for sale (6,475) (6,456) (6,456)
Fixed assets (12,766) (18,388) (20,068)
Other assets and deferred charges 600 (1,313) (5,598)
Investments in affiliate companies (11,740) (8,403) (11,041)
Other current liabilities & long-term
liabilities 36,632 41,980 62,298
All other items - 1,151 (1,036)
Benefit from NOL carryforward 2,779 6,857 2,103
Total deferred tax liability $0 $(4,100) $(4,100)
At December 31, 1992, the Company had domestic federal tax basis net operating
loss carryforwards available to offset future taxable income of $148,466. The
Company's domestic federal tax basis net operating loss carryforwards exceed
the book basis net operating loss carryforwards by approximately $50,323. In
accordance with SFAS 96, "Accounting for Income Taxes", the tax benefits of the
unused loss and tax credit carryforwards have not been recognized in the
Consolidated Financial Statements, except by reducing the deferred taxes, as
the realization of these benefits is dependent on future taxable income.
The tax basis net operating loss carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
2004 $3,641
2005 70,011
2006 33,809
2007 41,005
Total $148,466
The Company also has various state net operating loss carryforwards expiring at
various dates through 2007 available to reduce future state taxable income and
income taxes. In addition, one of the Company's foreign subsidiaries has
approximately $332 of tax basis loss carryforwards, expiring in 1995, which may
be available to offset future foreign taxable income.
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of international subsidiaries as those earnings have
been, and will continue to be, permanently reinvested. No U.S. income taxes
would be payable in the event of distribution of such earnings. However, on
remittance, certain foreign countries impose withholding taxes that are then
available for use as credits against U.S. tax liabilities, if any, subject to
certain limitations. The amount of withholding tax that would be payable on
remittance of the entire amount of undistributed earnings would approximate
$689.
The Company made income tax payments of $721, $716 and $788 in 1992, 1991 and
1990, respectively.
NOTE J - STOCKHOLDERS' INVESTMENT
Stock Issuance: The Company was capitalized in 1989 upon the issuance of
510,000 shares of Terex Holdings Common Stock for $10,000. On June 14, 1991
the authorized number of shares of Fruehauf Common Stock was increased to
20,000,000. Each share of Terex Holdings Common Stock outstanding was
converted into nine shares of Fruehauf Common Stock on July 8, 1991 in
conjunction with the Initial Public Offering and Recapitalization (see Note B -
"Initial Public Offering and Recapitalization"). The per share calculation
described below, as well as the issued and outstanding shares indicated on the
Consolidated Balance Sheet, take the conversion into account.
The Company completed the IPO by issuing 4,000,000 shares of Fruehauf Common
Stock at a price of $11 per share. The Company's common stock is traded on the
New York Stock Exchange under the symbol "FTC" (see Note B - "Initial Public
Offering and Recapitalization").
Stock Warrants: The Company issued two warrants (the "Terex Holdings
Warrants") to related parties in conjunction with the issuance of the Series A
Notes in 1989. As discussed in Note B - "Initial Public Offering and
Recapitalization," one Terex Holdings Warrant was exercised in 1991, and the
other was exchanged for a Fruehauf Warrant in 1991. The Fruehauf Warrant
enables the holder to purchase up to an aggregate 2,205,000 shares of Fruehauf
Common Stock at an exercise price of $3.40 per share. The Fruehauf Warrant was
not exercised as of December 31, 1992.
Dividends: As discussed in Note G - "Long-Term Debt", the Credit Agreement
contains restrictions as to the payment of cash dividends. As a result of
these restrictions, no dividends could have been paid based on the Company's
financial position as of December 31, 1990, 1991 or 1992.
Net Income (Loss) Per Common and Common Equivalent Share: Net income (loss)
per common and common equivalent share was computed by dividing the net loss by
the average number of dilutive shares of common stock and common stock
equivalents outstanding during the period after the conversion described above.
Stock Option Plan: The Board of Directors has approved a stock option plan for
certain key employees and the directors of the Company. The number of shares
of Common Stock to be made available under the proposed stock option plan total
200,000 shares for key employees and 50,000 for directors. The proposed stock
option plan is subject to stockholder approval.
Preferred Stock: The Company has filed a consent solicitation with the
Securities and Exchange Commission to authorize the issuance of up to 2,500,000
shares of preferred stock. A portion of these shares would be issued to Terex
in exchange for $11,587 of the long term payable due Terex. The proposed
transaction would require ratification by the Company's stockholders prior to
completion. The consent solicitation was pending at December 31, 1992. The
completion of this transaction is uncertain.
NOTE K - RETIREMENT PLANS
Prior to 1990, Fruehauf's trailer operations had multiple defined benefit
pension plans covering most domestic employees. During 1990, Fruehauf's
salaried, nonunion hourly and union hourly plans were merged into a single
plan. A separate plan exists for Jacksonville's hourly employees. Benefits
for the salaried employees are based primarily on years of service and
employees' qualifying compensation during the final years of employment. The
benefits for hourly employees are based primarily on years of service and a
fixed dollar amount per year of service.
Effective October 1, 1990, the Company amended the pension benefits for certain
employees. The plan amendment increased the projected benefit obligation by
approximately $2.7 million. The impact on pension expense was not material.
It is the Company's policy to fund its pension plans based on the minimum
requirements of the Employee Retirement Income Security Act of 1974 ("ERISA").
Plan assets consist primarily of common stocks, bonds and short-term cash
equivalent funds. Assets of Fruehauf's merged plan and the Jacksonville Hourly
plan were combined with the assets of Terex's pension plans into a master trust
(the "Master Trust") effective January 1, 1992.
The following table summarizes the components of pension expense:
Year ended December 31,
1992 1991 1990
Service cost for benefits earned
during the period $962 $893 $1,507
Interest cost on projected benefit obligation 5,109 5,025 4,540
Actual (return) loss on plan assets (13,098) (10,315) 5,945
Net amortization and deferral 8,357 5,400 (11,598)
Curtailment loss - 17 -
Net pension expense $1,330 $1,020 $394
The expected long-term rate of return on plan assets was 9.0% for the periods
presented. The discount rate assumption was 8.25% for 1992, 8.5% for 1991 and
9.0% for 1990. Consistent with the provisions of the plan, the actuarial
assumption for the rate of compensation increase was 5.5% for plan years ending
on or prior to December 31, 1991 and zero thereafter.
The following table sets forth the plans' funded status and amounts recognized
in the Consolidated Balance Sheet:
December 31,
1992 1991
Actuarial present value of:
Vested benefits $72,226 $69,587
Accumulated benefits $72,705 $70,705
Projected benefits $72,705 $70,705
Fair value of plan assets 81,795 73,744
Plan assets in excess of
projected benefit obligation 9,090 3,039
Unrecognized net loss from past
experience different than assumed 3,816 11,756
Unrecognized prior service cost (5,111) (5,691)
Prepaid pension cost $7,795 $9,104
The Master Trust is a participant in the Credit Agreement, and also has
investments in Terex securities. The rights of the Master Trust are equivalent
to those of the other lenders and investors. Included in the fair value of the
Company's plan assets at December 31, 1992 and December 31, 1991 are
approximately $6,445 and $2,365 of such investments.
In addition to providing pension benefits, the Company provides health care
benefits for certain retired employees. Certain domestic union employees may
become eligible for those benefits if they reach the required years of service
and retirement age while working for the Company. Certain of the Company's
former domestic salaried employees who retired prior to December 31, 1990
receive company-provided health care benefits. Domestic salaried employees
retiring after December 31, 1990 are not eligible for such benefits.
In December 1990, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". This statement requires accrual of postretirement benefits (such as
health care benefits) during the years an employee provides services. Reserves
for past service costs of then-retired employees were established in the
purchase price allocation for the Fruehauf Acquisition in 1989. The Company
discontinued providing postretirement health benefits for salaried employees
retiring after December 31, 1990, and such benefits have been eliminated for
future retirees of certain hourly plans since the Fruehauf Acquisition. As a
result, the Company has adequate reserves for such obligations at December 31,
1992. Accordingly, the Company does not anticipate the implementation of this
pronouncement to have a significant effect on its operating results or
financial position. The Company paid retiree health claims totalling $3,101 in
1992, $3,438 in 1991 and $3,161 during 1990.
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
contributes to certain of these plans.
NOTE L - CONTINGENCIES & LITIGATION
The Company is contingently liable for a portion of the losses incurred on new
trailer loans written by a finance company (the "Finance Company") to the
Company's customers. In the event a customer defaults on a loan, the
underlying trailers are repossessed by the Finance Company and sold. The
Company absorbs 50% of the difference between the remaining loan balance and
the proceeds from the sale of the trailer(s), up to an aggregate annual maximum
of $750. The Finance Company's portfolio subject to this arrangement totalled
$104,136 at December 31, 1992 and $129,520 at December 31, 1991. The average
life of the loans in the portfolio is approximately 2 - 3 years. Total losses
incurred by the Company under this arrangement were $750 in 1992, $708 in 1991
and $635 in 1990. Reserves have been recorded for potential losses.
The Company is obligated to reimburse the Finance Company for shortfalls in
guaranteed residual values of certain leased trailers. All obligations under
this arrangement are anticipated to cease prior to December 31, 1993. The
Company's total payments to the Finance Company pursuant to these guarantees
were $38 in 1992, $664 in 1991 and $1,135 in 1990, respectively. Reserves have
been recorded for potential losses.
The Company is contingently liable to various customers and other finance
companies as a guarantor of the residual values of certain trailers sold by the
Company. The Company's loss exposure on such trailers is the difference
between the fair market values of the trailers at a predetermined rate and
predetermined values. The Company's contingent liability on such agreements
totalled approximately $9,356 and $6,115 at December 31, 1992 and December 31,
1991, respectively. The Company has not experienced any losses under such
guarantees in the three years ended December 31, 1992.
As part of the Fruehauf Acquisition, the Company assumed a Fruehauf Corporation
guarantee of a customer's trailer loan. The outstanding loan balance was
approximately $993 and $2,882 at December 31, 1992 and December 31, 1991,
respectively. The loan is scheduled to be extinguished prior to December 31,
1993, at which time the guarantee will cease.
Fruehauf is a party to an agreement with the Finance Company in which the
Finance Company purchases certain pools of customer receivables for cash, with
recourse to the Company. Under the agreement, the Company acts as an agent for
the Finance Company by performing recordkeeping and collection functions on the
receivables sold. The outstanding principal balance on open account
receivables purchased by the Finance Company totaled $4,300 at December 31,
1992. The Company's losses under this arrangement have been, and are expected
to continue to be, immaterial.
As disclosed in Note G - "Long-term Debt," outstanding letters of credit
totalled $11,322 and $20,520 at December 31, 1992 and December 31, 1991,
respectively. The letters of credit generally serve as collateral for certain
liabilities included in the Consolidated Balance Sheet.
The Company has facilities at numerous geographic locations, which are subject
to a range of federal, state and local environmental laws and regulations.
Compliance with these laws has, and will, require expenditures on a continuing
basis. The Company has been identified as a "Potentially Responsible Party" at
approximately 19 multi-party Superfund sites, and has also identified
environmental exposures at approximately 21 other sites not designated as
Superfund sites. The Company is currently participating in administrative or
court proceedings involving a number of these sites. Many of the proceedings
are at a preliminary stage, and the total cost of remediation, the timing and
extent of remedial actions which may be required, and the amount of the
Company's liability with respect to those sites cannot presently be estimated.
When it is possible to make reasonable estimates of the Company's liability
with respect to such matters, a provision is recorded. When it is possible to
estimate a range of liability but management is unable to determine the amount
within the range that is the best estimate, a provision is recorded for the
minimum amount of the range. The Company's policy is to record liabilities for
environmental exposures on a gross basis without consideration of possible
recoveries from third parties. The Company is self-insured with respect to
environmental exposures. The Company's reserves for Superfund sites and other
environmental projects and contingencies totaled $12.3 million at December 31,
1992 relating to 7 Superfund sites and 20 other sites for which the Company has
been able to make estimates. The amount of possible loss, if any, in excess of
the amounts recorded cannot presently be estimated. If the amount of payments
required in respect of these sites exceeds the Company's available cash
resources, there could be a material adverse effect on the Company.
The Internal Revenue Service is currently in the early stages of examination of
the Company's federal tax return for the period July 14, 1989 through December
31, 1989. In addition, SESR is currently under audit by France's taxing
authorities for 1988, 1989 and 1990. The Company believes that its positions
for issues raised in these audits are correct and that it would prevail if the
taxing authorities would propose adjustments. In any event, management
believes that the outcome of these examinations will not have a material impact
on the consolidated financial statements because the Company has significant
net operating loss carryovers. No accruals have been established for these
contingencies.
In December 1992, a Class Action Complaint was filed purportedly on behalf of
all persons who purchased Fruehauf common stock during the period June 28, 1991
through December 4, 1992 (the "Period") against the Company, Terex, certain of
the Company's officers and directors, namely, Randolph W. Lenz, Marvin B.
Rosenberg, Arthur E. Rowe, G. Chris Andersen, Raymond J. Dempsey and certain of
the underwriters of the Company's initial public offering ("IPO"), namely,
PaineWebber Incorporated, Alex Brown & Sons, Incorporated and Wertheim
Schroeder & Co., Incorporated, in the United States District Court, Eastern
Michigan, Southern Division, seeking unspecified compensatory and punitive
damages. The complaint alleges, among other things, that in connection with
the IPO, the defendants misrepresented the Company's liquidity and status of
compliance with the Company's credit facilities at the time of the IPO. The
Company believes that the claims are without merit and that it has valid
defenses to the claims made. This action is at a very early stage and the
ultimate resolution of the claim cannot be predicted with complete certainty.
However, the Company believes that it will be successful in its defense of this
action and that the ultimate resolution of this litigation will not have a
material adverse effect on the Company.
The Company is involved in other various legal proceedings which have arisen in
the normal course of its business. Most of these legal proceedings involve
product liability claims for which the Company is principally self insured.
Although the Company has established reserves for loss contingencies based on
the Company's historical record of payments on product liability claims, the
Company is at risk of being obligated to pay substantial damages to product
liability claimants. Based on an evaluation of historical losses, it is the
opinion of management that none of the product liability or other current
proceedings alone or in the aggregate will have a material adverse effect on
the Company.
NOTE M - RELATED PARTY TRANSACTIONS
The Chairman of the Board is the controlling shareholder of Terex, Fruehauf's
parent company, and KCS, a corporation which provides legal, financial and
management services to the Company and Terex under separate management
contracts. Pursuant to certain restrictions in the Credit Agreement, the
Company was prohibited from paying management fees to KCS in excess of $2,300
in 1992 and is prohibited from making any payments in 1993 until all
indebtedness under the Credit Agreement is repaid. Payments to KCS for
services rendered and out-of-pocket expenses amounted to $2,300 in 1992, $3,633
in 1991 and $3,322 in 1990. KCS and its shareholders own approximately 21.5%
of Fruehauf's outstanding Common Stock.
See Note B - "Initial Public Offering and Recapitalization" for a description
of transactions with KCS in the Recapitalization. Interest on the Series A and
B Notes issued to KCS aggregated zero in 1992, $1,651 in 1991 and $2,746 in
1990.
KCS and the Company entered into an agreement (the "KCS Note") whereby KCS
borrowed $1,000 on an unsecured basis from the Company during 1992. These
funds were to be used by KCS as an advance in connection with the KCS-owned
insurance company through which the Company would obtain coverage, as approved
by the Company's Board of Directors. These funds were utilized by KCS, pending
implementation of the insurance program, which is not yet complete. KCS
borrowed an additional $622 from Fruehauf during 1992. The KCS obligations
bear interest at prime. The entire $1,622 balance owed by KCS was repaid on
January 25, 1993.
Terex directly owns approximately 42.2% of Fruehauf's outstanding Common Stock.
See Note B - "Initial Public Offering and Recapitalization" for a description
of transactions with Terex in the Recapitalization. Terex charged Fruehauf for
management services totaling zero in 1992, $1,932 in 1991 and $2,500 in 1990.
Terex also charged Fruehauf interest of zero in 1992, $1,612 in 1991 and $1,562
in 1990 on amounts owed Terex, including the $6.0 million Series B Note held by
Terex. As of January 1, 1992, Terex no longer charges Fruehauf for management
expenses and interest on amounts due Terex. However, Terex and Fruehauf
continue to charge one another for payments made on each other's behalf in the
normal course of business. The outstanding balance owed by Fruehauf to Terex
was $14,890 at December 31, 1992 and $10,244 at December 31, 1991. As
disclosed in Note J - "Stockholders' Investment", the Company filed a consent
solicitation with the Securities and Exchange Commission in 1992, which
contemplates converting $11,587 of the balance due Terex into preferred stock.
The Company's Board of Directors approved a program to consolidate the
Company's parts warehousing and administration functions with Terex. This
consolidation has not yet been fully implemented. In November, 1992, in
contemplation of this agreement, Terex advanced $2,000 to Fruehauf.
On January 12, 1993, Terex and the Company announced that an investment banking
firm had been retained to explore opportunities to maximize stockholder value.
A member of the Company's Board of Directors is an executive with the
investment banking firm. See Note Q - "Plan of Restructuring and Refinancing"
for further information regarding this action.
At December 31, 1992, Airlie owned approximately 3.3% of Fruehauf's outstanding
Common Stock. See Note B - "Initial Public Offering and Recapitalization" for
a description of transactions with Airlie in the Recapitalization. Assuming
Airlie exercised the Fruehauf Warrant it received in the Recapitalization, it
would own approximately 18.2% of the Company's Common Stock. Interest on the
Series A and B Notes and the Fruehauf Notes aggregated $975 in 1992, $2,092 in
1991 and $2,749 in 1990.
The Master Trust is a participant in the Credit Agreement, and also has
investments in Terex securities. The rights of the Master Trust are equivalent
to those of the other lenders and investors. See Note K - "Retirement Plans,"
for further information.
The Company rents a facility in Germany to SESR, as disclosed in Note O -
"Facility Leased to Affiliate". Additionally, the Company sells trailer
components to its equity investees and licensees, as further described in Note
C - "Investments in Affiliate Companies."
NOTE N - INDUSTRY SEGMENT INFORMATION
The Company operates principally in the trailer manufacturing industry.
Trailer operations consist primarily of the manufacture and sale of trailers
and replacement parts. The Company also performs maintenance and repair work
on trailers, and purchases and sells used trailers. With the exception of
export parts sales and international license, trademark and royalty
arrangements, substantially all of the trailer segment's business is conducted
in North America.
Jacksonville and CEMCO (collectively, the "Maritime Business") were acquired in
the Fruehauf Acquisition, at which time the Company announced its intention to
divest such operations. Substantially all of the operating assets of CEMCO
were sold in 1991. As a result of its inability to sell Jacksonville as a
business, the Company ceased operations in 1992, and a program was implemented
to liquidate the remaining assets, consisting primarily of the real estate and
receivables. For more information, see Note F - "Assets and Businesses Held
for Sale." The assets and liabilities of the Maritime Business are included in
the Consolidated Balance Sheet. The operating results of the Maritime Business
are not included in the Consolidated Statement of Income other than the $6,599
gain recognized in 1991 on the sale of CEMCO's operating assets and the $11,551
provision recorded in 1992 relating to Jacksonville liquidation costs.
Export sales from U.S. operations were $18,257, $18,576 and $12,818 for 1992,
1991 and 1990, respectively.
The Company is not dependent upon any single customer. No single customer
accounted for more than 10% of consolidated net sales during 1992, 1991 or
1990.
NOTE O - FACILITY LEASED TO AFFILIATE
The Company owns a manufacturing facility in Germany that it leases to SESR,
pursuant to a lease agreement assumed in the Fruehauf Acquisition. SESR has
the option to purchase the facility from the Company at an amount approximating
book value any time prior to December 31, 1997. The carrying value of this
asset was $14,000 and $18,955 at December 31, 1992 and 1991, respectively. The
facility is reported as "Facility Leased to Affiliate" in the Consolidated
Balance Sheet. In 1992, the Company was refunded a $3,155 purchase deposit
made on a property adjoining the facility leased to SESR. The deposit was
acquired by the Company in the Fruehauf Acquisition. The Company received
rental revenue of $811, $657 and $665 from SESR in 1992, 1991 and 1990,
respectively. Rental revenue is recorded in Other Income (Expense) in the
Consolidated Statement of Income and is reduced by depreciation expense on the
facility. SESR is responsible for paying the property taxes, insurance,
maintenance and expenses related to the leased property.
The future rental revenues under this non-cancelable operating lease, as of
December 31, 1992, are as follows:
1993 $956
1994 1,200
1995 1,288
1996 1,288
1997 1,288
Total $6,020
NOTE P - RESTATEMENT OF PRIOR YEAR RESULTS
As a result of inquiries by its current independent accountants, the Company
reviewed its accounting treatment for certain prior year transactions and
concluded that restatements were required to be made to the previously issued
financial statements for the years ended December 31, 1990 and 1991.
The Company issued increasing rate debt with detachable warrants in the
Fruehauf Acquisition, and redeemed the warrants in 1990. The amount paid to
redeem the warrants was deferred, to be amortized over the life of the debt.
The fair value of the warrants at the date of issue should have been initially
recorded as a debt discount and amortized as interest expense over the life of
the debt. Subsequent increases in their fair value should have been recorded
as additional interest cost in 1989 and 1990. Additionally, it has been
determined that the interest expense recognized on the increasing rate debt in
1989 and 1990 was not properly recorded.
In 1990, the Company accounted for a debt transaction as a modification to an
existing debt instrument as opposed to an extinguishment of debt and the
issuance of new debt. In accounting for the transaction as a modification, the
Company continued to amortize the remaining deferred debt issue costs incurred
on the old debt over the term of the new debt. Had the transaction been
properly accounted for as an extinguishment of debt, all unamortized debt issue
costs would have been written off in 1990 as an extraordinary loss.
The Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated
Statement of Cash Flows and Consolidated Statement of Stockholders' Investment
have been restated to reflect the foregoing items. The following table sets
forth selected information as originally reported and as restated for the years
ended December 31, 1991 and 1990.
Year ended December 31,
1991 1990
Net Income (Loss) before Extraordinary Loss:
As originally reported $(30,022) $2,324
Restatement adjustment 1,146 (2,308)
Restated Net Income (loss) before
Extraordinary Loss $(28,876) $16
Net Income (Loss):
As originally reported $(30,022) $2,324
Restatement adjustment 1,146 (4,500)
Restated Net Income (loss) $(28,876) $(2,176)
Net Income (Loss) per Share before Extraordinary Loss:
As originally reported $(3.63) $0.51
Restatement adjustment 0.13 (0.51)
Restated Net Income (loss) per share
before Extraordinary Loss $(3.50) $0.00
Net Income (Loss) per Share:
As originally reported $(3.63) $0.51
Restatement adjustment 0.13 (0.98)
Restated Net Income (loss) per share $(3.50) $(0.47)
Weighted Average Common and Common Equivalent
Shares Outstanding 8,260 4,590
NOTE Q - PLAN OF RESTRUCTURING AND REFINANCING
As a result of significant operating losses which have continued through the
first quarter of 1993, and cash flow difficulties, the Company has taken
significant actions to reduce its overall cost structure and improve liquidity.
As described in Note D - "Restructuring Costs," in 1991 the Company implemented
a restructuring program affecting its distribution system and certain of its
manufacturing operations. This program continued through 1992 with additional
actions, including, among others, temporary plant shutdown, salary reductions
and reductions in fringe benefits.
On March 15, 1993, the Company and its lenders amended the terms of the Credit
Agreement. The amendment provides up to $6.6 million of additional borrowing
availability to the Company, and waives past covenant violations. The interest
rate under the Credit Agreement was increased to prime plus 2.25% effective
January 1, 1993. Additionally, the maturity of the Credit Agreement was
changed from December 31, 1995 to June 30, 1993. The Company has included all
outstanding loans under the Credit Agreement in current liabilities in the
Consolidated Balance Sheet to reflect the new maturity date.
The Company is attempting to secure alternative financing which would provide
incremental borrowing and enable it to extinguish all amounts owed under the
Credit Agreement. Additionally, the Company and Terex are reviewing various
proposals to maximize stockholder value, including potential equity infusions
and other financing transactions. The Company and Terex are conducting
discussions with interested parties. However, no definitive agreements, terms
or structures have been reached, and there are no assurances that any
transactions will be consummated. If the Company is unable to secure
additional financial resources and refinance the credit agreement, there could
be a material adverse impact on the Company's financial position and results of
operations.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
For the Nine Months
Ended September 30,
1993 1992
Net Sales $196,904 $388,552
Cost of goods sold 186,496 350,356
Gross profit 10,498 38,196
Engineering, selling and administrative expenses
Third parties 38,635 44,325
Related parties --- 2,300
38,635 46,625
Restructuring provision 47,478 15,500
Loss from operations (75,615) (23,929)
Other income (expense):
Interest expense (8,395) (7,561)
Equity in net loss of affiliate
companies (2,725) (1,281)
Royalty income 2,233 2,205
Adjustments of net realizable
value of Jacksonville --- (7,441)
Debt issue/modification costs (3,177) (754)
Other income (expense) - net (4,917) 1,423
Loss before income taxes (92,596) (37,338)
Provision (benefit) for
income taxes 508 (2,703)
Net Loss $(93,104) $(34,635)
Loss per share $(6.98) $(2.85)
Weighted average common shares
outstanding (see Exhibit 11) 13,341 12,159
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
September 30,
1993
ASSETS
Current assets
Cash and cash equivalents $10,206
Net receivables 19,721
Net inventories 27,160
Other current assets 1,444
Total current assets 58,531
Restricted cash 40
Prepaid pension cost 7,063
Assets held for sale 81,461
Other assets 2,873
Property, plant and equipment
Property, plant and equipment 60,296
Less - accumulated depreciation 14,399
Net property, plant and equipment 45,897
Total Assets $195,865
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities
Notes payable $2,268
Trade accounts payable 29,609
Accrued compensation and benefits 15,268
Accrued warranties 9,514
Accrued workers compensation 5,403
Accrued restructuring costs 32,615
Other current liabilities 14,796
Current portion of long-term debt 7,576
Total current liabilities 117,049
Long-term debt, less current portion 97,551
Postretirement health insurance,
less current portion 40,232
Long-term payable to Terex Corporation 13,507
Other long-term liabilities 35,325
Stockholders' investment
Common stock, $0.01 par value -- authorized
20,000 shares; issued and outstanding
20,000 as of September 30, 1993 and
12,159 shares as of December 31, 1992 200
Additional paid-in capital 81,683
Accumulated deficit (189,507)
Foreign currency translation adjustment (176)
Total stockholders' investment (107,799)
Total liabilities and stockholders'
investment $195,865
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
For the Nine Months
Ended September 30,
1993 1992
OPERATING ACTIVITIES
Net loss $(93,104) $(34,637)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 3,787 3,450
(Gain) loss on sale of property,
plant and equipment (453) 35
Net unremitted equity loss
in affiliates 3,330 1,281
Restructuring provision 47,478 15,500
Noncash liquidation costs
of Jacksonville 0 7,441
Increase (decrease) in cash due to changes
in operating assests and liabilities:
Net receivables 19,666 2,423
Net inventories 25,091 28,760
Other current assets 1,363 (1,164)
Trade accounts payable (17,764) (2,193)
Payable to Terex Corporation 617 2,802
Accrued compensation and benefits (991) (4,788)
Accrued workers compensation (267) (7,887)
Accrued warranties 2,097 (104)
Other current liabilities (3,237) (22,118)
Other long-term assets (5,692) 1,868
Other long-term liabilities (1,290) (9,337)
Net cash used in
operating activities (19,369) (18,668)
INVESTING ACTIVITIES
Capital expenditures (461) (1,467)
Proceeds from sale of property,
plant and equipment 11,229 7,903
Increase in restricted cash (40) 0
Decrease in marketable securities 0 457
Net cash from investing activities 10,728 6,893
FINANCING ACTIVITIES
Proceeds from issuance of common stock 9,880 0
Net borrowings under revolving
line of credit agreements 6,259 15,014
Proceeds from issuance of convertible
subordinated notes 8,783 0
Principal repayment of long-term debt (8,399) (6,042)
Net borrowings (repayments) under
short-term notes payable (695) 1,926
Net cash from (used) in financing
activities 15,828 10,900
Effect of exchange rate changes on
cash and cash equivalents (4) 12
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 7,183 (863)
Cash and cash eqiuvalents at
beginning of period 3,023 2,985
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $10,206 $2,122
The accompanying notes are an integral part of these statements.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, unless otherwise denoted)
September 30,1993
NOTE A - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Fruehauf
Trailer Corporation and subsidiaries (the "Company") as of September 30, 1993
and for the nine months ended September 30, 1993 and 1992 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a
normal recurring nature, other than those adjustments discussed in Notes B, F
and G. Operating results for the nine months ended September 30, 1993, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1993. For further information, refer to the consolidated
financial statements for the year ended December 31, 1992.
NOTE B - RESTRUCTURING PROVISION
As discussed more fully in Note E - "Long-Term Debt", the Company completed a
series of transactions (the "Restructuring") In August 1993 with its existing
lenders, a new lender and equity investors which provided for (i) the issuance
of common stock (the "Common Stock") and certain convertible notes (the
"Convertible Notes") of the Company for approximately $20.5 million, (ii) the
establishment of a now $25 million revolving credit facility (the 'Revolving
Credit Facility"), (iii) in amendment and restatement of the Company's existing
bank credit facility (as amended and restated, the "Restructured Credit
Agreement"), (iv) the issuance of 2,251,187 shares of Common Stock to Terex
Corporation ("Terex") in satisfaction (the "Satisfaction") of $13,507,000 of
indebtedness owed to Terex by the Company and (v) an amendment to the Company's
outstanding unsecured promissory notes hold by certain holders of warrants to
purchase Common Stock ("Warrant Note") by adding approximately $1.2 million of
accrued interest to principal and by extending the maturity (the "Note
Amendment"). These transactions were consummated with a view to fund the
Company's turnaround plan (the "Turnaround Plan"). Key elements of the
Turnaround Plan include reductions of fixed costs to lower the Company's
breakeven levels, obtaining of access to sufficient working capital and vendor
credit, and restructuring of existing bank debt. Specific actions contemplated
in the Turnaround Plan include further reductions in excess manufacturing
capacity, deemphasizing vertical Integration from both the perspective of the
manufacture of component parts, as well so reaffirming previous decisions
concerning the branch restructuring program, and rationalization of the
Company's current management infrastructure to levels more appropriate for
current business levels. As a result of the approval of the Turnaround Plan by
the Company's Board of Directors and management's commitment to its lenders to
implement the Turnaround Plan, the Company provided a restructuring provision
of $47.5 million in the second quarter of 1993 to cover the anticipated costs
and writedowns involved in implementing the Turnaround Plan. The components of
the restructuring provision (in millions) are as follows:
Inventory liquidation and transfer $ 2.7
Asset held for sale valuation adjustments 22.1
Idle facility holding costs 14.6
Reduction in force costs 4.0
Other 4.1
$ 47.5
NOTE C - INVENTORIES
Inventories consist of the following at September 30, 1993:
New trailers $ 5,314
Used trailers 913
Replacement parts 7,842
Work-in-process 3,606
Raw materials and supplies 8,249
Gross inventories 25,924
Excess of LIFO inventory value
over FIFO costs. 1,236
Net inventories $ 27,160
NOTE D - ASSETS HELD FOR SALE
At December 31, 1992, the Company was holding for sale certain excess real
estate, facilities and other assets, as well as its Decatur Business. As a
result of the further actions to be taken pursuant to the Turnaround Plan as
discussed in Note B - "Restructuring Provision", additional excess real estate,
facilities and machinery and equipment, as well as the Company's investment in
non-consolidated affiliates are held for sale. The Company is actively
marketing all excess properties, and in certain instances, is leasing them in
order to mitigate idle facility holding costs. These properties are included
in the Condensed Consolidated Balance Sheet in Assets Held for Sale, and are
carried on a lower of cost or net realizable value basis. Adequate reserves
have been established to absorb the holding costs until anticipated
disposition. As a result of the Company's decision to sell the remaining
investments in non-consolidated affiliates, the Company recorded a provision to
reduce the carrying values of investments in non-consolidated affiliates to
their not realizable value. The Company discontinued the application of the
equity method of accounting for these investments.
Prior to the Restructuring, all proceeds from the sale of collateralized assets
were applied against outstanding indebtedness under the Company's then existing
bank credit facility (the "Prior Credit Agreement") including proceeds from the
sale of properties included in Assets Held for Sale on the Consolidated Balance
Sheet. As part of the Restructured Credit Agreement, the Company is allowed to
retain specified percentages ranging from 15% to 44% of certain properties
included in Assets Held for Sale for purposes other than debt repayment. The
remaining proceeds are required to be deposited into an account solely for the
purpose of repayment of indebtedness under the Restructured Credit Agreement.
Given that certain of the proceeds are restricted for purposes of debt
repayment, Assets Held for Sale are presented as noncurrent in the Consolidated
Balance Sheet.
NOTE E - LONG-TERM DEBT
Long-term debt consists of the following at September 30, 1993:
Restructured Credit Agreement bearing interest
at prime plus 2.25%, due August 20, 1998 $ 83,103
Revolving Credit Facility bearing interest at
prime plus 2.5%, due August, 1995 --
Convertible Subordinated Notes 8,783
Unsecured promissory notes bearing interest
at 14%, due October 31, 1998 8,692
Mortgage note bearing interest at 9.625%
collateralized by an idle plant, due
September, 2001 3,891
Other 658
Total long-term debt 105,127
Less: Current portion of long-term debt 7,576
Long-term debt, less current portion $ 97,551
On August 20, 1993, the Company completed the Restructuring which provided for
(i) the issuance of Common Stock and Convertible Notes for approximately $20.5
million, (ii) the establishment of the Revolving Credit Facility, (iii) a
restructuring of the Prior Credit Agreement, (iv) the entry into an agreement
to affect the Satisfaction, and (v) the Note Amendment.
New Equity Funding
As part of the Restructuring, the Company sold 7,841,326 shares of Common Stock
and approximately $8.8 million of Convertible subordinated Notes (collectively
the "New Equity"). Proceeds to the Company, net of issuance and estimated
registration costs, were approximately $18.7 million. The Convertible
subordinated Notes and, at the Company's option, any additional Convertible
subordinated Notes issued in payment of interest thereon are convertible into
Common Stock at the rate of one share of Common Stock for each $1.50 in
principal amount of and accrued interest on the Convertible subordinated Notes.
The Convertible Notes accrue interest at 6% through March 31, 1994. Such rate
increases to 10% as of April 1, 1994 and increases by one percentage point
every six months, thereafter, it the Convertible Notes are not converted by
April 1, 1994. Interest accrued through March 31, 1994 can, at the Company's
option, be paid through the issuance of additional Convertible subordinated
Notes. Subsequent interest accrued is payable in cash. On October 1, 1993,
the Company made an interest payment in kind on the Convertible Notes
aggregating $61 in additional Convertible Notes. The Convertible Notes are due
and payable on December 31, 1998, with no prior amortization of principal, and
are subordinate to all other indebtedness of the Company.
The sale of the Common Stock pursuant to the Restructuring brought the total of
issued and outstanding shares of Common Stock as of August 20, 1993 to
19,999,983. Currently, the Company's certificate of incorporation provides for
the issuance of 20 million shares. The Company has prepared a consent
solicitation statement seeking shareholder approval of an amendment to the
Company's certificate of incorporation to increase the number of shares of
Common Stock issuable thereunder to 50 million shares which would result in the
issuance of Common Stock for mandatory conversion of the Convertible Notes, and
the issuance of 2,251,167 shares of Common Stock to Terex in the Satisfaction.
On October 29, 1993, the Company filed the preliminary consent solicitation
statement with the Securities and Exchange Commission. The provisions of the
Subscription Agreements require Terex to consent or vote in favor of such
amendment. In addition, the agreements governing the sale of the New Equity
require the purchasers thereof to consent to or vote in favor of such
amendment. Given these requirements, the Company believes that such matters
will be approved by the stockholders of the Company. The Company is also
obligated to register the Common Stock issued in the Restructuring and the
Common Stock issuable upon the conversion of the shares issued upon the
Convertible Notes with the Securities and Exchange Commission.
Revolving Credit Facility
As part of the Restructuring, the Company entered into the Revolving Credit
Facility with a financial institution to be used for working capital purposes.
The Revolving Credit Facility provides for borrowings limited to the lesser of
$25 million or the available borrowing bass. The available borrowing base is
calculated by applying prescribed advance ratios against eligible receivables
(ranging from 50% to 85%) and inventory balances (ranging from 35% to 65%), in
accordance with the terms of the Revolving Credit Facility. On August 20,
1993, the Company borrowed $1 million under the Revolving Credit Facility. The
interest rate on loans pursuant to the Revolving Credit Facility is prime rate,
as defined, plus an applicable margin of 2.5% per annum, so long as there is no
event of default, and at the prime rate plus 4.5% upon the occurrence of an
event of default. Interest is payable monthly. The loans under the Revolving
Credit Facility are due August 20, 1995. The Revolving Credit Facility is
secured by liens on all accounts receivable and inventory of the Company and
certain other assets. At September 30,1993, no amounts were outstanding under
the Revolving Credit Facility. As of November 11, 1993, outstanding borrowings
under the Revolving Credit Facility totaled $6.2 million.
Restructured Credit Agreement
The Prior Credit Agreement became due and payable which was subsequently
extended to July 9, 1993. As part of management's overall plan of
recapitalization and restructuring, the Company's previous lenders under the
Prior Credit Agreement agreed to restructure the terms of the Prior Credit
Agreement and waive past events of default pursuant to the Restructured Credit
Agreement. The Prior Credit Agreement consisted of a term loan and a revolving
credit and letter of credit facility. Amounts outstanding under the term loan
at the time of the Restructuring totaled approximately $51.5 million, while
amounts outstanding under the revolving credit facility totaled approximately
$30.6 million. Outstanding letters of credit totaled $7.0 million. In
addition, letter of credit reimbursement liabilities totaled $2.5 million with
respect to draws on previously outstanding letters of credit. The terms of the
Restructured Credit Agreement provided for the conversion of the amounts owed
pursuant to the Prior Credit Agreement into term loans (the "Term Loans") in
the amount of $84.6 million.
The Term Loans are payable (i) in twelve consecutive monthly installments of
approximately $538 each payable on the last day of each calendar month,
commencing July 31, 1994, (ii) in thirty-seven consecutive monthly installments
of approximately $1,077 each payable on the last day of each calendar month,
commencing on July 31, 1996, and (iii) in the following six installments
payable on the dates set forth and in the amounts set forth: February 28, 1994
in the amount of $2 million; August 31, 1994 in the amount of $3 million,
February 28, 1995, June 30, 1995 and September 30, 1995 in the amount of $5
million on each date; with the balance of the Term Loans due on August 20,
1998. In addition to the principal amortizations set forth above, the Term
Loans must be mandatorily prepaid upon the occurrence of certain events
including asset sales and any new equity offering. In addition, the Company is
required to apply 50% of its "excess cash flow" (as defined) to prepay the Term
Loans. The Term Loans bear interest at the rate of the base rate (generally
prime rate) plus a margin of 2.25%, so long as there is no event of default,
and at the rate of Base Rate plus 5.75% upon the occurrence of an event of
default, in each case payable monthly in arrears.
Letters of Credit
The Restructured Credit Agreement does not provide for the issuance of any new
letters of credit. Existing letters of credit issued for the benefit of the
Company (totaling $7.0 million) may be renewed or extended, and will be cash
collateralized to the extent of the lenders' defined Excess Cash Flow. In the
event of a drawing on a letter of credit, the Company must Immediately
reimburse the lenders. In the event of a refinancing of the Term Loans, the
letters of credit will terminate.
Collateral and Financial Covenants
The Term Loans issued pursuant to the Restructured Credit Agreement are secured
by substantially all of the assets of the Company subject to the first priority
lien on accounts receivable and inventories held by the lender under the
Revolving Credit Facility lender and the right of such lender to look to other
assets of the Company for any deficiency suffered in the event of liquidation.
The Restructured Credit Agreement provides for financial covenants related
to tangible net worth and interest coverage. The minimum levels set forth
in the Restructured Credit Agreement are specifically based upon the Turnaround
Plan.
Note Amendment
The Prior Credit Agreement prohibited the Company from making required
principal and Interest payments on the Warrant Note following a violation of
certain financial covenants contained In the Prior Credit Agreement.
Accordingly, the Company did not make required Interest payments and was In
default through August 19, 1993 with respect to this Warrant Note. As part of
the Restructuring, the holders of the Warrant Note agreed to restructure the
terms of the Warrant Notes whereby accrued interest at August 20, 1993 of $1.2
million was added to the principal balance bringing the outstanding principal
balance to $8.7 million. In addition, the Interest rate on the Warrant Note
was increased from 14% to 15% after August 20, 1994 and the maturity date of
the Warrant Notes was extended from March 31, 1996 to October 31, 1998.
Satisfaction
As discussed above, Terex has agreed to accept 2,251,167 shares of Common Stock
of the Company in satisfaction of $13.5 million of certain non-interest bearing
debt owing from the Company to Terex. As discussed previously, consummation of
the Satisfaction Is subject to stockholder approval. The Company has prepared
and filed a preliminary consent solicitation statement with the Securities and
Exchange Commission.
The following table sets forth the scheduled maturities of the long-term debt
outstanding at September 30, 1993 after giving effect to the Restructuring and
assuming the conversion of the Convertible Subordinated Notes:
Remainder of fiscal 1993 $ 1.2
1994 8.6
1995 25.1
1996 13.3
1997 13.4
Thereafter 34.7
$ 96.3
NOTE F - POSTRETIREMENT BENEFITS
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions" on
January 1, 1993. This statement requires accrual of postretirement benefits
(such as health care benefits) during the years an employee provides service.
The Company provides health care benefits to former salaried employees who
retired prior to December 31, 1990, and certain hourly employees covered by
bargaining unit contracts that provide such benefits. Reserves for past
service costs of employees were established in the purchase price allocation
relating to the Company's acquisition of its businesses from Fruehauf
Corporation in 1989 (the "Fruehauf Acquisition"). As a result, at the time of
adopting SFAS No. 106 the Company had an adequate reserve on its Consolidated
Balance Sheet for such benefits based upon actuarial studies and reports.
Thus, the Company did not require a one-time charge to reflect the adoption of
the new accounting pronouncement, nor does the Company have an unrecognized
transition obligation to recognize in future periods related to the adoption of
SFAS No. 106. The obligation for such benefits is reported on a present value
basis on the Company's Consolidated Balance Sheet.
Net periodic postretirement benefit expense for the nine months ended September
30, 1 993 includes the following components:
Service Cost $495
Interest Cost on projected
benefit obligation. 3,161
Amortization of unrecognized
transition obligation 0
Net periodic postretirement benefit expense
$3,656
The difference between the net periodic postretirement benefit expense on a
cash basis versus accrual basis was not material for the nine months ended
September 30, 1993 nor is it expected to be material for the year ended
December 31, 1993.
Currently, the Company's postretirement benefit obligations are not funded.
The liability of the Company, as of January 1, 1993, was as follows:
Actuarial present value of accumulated postretirement benefit obligation:
Retirees $ 37,482
Active participants 4,853
Total accumulated postretirement
benefit obligation 42,335
Less: Current portion 3,450
Accumulated postretirement benefit
obligation - noncurrent $ 38,885
Health care cost trends in the actuarial assumptions range from 2% to 14% based
on the employee group involved. These rates decrease to 0% to 7%,
respectively, over a period of 5 to 12 years, depending on the group involved.
The discount rate used in determining the accumulated postretirement benefit
obligation is 8.5%. The effect of a one percentage-point change in the health
care cost trend rates would change the accumulated postretirement benefit
obligation by approximately 5% to 10%.
NOTE G - ACCOUNTING FOR INCOME TAXES
The Company adopted SFAS No. 109, "Accounting for Income Taxes" on January 1,
1993. The new pronouncement retains the basic concepts of SFAS No. 96, but
generally simplifies its application. The adoption of this new pronouncement
did not have an impact on the Company's operating results or financial
position.
At September 30, 1993, the Company had domestic federal tax basis net operating
loss carryforwards of approximately $185 million. In accordance with the
provisions of the Internal Revenue Code, the Restructuring described in Note E
- - "Long-Term Debt" will likely result in a significant limitation on the use of
the losses In future years, The Company continues to assess the extent of such
limitations In light of the complex structure of the Restructuring. Although
applying the provisions of the Internal Revenue Code to the Restructuring will
limit the utilization of the not operating loss carryforwards, the limitation
does not currently result In the recording of a deferred tax liability.
NOTE H - CONTINGENCIES AND LITIGATION
The Company's new management team, with the assistance of new outside counsel,
has recently initiated a review of the shareholder suit and the product
liability and other cases that have arisen in the normal course of the
Company's business. As a result of this review, which is ongoing, the Company
has evaluated the possible impact of this litigation on the Company in light of
current circumstances. The Company is currently unable to determine whether
these matters, individually or in the aggregate, will have a material adverse
effect on the Company. The Company's present liquidity situation may make
settlements in one or more of these cases difficult. Existing or potential
judgments against the Company in one or more of these cases could require
expenditure of funds beyond the Company's cash resources and could, depending
upon their size, result in the violation of certain covenants contained in the
Restructured Credit Agreement and the Revolving Credit Facility. In the event
that judgments in any of these cases are rendered against the Company that
require the expenditure of funds beyond the Company's available cash resources
or result in covenant violations that are not waived or otherwise cured, such
judgments could jeopardize the Turnaround Plan and could have a material
adverse effect on the Company.
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company. Neither the delivery of this
Prospectus nor any sale hereunder shall, under any circumstances, create any
implication that the information contained herein is correct as of any time
subsequent to its date. This Prospectus does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer
or solicitation.
Page
Available Information 2
Prospectus Summary 3
Investment Considerations 6
The Company 8
Use of Proceeds 9
Market for Common Stock and Dividend Policy 10
Capitalization 11
Selected Consolidated Financial Information 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Business 27
Management 35
Principal Stockholders 39
Selling Security Holders 41
Certain Transactions 42
Description of Securities 44
Certain Federal Income Tax Considerations 49
Plan of Distribution 50
Legal Matters 51
Auditors 51
Index to Consolidated Financial Statements F-1
Until __________ __, 1994, all dealers effecting transactions in the Warrants
and Warrant Shares, whether or not participating in this offering, may be
required to deliver a Prospectus.
1,300,000 Warrants
3,900,000 Shares
of
TEREX CORPORATION
Common Stock Purchase Warrants
and
Common Stock
PROSPECTUS
, 1994
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by the Company in connection
with the offering of the Warrants and shares of Common Stock being registered.
All the amounts shown are estimates except the SEC registration fee.
Item Amount
Registration Fee - SEC $11,094.83
Warrant Agent Fees and Expenses *
Printing and Engraving Expenses *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Blue Sky Fees and Expenses *
Miscellaneous Expenses *
TOTAL $ *
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") and Article IX of
the Company's By-laws provide for the indemnification of the Company's
directors and officers in a variety of circumstances, which may include
liabilities under the Securities Act of 1933, as amended (the "Securities
Act").
Article IX of the Company's By-laws generally requires the Company to indemnify
its directors and officers against all liabilities (including judgments,
settlements, fines and penalties) and reasonable expenses incurred in
connection with the investigation, defense, settlement or appeal of any type of
action, whether instituted by a third party or a stockholder (either directly
or derivatively) and including specifically, but without limitation, actions
brought under the Securities Act and/or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided that no such indemnification will be
allowed if such director or officer was not successful in defending against any
such action and it is determined that the director or officer engaged in
misconduct which constitutes (i) a willful breach of his or her "duty of
loyalty" (as further defined therein) to the Company or its stockholders; (ii)
acts or omissions not in "good faith" (as further defined therein) or which
involve intentional misconduct or a knowing violation of law; (iii) the payment
of an illegal dividend or the authorization of an unlawful stock repurchase in
violation of Delaware law; or (iv) a transaction from which the executive
derived a material improper personal financial profit.
Finally, the Company's Certificate of Incorporation, as amended, contains a
provision which eliminates the personal liability of a director to the Company
and its stockholders for certain breaches of his or her fiduciary duty of care
as a director. This provision does not, however, eliminate or limit the
personal liability of a director (i) for any breach of such director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under the Delaware statutory provision making directors personally
liable, under a negligence standard, for unlawful dividends of unlawful stock
repurchases or redemptions, or (iv) for any transaction from which the director
derived an improper personal benefit. This provision offers persons who serve
on the Board of Directors of the Company protection against awards of monetary
damages resulting from negligent (except as indicated above) and "grossly"
negligent actions taken in the performance of their duty of care, including
grossly negligent business decisions made in connection with takeover proposals
for the Company. As a result of this provision, the ability of the Company or
a stockholder thereof to successfully prosecute an action against a director
for a breach of his duty of care has been limited. However, the provision does
not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. Although the
validity and scope of the new statute has not been tested in court, the
Securities and Exchange Commission (the "Commission") has taken the position
that the provision will have no effect on claims arising under the Federal
securities laws.
Item 15. Recent Sales of Unregistered Securities
On July 31, 1992, the Company completed the private placement of $160 million
aggregate principal amount of its 13% Senior Secured Notes due 1996 and 576,000
of its common stock appreciation rights ("CSARs") to institutional investors.
The Company also issued 82,409 CSARs to holders of its 13-1/2% Senior
Subordinated Notes due 1997 in consideration for their consent to issuance of
the Senior Secured Notes. This private placement was effected pursuant to
Section 4(2) of the Securities Act.
On December 20, 1993, the Company completed the private placement of (i) the
1,300,000 Warrants being registered hereby and (ii) 1,200,000 shares of the
Company's Series A Cumulative Redeemable Convertible Preferred Stock to 22
institutional investors for aggregate proceeds to the Company of $30.2 million.
This private placement was effected pursuant to Section 4(2) of the Securities
Act.
On December 29, 1993, the Company issued and contributed 350,000 shares of its
Common Stock to the Terex Corporation Master Retirement Plan Trust (the "Plan")
in satisfaction of certain outstanding obligations of the Company to the Plan.
This private placement was effected pursuant to Section 4(2) of the Securities
Act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
3.1 Restated Certificate of Incorporation of Terex Corporation.*
3.2 Restated Bylaws of Terex Corporation.*
4.1 Indenture dated as of June 30, 1987 regarding Terex Corporation, as
Obligor, and Northwest Engineering Company, as Guarantor, with respect to Terex
Corporation's 13-1/2% Senior Subordinated Notes due July 1, 1997 (incorporated
by reference to Exhibit 4.2 to the Form 8-K dated June 30, 1987 of Northwest
Engineering Company, Commission File No. 0-572).
4.2 First Supplemental Indenture dated as of August 24, 1988 relating to
Terex Corporation's 13-1/2% Senior Subordinated Notes due July 1, 1997
(incorporated by reference to Exhibit 4.5 to Amendment No. 1 to the Form S-2
Registration Statement of Terex Corporation, Registration No. 33-23832).
4.3 Second Supplemental Indenture dated as of July 31, 1992 relating to
Terex Corporation's 13-1/2% Senior Subordinated Notes due July 1, 1997
(incorporated by reference to Exhibit 4.28 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.4 Third Supplemental Indenture dated as of April 20, 1993 relating to
Terex Corporation's 13-1/2% Senior Subordinated Notes due July 1, 1997.*
4.5 Fourth Supplemental Indenture dated as of August 25, 1993 relating to
Terex Corporation's 13-1/2% Senior Subordinated Notes due July 1, 1997.*
4.6 Indenture dated as of July 31, 1992 between Terex Corporation, as
Obligor, and United States Trust Company of New York, as Trustee, with respect
to the 13% Senior Secured Notes due 1996 (incorporated by reference to Exhibit
4.16 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
4.7 First Supplemental Indenture dated as of November 1, 1992 relating to
the 13% Senior Secured Notes due 1996 (incorporated by reference to Exhibit
4.27 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
4.8 Second Supplemental Indenture dated as of April 20, 1993 relating to the
13% Senior Secured Notes due 1996.*
4.9 Security and Pledge Agreement dated as of July 31, 1992 between Terex
Corporation and United States Trust Company of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.38 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.10Bond and Floating Charge, dated as of July 31, 1992, executed by Terex
Corporation in favor of United States Trust Company of New York, as Collateral
Agent (incorporated by reference to Exhibit 4.18 to the Form 10-K for the year
ended December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.11Guarantee and Bond and Floating Charge, dated July 31, 1992, executed by
Terex Equipment Limited in favor of United States Trust Company of New York, as
Collateral Agent (incorporated by reference to Exhibit 4.19 to the Form 10-K
for the year ended December 31, 1992 of Terex Corporation, Commission File No.
1-10702).
4.12Bond and Floating Charge, dated as of July 31, 1992, executed by Terex
Corporation in favor of Continental Bank, N.A. (incorporated by reference to
Exhibit 4.29 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
4.13Guarantee and Bond and Floating Charge dated July 31, 1992, executed by
Terex Equipment Limited in favor of Continental Bank, N.A. (incorporated by
reference to Exhibit 4.30 to the Form 10-K for the year ended December 31, 1992
of Terex Corporation, Commission File No. 1-10702).
4.14Mortgage, Assignment of Rents and Fixture Filing dated as of July 31,
1992 from Terex Corporation in favor of United States Trust Company of New
York, as collateral agent, affecting Koehring Machinery Center, Waterloo, Iowa
(incorporated by reference to Exhibit 4.20 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.15Mortgage, Assignment of Rents and Fixture Filing dated as of July 31,
1992 from Terex Corporation in favor of United States Trust Company of New
York, as collateral agent, affecting Unit Rig, Tulsa, Oklahoma (incorporated by
reference to Exhibit 4.21 to the Form 10-K for the year ended December 31, 1992
of Terex Corporation, Commission File No. 1-10702).
4.16Mortgage, Assignment of Rents and Fixture Filing dated as of July 31,
1992 from Terex Corporation in favor of United States Trust Company of New
York, as collateral agent, affecting Unit Rig Parts Depot, Gillette, Wyoming
(incorporated by reference to Exhibit 4.22 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.17Mortgage, Assignment of Rents and Fixture Filing dated as of July 31,
1992 from Clark Material Handling Company in favor of United States Trust
Company of New York, as collateral agent, affecting Danville Plant, Danville,
Kentucky, Engineering and Training Center, Lexington, Kentucky and Lees Town
Plant, Lexington, Kentucky (incorporated by reference to Exhibit 4.23 to the
Form 10-K for the year ended December 31, 1992 of Terex Corporation, Commission
File No. 1-10702).
4.18Mortgage, Assignment of Rents and Fixture Filing dated as of July 31,
1992 from Drexel Industries, Inc. in favor of United States Trust Company of
New York, as collateral agent, affecting Drexel Plant, Horsham, Pennsylvania
(incorporated by reference to Exhibit 4.24 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.19Gesellschaft (mortgage) dated as of July 31, 1992 from Clark Equipment
GmbH in favor of United States Trust Company of New York and Continental Bank,
N.A. as collateral agents, affecting Mulheim-Ruhr, Germany (incorporated by
reference to Exhibit 4.25 to the Form 10-K for the year ended December 31, 1992
of Terex Corporation, Commission File No. 1-10702).
4.20Mortgage, Assignment of Rents and Fixture Filing dated as of July 31,
1992 from Terex Corporation in favor of United States Trust Company of New
York, as collateral agent, affecting Distribution Center, Southaven,
Mississippi (incorporated by reference to Exhibit 4.26 to the Form 10-K for the
year ended December 31, 1992 of Terex Corporation, Commission File No.
1-10702).
4.21Junior Mortgage, Assignment of Rents and Fixture Filing dated as of July
31, 1992 from Terex Corporation in favor of Continental Bank, N.A., as
collateral agent, affecting Koehring Machinery Center, Waterloo, Iowa
(incorporated by reference to Exhibit 4.31 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.22Junior Mortgage, Assignment of Rents and Fixture Filing dated as of July
31, 1992 from Terex Corporation in favor of Continental Bank, N.A., as
collateral agent, affecting Unit Rig, Tulsa, Oklahoma (incorporated by
reference to Exhibit 4.32 to the Form 10-K for the year ended December 31, 1992
of Terex Corporation, Commission File No. 1-10702).
4.23Junior Mortgage, Assignment of Rents and Fixture Filing dated as of July
31, 1992 from Terex Corporation in favor of Continental Bank, N.A., as
collateral agent, affecting Unit Rig Parts Depot, Gillette, Wyoming
(incorporated by reference to Exhibit 4.33 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.24Junior Mortgage, Assignment of Rents and Fixture Filing dated as of July
31, 1992 from Clark Material Handling Company in favor of Continental Bank,
N.A., as collateral agent, affecting Danville Plant, Danville, Kentucky,
Engineering and Training Center, Lexington, Kentucky and Lees Town Plant,
Lexington, Kentucky (incorporated by reference to Exhibit 4.34 to the Form 10-K
for the year ended December 31, 1992 of Terex Corporation, Commission File No.
1-10702).
4.25Junior Mortgage, Assignment of Rents and Fixture Filing dated as of July
31, 1992 from Drexel Industries, Inc. in favor of Continental Bank, N.A., as
collateral agent, affecting Drexel Plant, Horsham, Pennsylvania (incorporated
by reference to Exhibit 4.35 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
4.26Junior Mortgage, Assignment of Rents and Fixture Filing dated as of July
31, 1992 from Terex Corporation in favor of Continental Bank, N.A., as
collateral agent, affecting Distribution Center, Southaven, Mississippi
(incorporated by reference to Exhibit 4.36 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.27Security Agreement dated as of July 31, 1992 between Clark Material
Handling Company and United States Trust Company of New York, as collateral
agent (incorporated by reference to Exhibit 10.39 to the Form 10-K for the year
ended December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.28Security Agreement dated as of July 31, 1992 between Clark Lift of
Western Michigan, Inc. and United States Trust Company of New York, as
collateral agent (incorporated by reference to Exhibit 10.40 to the Form 10-K
for the year ended December 31, 1992 of Terex Corporation, Commission File No.
1-10702).
4.29Security Agreement dated as of July 31, 1992 between Clark Components
International, Inc. and the United States Trust Company of New York, as
collateral agent (incorporated by reference to Exhibit 10.41 to the Form 10-K
for the year ended December 31, 1992 of Terex Corporation, Commission File No.
1-10702).
4.30Security Agreement dated as of July 31, 1992 between Drexel Industries,
Inc. and United States Trust Company of New York, as collateral agent
(incorporated by reference to Exhibit 10.45 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.31Security and Pledge Agreement dated as of July 31, 1992 between Terex
Corporation and Continental Bank, N.A., as collateral agent (incorporated by
reference to Exhibit 10.42 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
4.32Security Agreement dated as of July 31, 1992 between Clark Material
Handling Company and Continental Bank, N.A., as collateral agent (incorporated
by reference to Exhibit 10.43 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
4.33Security Agreement dated as of July 31, 1992 between Drexel Industries,
Inc. and Continental Bank, N.A., as collateral agent (incorporated by reference
to Exhibit 10.44 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
4.34Security Agreement dated as of July 31, 1992 between Clark Lift of
Western Michigan, Inc. and Continental Bank, N.A., as collateral agent
(incorporated by reference to Exhibit 10.46 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.35Security Agreement dated as of July 31, 1992 between Clark Components
International, Inc. and Continental Bank, N.A., as collateral agent
(incorporated by reference to Exhibit 10.47 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
4.36First Amendment, dated as of January 1, 1993, to Security Agreement
between Clark Material Handling Company and United States Trust Company of New
York, as Collateral Agent, dated as of July 31, 1992.*
4.37First Amendment, dated as of January 1, 1993, to Security Agreement
between Clark Lift of Western Michigan, Inc. and United States Trust Company of
New York, as Collateral Agent, dated as of July 31, 1992.*
4.38First Amendment, dated as of January 1, 1993, to Security Agreement
between Clark Components International, Inc. and United States Trust Company of
New York, as Collateral Agent, dated as of July 31, 1992.*
4.39First Amendment, dated as of January 1, 1993, to Security Agreement
between Drexel Industries, Inc. and United States Trust Company of New York, as
Collateral Agent, dated as of July 31, 1992.*
4.40Warrant Agreement dated as of December 20, 1993 between Terex
Corporation and Mellon Securities Trust Company, as Warrant Agent.*
4.41 Form of Warrant.*
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman as to legality of
securities being registered.**
10.1 Terex Corporation Incentive Stock Option Plan, as amended (incorporated
by reference to Exhibit 4.1 to the Form S-8 Registration Statement of Terex
Corporation, Registration No. 33-21483).
10.2 Purchase Agreement dated June 30, 1987, with respect to Terex
Corporation's 13-1/2% Senior Subordinated Notes due July 1, 1997 between Terex
Corporation and the original purchasers of the Notes (incorporated by reference
to Exhibit 4.2 to the Form S-4 Registration Statement of Terex Corporation,
Registration No. 33-20737).
10.3 Purchase Agreement dated July 31, 1992 between Terex Corporation and the
original purchasers of the Notes with respect to Terex Corporation's 13% Senior
Secured Notes due 1996 (incorporated by reference to Exhibit 10.35 to the Form
10-K for the year ended December 31, 1992 of Terex Corporation, Commission file
No. 1-10702).
10.4 Debt Registration Rights Agreement dated as of July 31, 1992 between
Terex Corporation and the purchasers who are signatories thereto (incorporated
by reference to Exhibit 4.17 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
10.5 Common Stock Appreciation Rights Agreement dated as of July 31, 1992
between Terex Corporation and United States Trust Company of New York, as SAR
Agent (incorporated by reference to Exhibit 10.36 to the Form 10-K for the year
ended December 31, 1992 of Terex Corporation, Commission file No. 1-10702).
10.6 SAR Registration Rights Agreement dated as of July 31, 1992 between
Terex Corporation and the purchasers who are signatories thereto (incorporated
by reference to Exhibit 10.37 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission file No. 1-10702).
10.7 Stock Purchase Agreement dated as of May 27, 1992 between Clark
Equipment Company and Terex Corporation (incorporated by reference to Exhibit
10.27 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
10.8 First Amendment to Stock Purchase Agreement dated as of July 31, 1992
between Terex Corporation and Clark Equipment Company (incorporated by
reference to Exhibit 10.28 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
10.9 Promissory Note dated as of July 31, 1992 executed by Terex Corporation
in favor of Clark Equipment Company (incorporated by reference to Exhibit 10.29
to the Form 10-K for the year ended December 31, 1992 of Terex Corporation,
Commission File No. 1-10702).
10.10Tax Agreement dated as of July 31, 1992 between Terex Corporation in
favor of Clark Equipment Company (incorporated by reference to Exhibit 10.30 to
the Form 10-K for the year ended December 31, 1992 of Terex Corporation,
Commission File No. 1-10702).
10.11 Trademark Assignment Agreement dated as of July 31, 1992
between Clark Equipment Company and Clark Material Handling Company
(incorporated by reference to Exhibit 10.31 to the Form 10-K for the year ended
December 31, 1992 of Terex Corporation, Commission File No. 1-10702).
10.12Trademark Assignment dated as of July 31, 1992 executed by Clark
Equipment Company in favor of Clark Material Handling Company (incorporated by
reference to Exhibit 10.32 to the Form 10-K for the year ended December 31,
1992 of Terex Corporation, Commission File No. 1-10702).
10.13License Agreement dated as of July 31, 1992 between Clark Equipment
Company and Clark Material Handling Company (incorporated by reference to
Exhibit 10.33 to the Form 10-K for the year ended December 31, 1992 of Terex
Corporation, Commission File No. 1-10702).
10.14Mortgage dated as of July 31, 1992 by Clark Equipment GmbH for the
benefit of Clark Equipment Company (incorporated by reference to Exhibit 10.34
to the Form 10-K for the year ended December 31, 1992 of Terex Corporation,
Commission File No. 1-10702).
10.15Loan and Security Agreement dated as of May 20, 1993 between Foothill
Capital Corporation and Terex Corporation (incorporated by reference to Exhibit
10.1 to the Form S-3 Registration Statement of Terex Corporation Registration
No. 33-56924).
10.16Loan and Security Agreement dated as of May 20, 1993 between Foothill
Capital Corporation and Clark Material Handling Company (incorporated by
reference to Exhibit 10.2 to the Form S-3 Registration Statement of Terex
Corporation, Registration No. 33-56924).
10.17Continuing Guaranty dated as of May 20, 1993 of Terex Corporation
(incorporated by reference to Exhibit 10.3 to the Form S-3 Registration
Statement of Terex Corporation, Registration No. 33-56924).
10.18Continuing Guaranty dated as of May 20, 1993 of Clark Material Handling
Company (incorporated by reference to Exhibit 10.4 to the Form S-3 Registration
Statement of Terex Corporation, Registration No. 33-56924).
10.19Amendment Number One dated as of August 24, 1993 to Loan and Security
Agreement dated as of May 20, 1993 between Foothill Capital Corporation and
Terex Corporation.*
10.20Amendment Number One dated as of August 24, 1993 to Loan and Security
Agreement dated as of May 20, 1993 between Foothill Capital Corporation and
Clark Material Handling Company.*
10.21Termination, General Release and Waiver Agreement, dated as of June 29,
1993, between Clark Material Handling Company and Gary D. Bello.*
10.22Form of Purchase Agreement dated as of December 20, 1993 between Terex
Corporation and the purchasers of Warrants and shares of Series A Cumulative
Redeemable Convertible Preferred Stock of Terex Corporation.*
10.23Registration Rights Agreement dated as of December 20, 1993 between
Terex Corporation and the purchasers of Warrants.*
10.24Registration Rights Agreement dated as of December 20, 1993 between
Terex, Corporation and the purchasers of shares of Series A Cumulative
Redeemable Convertible Preferred Stock of Terex Corporation.*
10.25Agreement dated July 1, 1987, between KCS Industries, Inc. and Northwest
Engineering Company (incorporated by reference to Exhibit 10.2 to the Form S-4
Registration Statement of Terex Corporation, Registration No. 33-20737).
10.26Management Agreement Amendment, dated January 1, 1993, between KCS
Industries, Inc. and Terex Corporation.*
10.27Management Agreement Termination Agreement, dated January 1, 1994,
between KCS Industries, L.P. and Terex Corporation.*
10.28Credit Facility, dated December 23, 1993, among Terex Equipment Limited,
Terex Corporation and Standard Chartered Bank.*
11.1 Computation of per share earnings.*
12.1 Computation of ratio of earnings to fixed charges.*
21.1 Subsidiaries of Terex Corporation.*
23.1 Consent of Robinson Silverman Pearce Aronsohn & Berman (included as part
of Exhibit 5.1).**
23.2 Independent Accountants' Consent of Price Waterhouse - Milwaukee,
Wisconsin.**
23.3 Independent Accountants' Consent of Deloitte & Touche - Detroit,
Michigan.**
23.4 Independent Accountants' Consent of Price Waterhouse - South Bend,
Indiana.**
23.5 Independent Accountants' Consent of Price Waterhouse - Milwaukee,
Wisconsin.**
23.6 Independent Accountants' Consent of Deloitte & Touche - Detroit,
Michigan.**
24.1 Power of Attorney (included on signature pages).*
* Filed herewith.
** To be filed by amendment.
RESTATED CERTIFICATE OF INCORPORATION
OF
TEREX CORPORATION
TEREX CORPORATION, a corporation duly organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
First: That the name of the corporation is Terex Corporation, and
that the name under which the corporation was originally incorporated was Terex
U.S.A., Inc.
Second: That the original certificate of incorporation of the
corporation was filed by the Secretary of State of the State of Delaware on the
thirtieth day of October, 1986.
Third: That this Restated Certificate of Incorporation only restates
and integrates and does not further amend the provisions of the corporation's
Certificate of Incorporation as heretofore amended or supplemented, and there
is no discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
Fourth: That this Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Section 245(b) of the General
Corporation Law of the State of Delaware by the board of directors of said
Terex Corporation without a vote of the stockholders of the corporation.
Fifth: That the text of the Certificate of Incorporation of said
Terex Corporation, as amended or supplemented heretofore, is hereby restated to
read in full as follows:
ARTICLE I
The name of the corporation (hereinafter called the "Corporation") is
Terex Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its initial registered agent at such address is The Corporation
Trust Company. The Corporation may change its registered office and/or its
registered agent in the State of Delaware at any time or from time to time in
the manner provided under the General Corporation Law of Delaware.
ARTICLE III
The purpose for which the Corporation is organized is to carry on and
engage in any lawful activity for which corporations may be organized under the
General Corporation Law of Delaware.
ARTICLE IV
(a) The aggregate number of shares which the corporation shall have the
authority to issue is 40,000,000, consisting of (i) 30,000,000 shares
designated as Common Stock, par value $.01 per share ("Common Stock"), and (ii)
10,000,000 shares designated as Preferred Stock, par value $.01 per share
("Preferred Stock").
(b) Common Stock. The terms of the Common Stock shall be as follows:
(i) Dividends. Holders of Common Stock will be entitled to receive
such dividends as may be declared by the Board of Directors.
(ii) Distribution of Assets. In the event of the voluntary or
involuntary liquidation, distribution or winding up of the corporation, subject
to the rights of the holders of Preferred Stock, holders of Common Stock will
be entitled to receive pro rata all of the remaining assets of the corporation
available for distribution to its stockholders.
(iii) Voting Rights. The holders of Common Stock shall have the
general right to vote for all purposes, including the election of directors, as
provided by law. Each holder of Common Stock shall be entitled to one vote for
each share thereof held.
(c) Preferred Stock. The Board of Directors of the corporation is
authorized, subject to any limitations prescribed by law, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish, and, to the fullest extent permitted by law, to increase or
decrease, from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and if no shares of stock of any such series has been issued, to amend the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such
holders is required pursuant to the certificate or certificates establishing
the series of Preferred Stock.
(d) Series A Preferred Stock. Pursuant to the authority conferred by
this Article IV, the Series A Cumulative Redeemable Convertible Preferred Stock
(the "Series A Preferred Stock") has been designated, with such series
consisting of 1,200,000 shares, par value $.01 per share, with the powers,
preferences and relative, participating, optional or other rights, and
qualifications, limitations or restrictions thereof, as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes hereof, the
meanings herein specified.
"Accretion Termination Date" shall mean the Dividend Payment Date
immediately preceding the first Dividend Payment Date on which the Corporation
is permitted to declare and pay cash dividends on the Series A Preferred Stock
under the Loan Agreements.
"Applicable Rate" shall mean the sum of the Base Rate and the
Non-Liquidity Rate.
"Base Rate" shall mean (a) 13% per annum from the Issue Date through the
fifth anniversary of the Issue Date and (b) 18% per annum thereafter.
"Closing Price" on any day shall mean the per share closing sale price of
the Common Stock, regular way, on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices, regular
way, in each case on the principal national securities exchange or quotation
system on which the Common Stock is quoted or listed or admitted to trading or,
if not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and asked prices
of the Common Stock on the over-the-counter market on such day as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
nationally recognized New York Stock Exchange member firm selected from time to
time by the Board of Directors of the Corporation in good faith for that
purpose.
"Common Stock" shall mean all shares now or hereafter authorized of any
class of common stock of the Corporation and any other stock of the
Corporation, howsoever designated, authorized after the Issue Date, which has
the right (subject always to prior rights of any class or series of preferred
stock) to participate in the distribution of the assets and earnings of the
Corporation without limit as to per share amount.
"Conversion Date" shall have the meaning set forth in paragraph 7(b)
below.
"Conversion Price" shall initially mean $11.11 unless and until such
Conversion Price may be adjusted in accordance with the provisions of paragraph
7(d) below, and thereafter shall mean the Conversion Price from time to time as
so adjusted. All adjustments in the Conversion Price shall be rounded to the
nearest whole cent.
"Current Market Price" per share of Common Stock on any date shall mean
the average of the daily Closing Prices with respect to the Common Stock for
the thirty consecutive trading days ending on such date (or, if such date is
not a trading day, on the trading day immediately preceding such date);
provided, however, that if there shall have occurred prior to such date any
event described in paragraph 7(d) that shall have become effective at any time
during such thirty trading day period, the Closing Price shall be adjusted, for
purposes of calculating such average, to ensure that the effect of such event
on the market price of the Common Stock shall, as nearly as possible, be
eliminated in order that the distortion in the calculation of the Current
Market Price may be minimized. Notwithstanding the foregoing, if the Common
Stock is not publicly traded, the Current Market Price shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors of the Corporation.
"Determination Date" shall mean with respect to any dividend or other
distribution, the date fixed for the determination of the holders of shares of
Common Stock entitled to receive such dividend or distribution, or if a
dividend or distribution is paid or made without fixing such a date, the date
of such dividend or distribution.
"Dividend Payment Date" shall mean March 31, June 30, September 30 and
December 31 of each year.
"Dividend Period" shall mean the quarterly period between consecutive
Dividend Payment Dates.
"Effectiveness Date" shall mean the 150th day following the Issue Date.
"Effectiveness Period" shall mean the period during which a registration
statement relating to the shares of Series A Preferred Stock is required to be
maintained effective pursuant to the Registration Rights Agreement.
"Event" shall be deemed to occur if (i) the Shelf Registration Statement
has not been filed on or prior to the Filing Date; (ii) the Shelf Registration
Statement has not become effective on or prior to the Effectiveness Date; or
(iii) prior to the end of the Effectiveness Period, the SEC shall have issued a
stop order suspending the effectiveness of the Shelf Registration Statement.
"Event Day" shall mean any day if on or prior to such day one or more
Events shall have occurred with respect to which there has not yet been an
Event Termination.
"Event Termination" shall be deemed to occur, with respect to any Event,
if the Shelf Registration Statement is (a) filed, in the case of an Event
described in clause (i) of the definition thereof, (b) declared effective, in
the case of an Event described in clause (ii) of the definition thereof, or (c)
no longer subject to an order suspending the effectiveness thereof, in the case
of an Event described in clause (iii) of the definition thereof.
"Filing Date" shall mean the 60th day following the Issue Date.
"Final Redemption Date" shall have the meaning set forth in subparagraph
5(f) below.
"Issue Date" shall mean the date that shares of Series A Preferred Stock
are first issued by the Corporation.
"Junior Stock" shall mean the Common Stock and, for purposes of paragraphs
3 and 6 below, any other class or series of capital stock of the Corporation
issued after the Issue Date not entitled to receive any dividends in any
Dividend Period unless all dividends required to have been paid or declared and
set apart for payment on the Series A Preferred Stock shall have been paid and,
for purposes of paragraphs 4 and 6 below, any class or series of capital stock
of the Corporation issued after the Issue Date not entitled to receive any
assets upon any Liquidation until the Series A Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
Liquidation.
"Liquidation" shall mean the voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
"Liquidation Preference" per share of Series A Preferred Stock shall mean
$25.00 plus any accretion thereon pursuant to paragraph 2 below.
"Loan Agreements" means (i) the Indenture, dated as of July 31, 1992,
among the Corporation, certain of its subsidiaries and United States Trust
Company of New York, as trustee, (ii) the Indenture, dated as of June 30, 1987,
between the Corporation and Continental Bank, National Association (formerly
Continental Illinois National Bank and Trust Company of Chicago), as trustee,
(iii) the Loan and Security Agreement, dated as of May 20, 1993, between
Foothill Capital Corporation and the Corporation, and (iv) the Loan and
Security Agreement, dated as of May 20, 1993, between Foothill Capital
Corporation and Clark Material Handling Company, in each case as amended and in
effect on the Issue Date.
"Non-Liquidity Rate" shall mean (a) 0% on any day other than an Event Day,
(b) 0.25% per annum on any Event Day on or prior to the 180th day following the
Issue Date and (c) 0.50% per annum on any Event Day after the 180th day
following the Issue Date.
"Normal Cash Dividend" shall mean any cash dividend or cash distribution
payable out of earned surplus of the Corporation; provided, that the per share
amount of such dividend or distribution, together with the aggregate per share
amount of all other cash dividends and cash distributions declared or paid
during the one year period ending on the date such dividend is declared (the
"Declaration Date") does not exceed 4% of the Current Market Price per share of
Common Stock on the trading day immediately prior to the Declaration Date.
"Parity Stock" shall mean, for purposes of paragraphs 3 and 6 below, any
other class or series of capital stock of the Corporation issued after the
Issue Date entitled to receive payment of dividends on a parity with the Series
A Preferred Stock and, for purposes of paragraphs 4 and 6 below, any other
class or series of capital stock of the Corporation issued after the Issue Date
entitled to receive assets upon any Liquidation on a parity with the Series A
Preferred Stock.
"Record Date" shall mean, with respect to the dividend payable on March
31, June 30, September 30 and December 31, respectively, of each year, the
preceding March 15, June 15, September 15 and December 15, or such other record
date designated by the Board of Directors of the Corporation with respect to
the dividend payable on such respective Dividend Payment Date.
"Redemption Agent" shall have the meaning set forth in subparagraph 5(e)
below.
"Redemption Date" shall have the meaning set forth in subparagraph 5(d)
below.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of the Issue Date, relating to the registration of the
Series A Preferred Stock.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Senior Stock" shall mean, for purposes of paragraphs 3 and 6 below, any
class or series of capital stock of the Corporation issued after the Issue Date
ranking senior to the Series A Preferred Stock in respect of the right to
receive dividends, and, for purposes of paragraphs 4 and 6 below, any class or
series of capital stock of the Corporation issued after the Issue Date ranking
senior to the Series A Preferred Stock in respect of the right to receive
assets upon any Liquidation.
"Shelf Registration Statement" shall mean the registration statement of
the Company relating to the shares of Series A Preferred Stock and the Common
Stock issuable upon the conversion thereof that is required to be filed
pursuant to the Registration Rights Agreement.
"Warrants" shall mean the Warrants exercisable into shares of Common Stock
that were issued on the Issue Date.
2. Liquidation Preference. On the Issue Date the Liquidation Preference
of each share of Series A Preferred Stock shall equal $25.00. During the
period commencing on the Issue Date and ending on the Accretion Termination
Date, the Liquidation Preference will accrete and accrue daily, at the
Applicable Rate. Such accretion shall be computed on the basis of a 360-day
year and shall compound quarterly on each Dividend Payment Date.
3. Dividends.
(a) Subject to the prior preferences and other rights of any Senior
Stock, from and after the Accretion Termination Date, the holders of Series A
Preferred Stock shall be entitled to receive, out of funds legally available
for that purpose, cash dividends that shall accrue from the Accretion
Termination Date at the Applicable Rate. Such dividends shall be cumulative
and payable in cash, quarterly, in arrears, when and as declared by the Board
of Directors, on each Dividend Payment Date commencing on the first Dividend
Payment Date following the Accretion Termination Date. Each such dividend
shall be paid to the holders of record of the Series A Preferred Stock as their
names appear on the share register of the Corporation on the corresponding
Record Date. The holder of a share of Series A Preferred Stock at the close of
business on a Record Date shall be entitled to receive the dividend payable
thereon on the corresponding Dividend Payment Date notwithstanding the
conversion thereof during the period between such Record Date and the
corresponding Dividend Payment Date. Dividends on account of arrears for any
past Dividend Periods may be declared and paid at any time, without reference
to any Dividend Payment Date, to holders of record on such date, not exceeding
50 days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(b) If full cash dividends are not paid or made available to the
holders of all outstanding shares of Series A Preferred Stock and of any Parity
Stock, and funds available shall be insufficient to permit payment in full in
cash to all such holders of the preferential amounts to which they are then
entitled, the entire amount available for payment of cash dividends shall be
distributed among the holders of the Series A Preferred Stock and of any Parity
Stock, ratably in proportion to the full amount to which they would otherwise
be respectively entitled, and any remainder not paid in cash to the holders of
the Series A Preferred Stock shall cumulate as provided in subparagraph 3(c)
below.
(c) If, on any Dividend Payment Date, the holders of the Series A
Preferred Stock shall not have received the full dividends provided for in the
other provisions of this paragraph 3, then such dividends shall cumulate,
whether or not earned or declared, with additional dividends thereon for each
succeeding full Dividend Period during which such dividends shall remain
unpaid. Unpaid dividends for any period less than a full Dividend Period shall
cumulate on a day-to-day basis and shall be computed on the basis of a 360-day
year.
(d) So long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not declare or pay on any Junior Stock any
dividend whatsoever, whether in cash, property or otherwise (other than
dividends payable in shares of the class or series upon which such dividends
are declared or paid), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased or redeemed by the
Corporation or any subsidiary of the Company, nor shall any monies be paid or
made available for a sinking fund for the purchase or redemption of any Junior
Stock; provided that from and after the Accretion Termination Date, the
Corporation may declare and pay cash dividends on Junior Stock so long as (i)
all dividends to which the holders of Series A Preferred Stock shall have been
entitled for all previous Dividend Periods shall have been declared and paid
and (ii) on or prior to the later of (x) the third year anniversary of the
Issue Date and (y) the one year anniversary of the Accretion Termination Date,
the Company will not pay dividends on Common Stock in excess of the Normal Cash
Dividend.
4. Distributions Upon Liquidation, Dissolution or Winding Up. In the
event of any Liquidation, subject to the prior preferences and other rights of
any Senior Stock, but before any distribution or payment shall be made to the
holders of Junior Stock, the holders of the Series A Preferred Stock shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its stockholders, the Liquidation Preference of all outstanding
shares of Series A Preferred Stock as of the date of such Liquidation, plus all
accrued and unpaid dividends thereon to such date, in cash. If such payment
shall have been made in full to the holders of the Series A Preferred Stock,
and if payment shall have been made in full to the holders of any Senior Stock
and Parity Stock of all amounts to which such holders shall be entitled, the
remaining assets and funds of the Corporation shall be distributed among the
holders of Junior Stock, according to their respective shares and priorities.
If, upon any such Liquidation, the net assets of the Corporation distributable
among the holders of all outstanding shares of the Series A Preferred Stock and
of any Parity Stock shall be insufficient to permit the payment in full to such
holders of the preferential amounts to which they are entitled, then the entire
net assets of the Corporation remaining after the distributions to holders of
any Senior Stock of the full amounts to which they may be entitled shall be
distributed among the holders of the Series A Preferred Stock and of any Parity
Stock ratably in proportion to the full amounts to which they would otherwise
be respectively entitled. Neither the consolidation or merger of the
Corporation into or with another corporation or corporations, nor the sale of
all or substantially all of the assets of the Corporation to another
corporation or corporations, shall be deemed a Liquidation within the meaning
of this paragraph 4.
5. Redemption by the Corporation.
(a) Except as set forth in paragraph 5(b) below, the Series A
Preferred Stock shall not be redeemed in whole or in part prior to December 31,
1994. On and after December 31, 1994, the Series A Preferred Stock may be
redeemed by the Corporation in cash at any time in whole or (subject to the
last sentence of this paragraph 5(a)), from time to time, in part, at the
option of the Corporation, at a per share redemption price equal to the
Liquidation Preference per share on the date of redemption plus all accrued but
unpaid dividends thereon to and including the date of redemption. If less than
all of the outstanding shares of Series A Preferred Stock are to be redeemed,
such shares shall be redeemed pro rata or by lot as determined by the Board of
Directors in its sole discretion. The Corporation shall not redeem less than
all of the outstanding shares of Series A Preferred Stock pursuant to this
paragraph 5(a) at any time unless all cumulative dividends on the Series A
Preferred Stock for all previous quarterly Dividend Periods have been paid or
declared and funds therefor set apart for payment.
(b) The Series A Preferred Stock may be redeemed prior to December
31, 1994 in whole, but not in part, at a per share redemption price equal to
the Liquidation Preference per share on the date of redemption plus all accrued
but unpaid dividends thereon to and including the date of redemption; provided,
that concurrently with such redemption the Corporation redeems all Warrants
then outstanding.
(c) The Corporation shall redeem all then outstanding shares of
Series A Preferred Stock on or prior to December 31, 2000 at a per share
redemption price equal to the Liquidation Preference per share on the date of
redemption plus all accrued but unpaid dividends thereon to and including the
date of redemption.
(d) Notice of every proposed redemption of Series A Preferred Stock
shall be sent by or on behalf of the Corporation, by first class mail, postage
prepaid, to the holders of record of the shares of Series A Preferred Stock so
to be redeemed at their respective addresses as they shall appear on the
records of the Corporation, not less than thirty (30) days nor more than sixty
(60) days prior to the date fixed for redemption (the "Redemption Date") (i)
notifying such holders of the election or obligation of the Corporation to
redeem such shares of Series A Preferred Stock and of the Redemption Date, (ii)
stating the place or places at which the shares of Series A Preferred Stock
called for redemption shall, upon presentation and surrender of the
certificates evidencing such shares of Series A Preferred Stock, be redeemed,
and the redemption price therefor, and (iii) stating the name and address of
any Redemption Agent selected by the Corporation in accordance with paragraph
5(e) below, and the name and address of the Corporation's transfer agent for
the Series A Preferred Stock.
(e) The Corporation may not act as the redemption agent to redeem
the Series A Preferred Stock. The Corporation shall appoint as its agent for
such purpose a bank or trust company in good standing, organized under the laws
of the United States of America or any jurisdiction thereof, and having
capital, surplus and undivided profits aggregating at least Fifty Million
Dollars ($50,000,000), which agent may be the Corporation's transfer agent for
the Series A Preferred Stock, and may appoint any one or more additional such
agents which shall in each case be a bank or trust company in good standing
organized under the laws of the United States of America or of any jurisdiction
thereof, and having capital, surplus and undivided profits aggregating at least
Fifty Million Dollars ($50,000,000). Each such bank or trust company is
hereinafter referred to as the "Redemption Agent." Following such appointment
and prior to any redemption, the Corporation shall deliver to the Redemption
Agent irrevocable written instructions authorizing the Redemption Agent, on
behalf and at the expense of the Corporation, to cause such notice of
redemption to be duly mailed as herein provided as soon as practicable after
receipt of such irrevocable instructions and in accordance with the above
provisions. All funds necessary for the redemption shall be deposited with the
Redemption Agent in trust at least one business day prior to the Redemption
Date, for the pro rata benefit of the holders of the shares of Series A
Preferred Stock so called for redemption, so as to be and continue to be
available therefor.
(f) If notice of redemption shall have been given as hereinbefore
provided, and the Corporation shall not default in the payment of the
applicable redemption price, then each holder of shares of Series A Preferred
Stock called for redemption shall be entitled to all preferences and relative
and other rights accorded to such shares of Series A Preferred Stock until and
including the Redemption Date. If the Corporation shall default in making
payment or delivery as aforesaid on the Redemption Date, then each holder of
the shares called for redemption shall be entitled to all preferences and
relative and other rights accorded to such shares of Series A Preferred Stock
until and including the date (the "Final Redemption Date") when the Corporation
makes payment or delivery as aforesaid to the holders of the Series A Preferred
Stock. From and after the Redemption Date or, if the Corporation shall default
in making payment or delivery as aforesaid, the Final Redemption Date, the
shares of Series A Preferred Stock called for redemption shall no longer be
deemed to be outstanding, and all rights of the holders of such shares shall
cease and terminate, except the right of the holders of such shares, upon
surrender of certificates therefor, to receive amounts to be paid hereunder.
The deposit of monies in trust with the Redemption Agent shall be irrevocable
except that the Corporation shall be entitled to receive from the Redemption
Agent the interest or other earnings, if any, earned on any monies so deposited
in trust, and the holders of any shares of Series A Preferred Stock redeemed
shall have no claim to such interest or other earnings, and any balance of
monies so deposited by the Corporation and unclaimed by the holders of the
Series A Preferred Stock entitled thereto at the expiration of one (1) year
from the Redemption Date (or the Final Redemption Date, as applicable) shall be
repaid, together with any interest or other earnings thereon, to the
Corporation, and after any such repayment, the holders of the shares of Series
A Preferred Stock entitled to the funds so repaid to the Corporation shall look
only to the Corporation for such payment, without interest.
6. Voting Rights.
(a) The holders of the issued and outstanding shares of Series A
Preferred Stock shall have no voting rights except as set forth in this
paragraph 6 or as otherwise required by law.
(b) In addition to any other rights provided by law, so long as any
Series A Preferred Stock is outstanding, the Corporation, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the then outstanding shares of Series A Preferred Stock,
voting separately as a class, will not:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation or By-laws if such action would
alter adversely or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of, any Series A Preferred Stock, or
increase or decrease the number of shares of Series A Preferred Stock
authorized hereby;
(ii) authorize or issue shares of any class or series of Senior
Stock (or, prior to the date designated as the Warrant Ratio Determination Date
pursuant to the terms of the Warrants, any Parity Stock);
(iii) reclassify any class or series of any Junior Stock into
Parity Stock or Senior Stock or reclassify any series of Parity Stock into
Senior Stock;
(iv) authorize, enter into, or consummate any transaction that
would constitute a deemed dividend to holders of the Series A Preferred Stock
under United States Federal tax laws (other than any deemed dividend by reason
of the operation of paragraph 3 above); or
(v) consolidate with or merge with or into another corporation,
other than in a transaction in which the Corporation is the surviving
corporation.
(c) From and after the Accretion Termination Date, (i) if and
whenever the Corporation shall have failed to declare and pay in cash the full
amount of dividends payable on the Series A Preferred Stock on any two (2)
Dividend Payment Dates, then (subject to the provisions of the next paragraph)
the holders of the Series A Preferred Stock, voting separately as a class,
shall be entitled at the next annual meeting of the stockholders of the
Corporation or at any special meeting to elect one (1) director, and (ii) if
and whenever the Corporation shall have failed to declare and pay in cash the
full amount of dividends payable on the Series A Preferred Stock on any four
(4) Dividend Payment Dates, then (subject to the provisions of the next
paragraph) the holders of the Series A Preferred Stock, voting separately as a
class, shall be entitled at the next annual meeting of the stockholders of the
Corporation or at any special meeting to elect two (2) directors. Upon
election, such directors shall become additional directors of the Corporation,
and the authorized number of directors of the Corporation shall thereupon be
automatically increased by such number of directors.
Such right of the holders of Series A Preferred Stock to elect
directors may be exercised until all dividends in default on the Series A
Preferred Stock shall have been paid in full, and dividends for the current
Dividend Period declared and funds therefor set apart or paid, and when so paid
and set apart or paid, the right of the holders of Series A Preferred Stock to
elect such number of directors shall cease, the term of such directors shall
thereupon terminate, and the authorized number of directors of the Corporation
shall thereupon return to the number of authorized directors otherwise in
effect, but subject always to the same provisions for the vesting of such
special voting rights in the case of any such future dividend default or
defaults. The fact that dividends have been paid and set apart as required by
the preceding sentence shall be evidenced by a certificate executed by the
Chairman of the Board or President and the chief financial or accounting
officer of the Corporation and delivered to the Board of Directors. The
directors so elected by holders of Series A Preferred Stock shall serve until
the certificate described in the preceding sentence shall have been delivered
to the Board of Directors or until their respective successors shall be elected
or appointed and qualify.
At any time when such special voting rights have been so vested in the
holders of the Series A Preferred Stock, the Secretary of the Corporation may,
and, upon the written request of the holders of record of 10% or more of the
number of shares of the Series A Preferred Stock then outstanding addressed to
such Secretary at the principal office of the Corporation, shall, call a
special meeting of the holders of the Series A Preferred Stock for the election
of the directors to be elected by them as hereinabove provided, to be held in
the case of such written request within forty (40) days after delivery of such
request, and in either case to be held at the place and upon the notice
provided by law and in the Corporation's By-Laws for the holding of meetings of
stockholders.
7. Conversion Rights: The Series A Preferred Stock shall be convertible
into Common Stock as follows:
(a) Conversion. Subject to and upon compliance with the provisions
of this paragraph 7, each holder of shares of Series A Preferred Stock shall
have the right, at such holder's option, at any time or from time to time, to
convert any of such shares of Series A Preferred Stock into fully paid and
nonassessable shares of Common Stock upon the terms hereinafter set forth. In
case any share of Series A Preferred Stock is called for redemption, such right
of conversion shall terminate at the close of business on the day prior to the
Redemption Date or, if the Corporation shall default in the payment of the
Redemption Price, at the close of business on the day prior to the Final
Redemption Date. Each share of Series A Preferred Stock shall be converted
into a number of shares of Common Stock determined by dividing (i) $25.00 by
(ii) the Conversion Price in effect on the Conversion Date.
(b) Mechanics of Conversion. The holder of any shares of Series A
Preferred Stock may exercise the conversion right specified in paragraph 7(a)
above by surrendering to the Corporation or any transfer agent for the Series A
Preferred Stock of the Corporation the certificate or certificates for the
shares of Series A Preferred Stock so to be converted, accompanied by written
notice specifying the number of shares of Series A Preferred Stock so to be
converted. Conversion shall be deemed to have been effected on the date when
delivery of notice of an election to convert and certificates for shares of
Series A Preferred Stock is made and such date is referred to herein as the
"Conversion Date." Subject to the provisions of paragraph 7(d)(ix) below, as
promptly as practicable (and in any event, within five (5) trading days)
thereafter, the Corporation shall issue and deliver to or upon the written
order of such holder a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash
with respect to any fractional interest in a share of Common Stock as provided
in paragraph 7(c) below. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become a
holder of record of such Common Stock on the applicable Conversion Date. Upon
conversion of only a portion of the number of shares of Series A Preferred
Stock covered by a certificate representing shares of Series A Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to or upon
the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Series A Preferred Stock representing the unconverted
portion of the certificate so surrendered.
(c) Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series A Preferred Stock.
If more than one share of Series A Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series A Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock that would otherwise be
issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to that fractional interest of the Current Market Price on
the Conversion Date.
(d) Conversion Price Adjustments. The Conversion Price shall be
subject to adjustment from time to time as follows:
(i) Common Stock Dividends. If the Corporation shall fix a
Determination Date with respect to the payment or making of a dividend or other
distribution on its Common Stock exclusively in Common Stock, the Conversion
Price in effect as of the opening of business of the day following the
Determination Date shall be reduced by multiplying such Conversion Price by a
fraction (A) the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on the Determination Date and (B)
the denominator of which shall be the sum of such number of shares and the
total number of shares constituting such dividend or other distribution. If
such dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price that would then be in effect
if such Determination Date had not been fixed.
(ii) Rights. If the Corporation shall fix a Determination Date
with respect to the making of a dividend or other distribution on its Common
Stock consisting exclusively of rights or warrants entitling the holders
thereof to subscribe for or purchase, during a period not exceeding 45 days
from the date of such dividend or other distribution, shares of Common Stock at
a price per share less than the Current Market Price per share of the Common
Stock on the Determination Date, the Conversion Price in effect as of the
opening of business on the day following the Determination Date shall be
reduced by multiplying such Conversion Price by a fraction (A) the numerator of
which shall be the sum of (x) the number of shares of Common Stock outstanding
at the close of business on the Determination Date plus (y) the number of
shares of Common Stock that the aggregate maximum offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such Current Market Price and (B) the denominator of which shall be
the sum of (x) the number of shares of Common Stock outstanding at the close of
business on the Determination Date plus (y) the number of shares of Common
Stock so offered for subscription or purchase. To the extent such rights or
warrants expire and, as a result, shares of Common Stock issuable upon exercise
thereof will not be delivered, the Conversion Price shall be readjusted to the
Conversion Price that would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually issued upon exercise thereof. If
such rights or warrants are not so issued, the Conversion Price shall again be
adjusted to be the Conversion Price that would then be in effect if such
Determination Date had not been fixed.
(iii) Stock-Splits, etc. If outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common Stock or combined
into a smaller number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision or combination becomes effective shall be proportionally reduced or
increased, respectively, effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(iv) Other Distributions. If the Corporation shall fix a
Determination Date with respect to the making of a dividend or other
distribution on its Common Stock (including any such dividend or distribution
made in connection with a consolidation or merger in which the Corporation is
the continuing corporation, but excluding a dividend or distribution (A)
referred to in paragraph 7(d)(i) or (ii) above, or (B) in connection with a
Liquidation) consisting of securities other than Common Stock, evidences of its
indebtedness, or assets (excluding Normal Cash Dividends, but including all
other cash dividends and distributions) (any of the foregoing being hereinafter
referred to as "Assets"), then, in each such case the Conversion Price in
effect as of the opening of business on the day following the Determination
Date shall be reduced by multiplying such Conversion Price by a fraction (x)
the numerator of which shall be the Current Market Price per share of the
Common Stock on the Determination Date less the fair market value (as
determined in the case of Assets other than cash, by a nationally recognized
independent investment banking or appraisal firm selected by the Board of
Directors of the Corporation) on the Determination Date of the portion of the
Assets so distributed applicable to one share of Common Stock and (y) the
denominator of which shall be such Current Market Price per share of the Common
Stock on the Determination Date; provided however, that in the event the then
fair market value (as so determined) of the portion of the Assets so
distributed or distributable applicable to one share of Common Stock is equal
to or greater than the Current Market Price per share of the Common Stock on
the Determination Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each holder of shares of Series A Preferred Stock shall
have the right to receive, upon conversion, the amount and kind of such Assets
that such holder would have received if such holder had, immediately prior to
the Determination Date, converted its shares of Series A Preferred Stock. If
such dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price that would then be in effect
if such Determination Date had not been fixed.
(v) Common Stock Issued at Less Than Current Market Price. If
the Corporation shall issue any Common Stock (or securities convertible into or
exercisable for, Common Stock) for a consideration per share less than the
Current Market Price per share of Common Stock on the date of such issuance
(which consideration shall include any compensation received for the issuance
of any securities convertible into or exercisable for such Common Stock), the
Conversion Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to the price determined by
multiplying such Conversion Price by a fraction (A) the numerator of which is
the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such issuance plus (y) the aggregate consideration received for the
issuance of such additional shares (which shall include any compensation
received for the issuance of any securities convertible into or exercisable for
such Common Stock) divided by such Current Market Price and (B) the denominator
of which is the number of shares of Common Stock to be outstanding immediately
after such issuance and any subsequent conversion or exchange; provided, that
this subsection (v) shall not apply to:
(1) any transaction or distribution for which an adjustment has been
made pursuant to any other subparagraph of this paragraph (d),
(2) the conversion or exchange of securities convertible or
exchangeable for Common Stock or the exercise of rights or warrants issued to
the holders of Common Stock, in each case only if an adjustment was made (or
specifically not required to be made) in connection with the issuance of such
securities, rights or warrants pursuant to any subparagraph of this paragraph
(d),
(3) the conversion of shares of Series A Preferred Stock or the
exercise of Warrants,
(4) Common Stock or options to purchase Common Stock issued to
directors, officers or employees of the Corporation and its subsidiaries under
bona fide benefit plans adopted by the Board of Directors and approved by the
holders of Common Stock when required by law (but only to the extent that the
aggregate number of shares excluded hereby and issued after the Issue Date
shall not exceed 10% of the Common Stock outstanding at the time of the
adoption of each such plan, exclusive of antidilution adjustments thereunder),
or
(5) Common Stock issued pursuant to a bona fide registered public
offering, the manager or managers of which are nationally recognized investment
banking firms.
(vi) Voluntary Adjustments. In addition to any other adjustment
required hereby, to the extent permitted by law, the Corporation from time to
time may reduce the Conversion Price by any amount, for any period of time of
at least twenty (20) business days, if the reduction is irrevocable during the
period. Whenever the Conversion Price is reduced pursuant to this paragraph
7(d)(vi), the Corporation shall mail to holders of record of the Series A
Preferred Stock a notice of the reduction at least fifteen (15) days prior to
the date the reduced Conversion Price takes effect, and such notice shall state
the reduced Conversion Price and, if applicable, the period it will be in
effect.
(vii) Consolidation, Merger, Sale, etc. In case of (a) any
consolidation with or merger of the Corporation with or into another
corporation, (b) the occurrence of any other transaction or event pursuant to
which all or substantially all of the Common Stock is exchanged for, converted
into, or acquired for, or constitutes solely the right to receive, cash
securities, property or other assets (whether by exchange offer, liquidation,
tender offer or otherwise) or (c) the sale, lease or other transfer of all or
substantially all of the assets of the Company (collectively such actions being
hereinafter referred to as "Reorganizations"), each share of Series A Preferred
Stock shall after the date of such Reorganization be convertible into the
number of shares of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such Reorganization) upon
conversion of such share of Series A Preferred Stock would have been entitled
upon such Reorganization; and in any case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of the holders
of the shares of Series A Preferred Stock shall be appropriately adjusted so as
to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion of the
shares of Series A Preferred Stock.
(viii) Rounding of Calculations; Minimum Adjustment. All
calculations under this paragraph (d) shall be made to the nearest cent or to
the nearest one hundredth (1/100th) of a share, as the case may be. Any
provision hereof to the contrary notwithstanding, no adjustment in the
Conversion Price shall be made if the amount of such adjustment would be less
than $0.05, but any such amount shall be carried forward and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $0.05 or more.
(ix) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this paragraph (d) shall
require that an adjustment shall become effective immediately after a
Determination Date for an event, the Corporation may defer until the occurrence
of such event (A) issuing to the holder of any share of Series A Preferred
Stock converted after such Determination Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the shares of
Common Stock issuable upon such conversion before giving effect to such
adjustment and (B) paying to such holder any amount of cash in lieu of a
fractional share of Common Stock pursuant to paragraph 7(c), above; provided
that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares, and such cash, upon the occurrence of the event requiring
such adjustment.
(e) Statement Regarding Adjustments. On or prior to each day on
which the Conversion Price shall be adjusted as provided in paragraph (7)(d)
above, the Corporation shall (i) file, at the office of each transfer agent for
the Series A Preferred Stock and at the principal office of the Corporation, a
statement showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment, which statement
shall be certified by a nationally recognized independent public accounting
firm, and (ii) cause a copy of such certified statement to be sent by mail,
first class postage prepaid, to each holder of shares of Series A Preferred
Stock at its address appearing on the Corporation's records. Where
appropriate, such copy may be given in advance and may be included as part of a
notice required to be mailed under the provisions of paragraph 7(f).
(f) Prior Notice of Certain Events. In case:
(i) the Corporation shall (A) declare any dividend or any other
distribution on its Common Stock, (B) declare or authorize a redemption or
repurchase of Common Stock, or (C) authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants; or
(ii) of any reclassification of Common Stock, or of any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation shall be required, or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(iii) of a Liquidation; or
(iv) the Corporation shall propose to take any action that would
require an adjustment pursuant to paragraph 7(d);
then the Corporation shall cause to be filed with the transfer agent for, and
mailed to the holders of record of, the Series A Preferred Stock, at their last
addresses as they shall appear upon the stock transfer books of the
Corporation, at least fifteen (15) days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record (if any)
is to be taken for the purpose of such dividend, distribution, redemption,
repurchase or granting of rights or warrants or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, redemption, repurchase, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, share exchange or Liquidation is expected to become
effective, and the date, if any, as of which it is expected that holders of
record of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, share exchange or Liquidation.
(g) Treasury Stock. For the purposes of this paragraph 7, the sale
or other disposition of any Common Stock theretofore held in the Corporation's
treasury shall be deemed to be an issuance thereof.
(h) Payment of Taxes. The Corporation shall pay all documentary,
stamp, transfer and other taxes (other than taxes on income of the holders of
shares of Series A Preferred Stock) and other governmental charges attributable
to the issuance or delivery of shares of Series A Preferred Stock or of shares
of Common Stock upon conversion of shares of Series A Preferred Stock; provided
however, that the Corporation shall not be required to pay any taxes payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
A Preferred Stock in respect of which such shares are being issued.
(i) Reservation of Shares; Valid Issuance; Approvals. The
Corporation shall (i) reserve at all times so long as any shares of Series A
Preferred Stock remain outstanding, free from preemptive rights, out of its
treasury stock (if applicable) or its authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the conversion of the
shares of Series A Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series A Preferred
Stock, (ii) take all necessary action so that all shares of Common Stock that
are issued upon conversion of the shares of the Series A Preferred Stock will,
upon issuance, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof,
and (iii) take no action which will cause a contrary result (including, without
limitation, any action that would cause the Conversion Price to be less than
the par value, if any, of the Common Stock).
If any shares of Common Stock reserved for the purpose of conversion
of shares of Series A Preferred Stock require registration with or approval of
any governmental authority under any Federal or state law before such shares
may be validly issued or delivered upon conversion, then the Corporation will
in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be. If, and so long as, any Common
Stock into which the shares of Series A Preferred Stock are then convertible is
listed on any national securities exchange, the Corporation will, if permitted
by the rules of such exchange, list and keep listed on such exchange, upon
official notice of issuance, all shares of such Common Stock issuable upon
conversion.
8. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Series A Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth herein and in the Corporation's Certificate of
Incorporation. The shares of Series A Preferred Stock shall have no preemptive
or subscription rights.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
10. Severability. If any right, preference or limitation of the Series A
Preferred Stock set forth herein (as so amended) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, all
other rights, preferences and limitations set forth herein (as so amended)
which can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
11. Status of Reacquired Shares. Shares of Series A Preferred Stock that
have been issued and reacquired in any manner shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the status of
authorized and unissued shares of Series A Preferred Stock issuable in series
undesignated as to series and may be redesignated and reissued.
ARTICLE V
Holders of shares of stock of the Corporation shall not have any
preemptive right to acquire additional, unissued, or treasury shares of the
Corporation, or securities of the Corporation convertible into or carrying a
right to subscribe to or acquire such shares.
ARTICLE VI
Each holder of record of stock of this Corporation shall be entitled to
one (1) vote for each share thereof standing registered in his name on the
books of the Corporation. At all elections of directors of the Corporation,
each shareholder shall be entitled to vote the shares owned of record by him
for him for as many persons as there are directors to be elected, but shall not
be entitled to exercise any right of cumulative voting.
ARTICLE VII
The number of directors constituting the Board of Directors of the
Corporation shall be such number (one or more) as is fixed from time to time by
the By-laws of the Corporation.
ARTICLE VIII
Election of directors need not be by written ballot unless the By-laws of
the Corporation shall so provide. The books of the Corporation may be kept
(subject to any provision contained in the General Corporation Law of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the By-laws of the Corporation.
ARTICLE IX
In furtherance and not in limitation of the powers conferred by the
General Corporation Law of Delaware, the Board of Directors is expressly
authorized to make, amend or repeal the By-laws of this Corporation.
ARTICLE X
Section 1. Elimination of Certain Director Liability. No director of
this Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages or other liabilities for a breach of his
fiduciary duty as a director, except for liability (i) for a breach of the
director's "duty of loyalty" (as defined herein) to the corporation or its
stockholders; (ii) for acts or omissions not in "good faith" (as further
defined herein) or which involve intentional misconduct or a knowing violation
of the law; (iii) under Section 174 of the General Corporation Law of the State
of Delaware; or (iv) for any transaction from which the director derived an
improper personal profit; provided, however, that if the director shall be
liable solely by reason of this clause (iv), then his or her personal liability
shall be limited to the amount of such profit.
Section 2. Definitions.
(a) The Term "duty of loyalty," as used herein, shall mean a breach of
fiduciary duty by the director which constitutes a willful failure to deal
fairly with the Corporation or its stockholders in connection with a
transaction in which the director has a material undisclosed conflict of
interest.
(b) In determining whether a director has acted or omitted to act
otherwise than in "good faith," as such term is used herein, the authority
making such determination shall determine solely whether such director: (i) in
the case of conduct in his or her "official capacity" (as defined herein) with
the Corporation, believed in the exercise of his or her business judgment that
his or her conduct was in the best interests of the Corporation; and (ii) in
all other cases, reasonably believed that his or her conduct was at least not
opposed to the best interests of the Corporation.
(c) "Official capacity," as such term is used herein, shall mean the
office of director in the Corporation, membership on any committee of
directors, any other offices in the Corporation held by the director and any
other offices in the Corporation held by the director and any other employment
or agency relationship between the director and the Corporation; provided,
however, that such term, as used herein, shall not include service for any
other foreign or domestic corporation or any partnership, joint venture, trust,
employee benefit plan, or other enterprise.
Section 3. Subsequent Amendment. If the General Corporation Law of
Delaware is hereinafter amended to authorize the further limitation or
elimination of the personal liability of a director, or to authorize the
limitation or elimination of the personal liability of an officer, then the
liability of a director and/or officer of the Corporation shall be limited or
eliminated to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended, without further authorization by or on behalf of the
Corporation. Any repeal, modification or amendment of the foregoing provisions
of this Article X by the stockholders of the Corporation shall not adversely
affect any right or protection of a director (or officer) of the Corporation
existing under this Article X at the time of such repeal, modification or
amendment.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained herein, in the manner now or hereafter prescribed by
statute or herein, and all rights conferred upon stockholders herein are
granted subject to this reservation.
In witness whereof, Terex Corporation has caused this certificate to
be signed by its President and attested by its Secretary this 24th day of
January, 1994.
TEREX CORPORATION
By: /s/ Ronald M. DeFeo
Ronald M. DeFeo, President
Attest:
By: /s/ Marvin B. Rosenberg
Marvin B. Rosenberg, Secretary
RESTATED
BY-LAWS
OF
TEREX CORPORATION
as of November 9, 1993
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Delaware, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office. The registered office of the corporation
required by the Delaware General Corporation Law to be maintained in the State
of Delaware may be, but need not be, identical with the principal office in
the State of Delaware, and the address of the registered office may be changed
from time to time by resolution of the Board of Directors or by the registered
agent. The business office of the registered agent of the corporation shall
be identical to such registered office.
ARTICLE II. STOCKHOLDERS
2.01. Annual Meeting. The annual meeting of the stockholders shall
be held at such time and date as may be fixed by or under the authority of the
Board of Directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day fixed as herein provided
for any annual meeting of the stockholders, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting of
the stockholders as soon thereafter as conveniently may be.
2.02. Special Meeting. Except as otherwise set forth in the
certificate of incorporation, special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Board of Directors or by the person or in the manner designated by the
Board of Directors.
2.03. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made or if a special meeting be otherwise
called, the place of meeting shall be at the principal executive offices of
the corporation.
2.04. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered to each
stockholder of record entitled to vote at such meeting not less than ten (10)
days (unless a longer period is required by law) nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by or at the
direction of the President or the Secretary or other officer or persons
calling the meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock record books of the corporation, with
postage thereon prepaid.
2.05. Adjournment. Any meeting may be adjourned to reconvene at any
place designated by the vote of a majority of the votes represented by shares
thereat. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting. No notice of the
time or place of an adjournment need be given if the time and place are
announced at the meeting at which an adjournment is taken, unless the
adjournment is for more than thirty (30) days or a new record date is fixed
for the adjourned meeting, in which case notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote thereat. Unless a new
record date for the adjourned meeting is fixed, the determination of
stockholders of record entitled to notice of or to vote at the meeting at
which adjournment is taken shall apply to the adjourned meeting.
2.06. Fixing of Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a date as the
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty (60) nor less than ten(10) days
before the date of such meeting. For the purpose of determining the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a date as the
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall not
be more than sixty (60) days prior to such action. For the purpose of
determining the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than ten (10) days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. If no record date is fixed,
the record date for determining:
(a) stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the
day on which the meeting is held;
(b) stockholders entitled to express consent to a corporate action
in writing without a meeting, when no prior action of the Board
of Directors is necessary, shall be the first day on which a
signed written consent is delivered to the corporation in
accordance with applicable law;
(c) stockholders entitled to express consent to a corporate action
in writing without a meeting, when prior action of the Board of
Directors is necessary, shall be at the close of business on
the day on which the Board of Directors adopts the resolution
taking such prior action; and
(d) stockholders for any other purpose shall be the close of
business on the day on which the Board of Directorsadopts the
resolution relating thereto.
2.07. Voting Records. The officer having charge of the
stock transfer books for shares of the corporation shall, at least ten (10)
days before each meeting of stockholders, make a complete record of the
stockholders entitled to vote at such meeting, arranged in alphabetical order,
showing the address of each stockholder, the number of shares of each class of
stock of the corporation entitled to vote registered in the name of each
stockholder and the total number of votes to which each stockholder is
entitled. Such record shall be produced and kept open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held as specified
in the notice of the meeting or at the place of the meeting. The record shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and maybe inspected by any stockholder present. The
original stock transfer books shall be the only evidence as to who are the
stockholders entitled to examine such record or transfer books or to vote at
any meeting of stockholders.
2.08. Quorum; Required Vote. Except as otherwise provided in the
certificate of incorporation, a quorum at a meeting of stockholders will exist
if shares of the corporation holding a majority of the votes entitled to be
cast at such meeting are represented in person or by proxy, but in no event
shall less than one-third of the shares entitled to vote constitute a quorum.
In all matters other than the election of directors, the affirmative vote of
the holders of a majority of the votes represented at the meeting in person or
by proxy voting together as one class shall be the act of the stockholders,
unless a greater vote is required by law or the certificate of incorporation.
Unless otherwise required by law or the certificate of incorporation,
directors shall be elected by a plurality of the votes of shares represented
at the meeting in person or by proxy and entitled to vote on the election of
directors. Though less than a quorum is represented at a meeting, a majority
of the votes represented at the meeting in person or by proxy may adjourn the
meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
2.09. Conduct of Meeting. The Chairman of the Board or, in his
absence, the President or, in their absence, a Vice Presidentin the order
provided under Section 4.07 or, in their absence, any person chosen by the
stockholders present shall call the meeting of the stockholders to order and
shall act as chairman of the meeting. The Secretary of the corporation shall
act as secretary of all meetings of the stockholders, but in the absence of
the Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting.
2.10. Proxies. At all meetings of stockholders, a stockholder
entitled to vote may vote in person or by proxy appointed in writing by the
stockholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretaryof the corporation before or at the time of the
meeting. Unlessotherwise provided in the proxy and supported by sufficient
interest, a proxy may be revoked at any time before it is voted, either by
written notice filed with the Secretary or the acting secretary of the meeting
or by oral notice given by the stockholder to the presiding officer during the
meeting. The presence of a stockholder who has filed his proxy shall not of
itself constitute a revocation. No proxy shall be valid after three (3) years
from the date of its execution, unless otherwise provided in the proxy. The
Board of Directors shall have the power and authority to make rules
establishing presumptions as to the validity and sufficiency of proxies.
2.11. Voting of Shares. Each outstanding share of stock of the
corporation shall be entitled to that number of votes, if any, upon each
matter submitted to a vote at a meeting of stockholders as provided in or in
accordance with the certificate of incorporation.
2.12. Voting of Shares by Certain Holders.
(a) other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the president of
such corporation or any other officer appointed by such president. A proxy
executed by any principal officer of such other corporation or assistant
thereto shall be conclusive evidence of the signer's authority to act, in the
absence of express notice to this corporation, given in writing to the
Secretary of this corporation, of the designation of some other person by the
board of directors or the by-laws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by any
administrator, executor, guardian, conservator, trustee in bankruptcy,
receiver, or assignee for creditors may be voted by duly executed proxy,
without a transfer of such shares to his name. Shares standing in the name of
a fiduciary may be voted by him, either in person or by proxy. A proxy
executed by a fiduciary shall be conclusive evidence of the signer's authority
to act in the absence of express notice to this corporation, given in writing
to the Secretary of this corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
(c) Pledgees. A stockholder whose shares are pledged shall be entitled
to vote such shares unless in the transfer of the shares the pledger has
expressly authorized the pledgee to vote the shares and thereafter the pledgee
or his proxy shall be entitled to vote the shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares, nor
shares held by another corporation if a majority of the shares entitled to
vote for the election of directors of such other corporation is held by this
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares entitled to vote, but shares of its own issue
held by this corporation in a fiduciary capacity or held by such other
corporation in a fiduciary capacity maybe voted and shall be counted in
determining the total number of outstanding shares entitled to vote.
(e) Joint Holders. Shares of record in the names of two or more
persons or shares to which two or more persons have the same fiduciary
relationship, unless the Secretary of the corporation is given notice
otherwise and furnished with a copy of the instrument creating the
relationship, may be voted as follows:
(i) If voted by an individual, his vote binds all holders.
(ii) If voted by more than one holder, the majority vote binds all,
unless the vote is evenly split in which case the shares may be voted
proportionally, or according to the ownership interest as shown in the
instrument filed with the Secretary of the corporation.
.13. Waiver of Notice by Stockholders. Whenever any notice whatever is
required to be given to any stockholder of the corporation under the
certificate of incorporation or by-laws or any provision of the Delaware
General Corporation Law, a waiver thereof in writing, signed at any time,
whether before or after the time of meeting, by the stockholder entitled to
such notice, shall be deemed equivalent to the giving of such notice.
Attendance of a person at a meeting shall constitute waiver of notice of such
meeting, except when the person attends for the express purpose of objecting
to the transaction of any business. Neitherthe business nor purpose of any
regular or special meeting of stockholders, directors or members of a
committee of directors need be specified in the waiver.
2.14. Stockholders Consent without Meeting. Except as otherwise set
forth in the certificate of incorporation, any action required or permitted by
the certificate of incorporation or by-laws or any provision of law to be
taken at a meeting of the stockholders, may be taken without a meeting, prior
notice, or vote, if a consent, or consents, in writing, setting forth the
action so taken, shall be signed by, and bear the date(s) of signature of, the
number of stockholders required to authorize such action at a meeting and
shall be delivered to the corporation in accordance with applicable law. If
the action is authorized by less than unanimous consent, notice of the action
shall be given to nonconsenting stockholders.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. The business and affairs of the
corporation shall be managed by its Board of Directors. The Board of
Directors shall consist of three or more members, the number thereof to be
determined from time to time by resolution of the Board of Directors.
3.02. Tenure and Oualifications. Except as otherwise set forth in
the certificate of incorporation, each director shall hold office until the
next annual meeting of stockholders and until his successor shall have been
elected and qualified, or until his prior death, resignation or removal.
Except as otherwise set forth in the certificate of incorporation, a director
may be removed from office by affirmative vote of a majority of the votes
represented by outstanding shares entitled to vote for the election of such
director taken at a meeting of stockholders called for that purpose. A
director may resign at any time by filing his written resignation with the
Secretary of the corporation. Directors need not be residents of the State of
Delawareor stockholders of the corporation.
3.03. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after the
annual meeting of stockholders and each adjourned session thereof. The place
of such regular meeting shall be the same as the place of the meeting of
stockholders which precedes it, or such other suitable place as may be
announced at such meeting of stockholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Delaware, for the holding of additional regular meetings without other
notice than such resolution.
3.04. Special Meetings. Except as otherwise set forth in the
certificate of incorporation, special meetings of the Boardof Directors may be
called by or at the request of the Chairmanof the Board, President, Secretary
or any two (2) directors. Theindividuals calling any special meeting of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of
Directors called by them, and if no other place is fixed the place of the
meeting shall be at the principal executive offices of the corporation.
3.05. Notice; Waiver. Notice of each meeting of the Boardof
Directors (unless otherwise provided in or pursuant to Section3.03) shall be
given by written notice delivered personally or mailed or given by telegram to
each director at his business address or at such other address as such
director shall have designated in writing filed with the Secretary, in each
case not less than seventy-two (72) hours prior thereto. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. Ifnotice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Whenever any notice whatever is required
to be given to any director of the corporation under the certificate of
incorporation or by-laws or any provision of law, a waiver thereof in writing,
signed at any time, whether before or after the time of meeting, by the
director entitled to such notice, shall be deemed equivalent to the giving of
such notice. Theattendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
and objects thereat to the transaction of any business because the meeting is
not lawfully called or convened. Neitherthe business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors need
be specified in the notice or waiver of notice of such meeting.
3.06. Quorum. Except as otherwise provided by law or by the
certificate of incorporation or these by-laws, a majority of the directors
shall constitute a quorum for the transaction of business at any meeting of
the Board of Directors, but in no event shall less than one-third of the
directors constitute a quorum. A majority of the directors present (though
less than such quorum) may adjourn the meeting from time to time without
further notice.
3.07. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors, unless the act of a greater number is required by law or
by the certificate of incorporation or these by-laws.
3.08. Conduct of Meetings. The Chairman of the Board or, in his
absence, the President or, in their absence, any director chosen by the
directors present, shall call meetings of the Boardof Directors to order and
shall act as chairman of the meeting. The Secretary of the corporation shall
act as secretary of all meetings of the Board of Directors but in the absence
of the Secretary, the presiding officer may appoint any Assistant Secretary or
any director or other person present to act as secretary of the meeting.
3.09. Vacancies. Except as otherwise set forth in the certificate of
incorporation, any vacancy occurring in the Boardof Directors, including a
vacancy created by an increase in the number of directors, may be filled until
the next succeeding annual election by the affirmative vote of a majority of
the directors then in office, though less than a quorum of the Boardof
Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the stockholders, the stockholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof, except as
otherwise set forth in the certificate of incorporation.
3.10. Compensation. The Board of Directors, by affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority to an
appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers and employees
and to their estates, families, dependents or beneficiaries on account of
prior services rendered by such directors, officers and employees to the
corporation.
3.11. Presumption of Assent. Solely for the purposes of Section 174
of the Delaware General Corporation Law, a director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered
mail to the Secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
3.12. Committees. The Board of Directors by resolution adopted by
the affirmative vote of a majority of the authorized number of directors may
designate one or more committees, each committee to consist of one or more
directors elected by the Board of Directors, which to the extent provided in
said resolution as initially adopted and as thereafter supplemented or amended
by further resolution adopted by a like vote, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation and may authorize the seal of the corporation to be affixed
to all papers which may require it. Each such committee shall fix its own
rules governing the conduct of its activities and shall make such reports to
the Board of Directors of its activities as the Boardof Directors may request.
3.13. Unanimous Consent without Meeting. Any action required or
permitted by the certificate of incorporation or by-laws or any provision of
law to be taken by the Board of Directors at a meeting or by a resolution of
any committee thereof may be taken without a meeting if a consent in writing,
setting forth the action so taken, filed with the minutes of the proceedings,
shall be signed by all of the directors then in office.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors.
Such other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any number of offices maybe
held by the same person.
4.02. Election and Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the stockholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successors
shall have been duly elected or until his prior death, resignation or removal.
Any officer may resign at any time upon written notice to the corporation.
Failure to elect officers shall not dissolve or otherwise affect the
corporation.
4.03. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not
of itself create contract rights.
4.04. Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, shall be filled by the
Board of Directors for the unexpired portion of the term.
4.05. The Chairman of the Board. The Chairman of the Boardshall be
the chief executive officer of the corporation and, subject to the control of
the Board of Directors, shall in general supervise and control all of the
business and affairs of the corporation. He shall, when present, preside at
all meetings of the stockholders and of the Board of Directors. He shall have
authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint such agents and employees of the corporation as he shall
deem necessary, to prescribe their powers, duties and compensation, and to
delegate authority to them. Such agents and employees shall hold office at
the discretion of the Chairman of the Board. He shall have authority to sign,
execute and acknowledge, on behalf of the corporation, all deeds, mortgages,
bonds, stock certificates, contracts, leases, reports and all other documents
or instruments necessary or proper to be executed in the course of the
corporation's regular business or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board
of Directors, he may authorize the President or any other officer or agent of
the corporation to sign, execute and acknowledge such documents or instruments
in his place and stead. In general, he shall perform all duties incident to
the office of Chairman of the Board and such other duties as may be prescribed
by the Board of Directors from time to time.
4.06. The President. The President shall be the chief operating
officer of the corporation and, subject to the control of the Board of
Directors, shall assist the Chairman of the Boardin supervising and
controlling all of the business and affairs of the corporation. In the
absence of the Chairman of the Board or in the event of his death, inability
or refusal to act, or in the event for any reason it shall be impracticable
for the chairman of the Board to act personally, the President shall perform
the duties of the Chairman of the Board and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the Chairman of the
Board. He shall, in the absence of the Chairman of the Board, when present,
preside at all meetings of the stockholders and of the Board of Directors. He
shall have authority, subject to such rules as may be prescribed by the Board
of Directors and to the approval of the Chairman of the Board, to appoint such
agents and employees of the corporation as he shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the discretion of the
President. He shall have authority to sign, execute and acknowledge, on
behalf of the corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other documents or instruments necessary or
proper to be executed in the course of the corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, he may authorize any
Vice President or other officer or agent of the corporation to sign, execute
and acknowledge such documents or instruments in his place and stead. In
general, he shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Board of Directors from time to
time.
4.07. The Vice Presidents. In the absence of the Presidentor in the
event of his death, inability or refusal to act, or in the event for any
reason it shall be impracticable for the President to act personally, the Vice
President (or, in the event there shall be more than one Vice President, the
Vice Presidentsin the order designated by the Board of Directors, or in the
absence of such designation, then in the order of their election) shall
perform the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any Vice
President may sign, with the Secretary or Assistant Secretary, certificates
for shares of the corporation; and shall perform such other duties and have
such authority as from time to time may be delegated or assigned to him by the
President or the Board of Directors. Theexecution of any instrument of the
corporation by any Vice President shall be conclusive evidence, as to third
parties, of his authority to act in the stead of the President.
4.08. The Secretary. The Secretary shall: (a) keep the minutes of
the meetings of the stockholders and the Board of Directors in one or more
books provided for the purpose; (b) attest instruments to be filed with the
Secretary of State; (c) see that all notices are duly given in accordance with
the provisions of these by-laws or as required by law; (d) be custodian of the
corporate records and of the seal of the corporation, if any, and see that the
seal of the corporation, if any, is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (e) keep
or arrange for the keeping of a register of the post office address of each
stockholder which shall be furnished to the Secretary by such stockholders;
(f) sign with the Chairman of the Board, the President or any Vice President
certificates for shares of the corporation the issuance of which shall have
been authorized by resolution of the Board of Directors; (g) have general
charge of the stock transfer books of the corporation; and (h) in general
perform all duties incident to the office of the Secretary and have such other
duties and exercise such authority as from time to time may be delegated or
assigned to him by the President or by the Board of Directors.
4.09. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation
from any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Section5.04; and (c) in general
perform all of the duties and exercise such other authority as from time to
time may be delegated or assigned to him by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such surety
or sureties as the Board of Directors shall determine.
4.10. Assistant Secretaries and Assistant Treasurers There shall be
such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretaries may sign
with the Presidentor any Vice President certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
4.11. Other Assistants and Acting Officers. The Board of Directors
shall have the power to appoint any person to act as assistant to any officer,
or as agent for the corporation in his stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed
by the Board of Directors shall have the power to perform all the duties of
the office to which he is so appointed to be an assistant, or as to which he
is so appointed to act, except as such power may be otherwise defined or
restricted by the Board of Directors.
4.12. Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND
DEPOSITS: SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contractor execute or deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. In the
absence of other designation, all deeds, mortgages and instruments or
assignment or pledge made by the corporation shall be executed in the name of
the corporation by the Chairman of the Board, the President or any Vice
President and by the Secretary, an Assistant Secretary,the Treasurer or an
Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary
or required, shall affix the corporate seal, if any, thereto; and when so
executed no other party to such instrument or any third party shall be
required to make any inquiry into the authority of the signing officer or
officers.
5.02. Loans. No indebtedness for borrowed money shall be contracted
on behalf of the corporation and no evidence of such indebtedness shall be
issued in its name unless authorized by or under the authority of a resolution
of the Board of Directors. Such authorization may be general or confined to
specific instances.
5.03. Checks, Drafts, etc. All cheeks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Boardof Directors.
5.04. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as may be selected by or under
the authority of a resolution of the Board of Directors.
5.05. Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by
this corporation may be voted at any meeting of security holders of such other
corporation by the Chairman of the Board of this corporation if he be present,
or in his absence by the President of this corporation if he be present, or in
their absence by any Vice President of this corporation who may be present,
and (b) whenever, in the judgment of the Chairman of the Board or in his
absence, of the President, or in their absence, of any Vice President, it is
desirable for this corporation to execute a proxy or written consent in
respect to any shares or other securities issued by any other corporation and
owned by this corporation, such proxy or consent shall be executed in the name
of this corporation by the Chairman of the Board, the Presidentor one of the
Vice Presidents of this corporation, without necessity of any authorization by
the Board of Directors,affixation of corporate seal, if any, or
countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power and authority to vote the shares or
other securities issued by such other corporation and owned by this
corporation the same as such shares or other securities might be voted by this
corporation.
ARTICLE VI. CERTIFICATES FOR SHARES
AND THEIR TRANSFER
6.01. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Suchcertificates shall be signed by the
Chairman of the Board, the President or any Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books for the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for alike
number of shares shall have been surrendered and cancelled, except as provided
in Section 6.06.
6.02. Facsimile Signatures. The signatures of any officers of the
corporation upon a certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent, or a registrar, other than the
corporation itself or an employee of the corporation.
6.03. Signature by Former Officers. In case any officer, who has
signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer
before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at
the date of its issue.
6.04. Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer the corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
corporation with a request to register for transfer, the corporation shall not
be liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the corporation had no duty to inquire into
adverse claims or has discharged any such duty. The corporation may require
reasonable assurance that said endorsements are genuine and effective and in
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors. Where a transfer of shares is made for
collateral security, and not absolutely, it shall be so expressed in the entry
of transfer if, when the shares are presented, both the transferor and the
transferee so request.
6.05. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the corporation upon the transfer of such shares.
Otherwise the restriction is invalid except against those with actual
knowledge of the restrictions.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner
claims that his certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if the
owner (a) so requests before the corporation has notice that such shares have
been acquired by a bona fide purchaser, and (b) files with the corporation a
sufficient indemnity bond, and (c) satisfies such other reasonable
requirements as may be prescribed by or under the authority of the Board of
Directors.
6.07. Consideration of Shares. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, consistent with the law of the State of Delaware.
6.08. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Delaware as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the corporation.
ARTICLE VII. SEAL
7.01. The Board of Directors may provide for a corporate seal in an
appropriate form or may provide that the corporation shall have no seal.
ARTICLE VIII. AMENDMENTS
8.01. By Stockholders. Except as otherwise set forth herein or in
the certificate of incorporation, these by-laws maybe adopted, amended or
repealed by the stockholders entitled to vote at the stockholders annual
meeting without prior notice, or at any other meeting provided the amendment
under consideration has been set forth in the notice of meeting, by the
affirmative vote of not less than a majority of the votes present or
represented by outstanding shares at any meeting at which a quorum is in
attendance.
8.02. By Directors. Except as otherwise set forth herein or in the
certificate of incorporation, these by-laws may be adopted, amended or
repealed by the directors as provided in the certificate of incorporation by
the affirmative vote of a majority of the Board of Directors at any meeting at
which a quorum is present, but no by-laws adopted by the stockholders shall be
amended or repealed by the Board of Directors if the by-laws so provide.
8.03. Implied Amendments. Any action taken or authorized by the
Board of Directors which would be inconsistent with these by-laws, but is
taken or authorized by the affirmative vote of not less than the number of
votes or the number of directors required to amend the by-laws to conform with
such action, shall be given the same effect as though the by-laws had been
temporarily amended or suspended so far, but only so far, as is necessary to
permit the specific action so taken or authorized.
ARTICLE IX. INDEMNIFICATION
9.01. Mandatory Indemnification.
(a) In all cases other than those set forth in Section9.01b hereof and
subject to the conditions and limitations set forth hereinafter in this
Article IX, the Corporation shall indemnify and hold harmless any person who
is or was a party, or is threatened to be made a party, to any Action (see
Section 9.16of this Article IX for definitions of capitalized terms used
herein) by reason of his or her status as an Executive and/or as to acts
performed in the course of such Executive's duties to the Corporation and/or
an Affiliate, against Liabilities and reasonable Expenses incurred by or on
behalf of an Executive in connection with any Action, including, without
limitation, in connection with the investigation, defense, settlement or
appeal of any Action; provided, that it is not determined by the Authority, or
by a court, pursuant to Section 9.03 that the Executive engaged in misconduct
which constitutes a Breach of Duty.
(b) To the extent an Executive has been successful on the merits or
otherwise in connection with any Action, including, without limitation, the
settlement, dismissal, abandonment or withdrawal of any such Action where the
Executive does not pay, incur or assume any material Liabilities, or in
connection with any claim, issue or matter therein, he or she shall be
indemnified by the Corporation against reasonable Expensesincurred by or on
behalf of him or her in connection therewith. The Corporation shall pay such
Expenses to the Executive (net of all Expenses, if any, previously advanced to
the Executivepursuant to Section 9.02), or to such other person or entity as
the Executive may designate in writing to the Corporation, within ten (10)
days after the receipt of the Executive's written request therefor, without
regard to the provisions of Section9.03. In the event the Corporation refuses
to pay such requested Expenses the Executive may petition a court to order the
Corporation to make such payment pursuant to Section 9.04.
(c) Notwithstanding any other provision contained in this Article IX to
the contrary, the Corporation shall not:
(i) indemnify, contribute or advance Expenses to an Executive with
respect to any Action initiated or brought voluntarily by the Executive
and not by way of defense, except with respect to Actions:
(1) brought to establish or enforce a right to
indemnification, contribution and/or an advance of Expenses under
Section 9.04 of this Article IX,under the Statute as it may then be
in effect or under any other applicable statute or law or otherwise
as required;
(2) initiated or brought voluntarily by an Executive to the
extent such Executive is successful on the merits or otherwise in
connection with such an Action in accordance with and pursuant to
Section 9.O1b of this Article IX;or
(3) as to which the Board determines it be appropriate.
(ii) indemnify an Executive against judgments, fines or penalties
incurred in a Derivative Action if the Executive is finally adjudged
liable to the Corporation by a court (unless the court before which such
Derivative Action was brought determines that the Executive is fairly and
reasonably entitled to indemnity for any or all of such judgments, fines
or penalties); or
(iii) indemnify an Executive under this Article IXfor any
amounts paid in settlement of any Actioneffected without the
Corporation's written consent.
The Corporation shall not settle any Action in any manner which would impose
any Liabilities or other type of limitation on the Executive without the
Executive's written consent. Neither the Corporation nor the Executive shall
unreasonably withhold their consent to any proposed settlement.
(d) in Executive's conduct with respect to an employee benefit plan
sponsored by or otherwise associated with the Corporation and/or an Affiliate
for a purpose he or she reasonably believes to be in the interests of the
participants in and beneficiaries of such plan is conduct that does not
constitute a breach or failure to perform his or her duties to the Corporation
or an Affiliate, as the case may be.
9.02. Advance for Expenses.
(a) The Corporation shall pay to an Executive, or to such other person
or entity as the Executive may designate in writing to the Corporation, his or
her reasonable Expenses incurred by or on behalf of such Executive in
connection with any Action, or claim, issue or matter associated with any such
Action, in advance of the final disposition or conclusion of any such
Action(or claim, issue or matter associated with any such Action),within ten
(10) days after the receipt of the Executive's written request therefor;
provided, the following conditions are satisfied:
(i) the Executive has first requested an advance of such Expenses
in writing (and delivered a copy of such request to the Corporation) from
the insurance carrier(s), if any, to whom a claim has been reported under
an applicable insurance policy purchased by the corporation and each such
insurance carrier, if any, has declined to make such an advance;
(ii) the Executive furnishes to the Corporation an executed written
certificate affirming his or her good faith belief that he or she has not
engaged in misconduct which constitutes a Breach of Duty; and
(iii) the Executive furnishes to the Corporation an executed
written agreement to repay any advances made under this Section 9.02 if
it is ultimately determined that he or she is not entitled to be
indemnified by the Corporation for such Expenses pursuant to this Article
IX.
(b) If the Corporation makes an advance of Expenses to an Executive
pursuant to this Section 9.02, the Corporation shall be subrogated to every
right of recovery the Executive may have against any insurance carrier from
whom the Corporation has purchased insurance for such purpose.
9.03. Determination of Right to Indemnification.
(a) Except as otherwise set forth in this Section 9.03 or in Section
9.O1c, any indemnification to be provided to an Executive by the Corporation
under Section la of this Article IXupon the final disposition or conclusion of
any Action, or any claim, issue or matter associated with any such Action,
unless otherwise ordered by a court, shall be paid by the Corporation to the
Executive (net of all Expenses, if any, previously advanced to the Executive
pursuant to Section 9.02), or to such other person or entity as the Executive
may designate in writing to the Corporation, within sixty (60) days after the
receipt of the Executive's written request therefor. Such request shall
include an accounting of all amounts for which indemnification is being
sought. No further corporate authorization for such payment shall be required
other than this Section 9.03a.
(b) Notwithstanding the foregoing, the payment of such requested
indemnifiable amounts pursuant to Section 9.01a may be denied by the
Corporation if:
(i) the Board by a majority vote thereof determines that the
Executive has engaged in misconduct which constitutes a Breach of Duty;
or
(ii) a majority of the directors of the Corporationis party in
interest to such Action.
(c) In either event of nonpayment pursuant to Section9.03b, the Board
shall immediately authorize and direct, by resolution, that an independent
determination be made as to whether the Executive has engaged in misconduct
which constitutes a Breach of Duty and, therefore, whether indemnification of
the Executive is proper pursuant to this Article IX.
(d) Such independent determination shall be made, at the option of the
Executive(s) seeking indemnification, by (i) a panel of three arbitrators
(selected as set forth below in Section 9.03f from the panels of arbitrators
of the American Arbitration Association) in Milwaukee, Wisconsin, in
accordance with the Commercial Arbitration Rules then prevailing of the
American Arbitration Association; (ii) an independent legal counsel mutually
selected by the Executive(s) seeking indemnification and the Board by a
majority vote of a quorum thereof consisting of directors who were not parties
in interest to such Action (or, if such quorum is not obtainable, by the
majority vote of the entire Board); or (iii) a court in accordance with
Section 9.04 of this Article IX.
(e) In any such determination there shall exist are buttable
presumption that the Executive has not engaged in misconduct which constitutes
a Breach of Duty and is, therefore, entitled to indemnification hereunder.
The burden of rebutting such presumption by clear and convincing evidence
shall be on the Corporation.
(f) If a panel of arbitrators is to be employed hereunder, one of such
arbitrators shall be selected by the Board by a majority vote of a quorum
thereof consisting of directors who were not parties in interest to such
Action (or, if such quorum is not obtainable, by an independent legal counsel
chosen by the majority vote of the entire Board), the second by the
Executive(s) seeking indemnification and the third by the previous two
arbitrators.
(g) The Authority shall make its independent determination hereunder
within sixty (60) days of being selected and shall simultaneously submit a
written opinion of its conclusions to both the Corporation and the Executive.
(h) If the Authority determines that an Executive is entitled to be
indemnified for any amounts pursuant to this Article IX, the Corporation shall
pay such amounts to the Executive (net of all Expenses, if any, previously
advanced to the Executive pursuant to Section 9.02), including interest
thereon as provided in Section 9.06c, or to such other person or entity as the
Executive may designate in writing to the Corporation, within ten (10) days of
receipt of such opinion.
(i) The Expenses associated with the indemnification process set forth
in this Section 9.03, including, without limitation, the Expenses of the
Authority selected hereunder, shall be paid by the Corporation.
9.04. Court-Ordered Indemnification and Advance for Expenses.
(a) An Executive may, either before or within two years after a
determination, if any, has been made by the Authority,petition the court
before which such Action was brought or any other court of competent
jurisdiction to independently determine whether or not he or she has engaged
in misconduct which constitutes a Breach of Duty and is, therefore, entitled
to indemnification under the provisions of this Article IX. Suchcourt shall
thereupon have the exclusive authority to make such determination unless and
until such court dismisses or otherwise terminates such proceeding without
having made such determination. An Executive may petition a court under this
Section 9.04 either to seek an initial determination by the court as
authorized by Section 9.03d or to seek review by the court of a previous
adverse determination by the Authority.
(b) The court shall make its independent determination irrespective of
any prior determination made by the Authority;provided, however, that there
shall exist a rebuttable presumption that the Executive has not engaged in
misconduct which constitutes a Breach of Duty and is therefore entitled to
indemnification hereunder. The burden of rebutting such presumption by clear
and convincing evidence shall be on the Corporation.
(c) In the event the court determines that an Executive has engaged in
misconduct which constitutes a Beach of Duty, it may nonetheless order
indemnification to be paid by the Corporationif it determines that the
Executive is fairly and reasonably entitled to indemnification in view of all
of the circumstances of such Action.
(d) In the event the Corporation does not (i) advance Expenses to the
Executive within ten (10) days of such Executive's compliance with Section
9.02; or (ii) indemnify an Executive with respect to requested Expenses under
Section 9.01bwithin ten (10) days of such Executive's written request
therefor, the Executive may petition the court before which such Action was
brought, if any, or any other court of competent jurisdiction to order the
Corporation to pay such reasonable Expenses immediately. Such court, after
giving any notice it considers necessary, shall order the Corporation to pay
such Expenses if it determines that the Executive has complied with the
applicable provisions of section 9.02 or 9.01b, as the case may be.
(e) If the court determines pursuant to this Section 9.04that the
Executive is entitled to be indemnified for any Liabilities and/or Expenses,
or to the advance of Expenses,unless otherwise ordered by such court, the
Corporation shall pay such Liabilities and/or Expenses to the Executive (net
of all Expenses, if any, previously advanced to the Executive pursuant to
Section 9.02), including interest thereon as provided in Section 9.06c or to
such other person or entity as the Executivemay designate in writing to the
Corporation, within ten (10) days of the rendering of such determination.
(f) An Executive shall pay all Expenses incurred by such Executive in
connection with the judicial determination provided in this Section 9.04,
unless it shall ultimately be determined by the court that he or she is
entitled, in whole or in part, to be indemnified by, or to receive an advance
from, the Corporation as authorized by this Article IX. All Expenses incurred
by an Executive in connection with any subsequent appeal of the judicial
determination provided for in this Section 9.04 shall be paid by the Executive
regardless of the disposition of such appeal.
9.05. Termination of an Action Is Nonconclusive. Theadverse
termination of any Action against an Executive by judgment, order, settlement
or conviction, or upon a plea of no contest or its equivalent, shall not, of
itself, create a presumption that the Executive has engaged in misconduct
which constitutes a Breach of Duty.
9.06. Partial Indemnification; Reasonableness; Interest.
(a) If it is determined by the Authority, or by a court, that an
Executive is entitled to indemnification as to some claims, issues or matters,
but not as to other claims, issues or matters, involved in any Action, the
Authority, or the court, shall authorize the proration and payment by the
Corporation of such Liabilities and/or reasonable Expenses with respect to
which indemnification is sought by the Executive, among such claims, issues or
matters as the Authority, or the court, shall deem appropriate in light of all
of the circumstances of such Action.
(b) If it is determined by the Authority, or by a court, that certain
Expenses incurred by or on behalf of an Executiveare for whatever reason
unreasonable in amount, the Authority, or the court, shall nonetheless
authorize indemnification to be paid by the Corporation to the Executive for
such Expenses as the Authority, or the court, shall deem reasonable in light
of all of the circumstances of such Action.
(c) Interest shall be paid by the Corporation to an Executive, to the
extent deemed appropriate by the Authority, or by a court, at a reasonable
interest rate, for amounts for which the Corporation indemnifies or advances
to the Executive.
9.07. Insurance; Subrogation.
(a) The Corporation may purchase and maintain insurance on behalf of any
person who is or was an Executive of the Corporation, and/or is or was serving
as an Executive of an Affiliate, against Liabilities and/or Expenses asserted
against him or her and/or incurred by or on behalf of him or her in any such
capacity or arising out of his or her status as such an Executive, whether or
not the Corporation would have the power to indemnify him or her against such
Liabilities and/or Expensesunder this Article IX or under the Statute as it
may then be in effect. Except as expressly provided herein, the purchase and
maintenance of such insurance shall not in any way limit or affect the rights
And obligations of the Corporation and/or any Executive under this Article IX.
Such insurance may, but need not, be for the benefit of all Executives of the
Corporation and those serving as an Executive of an Affiliate.
(b) If an Executive shall receive payment from any insurance carrier or
from the plaintiff in any Action against such Executive in respect of
indemnified amounts after payments on account of all or part of such
indemnified amounts have been made by the Corporation pursuant to this Article
IX, such Executive shall promptly reimburse the Corporation for the amount, if
any, by which the sum of such payment by such insurance carrier or such
plaintiff and payments by the Corporation to such Executive exceeds such
indemnified amounts; provided, however, that such portions, if any, of such
insurance proceeds that are required to be reimbursed to the insurance carrier
under the terms of its insurance policy, such as deductible, retention or
co-insurance amounts, shall not be deemed to be payments to such Executive
hereunder.
(c) Upon payment of indemnified amounts under this Article IX, the
Corporation shall be subrogated to such Executive'srights against any
insurance carrier in respect of such indemnified amounts and the Executive
shall execute and deliver any and all instruments and/or documents and perform
any and all other acts or deeds which the Corporation shall deem necessary or
advisable to secure such rights. The Executive shall do nothing to prejudice
such rights of recovery or subrogation.
9.08. Witness Expenses. The Corporation shall advance or reimburse
any and all reasonable Expenses incurred by or on behalf of an Executive in
connection with his or her appearance as a witness in any Action at a time
when he or she has not been formally named a defendant or respondent to such
an Action, within ten (10) days after the receipt of an Executive's written
request therefor.
9.09. Contribution.
(a) Subject to the limitations of this Section 9.09, if the indemnity
provided for in Section 9.01 of this Article IX is unavailable to an Executive
for any reason whatsoever, the corporation, in lieu of indemnifying the
Executive, shall contribute to the amount incurred by or on behalf of the
Executive, whether for Liabilities and/or for reasonable Expensesin connection
with any Action in such proportion as deemed fair and reasonable by the
Authority, or by a court, in light of all of the circumstances of any such
Action, in order to reflect:
(i) the relative benefits received by the Corporation and the
Executive as a result of the event(s) and/or transactions) giving cause
to such Action; and/or
(ii) the relative fault of the Corporation (and its other
Executives, employees and/or agents) and the Executive in connection with
such event(s) and/or transactions).
(b) The relative fault of the Corporation (and its other Executives,
employees and/or agents) on the one hand, and of the Executive, on the other
hand, shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent the circumstances resulting in such Liabilities and/or Expenses.
The Corporation agrees that it would not be just and equitable if contribution
pursuant to this Section 9.09 were determined by pro rata allocation or any
other method of allocation which does not take into account the foregoing
equitable considerations.
(c) An Executive shall not be entitled to contribution from the
Corporation under this Section 9.09 in the event it is determined by the
Authority, or by a court, that the Executivehas engaged in misconduct which
constitutes a Breach of Duty.
(d) The Corporation's payment of, and an Executive's right to,
contribution under this Section 9.09 shall be made and determined in
accordance with and pursuant to the provisions in Sections 9.03 and/or 9.04 of
this Article IX relating to the Corporation's payment of, and the Executive's
right to, indemnification under this Article IX.
9.10. Indemnification of Employees. Unless otherwise specifically
set forth in this Article IX, the Corporation shall indemnify and hold
harmless any person who is or was a party, or is threatened to be made a party
to any Action by reason of his or her status as, or the fact that he or she is
or was an employee or authorized agent or representative of the
Corporationand/or an Affiliate as to acts performed in the course and within
the scope of such employees, agent's or representatives duties to the
Corporation and/or an Affiliate, in accordance with and to the fullest extent
permitted by the Statute as it may then be in effect.
9.11. Severability. If any provision of this Article IXshall be
deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article IX contravenes public
policy, this Article IX shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any such
provisions which are invalid or inoperative or which contravene public policy
shall be deemed, without further Action or deed by or on behalf of the
Corporation, to be modified, amended and/or limited, but only to the extent
necessary to render the same valid and enforceable, and the Corporation shall
indemnify and hold harmless an Executive as to Liabilities and reasonable
Expenses with respect to any Action to the full extent permitted by any
applicable provision of this Article IX that shall not have been invalidated
and to the full extent otherwise permitted by the Statute as it may then be in
effect.
9.12. Nonexclusivity of Article IX. The right to indemnification,
contribution and advancement of Expensesprovided to an Executive by this
Article IX shall not be deemed exclusive of any other rights to
indemnification, contribution and/or advancement of Expenses which any
Executive or other employee or agent of the Corporation and/or of an Affiliate
maybe entitled under any charter provision, written agreement, resolution,
vote of stockholders or disinterested directors of the Corporation or
otherwise, including, without limitation, under the Statute as it may then be
in effect, both as to acts in his or her official capacity as such Executive
or other employee or agent of the Corporation and/or of an Affiliate or as to
acts in any other capacity while holding such office or position, whether or
not the Corporation would have the power to indemnify, contribute and/or
advance Expenses to the Executive under this Article Ix or under the Statute:
provided that it is not determined that the Executive or other employee or
agent has engaged in misconduct which constitutes a Breach of Duty.
9.13. Notice to the Corporation; Defense of Actions.
(a) An Executive shall promptly notify the Corporation in writing upon
being served with or having actual knowledge of any citation, summons,
complaint, indictment or any other similar document relating to any Action
which may result in a claim of indemnification, contribution or advancement of
Expenses hereunder, but the omission so to notify the Corporation will not
relieve the Corporation from any liability which it may have to the Executive
otherwise than under this Agreement unless the Corporation shall have been
irreparably prejudiced by such omission.
(b) With respect to any such Action as to which an Executive notifies
the Corporation of the commencement thereof:
(i) The Corporation shall be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided below, to the extent that it may
wish, the Corporation (or any other indemnifying party, including any
insurance carrier, similarly notified by the Corporation or the
Executive)shall be entitled to assume the defense thereof, with counsel
selected by the Corporation (or such other indemnifying party) and
reasonably satisfactory to the Executive.
(c) After notice from the Corporation (or such other indemnifying
party) to the Executive of its election to assume the defense of an Action,
the Corporation shall not be liable to the Executive under this Article IX for
any Expenses subsequently incurred by the Executive in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. The Executive shall have the right to employ his or her own
counsel in such Action but the Expenses of such counsel incurred after notice
from the Corporation (or such other indemnifying party) of its assumption of
the defense thereof shall be at the expense of the Executive unless (i) the
employment of counsel by the Executive has been authorized by the corporation;
(ii) the Executive shall have reasonably concluded that there may be a
conflict of interest between the Corporation(or such other indemnifying party)
and the Executive in the conduct of the defense of such Action; or (iii) the
Corporation(or such other indemnifying party) shall not in fact have employed
counsel to assume the defense of such Action, in each of which cases the
Expenses of counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any Derivative
Action or any Action as to which the Executive shall have made the conclusion
provided for in clause (ii) above.
9.14. Continuity of Rights and Obligations. The terms and provisions
of this Article IX shall continue as to an Executivesubsequent to his or her
Termination Date and such terms and provisions shall inure to the benefit of
the heirs, estate, executors and administrators of such Executive and the
successors and assigns of the Corporation, including, without limitation any
successor to the Corporation by way of merger, consolidation and/or sale or
disposition of all or substantially all of the assets or capital stock of the
Corporation. Except as provided herein, all rights and obligations of the
Corporation and the Executive hereunder shall continue in full force and
effect despite the subsequent amendment or modification of the Corporation's
Certificate of Incorporation, as it is in effect on the date hereof, and such
rights and obligations shall not be affected by any such amendment or
modification, any resolution of directors or stockholders of the Corporation,
or by any other corporate action which conflicts with or purports to amend,
modify, limit or eliminate any of the rights or obligations of the Corporation
and/or of the Executive hereunder.
9.15. Amendment. This Article IX may only be altered, amended or
repealed by the affirmative vote of a majority of the stockholders of the
Corporation so entitled to vote; provided, however, that the Board may alter
or amend this Article IXwithout such stockholder approval if any such
alteration or amendment:
(a) is made in order to conform to any amendment or revision of
the Delaware General Corporation Law,including, without limitation, the
Statute, which (i) expands or permits the expansion of an
Executive'sright to indemnification thereunder; (ii) limits or
eliminates, or permits the limitation or elimination ,of the liability of
the Executives; or (iii) is otherwise beneficial to the Executives; or
(b) in the sole judgment and discretion of the Board, does not
materially adversely affect the rights and protections of the
stockholders of the Corporation.
Any repeal, modification or amendment of this Article IXshall not
adversely affect any rights or protections of an Executive existing under this
Article IX immediately prior to the time of such repeal, modification or
amendment.
9.16. Certain Definitions. The following terms as used in this
Article IX shall be defined as follows:
(a) "Action(s)" shall include, without limitation, any threatened,
pending or completed action, claim, litigation, suitor proceeding, whether
civil, criminal, administrative arbitrative or investigative, whether
predicated on foreign, federal, state or local law, whether brought under
and/or predicated upon the Securities Act of 1933, as amended, and/or the
Securities Exchange Act of 1934, as amended, and/or their respective state
counterparts and/or any rule or regulation promulgated thereunder, whether a
Derivative Action and/or whether formal or informal.
(b) "Affiliate" shall include, without limitation, any corporation,
partnership, joint venture, employee benefit plan, trust, or other similar
enterprise that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the
Corporation.
(c) "Authority" shall mean the panel of arbitrators or independent legal
counsel selected pursuant to Section 9.03 of this Article IX.
(d) "Board" shall mean the Board of Directors of the Corporation.
(e) "Breach of Duty" shall mean the Executive breached or failed to
perform his or her duties to the Corporation or an Affiliate, as the case may
be, and the Executive's breach of or failure to perform those duties
constituted:
(i) a breach of his or her "duty of loyalty" (as defined herein)
to the Corporation or its stockholders;
(ii) acts or omissions not in "good faith" (as further defined
herein) or which involve intentional misconduct or a knowing violation of
the law;
(iii) a violation of Section 174 of the Delaware General
Corporation Law; or
(iv) a transaction from which the Executivederived an improper
direct personal financial profit (unless such profit is determined to be
immaterial in light of all the circumstances).
In determining whether an Executive has acted or omitted to act otherwise
than in "good faith," as such term is used herein, the Authority, or the
court, shall determine solely whether such Executive (i) in the case of
conduct in his or her "official capacity" (as defined herein) with the
Corporation, believed in the exercise of his or her business judgment that his
or her conduct was in the best interests of the Corporation; and (ii) in all
other cases reasonably believed that his or her conduct was at least not
opposed to the best interests of the Corporation.
(f) "Derivative Action" shall mean any Action brought by or in the right
of the Corporation and/or an Affiliate.
(g) "Duty of loyalty" shall mean a breach of fiduciary duty by an
Executive which constitutes a willful failure to deal fairly with the
Corporation or its stockholders in connection with a transaction in which the
Executive has a material undisclosed personal conflict of interest.
(h) "Executive(s)" shall mean any individual who is, was or has agreed
to become a director and/or officer of the Corporationand/or an Affiliate.
(i) "Expenses" shall include, without limitation, any and all expenses,
fees, costs, charges, attorneys' fees and disbursements, other out-of-pocket
costs, reasonable compensation for time spent by the Executive in connection
with the Action for which he or she is not otherwise compensated by the
Corporation,any Affiliate, any third party or other entity and any and all
other direct and indirect costs of any type or nature whatsoever.
(j) "Liabilities" shall include, without limitation, judgments, amounts
incurred in settlement, fines, penalties and, with respect to any employee
benefit plan, any excise tax or penalty incurred in connection therewith, and
any and all other liabilities of every type or nature whatsoever.
(k) "Official capacity" shall mean the
THIRD SUPPLEMENTAL INDENTURE dated as of April 20, 1993
between TEREX CORPORATION, a Delaware corporation (the
"Company"), and CONTINENTAL BANK, NATIONAL ASSOCIATION (formerly
known as Continental Illinois National Bank and Trust Company of
Chicago) (the "Trustee").
WHEREAS, the Company, and Clark Equipment Limited, a
Kentucky corporation, Terex Equipment Limited, an entity
organized under the laws of Scotland, and Clark Equipment GmbH,
an entity organized under the laws of Germany (collectively, the
"Guarantors"), as guarantors, and the Trustee are parties to an
Indenture dated as of June 30, 1987 providing for the issuance of
the Company's 13-1/2% Senior Subordinated Notes due July 1, 1997
(the "Securities"), as amended by the First Supplemental
Indenture dated as of August 24, 1988 and the Second Supplemental
Indenture dated as of July 31, 1992 (together, the "Indenture");
WHEREAS, the Company, the Guarantors and the Trustee
desire to amend the Indenture, pursuant to Section 9.01 thereof,
to correct certain ambiguities, defects and inconsistencies in
the Indenture to the extent permitted by the Trust Indenture Act
of 1939; and
WHEREAS, the definition of "Intangible Assets" as
defined and used in the definition of "Tangible Net Worth" in
Section 1.01 of the Indenture should be clarified so that the
parenthetical in clause (i) thereof includes all write-ups,
capitalized costs and adjustments in connection with the
Acquisition or the financing thereof.
NOW, THEREFORE, the Company, the Guarantors and the
Trustee agree as follows for the equal and ratable benefit of the
Holders of the Securities.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01.
The definition of "Tangible Net Worth" in Section 1.01
of the Indenture is hereby amended by inserting the following
sentence at the end of such definition:
"Notwithstanding any provision herein to the contrary,
Intangible Assets shall not include any write-ups, any
capitalized costs or any adjustments in connection with
the Clark Acquisition or the financing and refinancing
consummated concurrently therewith including, without
limitation, debt discount, issue and financing costs,
goodwill and other intangibles resulting from or
arising in connection with the Clark Acquisition or
such financing and refinancing."
ARTICLE 2
MISCELLANEOUS
Section 2.01.
The amendment to the Indenture effected hereby shall be
binding upon all Holders of the Securities, their transferees and
assigns. All Securities issued and outstanding on the date
hereof shall be deemed to incorporate by reference or include the
amendment to the Indenture effected hereby.
Section 2.02.
All terms used in this Third Supplemental Indenture
which are defined in the Indenture shall have the meanings
specified in the Indenture unless the context of this Third
Supplemental Indenture otherwise requires.
Section 2.03.
This Third Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all
of which shall constitute but one and the same agreement.
Section 2.04.
The recitals contained in this Third Supplemental
Indenture are made by the Company and not by the Trustee and all
of the provisions contained in the Indenture, in respect of the
rights, privileges, immunities, powers and duties of the Trustee
shall be applicable in respect thereof as fully and with like
effect as if set forth herein in full.
<PAGE>
SIGNATURES
Dated as of April 20, 1993 TEREX CORPORATION
By__________________________
Name:
Title:
ATTEST:
____________________________
Dated as of April 20, 1993 CONTINENTAL BANK, NATIONAL
ASSOCIATION
(formerly known as
CONTINENTAL ILLINOIS
NATIONAL BANK AND TRUST
COMPANY OF CHICAGO),
as Trustee
By___________________________
Name:
Title:
ATTEST:
____________________________
<PAGE>
GUARANTORS:
Dated as of April 20, 1993 CLARK EQUIPMENT LIMITED
By:_____________________________
Name:
Title:
ATTEST:
___________________________
TEREX EQUIPMENT LIMITED
By:_____________________________
Name:
Title:
ATTEST:
____________________________
CLARK EQUIPMENT GmbH
By:_____________________________
Name:
Title:
ATTEST:
___________________________
<PAGE>
______________________________________________________________________
______________________________________________________________________
TEREX CORPORATION
$50,000,000
13-1/2% Senior Subordinated Notes
due July 1, 1997
_________________________________
THIRD SUPPLEMENTAL INDENTURE
Dated as of April 20, 1993
________________________________
CONTINENTAL BANK, NATIONAL ASSOCIATION
(FORMERLY KNOWN AS CONTINENTAL ILLINOIS NATIONAL BANK AND
TRUST COMPANY OF CHICAGO), as Trustee
______________________________________________________________________
______________________________________________________________________
FOURTH SUPPLEMENTAL INDENTURE dated as of August __,
1993 between TEREX CORPORATION, a Delaware corporation (the
"Company"), and CONTINENTAL BANK, NATIONAL ASSOCIATION (formerly
known as Continental Illinois National Bank and Trust Company of
Chicago) (the "Trustee").
WHEREAS, the Company, and Clark Equipment Limited, a
Kentucky corporation, Terex Equipment Limited, an entity
organized under the laws of Scotland, and Clark Material Handling
GmbH, an entity organized under the laws of Germany
(collectively, the "Guarantors"), as guarantors, and the Trustee
are parties to an Indenture dated as of June 30, 1987 providing
for the issuance of the Company's 13-1/2% Senior Subordinated Notes
due July 1, 1997 (the "Securities"), as amended by the First
Supplemental Indenture dated as of August 24, 1988, the Second
Supplemental Indenture dated as of July 31, 1992 and the Third
Supplemental Indenture dated as of April 20, 1993 (collectively,
the "Indenture");
WHEREAS, the Company, the Guarantors and the Trustee
desire to amend the Indenture to provide for the maintenance by
the Company of certain amounts of Collateral (as such term is
defined in the Indenture).
NOW, THEREFORE, the Company, the Guarantors and the
Trustee agree as follows for the equal and ratable benefit of the
holders of the Securities ("Holders").
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01.
The Indenture is hereby modified by the addition of a
new Section 4.18 to read in its entirety as follows:
Section 4.18. Maintenance of Collateral
(a) If the Company's Value of the Collateral
(defined below) on the last day of any fiscal quarter (the
"Collateral Deficiency Date") is not greater than the Minimum
Collateral Amount (defined below), then the Company shall, no
later than 65 days after a Collateral Deficiency Date (110 days
if a Collateral Deficiency Date is also the end of the Company's
fiscal year), make an offer to purchase (a "Collateral Offer"),
in cash, (i) first, Senior Secured Notes and (ii) second, if no
Senior Secured Notes are then outstanding, Securities from all
Holders, in either case in an aggregate principal amount equal to
the greater of (i) 10% of the principal amount of Senior Secured
Notes or Securities, as the case may be, issued and outstanding
and (ii) the aggregate principal amount of Senior Secured Notes
or Securities, as the case may be, that if purchased in full
would result in a pro forma Collateral Coverage Ratio as of such
Collateral Deficiency Date of greater than the Minimum Collateral
Amount (the "Collateral Offer Amount"), at a purchase price equal
to 100% of the principal amount thereof, plus accrued interest to
the Collateral Payment Date. Any purchase of Securities pursuant
to a Collateral Offer shall be subject to the subordination
provisions and limitations of Article 10 hereof.
(b) Each Collateral Offer for Securities shall
remain open for a period of twenty (20) Business Days following
its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Collateral
Offer Period"). No later than five (5) Business Days after the
termination of the Collateral Offer Period (the "Collateral
Payment Date"), the Company shall purchase the Securities
tendered, up to the Collateral Offer Amount, or, if less than
such Collateral Offer Amount has been tendered, all Securities
tendered in response to such Collateral Offer.
(c) If the Collateral Payment Date is on or after
a record date with respect to the payment of interest and on or
before the related interest payment date, any accrued interest
will be paid to the person in whose name a Security is registered
at the close of business on such record date, and no additional
interest will be payable to Holders who tender Securities
pursuant to a Collateral Offer.
(d) The Company shall provide the Trustee with
notice of a Collateral Offer for Senior Secured Notes or
Securities, as the case may be, at least ten (10) days before the
notice of any such Collateral Offer is mailed to Holders. In the
event of a Collateral Offer for Senior Secured Notes, the Company
shall also provide the Trustee with a copy of the notice to
holders of Senior Secured Notes (the "Senior Holders") advising
them of the Collateral Offer at such time as the notice of such
Collateral Offer is mailed to Senior Holders.
(e) Upon the commencement of any Collateral Offer
for Securities, the Company or the Trustee shall send, by first
class mail, a notice to each Holder at its registered address as
it appears in the Securities register maintained by the
Registrar. The notice shall, to the extent permitted by
applicable law, be accompanied by a copy of the information
regarding the Company which is (or would be, if the Company were
subject to the reporting requirements of the Securities Exchange
Act of 1934 (the "Exchange Act")) required to be contained in a
Quarterly Report on Form 10-Q for the fiscal quarter ending on
the Collateral Deficiency Date if such fiscal quarter is one of
the Company's first three fiscal quarters. If such fiscal
quarter is the Company's last fiscal quarter, a copy of the
information which is (or would be, if the Company were subject to
the reporting requirements of the Exchange Act) required to be
contained in an Annual Report on Form 10-K (including any
financial statements or other information required to be included
or incorporated by reference therein) for the fiscal year ending
with such fiscal quarter shall either accompany the notice or be
delivered to Holders not less than fifteen (15) days before the
Collateral Payment Date. The notice shall contain all
instructions and materials necessary to enable such Holders to
tender Securities pursuant to such Collateral Offer. The notice,
which shall govern the terms of such Collateral Offer, shall
state:
(1) that the Collateral Offer is being made
pursuant to this Section 4.18 and the length of time the
Collateral Offer will remain open;
(2) the Collateral Offer Amount of Securities
subject to the Collateral Offer, the purchase price
(including the amount of accrued interest) and the
Collateral Payment Date;
(3) that any Security not tendered or accepted
for payment will continue to accrue interest;
(4) that, unless the Company defaults in making
payment therefor, any Security accepted for payment pursuant
to the Collateral Offer shall cease to accrue interest after
the Collateral Payment Date;
(5) that Holders electing to have a Security
purchased pursuant to the Collateral Offer will be required
to surrender the Security with the form entitled "Option of
Holder to Elect Purchase" on the reverse of such Security
completed, to the Paying Agent at the address specified in
the notice before the expiration of the Collateral Offer
Period;
(6) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than
the expiration of the Collateral Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Securities or
Senior Secured Notes such Holder delivered for purchase and
a statement that such Holder is withdrawing his election to
have the Securities purchased;
(7) that, if the aggregate principal amount of
Securities surrendered by Holders exceeds the Collateral
Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustment as may
be deemed appropriate by the Company so that only Securities
in denominations of $1,000, or integral multiples thereof,
shall be purchased); and
(8) that Holders whose Securities were purchased
only in part will be issued new Securities equal in
principal amount to the unpurchased portion of such
Securities surrendered.
Each such Collateral Offer shall comply with all
applicable provisions of Federal and state laws regulating tender
offers, and any provisions of this Indenture that conflict with
such laws shall be deemed to be superseded by the provisions of
such laws.
(f) On or before a Collateral Payment Date, the
Company shall (i) accept for payment on a pro rata basis the
Collateral Offer Amount of Securities tendered pursuant to the
Collateral Offer, or such lesser amount as shall have been
tendered, (ii) deposit with the Paying Agent money sufficient to
pay the purchase price (including accrued interest) of all
Securities or portions thereof so accepted, (iii) deliver or
cause the Paying Agent to deliver to the Trustee, the Securities
so accepted and (iv) deliver to the Trustee an Officers'
Certificate stating that such Securities or portions thereof are
accepted for payment by the Company in accordance with the terms
of this Section 4.18 and that sufficient funds have been
deposited with the Paying Agent to pay the purchase price
(including accrued interest) of such Securities or portions
thereof accepted for payment. The Paying Agent shall promptly
(but in any case not later than five (5) days after the
Collateral Payment Date) mail or deliver to each tendering Holder
an amount equal to the purchase price (including accrued
interest) of the Securities tendered by such Holder and accepted
by the Company for payment, and the Trustee shall promptly
authenticate and mail or deliver to such Holders new Securities
equal in principal amount to any unpurchased portion of the
Securities surrendered. Any Securities not so accepted shall be
promptly mailed or delivered by the Company to the respective
Holders thereof. The Company will, or will cause the Trustee to,
notify the Holders of the results of the Collateral Offer on the
Collateral Payment Date.
(g) In the event that upon completion of a
Collateral Offer the Value of the Collateral is not at least
equal to the Minimum Aggregate Value, the Company shall take such
action as may be necessary to cause the Value of the Collateral
to be equal to or greater than the Minimum Aggregate Value.
(h) "Collateral Coverage Ratio" means, at any
date, the ratio of (x) the aggregate value, on such date, of the
net inventory, net fixed assets and securities of Fruehauf
("Fruehauf Securities") that constitute Collateral securing the
Securities pursuant to valid and continuing first priority
perfected Liens, calculated in the following manner: (i) net
inventory and net fixed assets shall be valued at the net book
value thereof, as determined in accordance with GAAP and
reflected on the consolidated balance sheet of the Company as at
such date; provided that net inventory shall be adjusted to
exclude the effect of any LIFO reserves; and (ii) Fruehauf
Securities shall be valued (A) in the case of Common Stock, par
value $.01 per share, at the average of the daily Closing Price
for the thirty (30) consecutive trading days prior to such date
(after adjusting for all reclassifications, stock-splits, stock
dividends or distributions, and similar actions) (the "Fair
Market Value"), (B) in the case of securities exercisable for
such Common Stock (other than securities representing
indebtedness or preferred stock), at the Fair Market Value of the
number of shares of such Common Stock for which such securities
may be exercised less the applicable aggregate exercise price,
(C) in the case of indebtedness of Fruehauf, at the lower of the
book value (as reflected on the consolidated financial statements
of the Company in accordance with GAAP), principal amount or face
amount thereof and (D) in the case of preferred stock of
Fruehauf, at the lower of book value (as reflected on the
consolidated financial statements of the Company in accordance
with GAAP), liquidation preference or redemption price (the
"Value of the Collateral") to (y) the greater of (i) the
aggregate principal amount of Securities outstanding on such date
and (ii) the aggregate principal amount of Senior Secured Notes
outstanding on such date.
(i) "Minimum Collateral Amount" means a Value of
the Collateral equal to the greater of (i) an amount resulting in
a 1.75 Collateral Coverage Ratio and (ii) an amount (the "Minimum
Aggregate Value") equal to or greater than 115% of the aggregate
principal amount of and accrued interest on the Securities and
Senior Secured Notes then outstanding.
(j) "Closing Price" means for any trading day:
(i) if the Fruehauf Common Stock is then traded on a
national securities exchange (A) its last sales price on such
date, or (B) if there was no sale on such date, the last sales
price on the next preceding trading day on which there was a
sale, all as made available over the Consolidated Last Sale
Reporting System of Consolidated Tape Association Plan, or (C) if
the Fruehauf Common Stock is not then eligible for reporting over
such system, its last sales price on such national securities
exchange or, if there was no sale on such date, on the next
preceding trading day on which there was a sale on such exchange;
or
(ii) if the Fruehauf Common Stock is not then traded on
a national securities exchange but is quoted on the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), (A) the last sale price reported on NASDAQ or (B) if
the Fruehauf Common Stock is a security for which last sale
prices are not reported on NASDAQ, the average of the closing bid
and asked quotations, in each case on such date; provided, that
if the relevant NASDAQ price or quotation did not exist on such
date, then the price or quotation on the next preceding trading
day on which there was such a price or quotation; or
(iii) if the Fruehauf Common Stock is not then traded on
a national securities exchange or quoted on NASDAQ, the average
of the bid and asked quotations as quoted in any of The Wall
Street Journal, the National Quotation Bureau, Inc. pink sheets,
quotation sheets of registered market makers and, if necessary,
dealers' quotations; or if a Closing Price as of such date cannot
be determined on the basis of any of the foregoing methods of
valuation, the Current Market Price as of such date of
determination shall be determined in good faith by an independent
investment banking firm of nationally recognized standing.
ARTICLE 2
MISCELLANEOUS
Section 2.01.
The amendment to the Indenture effected hereby shall be
binding upon all Holders of the Securities, their transferees and
assigns. All Securities issued and outstanding on the date
hereof shall be deemed to incorporate by reference or include the
amendment to the Indenture effected hereby.
Section 2.02.
All terms used in this Fourth Supplemental Indenture
which are defined in the Indenture shall have the meanings
specified in the Indenture unless the context of this Fourth
Supplemental Indenture otherwise requires.
Section 2.03.
This Fourth Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all
of which shall constitute but one and the same agreement.
Section 2.04.
The recitals contained in this Fourth Supplemental
Indenture are made by the Company and not by the Trustee and all
of the provisions contained in the Indenture, in respect of the
rights, privileges, immunities, powers and duties of the Trustee
shall be applicable in respect thereof as fully and with like
effect as if set forth herein in full.
SIGNATURES
Dated as of August __, 1993 TEREX CORPORATION
By:__________________________
Name:
Title:
ATTEST:
____________________________
Dated as of August __, 1993 CONTINENTAL BANK, NATIONAL
ASSOCIATION
(formerly known as
CONTINENTAL ILLINOIS
NATIONAL BANK AND TRUST
COMPANY OF CHICAGO),
as Trustee
By:___________________________
Name:
Title:
ATTEST:
____________________________
<PAGE>
GUARANTORS:
Dated as of August __, 1993 CLARK EQUIPMENT LIMITED
By:_____________________________
Name:
Title:
ATTEST:
___________________________
TEREX EQUIPMENT LIMITED
By:_____________________________
Name:
Title:
ATTEST:
____________________________
CLARK MATERIAL HANDLING GmbH
(formerly known as Clark Equipment
GmbH)
By:_____________________________
Name:
Title:
ATTEST:
___________________________
<PAGE>
______________________________________________________________________
______________________________________________________________________
TEREX CORPORATION
$50,000,000
13-1/2% Senior Subordinated Notes
due July 1, 1997
_________________________________
FOURTH SUPPLEMENTAL INDENTURE
Dated as of August __, 1993
________________________________
CONTINENTAL BANK, NATIONAL ASSOCIATION
(FORMERLY KNOWN AS CONTINENTAL ILLINOIS NATIONAL BANK AND
TRUST COMPANY OF CHICAGO), as Trustee
______________________________________________________________________
______________________________________________________________________
SECOND SUPPLEMENTAL INDENTURE dated as of April 20,
1993 between TEREX CORPORATION, a Delaware corporation (the
"Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New
York corporation (the "Trustee").
WHEREAS, the Company, and Clark Material Handling
Company, a Kentucky corporation, Terex Equipment Limited, an
entity organized under the laws of Scotland and Clark Equipment
GmbH, an entity organized under the laws of Germany
(collectively, the "Guarantors"), as guarantors, and the Trustee
have executed an Indenture dated as of July 31, 1992 providing
for the issuance of the Company's 13% Senior Secured Notes due
August 1, 1996 (the "Securities"), as amended by the First
Supplemental Indenture dated as of November 1, 1992 (together,
the "Indenture");
WHEREAS, the Company, the Guarantors and the Trustee
desire to amend the Indenture, pursuant to Section 9.01 thereof,
to correct certain ambiguities, defects and inconsistencies in
the Indenture to the extent permitted by the Trust Indenture Act
of 1939; and
WHEREAS, the definition of "Intangible Assets" in
Section 1.01 of the Indenture should be clarified so that the
parenthetical in clause (i) thereof includes all write-ups,
capitalized costs and adjustments in connection with the
Acquisition or the financing thereof.
NOW, THEREFORE, the Company, the Guarantors and the
Trustee agree as follows for the equal and ratable benefit of the
Holders of the Securities.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01.
The definition of "Intangible Assets" in Section 1.01
of the Indenture is hereby amended by inserting the following
sentence at the end of such definition:
"Notwithstanding any provision herein to the contrary,
Intangible Assets shall not include any write-ups, any
capitalized costs or any adjustments in connection with
the Acquisition or the financing and refinancing
consummated concurrently therewith including, without
limitation, debt discount, issue and financing costs,
goodwill and other intangibles resulting from or
arising in connection with the Acquisition or such
financing and refinancing."
ARTICLE 2
MISCELLANEOUS
Section 2.01.
The amendment to the Indenture effected hereby shall be
binding upon all Holders of the Securities, their transferees and
assigns. All Securities issued and outstanding on the date
hereof shall be deemed to incorporate by reference or include the
amendment to the Indenture effected hereby.
Section 2.02.
All terms used in this Second Supplemental Indenture
which are defined in the Indenture shall have the meanings
specified in the Indenture unless the context of this Second
Supplemental Indenture otherwise requires.
Section 2.03.
This Second Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all
of which shall constitute but one and the same agreement.
Section 2.04.
The recitals contained in this Second Supplemental
Indenture are made by the Company and not by the Trustee and all
of the provisions contained in the Indenture, in respect of the
rights, privileges, immunities, powers and duties of the Trustee
shall be applicable in respect thereof as fully and with like
effect as if set forth herein in full.
<PAGE>
SIGNATURES
Dated as of April 20, 1993 TEREX CORPORATION
By__________________________
Name:
Title:
ATTEST:
____________________________
Dated as of April 20, 1993 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By___________________________
Name:
Title:
ATTEST:
____________________________
<PAGE>
GUARANTORS:
Dated as of April 20, 1993 CLARK MATERIAL HANDLING COMPANY
By:_____________________________
Name:
Title:
ATTEST:
___________________________
TEREX EQUIPMENT LIMITED
By:_____________________________
Name:
Title:
ATTEST:
____________________________
CLARK EQUIPMENT GmbH
By:_____________________________
Name:
Title:
ATTEST:
___________________________
<PAGE>
______________________________________________________________________
______________________________________________________________________
TEREX CORPORATION
$160,000,000
13% Senior Secured Notes
due August 1, 1996
_________________________________
SECOND SUPPLEMENTAL INDENTURE
Dated as of April 20, 1993
________________________________
UNITED STATES TRUST COMPANY OF NEW YORK
______________________________________________________________________
______________________________________________________________________
FIRST AMENDMENT TO SECURITY
AGREEMENT
First Amendment to Security Agreement dated as of
January 1, 1993 between Clark Material Handling Company, a
Kentucky corporation (the "Company") and United States Trust
Company of New York, a New York banking corporation, as
collateral agent (the "Collateral Agent").
WHEREAS, the Company and the Collateral Agent have
executed a Security Agreement dated as of July 31, 1992 (the
"Security Agreement");
WHEREAS, the Company and the Collateral Agent desire to
amend the Security Agreement in accordance with the provisions of
Section 9.01 of the Indenture dated as of July 31, 1992 (the
"Indenture") among Terex Corporation, a Delaware corporation, and
the Company, Terex Equipment Limited, an entity organized under
the laws of Scotland and Clark Equipment GmbH, an entity
organized under the laws of Germany, as guarantors, and the
Collateral Agent, as trustee, to correct certain ambiguities,
defects and inconsistencies in the Security Agreement;
WHEREAS, Section 4.13 of the Security Agreement should
be clarified to provide that for the ability of the Company to
dispose of assets in accordance with Section 4.12 of the
Indenture;
NOW, THEREFORE, the Company and the Collateral Agent
agree as follows:
1. Section 4.13 of the Security Agreement is hereby
amended to insert the word "and" at the end of clause (b)(i)
thereof and to delete clause (iii) thereof in its entirety and
insert the following in its place and stead:
"(c) the disposition of Collateral as provided for
in and in accordance with the provisions of Section
4.12 of the Indenture. In the event of a sale,
transfer, lease or other disposition of any of the
Collateral permitted by this Section 4.13, the
Collateral Agent shall execute such documents as shall
be required to evidence the release of the lien created
by this Security Agreement on such Collateral and, to
the extent such Collateral is in the possession of the
Collateral Agent, deliver such Collateral to the
Company or its designee."
<PAGE>
2. The recitals contained in this First Amendment to
Security Agreement are made by the Company and not by the
Collateral Agent and all of the provisions contained in the
Security Agreement, in respect of the rights, privileges,
immunities, powers and duties of the Collateral Agent shall be
applicable in respect thereof as fully and with like effect as if
set forth herein in full.
3. This First Amendment to Security Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and same
agreement.
IN WITNESS WHEREOF, the Company and the Collateral
Agent have caused this First Amendment to Security and Pledge
Agreement to be duly executed and delivered as of the date first
above written.
CLARK MATERIAL HANDLING COMPANY
By:
Marvin B. Rosenberg,
Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Collateral Agent
By:
Name:
Title:
FIRST AMENDMENT TO SECURITY
AGREEMENT
First Amendment to Security Agreement dated as of
January 1, 1993 between Clarklift of Western Michigan, Inc., a
Michigan corporation (the "Company") and United States Trust
Company of New York, a New York banking corporation, as
collateral agent (the "Collateral Agent").
WHEREAS, the Company and the Collateral Agent have
executed a Security Agreement dated as of July 31, 1992 (the
"Security Agreement");
WHEREAS, the Company and the Collateral Agent desire to
amend the Security Agreement in accordance with the provisions of
Section 9.01 of the Indenture dated as of July 31, 1992 (the
"Indenture") among Terex Corporation, a Delaware corporation, and
Clark Material Handling Company, a Kentucky corporation, Terex
Equipment Limited, an entity organized under the laws of Scotland
and Clark Equipment GmbH, an entity organized under the laws of
Germany, as guarantors, and the Collateral Agent, as trustee, to
correct certain ambiguities, defects and inconsistencies in the
Security Agreement;
WHEREAS, Section 4.13 of the Security Agreement should
be clarified to provide that for the ability of the Company to
dispose of assets in accordance with Section 4.12 of the
Indenture;
NOW, THEREFORE, the Company and the Collateral Agent
agree as follows:
1. Section 4.13 of the Security Agreement is hereby
amended to insert the word "and" at the end of clause (b)(i)
thereof and to delete clause (iii) thereof in its entirety and
insert the following in its place and stead:
"(c) the disposition of Collateral as provided for
in and in accordance with the provisions of Section
4.12 of the Indenture. In the event of a sale,
transfer, lease or other disposition of any of the
Collateral permitted by this Section 4.13, the
Collateral Agent shall execute such documents as shall
be required to evidence the release of the lien created
by this Security Agreement on such Collateral and, to
the extent such Collateral is in the possession of the
Collateral Agent, deliver such Collateral to the
Company or its designee."
2. The recitals contained in this First Amendment to
Security Agreement are made by the Company and not by the
Collateral Agent and all of the provisions contained in the
Security Agreement, in respect of the rights, privileges,
immunities, powers and duties of the Collateral Agent shall be
applicable in respect thereof as fully and with like effect as if
set forth herein in full.
3. This First Amendment to Security Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and same
agreement.
IN WITNESS WHEREOF, the Company and the Collateral
Agent have caused this First Amendment to Security Agreement to
be duly executed and delivered as of the date first above
written.
CLARKLIFT OF WESTERN MICHIGAN, INC.
By:
Marvin B. Rosenberg,
Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Collateral Agent
By:
Name:
Title:
FIRST AMENDMENT TO SECURITY
AGREEMENT
First Amendment to Security Agreement dated as of
January 1, 1993 between Clark Components International, Inc., a
Michigan corporation (the "Company") and United States Trust
Company of New York, a New York banking corporation, as
collateral agent (the "Collateral Agent").
WHEREAS, the Company and the Collateral Agent have
executed a Security Agreement dated as of July 31, 1992 (the
"Security Agreement");
WHEREAS, the Company and the Collateral Agent desire to
amend the Security Agreement in accordance with the provisions of
Section 9.01 of the Indenture dated as of July 31, 1992 (the
"Indenture") among Terex Corporation, a Delaware corporation, and
Clark Material Handling Company, a Kentucky corporation, Terex
Equipment Limited, an entity organized under the laws of Scotland
and Clark Equipment GmbH, an entity organized under the laws of
Germany, as guarantors, and the Collateral Agent, as trustee, to
correct certain ambiguities, defects and inconsistencies in the
Security Agreement;
WHEREAS, Section 4.13 of the Security Agreement should
be clarified to provide that for the ability of the Company to
dispose of assets in accordance with Section 4.12 of the
Indenture;
NOW, THEREFORE, the Company and the Collateral Agent
agree as follows:
1. Section 4.13 of the Security Agreement is hereby
amended to insert the word "and" at the end of clause (b)(i)
thereof and to delete clause (iii) thereof in its entirety and
insert the following in its place and stead:
"(c) the disposition of Collateral as provided for
in and in accordance with the provisions of Section
4.12 of the Indenture. In the event of a sale,
transfer, lease or other disposition of any of the
Collateral permitted by this Section 4.13, the
Collateral Agent shall execute such documents as shall
be required to evidence the release of the lien created
by this Security Agreement on such Collateral and, to
the extent such Collateral is in the possession of the
Collateral Agent, deliver such Collateral to the
Company or its designee."
2. The recitals contained in this First Amendment to
Security Agreement are made by the Company and not by the
Collateral Agent and all of the provisions contained in the
Security Agreement, in respect of the rights, privileges,
immunities, powers and duties of the Collateral Agent shall be
applicable in respect thereof as fully and with like effect as if
set forth herein in full.
3. This First Amendment to Security Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and same
agreement.
IN WITNESS WHEREOF, the Company and the Collateral
Agent have caused this First Amendment to Security Agreement to
be duly executed and delivered as of the date first above
written.
CLARK COMPONENTS INTERNATIONAL, INC.
By:
Marvin B. Rosenberg,
Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Collateral Agent
By:
Name:
Title:
FIRST AMENDMENT TO SECURITY
AGREEMENT
First Amendment to Security Agreement dated as of
January 1, 1993 between Drexel Industries, Inc., a Pennsylvania
corporation (the "Company") and United States Trust Company of
New York, a New York banking corporation, as collateral agent
(the "Collateral Agent").
WHEREAS, the Company and the Collateral Agent have
executed a Security Agreement dated as of July 31, 1992 (the
"Security Agreement");
WHEREAS, the Company and the Collateral Agent desire to
amend the Security Agreement in accordance with the provisions of
Section 9.01 of the Indenture dated as of July 31, 1992 (the
"Indenture") among Terex Corporation, a Delaware corporation, and
Clark Material Handling Company, a Kentucky corporation, Terex
Equipment Limited, an entity organized under the laws of Scotland
and Clark Equipment GmbH, an entity organized under the laws of
Germany, as guarantors, and the Collateral Agent, as trustee, to
correct certain ambiguities, defects and inconsistencies in the
Security Agreement;
WHEREAS, Section 4.13 of the Security Agreement should
be clarified to provide that for the ability of the Company to
dispose of assets in accordance with Section 4.12 of the
Indenture;
NOW, THEREFORE, the Company and the Collateral Agent
agree as follows:
1. Section 4.13 of the Security Agreement is hereby
amended to insert the word "and" at the end of clause (b)(i)
thereof and to delete clause (iii) thereof in its entirety and
insert the following in its place and stead:
"(c) the disposition of Collateral as provided for
in and in accordance with the provisions of Section
4.12 of the Indenture. In the event of a sale,
transfer, lease or other disposition of any of the
Collateral permitted by this Section 4.13, the
Collateral Agent shall execute such documents as shall
be required to evidence the release of the lien created
by this Security Agreement on such Collateral and, to
the extent such Collateral is in the possession of the
Collateral Agent, deliver such Collateral to the
Company or its designee."
<PAGE>
2. The recitals contained in this First Amendment to
Security Agreement are made by the Company and not by the
Collateral Agent and all of the provisions contained in the
Security Agreement, in respect of the rights, privileges,
immunities, powers and duties of the Collateral Agent shall be
applicable in respect thereof as fully and with like effect as if
set forth herein in full.
3. This First Amendment to Security Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and same
agreement.
IN WITNESS WHEREOF, the Company and the Collateral
Agent have caused this First Amendment to Security Agreement to
be duly executed and delivered as of the date first above
written.
DREXEL INDUSTRIES, INC.
By:
Marvin B. Rosenberg,
Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Collateral Agent
By:
Name:
Title:
WARRANT AGREEMENT, dated as of December 20, 1993, between
TEREX CORPORATION, a Delaware corporation (the "Company"), and
Mellon Securities Trust Company, a corporation organized and
existing under the laws of the State of New York, as Warrant
Agent (the "Warrant Agent").
Each party hereto agrees as follows:
The Company hereby appoints the Warrant Agent, and the Warrant
Agent hereby agrees, to act as agent for the Company in
accordance with the instructions set forth in this Agreement in
connection with the issuance, division, transfer and exercise of
the Company's Common Stock Purchase Warrants (the "Warrants"),
issued pursuant to the Purchase Agreement, dated as of the date
hereof, among the Company and the purchasers named on the
execution pages thereof (the "Purchase Agreement").
SECTION 1. Certain Definitions. Unless the context otherwise
requires, the terms set forth below shall have the meanings
herein specified:
"Adjustment Factor" on any date shall mean the product of (a)
0.005 times (b) the integer obtained by (i) dividing (x) the
number of Event Days occurring on or prior to such date by (y)
thirty days and (ii) discarding the remainder, if any.
"Closing Price" on any day shall mean the per share closing
sale price of the Common Stock, regular way, on such day or, in
case no such sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in each case
on the principal national securities exchange or quotation
system on which the Common Stock is quoted or listed or admitted
to trading or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the
average of the closing bid and asked prices of the Common Stock
on the over-the-counter market on such day as reported by the
National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or if not so available, in such
manner as furnished by any nationally recognized New York Stock
Exchange member firm selected from time to time by the Board of
Directors of the Company in good faith for that purpose.
"Common Stock" shall mean all shares now or hereafter
authorized of any class of common stock of the Company and any
other stock of the Company, howsoever designated, authorized
after the date hereof, which has the right (subject always to
prior rights of any class or series of preferred stock) to
participate in the distribution of the assets and earnings of
the Company without limit as to per share amount.
"Current Market Price" per share of Common Stock on any date
shall mean the average of the daily Closing Prices with respect
to the Common Stock for the thirty consecutive trading days
ending on such date (or, if such date is not a trading day, on
the trading day immediately preceding such date); provided,
however, that if there shall have occurred prior to such date
any event described in Section 9.1 that shall have become
effective at any time during such thirty trading day period, the
Closing Price shall be adjusted, for purposes of calculating
such average, to ensure that the effect of such event on the
market price of the Common Stock shall, as nearly as possible,
be eliminated in order that the distortion in the calculation of
the Current Market Price may be minimized. Notwithstanding the
foregoing, if the Common Stock is not publicly traded, the
Current Market Price shall be determined by a nationally
recognized investment banking firm selected by the Board of
Directors of the Company.
"Determination Date" shall mean with respect to any dividend
or other distribution, the date fixed for the determination of
the holders of shares of Common Stock entitled to receive such
dividend or distribution, or if a dividend or distribution is
paid or made without fixing such a date, the date of such
dividend or distribution.
"Effectiveness Date" shall mean the 90th day following the
date hereof.
"Effectiveness Period" shall mean the period during which a
registration statement relating to the Warrants is required to
be maintained effective pursuant to the Registration Rights
Agreement.
"Event" shall be deemed to occur if (i) the Shelf Registration
Statement has not been filed on or prior to the Filing Date;
(ii) the Shelf Registration Statement has not become effective
on or prior to the Effectiveness Date; or (iii) prior to the end
of the Effectiveness Period, the SEC shall have issued a stop
order suspending the effectiveness of the Shelf Registration
Statement.
"Event Day" shall mean any day if on or prior to such day one
or more Events shall have occurred with respect to which there
has not yet been an Event Termination Date.
"Event Termination Date" shall mean, with respect to any
Event, the date on which the Shelf Registration Statement is (a)
filed, in the case of an Event described in clause (i) of the
definition thereof, (b) declared effective, in the case of an
Event described in clause (ii) of the definition thereof, or (c)
no longer subject to an order suspending the effectiveness
thereof, in the case of an Event described in clause (iii) of
the definition thereof.
"Exercise Price" shall mean the per share exercise price of
the Warrants, which in the case of Common Stock shall be $.01
per share and in the case of all other Warrant Shares shall be
the lowest exercise price permitted by law.
"Filing Date" shall mean the 30th day following the date
hereof.
"Holder" shall mean a registered owner of the Warrants.
"Liquidation" shall mean the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Company.
"Pre-adjustment Ratio" shall mean (a) 3.0 shares of Common
Stock if the Current Market Price of a share of Common Stock on
the Warrant Ratio Determination Date is $5 or less; (b) a number
of shares of Common Stock determined in accordance with Schedule
1 hereto if such Current Market Price is greater than $5 but
less than $18; and (c) 1.0 shares of Common Stock if such
Current Market Price is $18 or more.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of the date hereof, relating to the
registration of the Warrants and the Warrant Shares.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
"Shelf Registration Statement" shall mean the registration
statement of the Company relating to the Warrants and the
Warrant Shares that is required to be filed pursuant to the
Registration Rights Agreement.
"Warrant Ratio Determination Date" shall mean the date
designated as such by the Board of Directors of the Company
pursuant to a duly adopted resolution of the Board, which date
shall be a trading day during the twelve month period beginning
on the date hereof or, if no such date is designated, the last
day of such twelve month period; provided, that if the Board of
Directors has not yet designated a Warrant Ratio Determination
Date and the Current Market Price of a share of Common Stock
equals or exceeds $18 on any date during such twelve month
period, "Warrant Ratio Determination Date" shall mean such date.
"Warrant Ratio" shall mean the number of Warrant Shares
issuable upon exercise or redemption of a single Warrant, which
shall mean the product of (a) the Pre-adjustment Ratio times (b)
the sum of one plus the Adjustment Factor, as such product is
adjusted from time to time in accordance with Section 9 hereof.
"Warrant Shares" shall mean the shares of Common Stock and
other consideration, if any, issuable upon exercise of the
Warrants, as determined in accordance with the terms hereof.
SECTION 2. Warrant Certificates.
2.1 Form of Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") shall be substantially in
the form set forth as Exhibit A hereto. Each such certificate
shall be marked with the legends set forth in Section 2.4
hereof. The Warrant Certificates may have such letters, numbers
or other marks of identification or designation and such
legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as
may be required to comply with any law, or with any rule or
regulation made pursuant thereto, or with any rule or regulation
of any stock exchange on which the Common Stock or the Warrants
may be listed.
2.2 Execution. Warrant Certificates shall be executed on
behalf of the Company by its Chairman of the Board, President,
Executive or Senior Vice President or Chief Financial Officer,
attested by its Secretary or an Assistant Secretary. The
signature of any of such officers may be manual or facsimile.
Warrant Certificates bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that any of such
individuals shall have ceased to hold such offices prior to the
delivery of such Warrant Certificates or did not hold such
offices on the date of this Agreement.
2.3. Countersignature and Dating. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be
valid for any purpose unless so countersigned. Such
countersignature shall be valid and binding, notwithstanding
that the persons whose signatures appear thereon as authorized
signers of the Warrant Agent shall have ceased to be such
authorized signers at the time of such countersignature,
issuance or delivery. Warrant Certificates shall be dated as of
the date of countersignature thereof by the Warrant Agent.
2.4. Legend. (a) A copy of this Agreement shall be filed with
the Secretary of the Company and shall be kept at its principal
executive office. Each Warrant Certificate shall carry a legend
as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS AND ENTITLED TO THE BENEFITS OF A WARRANT
AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF
DECEMBER 20, 1993. A COPY OF EACH SUCH AGREEMENT IS ON FILE AT
THE OFFICES OF THE COMPANY.
(b) So long as required thereunder, each Warrant Certificate
shall carry the legend required pursuant to Section 2.3(c) of
the Purchase Agreement.
SECTION 3. Registration, Transfer and Exchange.
3.1 Registration. The Warrant Certificates shall be numbered
and shall be registered in the books of the Company (the
"Warrant Register") maintained at the principal office of the
Warrant Agent at the address specified in Section 17 hereof.
The Company and the Warrant Agent shall be entitled to treat the
Holder of any Warrant whose name appears in the Warrant Register
as the owner in fact thereof for all purposes (notwithstanding
any notation of ownership or other writing thereon made by
anyone or any notice to the contrary).
3.2 Transfer. The Warrants shall be transferable only on the
Warrant Register, upon delivery thereof, accompanied by a
written instrument or instruments of transfer in form reasonably
acceptable to the Warrant Agent, duly executed by the registered
Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon
any registration of transfer, the Warrant Agent shall (a)
countersign and deliver a new Warrant Certificate evidencing the
Warrant or Warrants to the persons entitled thereto and (b)
cancel the surrendered Warrant Certificate. If a Holder desires
to transfer a Warrant bearing the legend required pursuant to
Section 2.3(c) of the Purchase Agreement (other than pursuant to
an effective registration statement under the Securities Act or
pursuant to Rule 144A) such Holder shall deliver to the Company
a written opinion of counsel (which may be an employee of such
Holder), reasonably satisfactory in form and substance to the
Company, that an exemption from the registration requirements of
the Securities Act is available.
3.3 Exchange. Each Warrant Certificate may be exchanged at
the option of the Holder thereof for another Warrant Certificate
or Certificates of like tenor and representing in the aggregate
a like number of Warrants. Any Holder desiring to exchange a
Warrant Certificate shall make such request in writing delivered
to the Warrant Agent, and shall surrender the Warrant
Certificate to be so exchanged at the principal office of the
Warrant Agent. Thereupon, the Warrant Agent shall (a)
countersign and deliver to the person entitled thereto a new
Warrant Certificate or Certificates as so requested and (b)
cancel the Warrant Certificate surrendered for exchange.
SECTION 4. Term of Warrants; Exercise of Warrants.
4.1 Term of Warrants.
(a) Subject to the terms of this Agreement, each Warrant may
be exercised at any time in whole and from time to time in part,
at the option of the Holder thereof, commencing at the opening
of business on the day following the Warrant Ratio Determination
Date until 5:00 p.m. New York time on December 31, 2000 (the
"Expiration Date").
(b) The Company shall mail written notice to each holder of
Warrants of (i) the Board's designation, if any, of the Warrant
Ratio Determination Date on or prior to the twenty fifth (25th)
trading day prior to the Warrant Ratio Determination Date and
(ii) the Warrant Ratio as of the Warrant Ratio Determination
Date on or prior to the fifth (5th) day following the Warrant
Ratio Determination Date.
4.2 Exercise of Warrants. A Warrant may be exercised upon (i)
surrender of the Warrant Certificate at the principal office of
the Warrant Agent as identified in Section 17 hereof, with the
form of election to purchase on the reverse thereof duly
completed and signed and (ii) payment of the Exercise Price with
respect to the Warrant Shares being purchased. Payment of the
aggregate Exercise Price shall be made by certified or bank
check payable to the order of the Company.
Upon each exercise of a Warrant, the Company shall issue and
cause to be delivered promptly upon such exercise (and in any
event within five (5) trading days) to, or upon the written
order of, the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full
Warrant Shares to which such Holder shall be entitled, together
with cash, as provided in Section 10 hereof, in lieu of any
fraction of a Warrant Share. Such certificate or certificates
shall be deemed to have been issued and any person so designated
to be named the person or persons entitled to receive the
Warrant Shares issuable upon exercise of the Warrants therein
shall be deemed to have become a holder of record of such
Warrant Shares for all purposes as of the date of the surrender
of such Warrant Certificate and payment of the Exercise Price.
If a Warrant Certificate is exercised in respect of less than
all of the Warrant Shares purchasable on such exercise at any
time prior to the date of expiration of the Warrants, a new
Warrant Certificate evidencing the remaining Warrant or Warrants
will be issued to the Holder, or its nominee(s), without charge
therefor, and the Warrant Agent shall countersign and deliver
the required new Warrant Certificate or Certificates pursuant to
the provisions of this Section 4 and of Section 3 hereof. All
Warrant Certificates surrendered in the exercise of the rights
thereby evidenced shall be cancelled by the Warrant Agent.
SECTION 5. Payment of Taxes. The Company shall pay all
documentary, stamp, transfer and other taxes (other than taxes
on income of the holders of Warrants) and other governmental
charges attributable to the issuance or delivery of the Warrants
or upon the issuance or delivery of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall
not be required to pay any taxes payable in respect of any
transfer involved in the issuance or delivery of any Warrants or
Warrant Shares in a name other than that of the registered
Holder of Warrants surrendered or in respect of which such
Warrant Shares are issued.
SECTION 6. Mutilated or Missing Warrants. If any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, and the Warrant Agent shall countersign and
deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or
destroyed, and upon receipt of evidence to their reasonable
satisfaction of the destruction, loss or theft of any Warrant
Certificate and such security or indemnity as may reasonably be
required by them to save each of them and any of their agents
harmless, to issue a new Warrant Certificate of like tenor and
representing an equivalent right or interest.
SECTION 7. Reservation of Warrant Shares; Obtaining of
Governmental Approvals and Stock Exchange Listings.
7.1 Reservation of Warrant Shares. The Company shall at all
times keep reserved and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock or
authorized Common Stock held in treasury, a number of shares of
Common Stock and, in the case of any adjustment made pursuant to
Section 9, other securities, if any, sufficient to provide for
the exercise of the outstanding Warrants.
The transfer agent for the Common Stock and every subsequent
transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants shall be irrevocably
authorized and directed at all times to reserve the maximum
number of authorized shares as shall be required for such
purpose. The Company shall keep a copy of this Agreement on
file with the transfer agent for the Common Stock and with every
subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such transfer agent the stock
certificates required to honor outstanding Warrants upon
exercise thereof in accordance with the terms hereof. The
Company shall supply such transfer agent with duly executed
stock certificates for such purposes and shall provide or
otherwise make available any cash that may be payable as
provided in Section 10 hereof.
Before taking any action that would cause an adjustment
pursuant to Section 9, the Company will take all corporate
action that, in the opinion of its counsel (which may be counsel
employed by the Company), may be necessary in order that the
Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price. The Company
covenants that all Warrant Shares issued upon exercise of the
Warrants will, upon issuance in accordance with the terms of
this Agreement, be fully paid and nonassessable and free from
all taxes, liens, charges and security interests with respect to
the issuance thereof that may be created by virtue of any act or
omission of the Company.
7.2 Governmental Approvals and Stock Exchange Listings . The
Company will use its best efforts to (a) obtain and keep
effective any and all permits, consents and approvals of
governmental agencies and authorities and to make securities
acts filings under federal and state laws, that are required in
connection with the issuance, sale, transfer and delivery of the
Warrant Certificates, the exercise or conversion of the
Warrants, and the issuance, sale, transfer and delivery of the
Warrant Shares issued upon exercise or conversion of the
Warrants, and (b) have the Warrant Shares, immediately upon
their issuance, listed on each securities exchange on which the
Common Stock is then listed.
SECTION 8. Cancellation of Warrants. If the Company purchases
or otherwise acquires Warrants, the same shall thereupon be
delivered to the Warrant Agent to be cancelled. The Warrant
Agent shall cancel any Warrant surrendered for exchange,
substitution, transfer or exercise in whole or in part.
Cancelled Warrant Certificates shall thereafter be disposed of
in a manner satisfactory to the Company.
SECTION 9. Adjustment of Warrant Ratio. The Warrant Ratio
shall be subject to adjustment from time to time as follows:
9.1 Mechanical Adjustments.
(a) Common Stock Dividends. If the Company shall fix a
Determination Date with respect to the payment or making of a
dividend or other distribution on its Common Stock exclusively
in shares of Common Stock, then, immediately after the
Determination Date with respect to such dividend, the Warrant
Ratio shall be adjusted so that the Holder of any Warrant
exercised after such time shall be entitled to receive the sum
of (A) the Warrant Shares that, if such Warrant had been
exercised immediately prior to such Determination Date, such
Holder would have received upon such exercise and (B) the number
of shares of Common Stock that such Holder would have been
entitled to receive by virtue of such dividend if such Warrant
had been exercised immediately prior to such Determination Date.
(b) Rights. If the Company shall fix a Determination Date
with respect to the making of a dividend or other distribution
on its Common Stock, consisting exclusively of rights or
warrants entitling the holders thereof to subscribe for or
purchase, during a period not exceeding 45 days from the date of
such dividend or other distribution, shares of Common Stock at a
price per share less than the Current Market Price per share of
Common Stock on the Determination Date, the Warrant Ratio in
effect as of the opening of business on the day following the
Determination Date shall be increased by multiplying such
Warrant Ratio by a fraction (A) the numerator of which shall be
the sum of (x) the number of shares of Common Stock outstanding
at the close of business on the Determination Date plus (y) the
number of shares of Common Stock so offered for subscription or
purchase and (B) the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding at the
close of business on the Determination Date plus (y) the number
of shares of Common Stock that the aggregate maximum offering
price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such Current
Market Price. To the extent such rights or warrants expire and,
as a result, shares of Common Stock issuable upon exercise
thereof will not be delivered, the Warrant Ratio shall be
readjusted to the Warrant Ratio that would then be in effect had
the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number
of shares of Common Stock actually issued upon exercise thereof.
If such rights or warrants are not so issued, the Warrant Ratio
shall again be adjusted to be the Warrant Ratio that would then
be in effect if such Determination Date had not been fixed.
(c) Stock-Splits, etc. If outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common
Stock or combined into a smaller number of shares of Common
Stock, the Warrant Ratio in effect at the opening of business on
the day following the day upon which such subdivision or
combination becomes effective shall be proportionally increased
or reduced, respectively, effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) Other Distributions. If the Company shall fix a
Determination Date with respect to the making of a dividend or
other distribution on its Common Stock (including any such
dividend or distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation but
excluding a dividend or distribution referred to in Section
9.1(a) or (b) hereof) consisting of (i) securities other than
Common Stock, (ii) evidences of its indebtedness, or (iii)
assets (including cash dividends or distributions) (any of the
foregoing hereinafter referred to as "Assets"), then in each
such case adequate provision shall be made so that each holder
of Warrants shall receive, without charge, concurrently with the
making of such dividend or distribution, the amount and kind of
such Assets that such holder would have received if such holder
had, immediately prior to the Determination Date, exercised its
Warrants.
(e) Common Stock Issued at Less Than Current Market Price.
If the Company shall issue any Common Stock (or securities
convertible into or exercisable for, Common Stock) for a
consideration per share less than the Current Market Price per
share of Common Stock on the date of such issuance (which
consideration shall include any compensation received for the
issuance of any securities convertible into or exercisable for
such Common Stock), the Warrant Ratio in effect immediately
prior to each such issuance shall immediately (except as
provided below) be increased by multiplying such Warrant Ratio
by a fraction (A) the numerator of which is the number of shares
of Common Stock outstanding immediately after the issuance of
such additional shares and (B) the denominator of which is the
sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issuance plus (y) the aggregate
consideration received for the issuance of such additional
shares (which shall include any compensation received for the
issuance of any securities convertible into or exercisable for
such Common Stock) divided by such Current Market Price;
provided, that this subsection (e) shall not apply to:
(1) any transaction or distribution for which an adjustment
has been made pursuant to any other subsection of this Section
9.1,
(2) the conversion or exchange of securities convertible or
exchangeable for Common Stock or the exercise of rights or
warrants issued to the holders of Common Stock, in each case if
an adjustment was made (or specifically not required to be made)
in connection with the issuance of such securities, rights or
warrants pursuant to any subsection of this Section 9.1,
(3) the conversion of shares of Series A Cumulative Redeemable
Convertible Preferred Stock of the Company, par value $.01 per
share (the "Preferred Stock"), or the exercise of Warrants, or
(4) Common Stock or options to purchase Common Stock issued to
directors, officers or employees of the Company and its
subsidiaries under bona fide benefit plans adopted by the Board
of Directors and approved by the holders of Common Stock when
required by law (but only to the extent that the aggregate
number of shares excluded hereby and issued after the Issue Date
shall not exceed 10% of the Common Stock outstanding at the time
of the adoption of each such plan, exclusive of antidilution
adjustments thereunder).
(5) Common Stock issued pursuant to a bona fide registered
public offering, the manager or managers of which are nationally
recognized investment banking firms.
(f) Rounding of Calculations. All calculations under this
Section 9.1 shall be made to the nearest one-hundredth of a
share.
(g) Timing of Issuance. In any case in which this Section
9.1 shall require that an adjustment be made effective
immediately after a Determination Date for a specified event,
the Company may defer until the occurrence of such event (i) the
issuing to the Holder of any Warrant exercised after such
Determination Date the Warrant Shares issuable upon such
exercise over and above the Warrant Shares issuable upon such
exercise prior to such adjustment and (ii) paying to such holder
any cash pursuant to Section 10 hereof; provided, however, that
the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive
such additional shares, and such cash, upon the occurrence of
the event requiring such adjustment.
9.2 Notice of Adjustment. On or prior to each day on which
the Warrant Ratio is adjusted as herein provided, the Company
shall promptly direct the Warrant Agent and the Warrant Agent
shall send to each Holder, notice of such adjustment and shall
deliver to the Warrant Agent a certificate of a firm of
independent public accountants selected by the Board (who may be
the regular accountants employed by the Company) setting forth
the Warrant Shares purchasable upon the exercise of each Warrant
and the Warrant Price after such adjustment, a brief statement
of the facts requiring such adjustment, and the computation by
which such adjustment was made.
9.3 Reorganizations. In case of (a) any consolidation or
merger of the Company with or into another corporation, (b) the
occurrence of any other transaction or event pursuant to which
all or substantially all of the Common Stock is exchanged for,
converted into, or acquired for, or constitutes solely the right
to receive, cash securities, property or other assets (whether
by exchange offer, liquidation, tender offer or otherwise) or
(c) the sale, lease or other transfer of all or substantially
all of the assets of the Company (collectively such actions
being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of each Warrant (in lieu
of the Warrant Shares theretofore deliverable), at the lowest
exercise price permitted by law, the number of shares of stock
or other securities or property to which a holder of the Warrant
Shares that would otherwise have been deliverable upon the
exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full
immediately prior to such Reorganization.
The Company shall not effect any Reorganization, unless prior
to the consummation thereof the successor or transferee (other
than the Company), or if the Company shall be the surviving
corporation in any such Reorganization and is not the issuer of
the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding
at the effective time thereof, then such issuer shall assume by
written instrument the obligation to deliver to the Holder of
any Warrant such shares of stock, securities, cash or other
property as such Holder shall be entitled to purchase in
accordance with the foregoing provisions, which agreement shall
provide for adjustments that shall be as nearly equivalent as
may be practical to the adjustments provided for in this Section
9.
9.4 Statement on Warrants. Irrespective of any adjustments
in the Warrant Price or the number or kind of Warrant Shares
purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are
stated in the Warrant Certificates initially issuable pursuant
to this Agreement.
SECTION 10. Fractional Interests. The Company shall not be
required to issue fractional shares of capital stock on the
exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same
Holder, the number of full shares of capital stock which shall
be issuable upon the exercise thereof shall be computed on the
basis of the aggregate number of Warrants so presented. If any
fraction of a share of capital stock would, except for the
provisions of this Section 10, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall
pay an amount in cash equal to the then Current Market Price per
share multiplied by such fraction.
The Company shall not be required to issue fractions of
Warrants on any distribution, transfer or exchange of Warrants
or to distribute Warrant Certificates that evidence fractional
Warrants. In lieu of such fractional Warrants there shall be
paid by the Company to the registered Holders of the Warrant
Certificates with regard to which such fractional Warrants would
otherwise be issuable, an amount in cash equal to the same
fraction of the Current Market Value of a full Warrant.
SECTION 11. No Rights as Stockholders. Nothing contained in
this Agreement or in any of the Warrants shall be construed as
conferring upon the Holders thereof or their transferees the
right to vote or to receive dividends or to consent or to
receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 12. Notices to Holders. In case:
(a) the Company shall (i) declare any dividend or any other
distribution on its Common Stock, (ii) declare or authorize a
redemption or repurchase of Common Stock, or (iii) authorize the
granting to all holders of Common Stock of rights or warrants to
subscribe for or purchase any shares of stock of any class or of
any other rights or warrants; or
(b) of any reclassification of Common Stock, or of any
consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company shall be
required, or of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or other
property; or
(c) of a Liquidation; or
(d) the Company shall propose to take any action that would
require an adjustment pursuant to Section 9.1;
then the Company shall cause to be filed with the Warrant Agent
and mailed to the Holders of Warrants, at least fifteen (15)
days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record (if any) is to be
taken for the purpose of such dividend, distribution,
redemption, repurchase or granting of rights or warrants or, if
a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend,
distribution, redemption, repurchase, rights or warrants are to
be determined or (y) the date on which such reclassification,
consolidation, merger, share exchange or Liquidation is expected
to become effective, and the date, if any, as of which it is
expected that holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification,
consolidation, merger, share exchange or Liquidation.
SECTION 13. Disposition of Proceeds on Exercise of Warrants;
Inspection of Warrant Agreement.
(a) The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the
Company all moneys received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such
Warrants.
(b) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office in New
York, New York. The Company shall supply the Warrant Agent from
time to time with such numbers of copies of this Agreement, the
Purchase Agreement and the Registration Rights Agreement as the
Warrant Agent may reasonably request.
SECTION 14. Redemption by the Corporation.
(a) Subject to the terms and conditions of this Section 14,
the Warrants may be redeemed in whole, but not in part, in
exchange for Warrant Shares at any time on or after the Warrant
Ratio Determination Date; provided, that concurrently with such
redemption the Company redeems all then outstanding shares of
the Preferred Stock. Each Warrant will be redeemable for a
number of Warrant Shares equal to the Warrant Ratio on the
Redemption Date (as defined below).
(b) Notice of redemption of the Warrants shall be sent by or
on behalf of the Company, to the Holders, not less than thirty
(30) days nor more than sixty (60) days prior to the date fixed
for redemption (the "Redemption Date") (i) notifying such
Holders of the election of the Corporation to redeem such
Warrants and of the Redemption Date, (ii) stating the place or
places at which the Warrants shall, upon presentation and
surrender of the certificates evidencing such Warrants, be
redeemed, and the number of Warrant Shares deliverable upon the
redemption thereof, and (iii) stating the name and address of
any Redemption Agent selected by the Company in accordance with
Section 14(c) below, and the name and address of the Company's
Warrant Agent.
(c) The Company may not act as the redemption agent to redeem
the Warrants. The Company shall appoint as its agent for such
purpose a bank or trust company in good standing, organized
under the laws of the United States of America or any
jurisdiction thereof, and having capital, surplus and undivided
profits aggregating at least Fifty Million Dollars
($50,000,000), which agent may be the Warrant Agent, and may
appoint any one or more additional such agents which shall in
each case be a bank or trust company in good standing organized
under the laws of the United States of America or of any
jurisdiction thereof, and having capital, surplus and undivided
profits aggregating at least Fifty Million Dollars
($50,000,000). Each such bank or trust company is hereinafter
referred to as the "Redemption Agent." Following such
appointment and prior to any redemption, the Company shall
deliver to the Redemption Agent irrevocable written instructions
authorizing the Redemption Agent, on behalf and at the expense
of the Corporation, to cause such notice of redemption to be
sent as herein provided as soon as practicable after receipt of
such irrevocable instructions and in accordance with the above
provisions. The Warrant Shares necessary for the redemption
shall be deposited with the Redemption Agent in trust at least
two business days prior to the Redemption Date, for the benefit
of the Holders of the Warrants so called for redemption, so as
to be and continue to be available therefor.
The Company covenants that all Warrant Shares issued upon
redemption of the Warrants will, upon issuance in accordance
with the terms of this Agreement, be fully paid and
nonassessable and free from all taxes, liens, charges and
security interests with respect to the issuance thereof that may
be created by virtue of any act or omission of the Company.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the
Company and the Holders, by their acceptance of Warrants, shall
be bound:
15.1 Correctness of Statements. The statements contained
herein and in the Warrants shall be taken as statements of the
Company. The Warrant Agent assumes no responsibility for the
correctness of any of such statements except such as describe
the Warrant Agent or action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of
the Warrants except as herein otherwise provided.
15.2 Reliance. The Warrant Agent may consult at any time
with legal counsel (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of Warrants in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel. The
Warrant Agent will not incur any liability or responsibility to
the Company or to any Holder for any action taken by it
hereunder in good faith reliance on any notice, resolution,
waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
15.3 Compensation. The Company agrees to pay the Warrant
Agent reasonable compensation for all services rendered by the
Warrant Agent in the performance of its duties under this
Agreement, to reimburse the Warrant Agent for all reasonable
expenses, taxes and governmental charges incurred by the Warrant
Agent in the performance of its duties under this Agreement, and
to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted by the Warrant Agent
in the execution and performance of its duties under this
Agreement except as a result of the Warrant Agent's gross
negligence or bad faith.
15.4 Legal Proceedings. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding to
or take any other action likely to involve expense unless the
Company or one or more Holders of Warrants shall furnish the
Warrant Agent with reasonable security and indemnity for any
costs and expenses that may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or
without any such security or indemnity. All rights of actions
under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in
its name as Warrant Agent, and any recovery of judgment shall be
for the ratable benefit of the Holders, as their respective
rights or interests may appear.
15.5 Other Transactions in Securities of Company. The
Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
15.6 Merger or Consolidation or Change of Name of Warrant
Agent. Any corporation into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant
Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution
or filing of any paper or any further act on the part of any of
the parties hereto, provided that such corporation would be
eligible for appointment as a successor Warrant Agent under the
provisions of Section 15.7 hereof. If, at the time such
successor to the Warrant Agent shall succeed to the agency
created by this Agreement, any of the Warrants shall have been
countersigned but not delivered, any such successor to the
Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned; and
if, at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may
countersign such Warrants whether in the name of the predecessor
Warrant Agent or in the name of the successor Warrant Agent.
If, at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver such Warrants
so countersigned; and if, at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name.
15.7 Change of Warrant Agent. The Warrant Agent may resign
and be discharged from its duties under this Agreement by giving
to the Company forty-five (45) days' written notice. The
Warrant Agent may be removed by written notice from the Company
or Holders owning at least two-thirds of the Warrants then
outstanding. If the Warrant Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of forty-five (45)
days after such removal or after it has been notified in writing
of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who shall with
such notice submit such Holder's Warrant for inspection by the
Company), then any Holder may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant
Agent. Pending appointment of a successor to the Warrant Agent,
either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. Any
successor warrant agent, whether appointed by the Company or
such a court, shall be a bank or trust company, in good
standing, and having at the time of its appointment as warrant
agent a combined capital and surplus of at least $50,000,000.
After appointment, the successor warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if
it had been originally named as Warrant Agent without further
act or deed; but the former Warrant Agent shall deliver and
transfer to the successor warrant agent any property at the time
held by it under, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to
file any notice provided for in this Section 15.7, however, or
any defect therein, shall not affect the legality or validity of
the resignation or removal of the Warrant Agent or the
appointment of the successor warrant agent, as the case may be.
In the event of such resignation or removal, the successor
warrant agent shall mail, first class, to each holder of
Warrants written notice of such removal or resignation and the
name and address of such successor warrant agent.
SECTION 16. Identity of Transfer Agent. Promptly upon the
appointment of any subsequent transfer agent of the Common
Stock, or any other shares of the Company's capital stock
issuable upon the exercise of the Warrants, the Company will
file with the Warrant Agent a statement setting forth the name
and address of such subsequent transfer agent.
SECTION 17. Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and
shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier or (iii) one
business day after being deposited with a reputable next-day
courier, postage prepaid, to the parties as follows:
if to the Company:
TEREX CORPORATION
500 Post Road East
Westport, Connecticut
Attention: Marvin Rosenberg, Esq.
Fax No.: (203) 222-7976
if to the Warrant Agent:
Mellon Securities Trust Company
120 Broadway, 33rd Floor
New York, New York 10271
Attention: Ms. Joan B. Hayes
Fax No.: (212) 571-0871
The Company or the Warrant Agent by notice to the other party
may designate additional or different addresses as shall be
furnished in writing by such party.
Any notice or communication sent or required to be sent to a
Holder of a Warrant shall be mailed to him by first class mail,
postage prepaid, at such Holder's address as it appears on the
books of the Warrant Agent and shall be sufficiently given to
him if so mailed within the time prescribed.
SECTION 18. Amendment and Waiver.
(a) The Company and the Warrant Agent may from time to time
supplement, modify or amend this Agreement, and waivers or
consents to departures from the provisions hereof may be given,
without the approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and
which shall not adversely affect the interest of the Holders.
Except as provided above, this Agreement may not be amended,
modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, without the written
consent of Holders of at least a majority of the Warrants.
(b) Whenever in the performance of its duties under this
Agreement the Warrant Agent deems it necessary or desirable that
any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically
prescribed or the Warrant Agent has actual knowledge to the
contrary) may be deemed to be conclusively proved and
established by a certificate signed by a person believed by the
Warrant Agent to be authorized officers of the Company.
SECTION 19. Successors. All the covenants and provisions of
this Agreement and the Warrants by or for the benefit of the
Company or the Warrant Agent shall be binding upon and shall
inure to the benefit of their respective successors and assigns
hereunder.
SECTION 20. Merger or Consolidation of the Company. The
Company will not merge or consolidate with or into any other
corporation unless the corporation resulting from such merger or
consolidation (if not the Company) shall expressly assume, by
supplemental agreement satisfactory in form to the Warrant Agent
and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant
and condition of this Agreement to be performed and observed by
the Company.
SECTION 21. Governing Law. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE
DELAWARE GENERAL CORPORATION LAW MAY GOVERN THIS AGREEMENT
SOLELY BY VIRTUE OF THE FACT THAT THE COMPANY IS INCORPORATED
UNDER THE LAWS OF THE STATE OF DELAWARE. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 22. Third Party Beneficiary. The provisions hereof
have been and are made solely for the benefit of the Company,
the Warrant Agent and each of the Holders of Warrants, and their
respective successors and assigns, and no other person shall
acquire or have any right hereunder or by virtue hereof.
SECTION 23. Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same instrument.
SECTION 24. Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect the
meaning hereof.
SECTION 25. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions
set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid,
illegal, void or unenforceable.
SECTION 26. Entire Agreement. This Agreement, together with
the Purchase Agreement and the Warrants, is intended by the
parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, together
with the Purchase Agreement and the Warrants, supersedes all
prior agreements and understandings between the parties with
respect to such subject matter.
SECTION 27. Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, the Purchase
Agreement or the Warrants, or where any provision hereof or
thereof is validly asserted as a defense, the prevailing party,
as determined by the court, shall be entitled to recover
reasonable attorneys' fees in addition to any other available
remedy. Notwithstanding the foregoing, this Section 27 shall
not impose any additional obligation on the Warrant Agent and
shall not offset the indemnification provision for the benefit
of the Warrant Agent hereunder.
SECTION 28. Further Assurances. Each party hereto agrees to
use all reasonable efforts to obtain all consents and approvals,
and to do all other things, necessary for the transactions
contemplated by this Agreement on or prior to the Expiration
Date. The parties agree to take such further action and to
deliver or cause to be delivered to each other after the date
hereof such additional agreements or instruments as any of them
may reasonably request for the purpose of carrying out this
Agreement and the agreements and transactions contemplated
hereby and thereby.
SECTION 29. Equitable Remedies. Each party hereto
acknowledges and agrees that irreparable harm, for which there
may be no adequate remedy at law and for which the ascertainment
of damages would be difficult, would occur in the event any of
the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached.
Each party hereto accordingly agrees that each other party
hereto shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement, or any
agreement contemplated hereunder and to enforce specifically the
terms and provisions hereof or thereof in any court of the
United States or any state thereof having jurisdiction, in each
instance without being required to post bond or other security
and in addition to, and without having to prove the inadequacy
of, other remedies at law.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first
above written.
TEREX CORPORATION
By: /s/ Randolph W. Lenz
Chairman of the Board
(Corporate Seal)
Attest:
/s/ Marvin B. Rosenberg
Secretary
MELLON SECURITIES TRUST COMPANY
as Warrant Agent
By: /s/ Joan B. Hayes
Its: Assistant Vice President
Attest:
_________________________
Its _____________________
EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM THE REGISTRATION UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS AND ENTITLED TO THE BENEFITS OF A WARRANT
AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF
DECEMBER 20, 1993. A COPY OF EACH SUCH AGREEMENT IS ON FILE AT
THE OFFICES OF THE COMPANY.
No. _________________
Certificate for ________ Warrants
EXERCISABLE IN WHOLE OR FROM TIME TO TIME
IN PART AT ANY TIME AFTER THE WARRANT RATIO
DETERMINATION DATE AND ON OR BEFORE
5:00 P.M. NEW YORK TIME, ON
December 31, 2000
TEREX CORPORATION
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that _____________________ or registered
assigns is the registered holder (the "Holder") of the number of
Warrants set forth above (the "Warrants"), each of which
represents the right to purchase shares of Common Stock, $.01
par value per share (the "Common Stock"), of Terex Corporation,
a Delaware corporation (the "Company"), on the terms set forth
in the Warrant Agreement, dated as of December 20, 1993 (the
"Warrant Agreement), between the Company and Mellon Securities
Trust Company, as Warrant Agent (the "Warrant Agent"), at any
time after the Warrant Ratio Determination Date (defined below)
and on or before the Expiration Date (defined below), by
surrendering this Warrant Certificate, with the form of election
to purchase set forth hereon duly executed (with signatures
guaranteed by a member firm of a national securities exchange, a
commercial bank or a trust company located in the United States,
or a member of the National Association of Securities Dealers,
Inc. (an "Eligible Institution")), at the office maintained for
that purpose by Mellon Securities Trust Company or its
successors as warrant agent, and by paying in full the Warrant
Price.
Payment of the exercise price may be made by the Holder hereof
in United States currency by certified or bank cashier's check
payable to the order of the Company.
This Warrant may be exercised at any time in whole and from
time to time in part at the option of the Holder hereof,
commencing at the opening of business on the Warrant Ratio
Determination Date until 5:00 p.m., New York time on December
31, 2000 (the "Expiration Date"). No Warrant may be exercised
after the Expiration Date and all Warrants evidenced hereby
shall thereafter become void. "Warrant Ratio Determination
Date" shall mean the date designated as such by the Board of
Directors of the Company pursuant to a duly adopted resolution
of the Board, which date shall be a trading day during the
twelve month period beginning on the date of the Warrant
Agreement, or, if no such date is designated, the last day of
such twelve month period; provided, that if the Board of
Directors has not yet designated a Warrant Ratio Determination
Date and the Current Market Price of a share of Common Stock
equals or exceeds $18 on any date during such twelve month
period, the term "Warrant Ratio Determination Date" shall mean
such date. The Company shall send written notice to each Holder
of Warrants of (i) the Board's designation, if any, of the
Warrant Ratio Determination Date on or prior to the twenty-fifth
(25th) trading day prior to the Warrant Ratio Determination Date
and (ii) the Warrant Ratio (defined below) as of the Warrant
Ratio Determination Date on or prior to the fifth (5th) day
following the Warrant Ratio Determination Date.
Prior to the Expiration Date, subject to any applicable laws,
rules or regulations restricting transferability and to any
restriction on transferability that may appear on this Warrant
Certificate, or in the Warrant Agreement, the Purchase Agreement
or the Registration Rights Agreement, the Holder shall only be
entitled to transfer this Warrant Certificate on the Warrant
Register maintained at the principal office of the Warrant
Agent, upon delivery thereof, duly endorsed by the Holder or by
his duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to
transfer deemed acceptable by the Warrant Agent, with the form
of assignment set forth hereon duly executed (with signatures
guaranteed by an Eligible Institution). Upon any such transfer,
a new Warrant Certificate or Warrant Certificates representing
the same aggregate number of Warrants will be issued in
accordance with instructions in the form of assignment.
Upon the exercise of less than all of the Warrants evidenced
by this Warrant Certificate, there shall be issued to the Holder
a new Warrant Certificate representing the Warrants not
exercised.
Prior to the Expiration Date, the Holder shall be entitled to
exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant
Certificates for the same aggregate number of Warrants, upon
surrender of this Warrant Certificate at the office maintained
for the purpose by the Warrant Agent.
Upon certain events provided for in the Warrant Agreement, the
number of shares of Common Stock and other consideration
issuable upon the exercise of each Warrant are required to be
adjusted.
No fractional shares will be issued upon the exercise of
Warrants. As to any final fraction of a share that the Holder
of one or more Warrant Certificates, the rights under which are
exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall pay the cash
value thereof determined as provided in the Warrant Agreement.
Subject to the terms and conditions of the Warrant Agreement,
the Warrants may be redeemed in whole, but not in part, in
exchange for Warrant Shares at any time on or after the Warrant
Ratio Determination Date; provided, that concurrently with such
redemption the Corporation redeems all the outstanding shares of
the Preferred Stock. Each Warrant will be redeemable for a
number of Warrant Shares equal to the Warrant Ratio on the
Redemption Date.
This Warrant Certificate is issued under and in accordance
with the Warrant Agreement and is subject to the terms and
provisions contained in said Warrant Agreement, to all of which
terms and provisions the Holder consents by acceptance hereof.
Capitalized terms not otherwise defined in this Warrant
Certificate shall have the meaning given thereto in the Warrant
Agreement.
This Warrant Certificate shall not entitle the Holder to any
of the rights of a shareholder of the Company, including,
without limitation, the right to vote, to receive dividends and
other distributions, or to attend or receive any notice of
meetings of shareholders or any other proceedings of the Company.
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS WARRANT
CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS, EXCEPT TO THE EXTENT THAT THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE MAY GOVERN THIS AGREEMENT SOLELY BY VIRTUE
OF THE FACT THAT THE COMPANY IS INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first
above written.
TEREX CORPORATION
By: /s/ Randolph W. Lenz
Chairman of the Board
(Corporate Seal)
Attest:
/s/ Marvin B. Rosenberg
Secretary
MELLON SECURITIES TRUST COMPANY
as Warrant Agent
By: /s/ Joan B. Hayes
Its: Assistant Vice President
Attest:
Its:
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise
_________ Warrants represented by this Warrant Certificate and
to purchase the shares of Common Stock issuable upon the
exercise of said Warrants, and requests that Certificates for
such shares be issued and delivered as follows:
ISSUE TO:
(Name)
(Address, Including Zip Code)
(Social Security or Tax Identification Number)
DELIVER TO:
(Name)
(Address, Including Zip Code)
In payment of the purchase price with respect to the Warrants
exercised the undersigned hereby tenders payment of $__________
by certified or bank cashiers check payable to the order of the
Company. If the number of Warrants hereby exercised is fewer
than all the Warrants represented by this Warrant Certificate,
the undersigned requests that a new Warrant Certificate
representing the number of full Warrants not exercised to be
issued and delivered as set forth below:
Name of Warrantholder or Assignee:
(Please Print)
Address:
Signature:________________________ DATED: ,
(Signature must conform in all respects to name of
holder as specified on the fact of the Warrant Certificate)
Signature Guaranteed: ________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the
undersigned represented by the within Warrant Certificate, with
respect to the number of Warrants set forth below:
Taxpayer
Number of Identification
Name of Assignee Address Warrants Number
and does hereby irrevocably constitute and appoint __________,
Attorney, to make such transfer on the Warrant Register
maintained at the principal office of the Warrant Agent with
full power of substitution in the premises.
Dated: ______________, ____
Signature
(Signature must conform in all
respects to name of holder
as specified on the face of the
Warrant Certificate).
Signature Guaranteed:
Schedule 1
Current Market Price Pre-Adjustment Ratio
$5.00 or less 3.00
$5.50 2.75
$6.00 2.53
$6.50 2.36
$7.00 2.20
$7.50 2.07
$8.00 1.95
$8.50 1.85
$9.00 1.76
$9.50 1.68
$10.00 1.60
$10.50 1.54
$11.00 1.48
$11.50 1.42
$12.00 1.37
$12.50 1.33
$13.00 1.28
$13.50 1.24
$14.00 1.21
$14.50 1.17
$15.00 1.14
$15.50 1.11
$16.00 1.08
$16.50 1.06
$17.00 1.03
$17.50 1.01
$18.00 or more 1.00
For any Current Market Price (the "Specified Price") greater
than $5.00 and less than $18.00 that is not set forth on the
foregoing table, the Pre-Adjustment Ratio shall be calculated by
determining the highest identified Current Market Price lower
than the Specified Price (the "Lower Boundary") and the lowest
identified Current Market Price greater than the Specified Price
(the "Upper Boundary") and calculating (in a straight-line
manner) that number of shares (rounded to the nearest .01) that
bears the same ratio between the Pre-Adjustment Ratio with
respect to the Lower Boundary and the Pre-Adjustment Ratio with
respect to Upper Boundary as the Specified Price bears to the
Lower Boundary and the Upper Boundary.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM THE REGISTRATION UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS AND ENTITLED TO THE BENEFITS OF A WARRANT
AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF
DECEMBER 20, 1993. A COPY OF EACH SUCH AGREEMENT IS ON FILE AT
THE OFFICES OF THE COMPANY.
No.
Certificate for Warrants
EXERCISABLE IN WHOLE OR FROM TIME TO TIME
IN PART AT ANY TIME AFTER THE WARRANT RATIO
DETERMINATION DATE AND ON OR BEFORE
5:00 P.M. NEW YORK TIME, ON
December 31, 2000
TEREX CORPORATION
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that or registered assigns is the registered
holder (the "Holder") of the number of Warrants set forth above
(the "Warrants"), each of which represents the right to purchase
shares of Common Stock, $.01 par value per share (the "Common
Stock"), of Terex Corporation, a Delaware corporation (the
"Company"), on the terms set forth in the Warrant Agreement,
dated as of December 20, 1993 (the "Warrant Agreement), between
the Company and Mellon Securities Trust Company, as Warrant
Agent (the "Warrant Agent"), at any time after the Warrant Ratio
Determination Date (defined below) and on or before the
Expiration Date (defined below), by surrendering this Warrant
Certificate, with the form of election to purchase set forth
hereon duly executed (with signatures guaranteed by a member
firm of a national securities exchange, a commercial bank or a
trust company located in the United States, or a member of the
National Association of Securities Dealers, Inc. (an "Eligible
Institution")), at the office maintained for that purpose by
Mellon Securities Trust Company or its successors as warrant
agent, and by paying in full the Warrant Price.
Payment of the exercise price may be made by the Holder hereof
in United States currency by certified or bank cashier's check
payable to the order of the Company.
This Warrant may be exercised at any time in whole and from
time to time in part at the option of the Holder hereof,
commencing at the opening of business on the Warrant Ratio
Determination Date until 5:00 p.m., New York time on December
31, 2000 (the "Expiration Date"). No Warrant may be exercised
after the Expiration Date and all Warrants evidenced hereby
shall thereafter become void. "Warrant Ratio Determination
Date" shall mean the date designated as such by the Board of
Directors of the Company pursuant to a duly adopted resolution
of the Board, which date shall be a trading day during the
twelve month period beginning on the date of the Warrant
Agreement, or, if no such date is designated, the last day of
such twelve month period; provided, that if the Board of
Directors has not yet designated a Warrant Ratio Determination
Date and the Current Market Price of a share of Common Stock
equals or exceeds $18 on any date during such twelve month
period, the term "Warrant Ratio Determination Date" shall mean
such date. The Company shall send written notice to each Holder
of Warrants of (i) the Board's designation, if any, of the
Warrant Ratio Determination Date on or prior to the twenty-fifth
(25th) trading day prior to the Warrant Ratio Determination Date
and (ii) the Warrant Ratio (defined below) as of the Warrant
Ratio Determination Date on or prior to the fifth (5th) day
following the Warrant Ratio Determination Date.
Prior to the Expiration Date, subject to any applicable laws,
rules or regulations restricting transferability and to any
restriction on transferability that may appear on this Warrant
Certificate, or in the Warrant Agreement, the Purchase Agreement
or the Registration Rights Agreement, the Holder shall only be
entitled to transfer this Warrant Certificate on the Warrant
Register maintained at the principal office of the Warrant
Agent, upon delivery thereof, duly endorsed by the Holder or by
his duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to
transfer deemed acceptable by the Warrant Agent, with the form
of assignment set forth hereon duly executed (with signatures
guaranteed by an Eligible Institution). Upon any such transfer,
a new Warrant Certificate or Warrant Certificates representing
the same aggregate number of Warrants will be issued in
accordance with instructions in the form of assignment.
Upon the exercise of less than all of the Warrants evidenced
by this Warrant Certificate, there shall be issued to the Holder
a new Warrant Certificate representing the Warrants not
exercised.
Prior to the Expiration Date, the Holder shall be entitled to
exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant
Certificates for the same aggregate number of Warrants, upon
surrender of this Warrant Certificate at the office maintained
for the purpose by the Warrant Agent.
Upon certain events provided for in the Warrant Agreement, the
number of shares of Common Stock and other consideration
issuable upon the exercise of each Warrant are required to be
adjusted.
No fractional shares will be issued upon the exercise of
Warrants. As to any final fraction of a share that the Holder
of one or more Warrant Certificates, the rights under which are
exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall pay the cash
value thereof determined as provided in the Warrant Agreement.
Subject to the terms and conditions of the Warrant Agreement,
the Warrants may be redeemed in whole, but not in part, in
exchange for Warrant Shares at any time on or after the Warrant
Ratio Determination Date; provided, that concurrently with such
redemption the Corporation redeems all the outstanding shares of
the Preferred Stock. Each Warrant will be redeemable for a
number of Warrant Shares equal to the Warrant Ratio on the
Redemption Date.
This Warrant Certificate is issued under and in accordance
with the Warrant Agreement and is subject to the terms and
provisions contained in said Warrant Agreement, to all of which
terms and provisions the Holder consents by acceptance hereof.
Capitalized terms not otherwise defined in this Warrant
Certificate shall have the meaning given thereto in the Warrant
Agreement.
This Warrant Certificate shall not entitle the Holder to any
of the rights of a shareholder of the Company, including,
without limitation, the right to vote, to receive dividends and
other distributions, or to attend or receive any notice of
meetings of shareholders or any other proceedings of the Company.
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS WARRANT
CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS, EXCEPT TO THE EXTENT THAT THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE MAY GOVERN THIS AGREEMENT SOLELY BY VIRTUE
OF THE FACT THAT THE COMPANY IS INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed.
TEREX CORPORATION
By:
Title:
Attest:
Secretary
Countersigned MELLON SECURITIES TRUST COMPANY
as Warrant Agent
Dated: By:
Authorized Signature
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise
_________ Warrants represented by this Warrant Certificate and
to purchase the shares of Common Stock issuable upon the
exercise of said Warrants, and requests that Certificates for
such shares be issued and delivered as follows:
ISSUE TO:
(Name)
(Address, Including Zip Code)
(Social Security or Tax Identification Number)
DELIVER TO:
(Name)
(Address, Including Zip Code)
In payment of the purchase price with respect to the Warrants
exercised the undersigned hereby tenders payment of $__________
by certified or bank cashiers check payable to the order of the
Company. If the number of Warrants hereby exercised is fewer
than all the Warrants represented by this Warrant Certificate,
the undersigned requests that a new Warrant Certificate
representing the number of full Warrants not exercised to be
issued and delivered as set forth below:
Name of Warrantholder or Assignee:
(Please Print)
Address:
Signature:________________________ DATED:
(Signature must conform in all respects to name of
holder as specified on the fact of the Warrant Certificate)
Signature Guaranteed: ________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the
undersigned represented by the within Warrant Certificate, with
respect to the number of Warrants set forth below:
Taxpayer
Number of Identification
Name of Assignee Address Warrants Number
and does hereby irrevocably constitute and appoint __________,
Attorney, to make such transfer on the Warrant Register
maintained at the principal office of the Warrant Agent with
full power of substitution in the premises.
Dated: ______________, ____
Signature
(Signature must conform in all
respects to name of holder
as specified on the face of
the Warrant Certificate).
Signature Guaranteed:
AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
This Amendment Number One To Loan and Security Agreement ("Amendment") is
entered into as of August 24, 1993, between FOOTHILL CAPITAL CORPORATION
('Foothill') and TEREX CORPORATION ('Borrower').
FACT ONE: Foothill and Borrower entered into that certain Loan And Security
Agreement as of May 20, 1993 (the 'Agreement').
FACT TWO: Borrower and Foothill desire to amend the Agreement as provided
herein.
NOW, THEREFORE, Foothill and Borrower hereby amend the Agreement as follows:
1. The followings definitions in Section 1.1 of the Agreement are amended
to read as follows:
(a) 'Permanent Facility' means the revolving loan facility set forth
in Section 2.2.
(b) 'Permanent Facility Closing Date' means the date that Foothill
receives the Permanent Facility Closing Fee.
(c) 'Permanent Facility Maximum Amount' means Twenty Million Dollars
($20,000,000).
(d) 'Permanent Facility Maximum Foothill Amount' means that portion
of the Permanent Facility Maximum Amount for which Foothill shall be
responsible hereunder and under the Clark Agreement, exclusive of any
participations with Participants, which amount is Sixteen Million Dollars
($16,000,000).
(e) 'Syndicated Amount' means a subcomponent of the Maximum Amount
equal to the aggregate financing commitments (to the extent not breached
or terminated) of all Participants.
The following definition is added to Section 1.1 of the Agreement:
'Dilution' means all non-cash charges to Borrower's Accounts,
including, but not limited to, returned Inventory, volume discounts, warranty
claims, writeoffs, offsets due to Inventory rotations and credits issued by
Borrower.
2. Section 2.2 of the Agreement
"2.2 Permanent Facility. From time to time, following the
Permanent Facility Effective Date, subject to the terms and conditions of
this Agreement, and so long as no Event of Default shall have occurred
and is continuing, Foothill agrees to make advances to Borrower in an
amount not to exceed the amount (the 'Permanent Borrowing Base') equal to the
lesser of:
(a) Seventy percent (70%) of the amount of Eligible Accounts; and (b)
An amount equal to Borrower's cash collections for the immediately
preceding forty-five (45) day period. Foothill shall not have any
obligation to make advances under this Section 2.2 to the extent that they
would cause the sum of the outstanding Obligations plus the outstanding
Clark Obligations to exceed the Permanent Facility Maximum Amount. In the
event that Borrower's Dilution exceeds ten percent (10%) of Borrower's
Accounts, then Foothill may, in its discretion, decrease its advance rate
against Eligible Accounts by the amount of estimated Dilution in excess of
ten percent (10%). For the sake of example only, if Dilution were twelve
percent (12%), then Foothill's advance rate would be reduced from seventy
percent (70%) of Eligible Accounts to sixty-eight percent (68%) of Eligible
Accounts. In the event that Borrower's Dilution is less than ten percent
(10%) of Borower's Accounts, then Foothill will increase its advance rate
against Eligible Accounts by the amount of estimated Dilution below ten
percent (10%) of Borrower's Accounts; provided, however, that the advance
rate against Eligible Accounts shall never exceed eighty percent (80%) of
Eligible Accounts. For the sake of example only, if Dilution were nine
(9%), then Foothill's advance rate would be increased from seventy percent
(70%) to seventy-one percent (71%) of Eligible Accounts. For purposes of
this Section 2.1(a), Dilution will be calculated by Foothill on a quarterly
basis, based upon its examinations of Borrower, unless Foothill determines
that it is necessary to make such calculation more frequently.
3. Section 2.3(a) of the Agreement is hereby amended to read as follows:
"(a) Borrower acknowledges that, from time to time, Foothill may
establish reserves against Eligible Accounts."
4. Section 2.5(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) the difference of Five Million Dollars ($5,000,000) less the
aggregate outstanding face amount of all L/Cs guaranteed by the L/C
Guarantees and letters of credit guaranteed by the Clark L/C Guarantees."
5. The second sentence Section 2.8 of the Agreement is hereby amended to
read as follows:
"For interest calculation purposes, all checks, wire transfers, or
other items of payment to Foothill shall be deemed to have been paid to
Foothill three (3) Business Days after the date Foothill actually
receives such wire transfer of immediately available federal funds,
or after Foothill actually receives possession of such check or other
item of payment.'
6. Section 2. 10(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) A one-time closing fee (the 'Permanent Facility Closing
Fee') of Four Hundred Thousand Dollars ($400,000) which shall be
earned, in full, on the Permanent Facility Closing Date and shall be
due and payable by Borrower (jointly and severally with Clark) to
Foothill in connection with this Agreement and the Clark Agreement on
the Permanent Facility Closing Date."
7. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION
By /s/ Pamela S. Ferro, VP
Title
TEREX CORPORATION
By /s/ Marvin B. Rosenberg
<PAGE>
AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
This Amendment Number One To Loan and Security Agreement ('Amendment") is
entered into as of August 24, 1993, between FOOTHILL CAPITAL CORPORATION
("Foothill") and CLARK MATERIAL HANDLING COMPANY ("Borrower").
FACT ONE: Foothill and Borrower entered into that certain Loan And
Security Agreement as of May 20, 1993 (the 'Agreement").
FACT TWO: Borrower and Foothill desire to amend the Agreement as
provided herein.
NOW, THEREFORE, Foothill and Borrower hereby amend the
Agreement as follows:
1. The followings definitions in Section 1.1 of the Agreement
are amended to read as follows:
(a) "Permanent Facility" means the revolving loan facility
set forth in Section 2.2.
(b) "Permanent Facility Closing Date" means the date
that Foothill receives the Permanent Facility Closing Fee.
(c) "Permanent Facility Maximum Amount" means Twenty
Million Dollars ($20,000,000).
(d) "Permanent Facility Maximum Foothill Amount" means
that portion of the Permanent Facility Maximum Amount for which
Foothill shall be responsible hereunder and under the Terex
Agreement, exclusive of any participations with Participants, which
amount is Sixteen Million Dollars ($16,000,000).
(e) "Syndicated Amount" means a subcomponent of the Maximum
Amount equal to the aggregate financing commitments (to the extent
not breached or terminated) of all Participants.
The following definition is added to Section 1.1 of the
Agreement:
"Dilution" means all non-cash charges to Borrower's
Accounts, including, but not limited to, returned Inventory, volume discounts,
warranty claims, writeoffs, offsets due to Inventory rotations and credits
issued by Borrower.
2. Section 2.2 of the Agreement is hereby amended to read as follows:
"2.2 Permanent Facility. From time to time, following the
Permanent Facility Effective Date, subject to the terms and conditions
of this Agreement, and so long as no Event of Default shall have
occurred and is continuing, Foothill agrees to make revolving
advances to Borrower in an amount not to exceed the amount (the
"Permanent Facility Borrowing Base") equal to the lesser of:
(a) Seventy percent (70%) of the amount of Eligible Accounts; and (b)
An amount equal to Borrower's cash collections for the immediately
preceding forty-five (45) day period. Foothill shall not have any
obligation to make advances under this Section 2.2 to the extent that
they would cause the sum of the outstanding Obligations plus the
outstanding Terex Obligations to exceed the Permanent Facility Maximum
Amount. In the event that Borrower's Dilution exceeds ten percent (10%)
of Borrower's Accounts, then Foothill may, in its discretion, decrease,
its advance rate against Eligible Accounts by the amount of estimated
in excess of ten percent (10%). For the sake of example only, if
Dilution were twelve percent (12%), then Foothill's advance rate would
be reduced from seventy percent (70%) of Eligible Accounts to
sixty-eight percent (68%) of Eligible Accounts. In the event that
Borrower's Dilution is less than ten percent (10%) of Borrower's
Accounts, then Foothill will increase its advance rate against Eligible
Accounts by the amount of estimated Dilution below ten percent (10%) of
Borrower's Accounts; provided, however, that the advance rate against
Eligible Accounts shall never exceed eighty percent (80%) of Eligible
Accounts. For the sake of example only, if Dilution were nine percent
(9%), then Foothill's advance rate would be increased from seventy
percent (70%) to seventy-one percent (71%) of Eligible Accounts. For
purposes of this Section 2.1(a), Dilution will be calculated by Foothill
on a quarterly basis, based upon its examinations of Borrower, unless
Foothill determines that it is necessary to make such calculation more
frequently."
3. Section 2.3(a) of the Agreement is hereby amended to read as follows:
"(a) Borrower acknowledges that, from time to time, Foothill may
establish reserves against Eligible Accounts.'
4. Section 2.5(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) the difference of Five Million Dollars ($5,000,000) less the
aggregate outstanding face amount of all L/Cs guaranteed by the L/C
Guarantees and letters of credit guaranteed by the Terex L/C Guarantees."
5. The second sentence Section 2.8 of the Agreement is hereby amended to read as
follows:
"For interest calculation purposes, all checks, wire transfers, or other
items of payment to Foothill shall be deemed to have been paid to Foothill
three (3) Business Days after the date Foothill actually receives such wire
transfer of immediately available federal funds, or after Foothill actually
receives possession of such check or other item of payment."
6. Section 2. 10(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) A one-time closing fee (the "Permanent Facility Closing Fee")
of Four Hundred Thousand Dollars ($400,000) which shall be earned,
in full, on the Permanent Facility Closing Date and shall be due and
payable by Borrower (jointly and severally with Terex) to Foothill
in connection with this Agreement and the Terex Agreement on
the Permanent Facility Closing Date.'
7. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects,
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION
By /s/ Pamela S. Ferro, VP
Title
CLARK MATERIAL HANDLING COMPANY
By /s/ Marvin B. Rosenberg
Title
AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
This Amendment Number One To Loan and Security Agreement ("Amendment") is
entered into as of August 24, 1993, between FOOTHILL CAPITAL CORPORATION
('Foothill') and TEREX CORPORATION ('Borrower').
FACT ONE: Foothill and Borrower entered into that certain Loan And Security
Agreement as of May 20, 1993 (the 'Agreement').
FACT TWO: Borrower and Foothill desire to amend the Agreement as provided
herein.
NOW, THEREFORE, Foothill and Borrower hereby amend the Agreement as follows:
1. The followings definitions in Section 1.1 of the Agreement are amended
to read as follows:
(a) 'Permanent Facility' means the revolving loan facility set forth
in Section 2.2.
(b) 'Permanent Facility Closing Date' means the date that Foothill
receives the Permanent Facility Closing Fee.
(c) 'Permanent Facility Maximum Amount' means Twenty Million Dollars
($20,000,000).
(d) 'Permanent Facility Maximum Foothill Amount' means that portion
of the Permanent Facility Maximum Amount for which Foothill shall be
responsible hereunder and under the Clark Agreement, exclusive of any
participations with Participants, which amount is Sixteen Million Dollars
($16,000,000).
(e) 'Syndicated Amount' means a subcomponent of the Maximum Amount
equal to the aggregate financing commitments (to the extent not breached
or terminated) of all Participants.
The following definition is added to Section 1.1 of the Agreement:
'Dilution' means all non-cash charges to Borrower's Accounts,
including, but not limited to, returned Inventory, volume discounts, warranty
claims, writeoffs, offsets due to Inventory rotations and credits issued by
Borrower.
2. Section 2.2 of the Agreement
"2.2 Permanent Facility. From time to time, following the
Permanent Facility Effective Date, subject to the terms and conditions of
this Agreement, and so long as no Event of Default shall have occurred
and is continuing, Foothill agrees to make advances to Borrower in an
amount not to exceed the amount (the 'Permanent Borrowing Base') equal to the
lesser of:
(a) Seventy percent (70%) of the amount of Eligible Accounts; and (b)
An amount equal to Borrower's cash collections for the immediately
preceding forty-five (45) day period. Foothill shall not have any
obligation to make advances under this Section 2.2 to the extent that they
would cause the sum of the outstanding Obligations plus the outstanding
Clark Obligations to exceed the Permanent Facility Maximum Amount. In the
event that Borrower's Dilution exceeds ten percent (10%) of Borrower's
Accounts, then Foothill may, in its discretion, decrease its advance rate
against Eligible Accounts by the amount of estimated Dilution in excess of
ten percent (10%). For the sake of example only, if Dilution were twelve
percent (12%), then Foothill's advance rate would be reduced from seventy
percent (70%) of Eligible Accounts to sixty-eight percent (68%) of Eligible
Accounts. In the event that Borrower's Dilution is less than ten percent
(10%) of Borower's Accounts, then Foothill will increase its advance rate
against Eligible Accounts by the amount of estimated Dilution below ten
percent (10%) of Borrower's Accounts; provided, however, that the advance
rate against Eligible Accounts shall never exceed eighty percent (80%) of
Eligible Accounts. For the sake of example only, if Dilution were nine
(9%), then Foothill's advance rate would be increased from seventy percent
(70%) to seventy-one percent (71%) of Eligible Accounts. For purposes of
this Section 2.1(a), Dilution will be calculated by Foothill on a quarterly
basis, based upon its examinations of Borrower, unless Foothill determines
that it is necessary to make such calculation more frequently.
3. Section 2.3(a) of the Agreement is hereby amended to read as follows:
"(a) Borrower acknowledges that, from time to time, Foothill may
establish reserves against Eligible Accounts."
4. Section 2.5(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) the difference of Five Million Dollars ($5,000,000) less the
aggregate outstanding face amount of all L/Cs guaranteed by the L/C
Guarantees and letters of credit guaranteed by the Clark L/C Guarantees."
5. The second sentence Section 2.8 of the Agreement is hereby amended to
read as follows:
"For interest calculation purposes, all checks, wire transfers, or
other items of payment to Foothill shall be deemed to have been paid to
Foothill three (3) Business Days after the date Foothill actually
receives such wire transfer of immediately available federal funds,
or after Foothill actually receives possession of such check or other
item of payment.'
6. Section 2. 10(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) A one-time closing fee (the 'Permanent Facility Closing
Fee') of Four Hundred Thousand Dollars ($400,000) which shall be
earned, in full, on the Permanent Facility Closing Date and shall be
due and payable by Borrower (jointly and severally with Clark) to
Foothill in connection with this Agreement and the Clark Agreement on
the Permanent Facility Closing Date."
7. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION
By /s/ Pamela S. Ferro, VP
Title
TEREX CORPORATION
By /s/ Marvin B. Rosenberg
<PAGE>
AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
This Amendment Number One To Loan and Security Agreement ('Amendment") is
entered into as of August 24, 1993, between FOOTHILL CAPITAL CORPORATION
("Foothill") and CLARK MATERIAL HANDLING COMPANY ("Borrower").
FACT ONE: Foothill and Borrower entered into that certain Loan And
Security Agreement as of May 20, 1993 (the 'Agreement").
FACT TWO: Borrower and Foothill desire to amend the Agreement as
provided herein.
NOW, THEREFORE, Foothill and Borrower hereby amend the
Agreement as follows:
1. The followings definitions in Section 1.1 of the Agreement
are amended to read as follows:
(a) "Permanent Facility" means the revolving loan facility
set forth in Section 2.2.
(b) "Permanent Facility Closing Date" means the date
that Foothill receives the Permanent Facility Closing Fee.
(c) "Permanent Facility Maximum Amount" means Twenty
Million Dollars ($20,000,000).
(d) "Permanent Facility Maximum Foothill Amount" means
that portion of the Permanent Facility Maximum Amount for which
Foothill shall be responsible hereunder and under the Terex
Agreement, exclusive of any participations with Participants, which
amount is Sixteen Million Dollars ($16,000,000).
(e) "Syndicated Amount" means a subcomponent of the Maximum
Amount equal to the aggregate financing commitments (to the extent
not breached or terminated) of all Participants.
The following definition is added to Section 1.1 of the
Agreement:
"Dilution" means all non-cash charges to Borrower's
Accounts, including, but not limited to, returned Inventory, volume discounts,
warranty claims, writeoffs, offsets due to Inventory rotations and credits
issued by Borrower.
2. Section 2.2 of the Agreement is hereby amended to read as follows:
"2.2 Permanent Facility. From time to time, following the
Permanent Facility Effective Date, subject to the terms and conditions
of this Agreement, and so long as no Event of Default shall have
occurred and is continuing, Foothill agrees to make revolving
advances to Borrower in an amount not to exceed the amount (the
"Permanent Facility Borrowing Base") equal to the lesser of:
(a) Seventy percent (70%) of the amount of Eligible Accounts; and (b)
An amount equal to Borrower's cash collections for the immediately
preceding forty-five (45) day period. Foothill shall not have any
obligation to make advances under this Section 2.2 to the extent that
they would cause the sum of the outstanding Obligations plus the
outstanding Terex Obligations to exceed the Permanent Facility Maximum
Amount. In the event that Borrower's Dilution exceeds ten percent (10%)
of Borrower's Accounts, then Foothill may, in its discretion, decrease,
its advance rate against Eligible Accounts by the amount of estimated
in excess of ten percent (10%). For the sake of example only, if
Dilution were twelve percent (12%), then Foothill's advance rate would
be reduced from seventy percent (70%) of Eligible Accounts to
sixty-eight percent (68%) of Eligible Accounts. In the event that
Borrower's Dilution is less than ten percent (10%) of Borrower's
Accounts, then Foothill will increase its advance rate against Eligible
Accounts by the amount of estimated Dilution below ten percent (10%) of
Borrower's Accounts; provided, however, that the advance rate against
Eligible Accounts shall never exceed eighty percent (80%) of Eligible
Accounts. For the sake of example only, if Dilution were nine percent
(9%), then Foothill's advance rate would be increased from seventy
percent (70%) to seventy-one percent (71%) of Eligible Accounts. For
purposes of this Section 2.1(a), Dilution will be calculated by Foothill
on a quarterly basis, based upon its examinations of Borrower, unless
Foothill determines that it is necessary to make such calculation more
frequently."
3. Section 2.3(a) of the Agreement is hereby amended to read as follows:
"(a) Borrower acknowledges that, from time to time, Foothill may
establish reserves against Eligible Accounts.'
4. Section 2.5(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) the difference of Five Million Dollars ($5,000,000) less the
aggregate outstanding face amount of all L/Cs guaranteed by the L/C
Guarantees and letters of credit guaranteed by the Terex L/C Guarantees."
5. The second sentence Section 2.8 of the Agreement is hereby amended to read as
follows:
"For interest calculation purposes, all checks, wire transfers, or other
items of payment to Foothill shall be deemed to have been paid to Foothill
three (3) Business Days after the date Foothill actually receives such wire
transfer of immediately available federal funds, or after Foothill actually
receives possession of such check or other item of payment."
6. Section 2. 10(a)(ii) of the Agreement is hereby amended to read as follows:
"(ii) A one-time closing fee (the "Permanent Facility Closing Fee")
of Four Hundred Thousand Dollars ($400,000) which shall be earned,
in full, on the Permanent Facility Closing Date and shall be due and
payable by Borrower (jointly and severally with Terex) to Foothill
in connection with this Agreement and the Terex Agreement on
the Permanent Facility Closing Date.'
7. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects,
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION
By /s/ Pamela S. Ferro, VP
Title
CLARK MATERIAL HANDLING COMPANY
By /s/ Marvin B. Rosenberg
Title
TERMINATION, GENERAL RELEASE AND WAIVER AGREEMENT
This TERMINATION, GENERAL RELEASE AND WAIVER AGREEMENT is
made and entered into this 29th day of June, 1993 by and between
CLARK MATERIAL HANDLING COMPANY (together with its subsidiaries,
the "Company") and GARY D. BELLO ("Bello").
1. Termination
Bello hereby acknowledges and agrees that his employment with
the Company shall be terminated effective as of the end of the
business day of May 7, 1993 (the "Termination Date"); provided that
(i) Bello shall not be obligated to perform any services for the
Company or any of its subsidiaries or affiliates after May 7, 1993
and (ii) Company agrees that as of the Termination Date, Bello has
no duty or duties, or other obligations or responsibilities to or
for the Company or any of its subsidiaries or affiliates, except as
expressly provided herein. Bello hereby waives any right and
agrees not to seek reinstatement or employment with the Company.
2. Payment of Accrued Earnings
The Company hereby agrees to pay promptly to Bello when due
all monetary or other benefits (including 401(k) contributions, but
excepting any medical, life insurance and disability benefits or
contributions required to be paid by the Company which will be paid
or made as required or otherwise), less withholding for applicable
taxes, which he has earned or accrued, or to which he is or may be
entitled (but excluding any accrued vacation and any pro-rated
bonuses to which Bello may be entitled to the Termination Date)
through the Termination Date ("Accrued Earnings Payment"). Bello
hereby acknowledges that any and all obligations of the Company
with respect to him, except as specifically otherwise provided
herein, will be fully satisfied by Bello's acceptance of the
Accrued Earnings Payment.
3. Termination Payment and Benefits
(a) Bello hereby agrees to accept three days from the
Effective Date, as provided below, as full and final consideration
for his promises, obligations and release set forth herein, and in
settlement of any and all claims as more particularly set forth
below, a lump sum payment of $300,000.00, less withholding for
income and other applicable taxes (collectively, "Termination
Payment") and the benefits referred to in subparagraphs 3(b)-(d)
below. The Termination Payment (i) shall be paid by the Company
into escrow with Robinson, Silverman, Pearce, Aronsohn & Berman
(the "Escrow Agent") simultaneously with the execution of this
Agreement and (ii) shall be paid at the end of three days from the
Effective Date (A) to Bello, if Bello has not challenged the
waivers and releases under this Agreement or (B) to the Company if
Bello has made such a challenge.
(b) The Company also shall continue to include Bello in
its medical benefits and life insurance programs during the period
commencing on the Termination Date and ending on May 7, 1994 (the
"Termination Period"), as if his employment had not been
terminated; provided, however, that such benefits shall cease at
such time during such period as Bello has secured similar medical
and insurance benefits from a new employer.
(c) Bello shall also be entitled to continue to use the
Company vehicle he is currently using during the Termination
Period, and the Company shall pay all costs of insurance in
accordance with its current policies. At the end of the
Termination Period Bello, at his option, may purchase the vehicle
from the Company at the lease buyout amount, may return the vehicle
to the Company or otherwise dispose of the vehicle at the Company's
direction.
(d) The Company agrees to pay for any outplacement
services obtained by Bello provided (i) the company providing such
services as selected by Bello is acceptable to the Company and (ii)
the Company shall be responsible for negotiation and settlement of
the fees and expenses due for such services. The Company also
agrees to pay legal fees incurred by Bello in connection with the
preparation and negotiation of this Agreement not to exceed
$5,000.00. The parties agree that any payment required to be made
by the Company pursuant to this clause (d) shall be timely and
fully made by the Company directly to the provider of such services
against detailed invoice therefor.
(e) Bello expressly agrees that he shall not be entitled
to and shall not receive any other payments or benefits of any kind
from the Company, including without limitation any bonus payments,
during the Termination Period, other than the Termination Payment,
the Accrued Earnings Payment and the benefits expressly provided
for herein.
4. Waiver and Release of Claims
(a) Bello understands that there are various state,
federal and local laws that prohibit employment discrimination on
the basis of age, sex, race, color, national origin, religion,
handicap, veteran status and other protected categories and that
these laws are enforced through the Equal Employment Opportunity
Commission, the U.S. Department of Labor, and other agencies. He
intends to give up any and all rights he may have under these or
any other laws relating to his employment with the Company and the
termination of his employment, except as expressly provided in this
Agreement.
(b) In consideration of and subject to and conditional
upon the Company's timely making the Termination Payment, the
Accrued Earning Payment and the other payments provided for in this
Agreement, and the Company's continuing to provide Bello with the
benefits provided for herein during the Termination Period, Bello,
on his behalf and on behalf of his successors and assigns, hereby
irrevocably, unconditionally and generally releases, and agrees not
to commence in any forum, any action or proceeding against the
Company and its parent, affiliates, subsidiaries, divisions, their
successors and assigns, and its and their respective officers,
agents, employees, directors, shareholders, representatives,
successors and assigns ("Releasees") from or in connection with,
and hereby waives and/or settles, except as otherwise stated in
this Agreement, to and as of the Effective Date, any and all
actions, causes of action, suits, debts, dues, sums of money,
accounts, controversies, agreements, promises, damages, judgments,
executions, or any liability, claims or demands, known or unknown
and of any nature whatsoever and which Bello and his successors or
assigns ever had, now have or hereafter can, shall or may have,
arising directly or indirectly out of or relating to his employment
with the Company or the performance of services for the Company or
the termination of such employment or services and, specifically,
without limitation (i) claims for wrongful dismissal or termination
of employment; (ii) claims arising under any contract, express or
implied; (iii) claims arising under any federal, state, local or
other fair or equal employment practice or employee relations
statutes, orders, laws, ordinances, regulations or the like,
specifically, without limitation, those statutes, executive orders,
laws, ordinances, regulations or the like prohibiting
discrimination based upon age, race, religion, sex, national
origin, disability or any other unlawful bases; (iv) claims based
upon any other federal, state or local statutes, orders, laws,
ordinances, regulations or the like; (v) claims for tort, tortious
or harassing conduct, infliction of mental distress, interference
with contract, fraud, libel or slander; and (vi) any claim
whatsoever for damages, including without limitation, punitive or
compensatory damages, or for attorneys' fees, expenses, costs,
wages, injunctive or equitable relief. Without in any way limiting
the generality of the foregoing, Bello hereby waives and releases
any rights or claims that he may have arising under the Age
Discrimination in Employment Act of 1967, as amended, the Civil
Rights Act of 1964, as amended, the Civil Rights Act of 1991, as
amended, the Civil Rights Act of 1866, the American's with
Disabilities Act of 1990, the Executive Law of the State of New
York and the Administrative Code of the City of New York. Bello
represents and warrants that he has not filed any complaints,
claims, or actions against the Company, its successors, assigns and
their affiliates, officers, agents, directors, supervisors,
employees, or representatives with any state, federal, or local
agency or court, based upon events occurring on or prior to the
date of this Agreement on any basis, including without limitation,
with respect to his employment with or performances of services the
Company or the termination of such employment or services.
Notwithstanding anything to the contrary contained
herein, the foregoing release shall not apply to any rights or
claims that Bello may have (i) for benefits under the provisions of
any pension or employee benefits plans maintained by the Company or
applicable affiliates or subsidiaries, (ii) for payments pursuant
to any obligation of the Company or any affiliate or subsidiary
thereof, or any such party's insurance carrier, to indemnify Bello
in connection with any third party or derivative claim arising out
of Bello's having served as a director, officer or employee of the
Company or any of its affiliates or subsidiaries, pursuant to any
by-law, charter provision, contract, policy or otherwise, or (iii)
arising out of any Releasee's gross negligence, fraud or willful
misconduct. The Company and any applicable subsidiaries or
affiliates shall, with respect to Bello's performance of services
through the date hereof and through the Termination Date, treat
Bello in the same manner as other officers and employees of such
companies are treated with respect to mandatory and discretionary
indemnification and directors' and officers' insurance coverage.
(c) In consideration of Bello's entry into and
compliance with the provisions of this Agreement, the Company, for
itself and on behalf of each of its parents, subsidiaries and
affiliates (including without limitation Clark Equipment GmbH),
successors and assigns (collectively, "Releasors"), hereby
irrevocably, unconditionally and generally releases, and agrees not
to commence in any forum, any action or proceeding against Bello,
his heirs, legal representatives, successors and assigns
("Releasee"), from or in connection with, and hereby waives and/or
settles, except as otherwise stated in or contemplated by this
Agreement, any and all actions, causes of action, suits, debts,
dues, sums of money, accounts, controversies, agreements, promises,
damages, judgments, executions, or any liability, claims or
demands, known or unknown and of any nature whatsoever and which
Releasors ever had, now have or hereafter can, shall or may have,
arising directly or indirectly out of or relating to Bello's
employment with the Company or any of its subsidiaries or
affiliates or the performance or services for the Company or any of
its subsidiaries or affiliates or the termination of such
employment or services, and, specifically, without limitation, (i)
claims for alleged breach of the duty of due care; (ii) claims
arising under any contract, express or implied; (iii) claims based
upon any federal, state or local statutes, orders, laws,
ordinances, regulations or the like; (iv) claims for tort,
interference with contract, fraud, libel or slander; and (v) any
claim whatsoever for damages, including without limitation,
punitive or compensatory, damages, or for attorney's fees, expenses,
costs, wages, or injunctive or equitable relief; provided, however,
that claims arising out of Bello's gross negligence, fraud or
willful misconduct shall not be released.
(d) Bello hereby acknowledges that, subject to the
Company's timely performance of its obligations under the
Agreement, all sums which are, were or may have been claimed to be
due to him have been paid or such payments have been released,
waived or settled by Bello as provided in this Agreement and by
payment of the Accrued Earnings Payment.
5. Protection of Confidential Information; NonCompetition;
NonDisparagement
In consideration of the Company's agreement to make the
Termination Payment and to continue to provide Bello with the
benefits provided for herein during the Termination Period:
(a) Bello acknowledges that:
(i) As a result of his employment with the
Company, he has obtained secret and confidential
information concerning the business of the Company
and its affiliates and their operations and
finances, including, without limitation, the
identity of customers and sources of supply, their
needs and requirements, the nature and extend of
contracts with them, and related cost, price and
sales information;
(ii) the Company and its affiliates will suffer
substantial damage which will be difficult to
compute if, during the period of his employment
with the Company or thereafter, Bello should enter
into a Competitive Business within one year after
the Termination Date or if he should divulge secret
and confidential information relating to the
business of the Company heretofore or hereafter
acquired by him in the course of his employment
with the Company or any affiliate; and
(iii) the provision of this Agreement are
reasonable and necessary for the protection of the
business of the Company and its affiliates.
(b) Bello agrees that he will not at any time during the
term of this Agreement, or thereafter, divulge to any person, firm
or corporation or use for his own benefit any proprietary
information obtained or learned by him during the course of his
employment with the company or any of its affiliates, or prior to
the commencement thereof in the course of his employment with Clark
Equipment Company, with regard to the operational, financial,
business or other affairs of the Company or its affiliates, their
officers and directors, including, without limitation, proprietary
trade "know how" and secrets, customer lists, sources of supply,
pricing policies, proprietary operational methods or technical
processes, except (i) with the Company's express written consent;
(ii) to the extent that any such information is in or becomes part
of the public domain other than as a result of Bello's breach of
any of his obligations hereunder; or (iii) where required to be
disclosed by court order, subpoena or other government or legal
process by law. In the event that Bello shall be required to make
disclosure pursuant to the provisions of clause (iii) of the
preceding sentence, Bello promptly, but in no event more than 48
hours after learning of such subpoena, court order, or other
government or legal process, shall notify, by personal delivery
or by facsimile transmission, confirmed by mail, the Company and,
at the Company's expense, Bello shall: (A) take all reasonably
necessary steps requested by the Company to defend against the
enforcement of such subpoena, court order or other government or
legal process and (B) permit the Company to intervene and
participate with counsel of its choice in any proceeding relating
to the enforcement thereof. Notwithstanding the foregoing if at
any time Bello is identified or referenced in any print or other
media in a manner which could reasonably be believed in any way to
have an adverse effect on the reputation or business affairs of
Bello, then in such event, Bello may comment or otherwise respond
to such matters (i) in a way or means consistent with the intent of
the Agreement (including, without limitation, subparagraphs 5(b)
and (e) hereof) and (ii) in an effort to defend, clarify or rectify
such matters. In the event Bello elects to respond, (i) he will
notify the Company not less than 48 hours before any response is
made public or given to the party or parties in question and (ii)
the Company, in the reasonable exercise of its discretion, shall
have the right to approve such response. In the event the Company
does not promptly approve the initial response from Bello, the
Company and Bello shall promptly negotiate, and the parties shall
promptly agree to a mutually satisfactory response.
(c) Bello will promptly deliver to the Company (to the
extent not previously delivered) all memoranda, notes, records,
reports, manuals, drawings, blueprints and other documents (and all
copies thereof) in his possession relating to the business of the
Company and its affiliates and all property associated therewith,
which he may possess or have under his control. Bello shall have
the right to retain all of his personal property.
(d) For a period of one (1) year after the Termination
Date, Bello, without the prior written permission of the Company,
shall not directly or indirectly, (i) enter into the employ of or
render any services to any person, firm or corporation engaged in
the manufacture or distribution (including, without limitation, all
authorized dealers of or for the Company) of forklift trucks, tow
tractors, powered hand trucks or other industrial material handling
equipment or replacement parts or components related thereto or
which otherwise directly or indirectly competes with the business
of the Company as presently conducted or proposed to be conducted
as of the Termination Date (a "Competitive Business"); (ii) engage
in any Competitive Business for his own account; (iii) become
associated with or interested in any Competitive Business as an
individual, partner, shareholder, creditor, director, officer,
principal, agent, employee, trustee, consultant, advisor or in any
other relationship or capacity; (iv) solicit, induce or entice, or
cause any other person or entity to solicit, induce or entice to
leave the employ of the Company any person who was employed or
retained by the Company on the date hereof, provided, however, that
Bello may (A) employ, retain or otherwise engage in business with
William Tweardy and/or Elwyn Gillette and (B) otherwise employ or
retain such other individuals as are subsequently approved by the
Company in the reasonable exercise of its discretion; or (v)
solicit, interfere with, or endeavor to entice away from the
Company or any of its affiliates any of its or their customers,
sources of supply, or dealers or in any other way interfere with
contractual relations with any such persons. However, nothing in
this Agreement shall preclude Bello from investing his personal
assets in the securities of any corporation or other business
entity which is engaged in a business competitive with that of the
Company if such securities are traded on a national stock exchange
or in the over-the-counter market and if such investment does not
result in his beneficially owning, at any time, more than 1% of the
publicly-traded equity securities of such competitor.
(e) Subject to paragraph 6 below, and except as
paragraph 5(b) permits or applicable law or legal process requires,
Bello agrees he will conduct himself in a professional manner and
not make any disparaging, negative or other statements regarding
the Company, its affiliates or any of the Company's or its
affiliates officers, directors or employees which could reasonably
be believed in any way to have an adverse affect on the business or
affairs of the Company or its affiliates or otherwise be injurious
to or not be in the best interests of the Company, its affiliates
or any such other persons. The Company agrees that it will conduct
itself in a professional manner and not make any disparaging,
negative or other statements regarding Bello which could in any way
have and adverse affect on Bello or his reputation or otherwise be
injurious to Bello.
(f) If Bello commits a breach, or threatens to commit a
breach, of any of the provisions of Paragraph 5, the Company shall
have the right and remedy:
(i) to have the provisions of this Agreement
specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by
Bello that the services rendered by him to the
Company were of a special, unique and extraordinary
character and that any such breach or threatened
breach will cause irreparable injury to the Company
and that money damages will not provide an adequate
remedy to the Company;
(ii) to require Bello to account for and pay over
to the Company all compensation, profits, monies,
accruals, increments or other benefits
(collectively "Benefits") derived or received by
him as the result of any transactions constituting
a breach of any of the provisions of Paragraph 5,
and Bello hereby agrees to account for and pay over
such Benefits to the Company; and
(iii) to require Bello to reimburse the Company for
all costs and expenses, including attorneys' fees
incurred in connection with the enforcement of this
Paragraph 5, unless Bello is the successful party
in which event the Company shall reimburse Bello
for all such costs and expenses incurred by him.
Each of the rights and remedies enumerated in this Paragraph 5
shall be independent of the other, and shall be severally
enforceable, and such rights and remedies shall be in addition to,
and not in lieu of, any other rights and remedies available to the
Company under law or equity.
(g) If any provision of this Paragraph 5 is held to be
unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have
the power to modify such score, duration, or area, or all of them,
and such provision or provisions shall then be applicable in such
modified form.
6. Resignation of Offices; Cooperation
Bello hereby resigns any and all positions previously
held as an officer or director of the Company effective
immediately. Accordingly, Bello shall not sign any financial
periodic or special reports on behalf of the Company, including but
not limited to financial reports or statements submitted to the
Company's lenders, the Securities and Exchange Commission, the
Internal Revenue Service, other governmental agencies or external
auditors. Bello shall upon reasonable notice and at reasonable
times (having due regard for conflicting obligations arising from
any other employment or engagement of Bello), advise and assist the
company in preparing such operational, financial or other reports
or other filings as the Company may reasonable request, and to
respond to inquiries concerning the operations, finances and
business of the Company and otherwise cooperate with the Company
and its affiliates as the Company shall reasonably request.
7. Consultation with Attorney and Review of Agreement
and Release
By executing this Agreement Bello acknowledges that (i)
he has been advised in writing by the Company to consult with an
attorney before executing this Agreement; (ii) he had adequate time
to review it and to consider whether to sign the Agreement and;
(iii) he understands each and every term of this Agreement and the
full effect of signing the Agreement, including his obligations to
the Company and his release and waiver of any and all claims.
8. Third Party Agreements
Bello hereby warrants and represents that he has not
entered into any third party agreements in the Company's name or on
the Company's behalf not known or disclosed to the board of
directors of Terex Corporation, individual directors on such board
or to David Langevin as of the Termination Date, other than in the
ordinary course of the Company's business. In consideration of the
Company's agreement to make the Termination Payment and to continue
to include Bello in its benefits program during the Termination
Period, upon reasonable notice and at reasonable times (having due
regard for conflicting obligations arising from any other
employment or engagement of Bello), Bello agrees to reasonably
cooperate with the Company at the Company's reasonable request and
at its expense in defending against any claims against the Company
and its affiliates. Bello further represents and warrants that
during the period of his employment with the Company, he has not
engaged in any conduct or activity which was (i) knowingly to Bello
a violation of the law (ii) was willful misconduct or (iii) a
material breach of Company policy.
9. Breach of this Agreement
(a) In addition to any other remedies which the Company
may have hereunder or by law, Bello acknowledges and agrees that in
the event of any breach of Bello's obligations under paragraph 5(d)
of this Agreement, the Company, at its option, shall be entitled
either (i) to the return of the Termination Payment (which shall be
forfeited) or (ii) two have the covenants contained in paragraph
5(d) above be automatically extended to a date one (1) year from
the date on which Bello either permanently ceases such violation or
becomes subject to a final order or judgment enforcing such
covenant.
(b) In addition to any other remedies which the Company
may have hereunder or by law, Bello acknowledges and agrees that in
the event of any breach of Bello's obligations under paragraphs
5 (b) or 5 (e), the Company shall be entitled to the return of the
Termination Payment, which shall be forfeited.
(c) Notwithstanding anything to the contrary contained
herein, prior to the company's exercising any rights or remedies
against Bello for any alleged breach of this Agreement (excluding
alleged breaches of paragraphs 5(b), 5(d) and 5(e) above), Bello
shall be entitled to cure such alleged breach within twenty (20)
days after written notice from the Company thereof. In the event
Bello materially breaches his obligations under any provision of
this Agreement (and fails to timely cure same, where permitted),
the Company shall be entitled to withhold any unpaid benefits which
would otherwise be paid or provided to Bello under this Agreement.
10. No Admissions by the Company
This Agreement and/or any payments made hereunder are not
intended to be, shall not be construed as and are not an admission
or concession by the Company of any wrongdoing or illegal or
actionable acts or omissions and the Company affirmatively states
that it is not engaged in any such acts or omissions. In
consideration of the Company's agreement to make the Termination
Payment and to continue to include Bello in its benefits program
during the Termination Period, Bello shall not directly or
indirectly make any written or oral statements, suggestions or
representations that the Company has made or implied any such
admission or concession.
11. Confidentiality of this Agreement
In consideration of the mutual covenants contained
herein, each party shall keep confidential and not disclose to any
person (excluding legal, financial and tax advisors and such
minimum disclosure as may be required by applicable securities
laws) any and all information concerning the terms of this
Agreement, including without limitation, the amounts of any
payments made hereunder, except as may be required by law.
12. Miscellaneous
This Agreement contains all the understandings and
agreements with respect to the matters set forth herein, and there
are no others made either contemporaneously herewith or otherwise.
This Agreement shall be governed by the laws of the State of New
York applicable to contracts made and wholly performed therein. If
any section of this Agreement is determined to be void, voidable or
unenforceable, it shall have no effect on the remainder, which
shall remain in full force and effect.
13. Voluntary Signing
Bello acknowledges that this Agreement and all the terms
hereof are fair, reasonable and are not the result of any fraud,
duress, coercion, pressure or undue influence exercised by the
Company and that he has approved and/or entered into this Agreement
and all of the terms hereof, knowingly, freely and voluntarily.
Each of the other parties hereto represents that this Agreement has
been duly authorized and executed by a duly authorized officer.
14. Survival
All of Bello's obligations pursuant to this Agreement
shall survive the Termination Date and the expiration of the
Termination Period, except as expressly stated in this Agreement.
15. Counterparts; Effective Signatures
This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one
instrument. Facsimile copies of signatures to this executed
Agreement shall be valid and enforceable to the same extent as the
original signatures to such agreement.
/s/ Gary D. Bello
GARY D. BELLO
CLARK MATERIAL HANDLING COMPANY
By: /s/ Marvin B. Rosenberg
Name: Marvin B. Rosenberg
Title: Secretary
CLARK MATERIAL HANDLING GmbH
By: /s/ Marvin B. Rosenberg
Name: Marvin B. Rosenberg
Title: Secretary
STATE OF KENTUCKY)
: ss.:
COUNTY OF FAYETTE)
On the 25th day of June, 1993 personally came before
me Gary D. Bello, and being duly sworn, acknowledged that he is the
person described in and who executed the foregoing Agreement and
acknowledged that he executed same.
My commission expires: March 16, 1996
/s/ C. Walker
Notary Public
<PAGE>
STATE OF Connecticut)
: ss.: Westport
COUNTY OF Fairfield )
On the 30th day of June, 1993 personally came before
me Marvin B. Rosenberg, who, being duly sworn, did depose and say
that he resides in Westport, Connecticut; that he is the
Secretary of Clark Material Handling Company, the
corporation described in and which executed that acknowledged that
he is the person described in the above instrument; and that he
signed his name thereto by order of the board of directors.
My commission expires: February 28, 1998
/s/ Patricia B. Zuckerman
Notary Public
STATE OF Connecticut)
: ss.: Westport
COUNTY OF Fairfield )
On the 30th day of June 1993 personally came before
me Marvin B. Rosenberg who, being duly sworn, did depose and say
that he resides in Westport, Connecticut; that he is the
Secretary of Clark Material Handling GmbH, the
corporation described in and which executed that acknowledged that
he is the person described in the above instrument; and that he
signed his name thereto by order of the board of directors.
My commission expires: Feburary 28, 1998
/s/ Patricia B. Zuckerman
Notary Public
TEREX CORPORATION
500 Post Road East
Westport, Connecticut 06880
December 20, 1993
To the Purchasers
Who Are Signatories Hereto
Dear Sirs:
TEREX CORPORATION, a Delaware corporation, hereby agrees with
you as follows:
SECTION 1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have
the following meanings:
Affiliate: An "Affiliate" of any specified Person means any
other Person, directly or indirectly, controlling or controlled
by or under direct or indirect common control with such
specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
Agreement: This Purchase Agreement and the Other Purchase
Agreements, in each case, as the same may be amended,
supplemented or modified from time to time in accordance with
the terms hereof and thereof.
Applicable Agreement: Any bond, debenture, note or any other
evidence of indebtedness, indenture, mortgage, deed of trust or
any other lease, contract, agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of
their respective properties or assets is subject.
Applicable Law: Any Federal, state, local or foreign statute,
law (including, without limitation, common law), code,
ordinance, governmental rule or regulation, or any judgment,
injunction, decree, rule, writ, or order of any court or
governmental agency or authority applicable to the Company or
any of the Subsidiaries or any of their respective properties or
assets.
Audited Financial Statements: The audited consolidated
financial statements, together with the notes thereto, of the
Company, included (or incorporated by reference) in the SEC
Documents.
Business Day: A day that is not a Saturday, a Sunday or a day
on which banking institutions in the State of New York are not
required to be open.
Certificate of Designation: The Certificate of Designation of
Preferences and Rights of the Preferred Stock substantially in
the form attached hereto as Exhibit 1.
Charter Documents: With respect to any Person, the Articles or
Certificate of Incorporation and By-laws, partnership agreement
or other organizational documents of such Person.
Code: The Internal Revenue Code of 1986, as amended.
Commission: The Securities and Exchange Commission.
Common Stock: Common Stock, $.01 par value per share, of the
Company.
Company: Terex Corporation, a Delaware corporation, and any
successor corporation thereto.
Documents: All documents necessary to consummate the
transactions contemplated by the Placement Memorandum, including
without limitation, this Agreement, the Certificate of
Designation, the Registration Rights Agreements, the Warrant
Agreement, the Securities and any documents or instruments
contemplated by or executed in connection with any of them or
the transactions contemplated hereby or thereby.
Environmental Laws: All Applicable Laws now or hereafter in
effect, relating to pollution or protection of human health or
the environment, including, without limitation, Applicable Laws
relating to (i) emissions, discharges, releases or threatened
releases of Hazardous Materials into the environment (including,
without limitation, ambient air, surface water, ground water,
land surface or subsurface strata), (ii) the manufacture,
processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of Hazardous Materials, and
(iii) underground storage tanks, and related piping, and
emissions, discharges, releases or threatened releases therefrom.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliate: Any affiliate of the Company as defined in
section 407(d)(7) of ERISA.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Commission
thereunder.
Financial Statements: Collectively, the Audited Financial
Statements and the Unaudited Financial Statements.
Hazardous Materials: All pollutants, contaminants, chemicals,
or industrial, toxic or hazardous constituents, substances or
wastes, including, without limitation, petroleum, including
crude oil or any fraction thereof, or any petroleum product or
other wastes, chemicals or substances regulated by any
Environmental Law.
Latest Unaudited Financial Statements: The unaudited
consolidated financial statements, together with the notes
thereto, of the Company at, and for the nine months ended,
September 30, 1993, included in the SEC Documents.
Lien: Any mortgage, lien, pledge, charge, security interest,
adverse claim, or encumbrance of any kind, in each case whether
or not filed, recorded or otherwise perfected under applicable
law (including, without limitation, any conditional sale or
other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of
or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
Loan Agreements: Collectively, (i) the Indenture, dated as of
July 31, 1992, among the Company, certain of its subsidiaries
and United States Trust Company of New York, as trustee (the
"Senior Indenture"), (ii) the Indenture, dated as of June 30,
1987, between the Company and Continental Bank, National
Association (formerly Continental Illinois National Bank and
Trust Company of Chicago), as trustee, (iii) the Loan and
Security Agreement, dated as of May 20, 1993, between Foothill
Capital Corporation and the Company, and (iv) the Loan and
Security Agreement, dated as of May 20, 1993, between Foothill
Capital Corporation and Clark Material Handling Company, in each
case as amended and in effect on December 31, 1993.
Material Adverse Effect: A material adverse effect on (i) the
properties, business, prospects, operations, earnings, assets,
liabilities or condition (financial or otherwise) of the Company
and its Subsidiaries, taken as a whole, (ii) the ability of the
Company to perform its obligations hereunder, under any of the
other Documents or under the Securities or (iii) the validity or
enforceability of this Agreement, any of the other Documents or
the Securities.
Pension Plan: Any "employee pension benefit plan", as defined
in Section 3(2) of ERISA (other than a multiemployer plan, as
defined in Section 3(37) of ERISA), maintained or contributed to
by the Company or any ERISA Affiliate of the Company.
Person: Any individual, partnership, corporation, joint
venture, association, joint-stock company, trust, unincorporated
organization, government or agency or political subdivision
thereof, or other entity.
Placement Agent: Jefferies & Company, Inc., as placement agent.
Placement Memorandum: The Amended and Restated Private
Placement Memorandum of the Company, dated December 14, 1993,
relating to the Securities, and all attachments, exhibits and
appendices thereto.
Preferred Stock: The Series A Cumulative Redeemable
Convertible Preferred Stock of the Company, $.01 par value per
share, having the rights, designations and preferences set forth
in the Certificate of Designation.
Privately Outstanding Securities: The Securities, the
Conversion Shares and the Warrant Shares upon original issuance
thereof, and at all times subsequent thereto until, in the case
of any such Security, (i) it has been effectively registered
under the Securities Act and disposed of in accordance with the
registration statement covering it, or (ii) it is sold pursuant
to Rule 144.
Proceeding: An action, claim, suit or proceeding (including,
without limitation, an investigation or partial proceeding, such
as a deposition).
Purchasers: Those Persons who have executed a counterpart of
this Agreement on any one of the signature pages hereof.
Registration Rights Agreements: The Registration Rights
Agreements, dated as of the Closing Date, by and among the
Company and the Purchasers, substantially in the forms attached
hereto as Exhibit 2(a) and (b), as amended from time to time in
accordance with the terms thereof.
Rule 144: Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
Rule 144A: Rule 144A as promulgated by the Commission under
the Securities Act, and any successor rule or regulation thereto.
SASM&F: Skadden, Arps, Slate, Meagher & Flom, special counsel
to the Purchasers.
Securities: Collectively, the Shares and the Warrants to be
sold pursuant to this Agreement.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission
thereunder.
State: One of the sovereign states or commonwealths of the
United States of America, the District of Columbia, the
Commonwealth of Puerto Rico and any U.S. Territory.
subsidiary: With respect to any Person, (a) a corporation a
majority of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by a subsidiary of
such Person, or by such Person and one or more subsidiaries of
such Person, (b) a partnership in which such Person or a
subsidiary of such Person is, at the date of determination, a
general partner of such partnership, or (c) any other Person
(other than a corporation) in which such Person, a subsidiary of
such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination
thereof, has (i) at least a majority ownership interest or (ii)
the power to elect or direct the election of the majority of the
directors or other governing body of such Person.
Unaudited Financial Statements: Collectively, the unaudited
consolidated financial statements, together with the notes
thereto, of the Company, included (or incorporated by reference)
in the SEC Documents.
Warrant Agreement: The Warrant Agreement, dated as of the
Closing Date, by and between the Company and the Warrant Agent,
substantially in the form attached hereto as Exhibit 3, as
amended from time to time in accordance with the terms thereof.
(b) In addition, the following terms shall have the respective
meanings given thereto in the Sections indicated below:
Defined Term Section
CERCLA 5.18
Closing 2.2
Closing Date 2.2
Conversion Shares 5.2
GAAP 5.6
Indemnified Parties 2.6
Intellectual Property 5.19
Losses 2.6
Other Purchase Agreements 2.2
Other Purchasers 2.2
Party in Interest 2.3
Prohibited Transaction 4.5
Purchaser Representatives 5.1
Qualified Trust 2.3
Scheduled Closing Date 2.4
SEC Documents 5.8
Separate Account 2.3
Shares 2.1
Subsidiaries 5.1
Warrant Agent 3.1.6
Warrants 2.1
Warrant Shares 5.2
SECTION 2. PURCHASE AND SALE OF SECURITIES
2.1 Issue of Securities
(a) The Company has authorized the issuance and sale to the
Purchasers hereunder of (i) 1,200,000 shares of Preferred Stock
(the "Shares") and (ii) 1,300,000 warrants (the "Warrants") to
purchase shares of its Common Stock, on the terms and subject to
the conditions set forth in the Warrant Agreement. Each share
of Preferred Stock will be evidenced by a certificate
substantially in the form attached hereto as Exhibit 4. Each
Warrant shall be evidenced by a certificate substantially in the
form attached to the Warrant Agreement as Exhibit A thereto.
(b) The Company hereby agrees (i) to cause to be authorized
and to reserve and keep available at all times during which any
shares of Preferred Stock remain outstanding, free from
preemptive rights, out of its treasury stock or authorized but
unissued shares of Common Stock, or both, solely for the purpose
of effecting the conversion of the Preferred Stock pursuant to
its terms, sufficient shares of Common Stock to provide for the
issuance of the maximum number of shares of Common Stock
issuable upon conversion of the outstanding shares of Preferred
Stock, (ii) to issue and cause the transfer agent to deliver
such shares of Common Stock as required upon conversion of the
shares of Preferred Stock, and to take all actions necessary to
ensure that all such shares of Common Stock will, when issued,
be duly and validly issued, fully paid and nonassessable, and
(iii) if any shares of its Common Stock to be reserved for the
purpose of issuance of shares of Common Stock upon conversion of
the Preferred Stock, require registration with or approval of
any governmental authority under any Applicable Law before such
shares of Common Stock may be validly issued or delivered, then
it shall secure such registration or approval, as the case may
be, and maintain such registration or approval in effect so long
as so required.
(c) The Company hereby agrees (i) to cause to be authorized
and to reserve and keep available at all times during which any
Warrants remain outstanding, free from preemptive rights, out of
its treasury stock or authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the exercise
of the Warrants pursuant to the terms of the Warrant Agreement,
sufficient shares of Common Stock to provide for the issuance of
the maximum number of shares of Common Stock issuable upon
exercise of the outstanding Warrants, (ii) to issue and cause
the transfer agent to deliver such shares of Common Stock as
required upon exercise of the Warrants, and to take all actions
necessary to ensure that all such shares of Common Stock will,
when issued and paid for pursuant to the exercise of the
Warrants, be duly and validly issued, fully paid and
nonassessable, and (iii) if any shares of its Common Stock to be
reserved for the purpose of issuance of shares of Common Stock
upon exercise of the Warrants, require registration with or
approval of any governmental authority under any Applicable Law
before such shares of Common Stock may be validly issued or
delivered, then it shall secure such registration or approval,
as the case may be, and maintain such registration or approval
in effect so long as so required.
2.2 Sale and Purchase of the Securities; Closing
(a) Subject to the terms and conditions set forth herein, the
Company hereby agrees to sell to each Purchaser, and each
Purchaser, severally and not jointly, agrees to purchase from
the Company, (i) the number of Shares set forth below such
Purchaser's name on the applicable signature page hereof, to be
sold at a price equal to $23 per Share, and (ii) the number of
Warrants set forth below such Purchaser's name on the applicable
signature page hereof, to be sold at a price equal to $2 per
Warrant. The Company and the Purchasers hereby agree that the
aggregate purchase price for the Preferred Stock and Warrants
shall be allocated $23 to the Preferred Stock and $2 to the
Warrants, which amounts are based on each instrument's
anticipated relative fair market value at the time of issuance.
(b) The sale and purchase of the Securities shall take place
at a closing (the "Closing") at the offices of SASM&F, 919 Third
Avenue, New York, New York, at 9:00 A.M., New York time, on
December 20, 1993, or such other Business Day and time as may be
agreed upon by you and the Company (such time and date being
referred to as the "Closing Date"). At the Closing, the Company
will deliver to each Purchaser (i) one or more certificates
representing such number of Shares as are to be purchased by
such Purchaser, in each case registered in such Purchaser's name
or in the name of such nominee or designee as such Purchaser may
request, and (ii) one or more certificates representing the
Warrants to be purchased by such Purchaser, in each case
registered in such Purchaser's name or in the name of such
nominee or designee as such Purchaser may request, against
payment of the purchase price therefor by Federal funds bank
wire transfer to such bank account as the Company shall
designate at least two Business Days prior to the Closing. The
Company agrees that in connection with the placement of the
Securities, the Placement Agent may, in its discretion, deduct
from the purchase price of the Securities to be remitted to the
Company at the Closing the amount of its fees and expenses as
Placement Agent and the fees and expenses of SASM&F.
(c) Simultaneously with the execution of this Agreement, the
Company is executing other purchase agreements (the "Other
Purchase Agreements") identical to this Agreement with the other
purchasers listed on the signature pages thereof (the "Other
Purchasers"), pursuant to which the Company shall issue and sell
Securities to such Other Purchasers in the respective aggregate
amounts set forth below their names on the signature pages
thereof for the respective purchase prices set forth thereon.
The number of Securities being sold hereby and to the Other
Purchasers shall aggregate the amounts indicated as authorized
to be sold in Section 2.1. The sale of Securities to you and
the Other Purchasers are to be separate sales, and this
Agreement and the Other Purchase Agreements are to be separate
agreements; provided, that references to this "Agreement" shall
include the Other Purchase Agreements where the context so
permits, together with all modifications hereof and thereof.
2.3 Purchaser's Representations
Each Purchaser severally represents and warrants to each other
party hereto as follows:
(a) Such Purchaser has full power and authority to execute
and deliver this Agreement and the Registration Rights
Agreements and to consummate the transactions contemplated
hereby and thereby. This Agreement has been duly executed and
delivered by such Purchaser and, assuming this Agreement
constitutes a valid and binding agreement of each other party
hereto, this Agreement constitutes a valid and binding agreement
of such Purchaser, enforceable against such Purchaser in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, as to general
principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law).
(b) Such Purchaser is acquiring the Securities being
purchased by it hereunder for its own account (or for accounts
over which such Purchaser exercises investment control), and not
with a view to the distribution or reselling said Securities or
any part thereof in violation of the Securities Act, any other
securities laws of the United States or any applicable State
securities laws, without prejudice, however, to such Purchaser's
right at all times to sell or otherwise dispose of all or any
part of said Securities pursuant to an effective registration
statement under the Securities Act and applicable State
securities laws, or under an exemption from such registration
available under the Securities Act and other applicable State
securities laws.
(c) Upon original issuance thereof, and until such time as no
longer required by law, each certificate evidencing the
Securities (and all securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR
(iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES.
If such Purchaser desires to offer, sell or otherwise
transfer, pledge or hypothecate all or any part of the
Securities bearing such legend (other than pursuant to an
effective registration statement under the Securities Act or
pursuant to Rule 144A), such Purchaser shall deliver to the
Company a written opinion of counsel (which may be an employee
of such Purchaser), reasonably satisfactory in form and
substance to the Company, that an exemption from the
registration requirements of the Securities Act is available.
(d) Either (i) no part of the funds to be used to purchase
the Securities to be purchased by such Purchaser constitutes
assets allocated to any qualified trust that contains the assets
of any employee benefit plan with respect to which the Company
is a party in interest or disqualified person or the use of such
assets would not constitute a non-exempt prohibited transaction
under ERISA or the Code or (ii) such Purchaser is Continental
Bank, National Association acting as trustee for the Terex
Corporation Master Retirement Plan Trust and the purchase of the
Securities to be purchased by you is otherwise permitted under
all Applicable Law, including (without limitation) ERISA and the
Code. The representation made in the preceding sentence is made
solely in reliance upon such Purchaser's review of the list (a
copy of which is set forth as Schedule 2.3 hereto), furnished to
the Purchasers by the Company, which sets forth the employee
benefit plans with respect to which the Company is a party in
interest or a disqualified person. The terms "employee benefit
plan," "separate account," and "party in interest" shall have
the meanings assigned to such terms in Section 3 of ERISA, the
term "disqualified person" shall have the meaning assigned to
such term in section 4975 of the Code, and the term "qualified
trust" shall mean any trust qualified under section 401(a) of
the Code in which is held the assets of any employee benefit
plan.
(e) Such Purchaser has received a copy of the Placement
Memorandum, is an "accredited investor" within the meaning of
Rule 501 under the Securities Act, and has had an opportunity to
investigate the business and financial condition of the Company
and each of the Subsidiaries, and to obtain such information as
such Purchaser requires from each of such companies.
2.4 Failure to Deliver
(a) If the Closing fails to occur on or before December 31,
1993, each Purchaser shall, at its election and notwithstanding
anything to the contrary in this Agreement, be relieved of all
further obligations under this Agreement without thereby waiving
any rights such Purchaser may have by reason of such
nonfulfillment or failure. Nothing in this Section 2.4 shall
operate to relieve the Company from any of its obligations
hereunder.
(b) If the Closing shall not actually occur on any date on
which the Closing is scheduled to occur (the "Scheduled Closing
Date"), and the Company shall have failed to notify Jefferies &
Company, Inc., Attention: Andrew Whittaker (Telephone: (310)
575-5200) prior to 10:30 A.M., New York City time, on such
Scheduled Closing Date that such Closing has been postponed, the
Company shall pay to each Purchaser by wire transfer of
immediately available funds to the bank account designated by
such Purchaser (as compensation for such Purchaser's loss of
funds and administrative costs) an amount equal to interest on
the aggregate purchase price for the Securities to have been
purchased by such Purchaser on such Scheduled Closing Date, at
the effective rate of interest equal to 13% per annum, for each
day from and including such Scheduled Closing Date to and
including the earlier of the date on which such Closing actually
occurs or the date on which the amount to be paid by such
Purchaser as the purchase price of such Securities is available
to such Purchaser for reinvestment, less interest actually
earned on such funds during such period, but in any case not
less than one day's interest.
2.5 Expenses
Whether or not the Closing occurs, the Documents are executed
or the other transactions contemplated hereby or thereby are
consummated, the Company shall pay (or, upon request, promptly
reimburse the Purchasers for) all reasonable expenses relating
to this Agreement, and the other Documents, including, but not
limited to:
(a) the costs of preparing, reproducing and filing this
Agreement, the other Documents and the Securities;
(b) the reasonable out-of-pocket expenses incurred by each
Purchaser and its agents in connection with the negotiation and
execution of this Agreement, the other Documents and the
Securities and the transactions contemplated hereby and thereby
(including, without limitation, the reasonable fees and expenses
of SASM&F and all such other counsel they may employ on the
Purchasers' behalf);
(c) the cost of delivering to each Purchaser's home office or
the office of such Purchaser's designee the Securities purchased
by such Purchaser at the Closing upon the issuance thereof;
(d) all expenses relating to any amendment, or modification
of, or any waiver, or consent or preservation of rights under,
this Agreement, the other Documents or the Securities;
(e) all other expenses, including reasonable attorneys' fees,
incurred by the Company in connection with the transactions
contemplated by this Agreement and the other Documents; and
(f) all reasonable fees and expenses (including reasonable
fees and expenses of counsel) in connection with any
registration or qualification of the Securities for offer and
sale hereunder under the securities or "blue sky" laws of any
jurisdiction requiring such registration or qualification or in
connection with obtaining any exemptions from such requirements.
Notwithstanding the foregoing to the contrary, the Company
shall not be required to pay for more than one legal counsel to
the Purchasers unless the Company shall have approved the
retention of such counsel.
2.6 Indemnification and Contribution
(a) The Company shall, without limitation as to time,
indemnify and hold harmless each Purchaser and its Affiliates,
and the employees, officers, directors and agents of each
Purchaser and its Affiliates (collectively, the "Indemnified
Parties"), to the fullest extent lawful, from and against all
losses, claims, liabilities, damages, costs (including, without
limitation, reasonable costs of preparation and reasonable
attorneys' fees) and expenses (including expenses of
investigation) (collectively, "Losses") arising out of or in
connection with this Agreement or the other Documents or the
transactions contemplated hereby or thereby, whether or not the
transactions contemplated by this Agreement or the other
Documents are consummated and whether or not any Indemnified
Party is a formal party to any Proceeding; provided, however,
that the Company shall not be liable to any Indemnified Party
for any Losses if it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to
appeal) that such Losses arose solely from such Indemnified
Party's gross negligence or willful misconduct that (i) is
independent of any wrongful act by the Company or any of its
Subsidiaries or any of their respective representatives and (ii)
was not taken in reliance upon any of the representations,
warranties, covenants or promises of the Company herein or in
the other Documents. The Company agrees promptly to reimburse
each Indemnified Party for all such Losses as they are incurred
by such Indemnified Party.
(b) Each Indemnified Party shall give prompt written notice
to the Company of any claim or of the commencement of any
Proceeding with respect to which such Indemnified Party seeks
indemnification or contribution pursuant hereto; provided,
however, that the failure so to notify the Company shall not
relieve the Company from any obligation or liability except to
the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to
appeal) that the Company has been prejudiced materially by such
failure. The Company shall have the right, exercisable by
giving written notice to an Indemnified Party within 20 Business
Days after the receipt of written notice from such Indemnified
Party of such Proceeding, to assume, at the Company's expense,
the defense of any such Proceeding; provided, however, that an
Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless: (1) the Company
agrees to pay such fees and expenses; or (2) the Company fails
promptly to assume the defense of such Proceeding or fails to
employ counsel reasonably satisfactory to such Indemnified
Party; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified
Party and the Company or an Affiliate of the Company, and such
Indemnified Party shall have been advised by counsel that there
may be one or more material defenses available to such
Indemnified Party that are in conflict with those available to
the Company or such Affiliate (in which case, if such
Indemnified Party notifies the Company in writing that it elects
to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense thereof,
it being understood, however, that the Company shall not, in
connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local
counsel) at any time for such Indemnified Party). Whether or
not such defense is assumed by the Company, such Indemnified
Party will not be subject to any liability for any settlement
made without its consent (but such consent will not be
unreasonably withheld).
(c) The Company shall not consent to entry of any judgment,
enter into any settlement or otherwise seek to terminate any
Proceeding in which any Indemnified Party is or could be a party
and as to which indemnification or contribution could be sought
by such Indemnified Party under this Section 2.6, unless such
judgment, settlement or other termination includes as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all
liability in respect of such Proceeding.
(d) If the indemnification provided for in Section 2.6(a) is
unavailable to any Indemnified Party in respect of any Losses
referred to therein or is insufficient to hold such Indemnified
Person harmless, then the Company, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in
such proportion as is appropriate to reflect the relative fault
of the Company, on the one hand, and such Indemnified Party, on
the other hand, in connection with the actions, statements or
omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault of the
Company, on the one hand, and any Indemnified Party, on the
other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been taken by, or
relates to information supplied by, the Company or such
Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent any
such action, statement or omission. The amount paid or payable
by a party as a result of any Losses shall be deemed to include
any legal or other fees or expenses incurred by such party in
connection with any Proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to
this Section 2.6(d) were determined by pro rata allocation or by
any other method of allocation which does not take account of
the equitable considerations referred to above. No Person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section 2.6
shall be in addition to any liability the Company may otherwise
have hereunder, under any of the other Documents or otherwise.
The obligations of the Company to each Indemnified Party
hereunder shall be separate obligations, and the liability of
the Company to any Indemnified Party hereunder shall not be
extinguished solely because any other Indemnified Party is not
entitled to indemnity hereunder. The obligations of the Company
under this Section 2.6 shall survive the payment or prepayment
of the Securities, any transfer of the Securities and any
termination of this Agreement or the other Documents.
2.7 Further Actions
During the period from the date hereof to the Closing Date, the
Company shall use its best efforts and take all action necessary
or appropriate to cause its representations and warranties
contained in Section 5 hereof to be true as of the Closing Date,
after giving effect to the transactions contemplated by this
Agreement and the Placement Memorandum, as if made on and as of
such date.
SECTION 3. CLOSING CONDITIONS
3.1 Conditions to Purchaser Obligations
Each Purchaser's obligation to purchase and pay for the
Securities to be delivered to it at the Closing shall be subject
to the satisfaction of the following conditions on or before the
Closing Date, unless waived in writing by such Purchaser or its
agent:
3.1.1. Opinions of Counsel
Such Purchaser shall have received the following opinions,
dated the Closing Date and addressed to the Purchasers:
(a) a favorable opinion of Marvin Rosenberg, Esq., General
Counsel of the Company, substantially in the form set forth as
Exhibit 5;
(b) a favorable opinion of Robinson Silverman Pearce Aronsohn
& Berman, special counsel to the Company, substantially in the
form set forth as Exhibit 6; and
(c) such other opinions of counsel covering matters
incidental to the transactions contemplated by this Agreement
and the other Documents as such Purchaser may reasonably request.
3.1.2. Officers' Certificates
Such Purchaser shall have received (a) a certificate or
certificates, dated the Closing Date and signed by the Chairman
of the Board or the President and the Acting Chief Financial
Officer of the Company certifying (i) that the conditions set
forth in Sections 3.1.3 through 3.1.9 hereof have been satisfied
on and as of such date and (ii) as to such other matters as such
Purchaser may reasonably request and (b) a certificate or
certificates, dated the Closing Date and signed by the Secretary
or an Assistant Secretary of the Company, certifying such
corporate matters as such Purchaser may reasonably request.
3.1.3. Completion of Other Transactions
(a) Prior to the sale to such Purchaser of the Securities to
be purchased by such Purchaser at the Closing, the Company shall
have duly filed the Certificate of Designation with the
Secretary of State of the State of Delaware.
(b) The Company shall have simultaneously issued and sold and
received payment for the Securities to be purchased by all of
the Other Purchasers pursuant to the Other Purchase Agreements
and the number of Securities purchased shall aggregate 1.2
million Shares and not less than 1.2 million Warrants.
(c) Such Purchaser (or the Placement Agent, on behalf of such
Purchaser) shall have received certificates representing the
Securities to be purchased by such Purchaser at the Closing as
required pursuant to Section 2.2(b) hereof.
3.1.4. Representations and Warranties True
The representations and warranties of the Company contained in
Section 5 hereof and in each of the other Documents shall be
true and correct in all material respects (except that any
representation or warranty that already contains a materiality
exception therein, in each such case shall be true and correct
as written) at and as of the Closing Date, after giving effect
to the transactions contemplated by this Agreement and the other
Documents, as if made on and as of such date.
3.1.5. Compliance with Agreements
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained
herein and in the other Documents that are required to be
performed or complied with by the Company on or before the
Closing Date.
3.1.6. The Warrant Agreement and Registration Rights Agreements
(a) The Company and a bank or trust company with a capital
surplus of not less than $50,000,000, and otherwise satisfactory
to the Purchasers, as Warrant Agent (the "Warrant Agent"), shall
have duly entered into the Warrant Agreement, and such Purchaser
shall have received counterparts, conformed as executed, of the
Warrant Agreement.
(b) The Company and the Other Purchasers shall have entered
into the Registration Rights Agreements, and such Purchaser
shall have received an original, duly executed by the Company,
of the Registration Rights Agreements.
3.1.7. Consents and Permits
Each of the Company and its Subsidiaries shall have received
all consents, permits and other authorizations, and made all
such filings and declarations, as may be required pursuant to
any Applicable Law in connection with the transactions
contemplated by this Agreement and the other Documents,
including without limitation the issuance and sale of the
Securities to the Purchasers, and pursuant to all other
agreements, orders and decrees to which any of them is a party
or to which any of them is subject, in connection with the
transactions contemplated by this Agreement and the other
Documents.
3.1.8. Purchase Permitted by Applicable Laws; Legal Investment
(a) Such Purchaser's purchase of and payment for the
Securities to be purchased by such Purchaser (a) shall not be
prohibited by any applicable law or governmental regulation,
release, interpretation or opinion (including, without
limitation, Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System), (b) shall not subject such
Purchaser to any material penalty or other onerous condition
under or pursuant to any Applicable Law, and (c) shall be
permitted by all Applicable Laws. The Company shall have
delivered to such Purchaser factual certificates or other
evidence as such Purchaser shall reasonably request, in form and
substance reasonably satisfactory to such Purchaser, to enable
such Purchaser to establish compliance with this condition.
(b) The Placement Agent shall have delivered to such
Purchaser and to SASM&F (i) a letter addressed to such Purchaser
to the effect that the Placement Agent has arranged for the sale
of the Securities pursuant to this Agreement and the Other
Purchase Agreements solely as a part of the furnishing of
investment banking services to the Company, and (ii) a copy of a
letter addressed to the Company, in form and substance
reasonably satisfactory to such Purchaser and the Company,
confirming certain matters set forth in Section 5.18(b) of this
Agreement.
3.1.9. Placement Memorandum
The Placement Memorandum shall not have been supplemented or
amended subsequent to December 14, 1993.
3.1.10. Proceedings Satisfactory
All proceedings taken in connection with the sale of the
Securities, the matters contemplated by Section 3.1.1 through
3.1.8 hereof, and all documents relating thereto, shall be
reasonably satisfactory in form and substance to such Purchaser.
Such Purchaser and SASM&F shall have received copies of such
documents as it and SASM&F may reasonably request in connection
with the Closing, all in form and substance reasonably
satisfactory to such Purchaser and SASM&F. Each Document shall
be reasonably satisfactory in form and substance to such
Purchaser and SASM&F.
3.2 Conditions to the Obligations of the Company
The obligations of the Company to sell the Securities to be
delivered to the Purchasers at the Closing shall be subject to
the satisfaction of the following conditions:
3.2.1. Sale of Securities
There shall have been delivered to the Company payment in
respect of the purchase of the Securities.
3.2.2. Purchasers' Representations and Warranties
The representations and warranties of each Purchaser contained
in Section 2.3 hereof shall be true and correct in all material
respects at and as of the Closing Date, after giving effect to
the transactions contemplated by this Agreement and the other
Documents, as if made at and as of such date.
3.2.3. No Material Judgment or Order
There shall not be on the Closing Date any judgment or order
of a court of competent jurisdiction or any ruling of any agency
of the Federal, state or local government that, in the
reasonable judgment of the Company, would prohibit the sale or
issuance of the Securities hereunder or subject the Company to
any material penalty if the Securities were to be issued and
sold hereunder.
3.2.4. The Sale by the Company Permitted by Applicable Laws
The sale by the Company and the Purchasers' payment for the
Securities (a) shall not be prohibited by any Applicable Law
(including, without limitation, Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System), (b) shall not
subject the Company to any material penalty under or pursuant to
any Applicable Law, and (c) shall be permitted by all Applicable
Laws.
SECTION 4. PURCHASER'S SPECIAL RIGHTS
The provisions of this Section 4 shall apply, notwithstanding
anything to the contrary in this Agreement or the other
Documents, to Privately Outstanding Securities only; provided
that all of the obligations of the Company set forth in this
Section 4 that are outstanding with respect to any Security at
the time such Security ceases to be a Privately Outstanding
Security shall survive until such time as such obligations with
respect to such Security shall be satisfied in full.
4.1 Delivery Expenses
If a holder of a Privately Outstanding Security surrenders
such security to the Company or the Warrant Agent for any
reason, the Company will pay the cost of delivering to and from
such holder's home office (or to and from the office of such
holder's designee) and the office of the Company or the Warrant
Agent, as the case may be, the surrendered security and each
security issued in substitution, replacement or exchange
therefor or upon conversion thereof.
4.2 Issue Taxes
The Company shall pay all stamp, transfer and other similar
taxes and governmental fees in connection with (a) the issuance,
sale, delivery or transfer by the Company to the Purchasers of
the Privately Outstanding Securities, (b) the execution and
delivery of the Documents and (c) any modification of the
Privately Outstanding Securities or the Documents. The Company
will hold each holder of Privately Outstanding Securities
harmless, without limitation as to time, against any and all
liabilities with respect to all such taxes and fees.
Notwithstanding the foregoing, except as set forth in the
Securities, the Company will not be responsible for any transfer
taxes in connection with the transfer of the Securities by the
Purchaser (other than to the Company). The obligations of the
Company under this Section 4.2 shall survive the payment or
prepayment of the Securities, at maturity, upon redemption or
otherwise, any transfer of the Securities by the Purchaser, and
the termination of this Agreement.
4.3 Direct Payment
The Company shall pay or cause to be paid all amounts payable
with respect to any Privately Outstanding Security (without any
presentment of such Privately Outstanding Security and without
any notation of such payment being made thereon) by crediting
such amount, before 12:00 Noon, New York City time, on the date
such amount is payable, by Federal funds bank wire transfer, to
each holder of Privately Outstanding Securities or its
nominee's, as the case may be, account in any bank in the United
States of America as may be designated by such holder or such
nominee not less than two Business Days prior to such payment.
Each Purchaser's initial bank account for this purpose is set
forth on its signature page hereof. Each holder of Privately
Outstanding Securities is solely responsible for advising the
Company of any changes in its designated bank account and the
Company shall have no responsibility for delays in transfers
because of any failure to advise the Company of a change.
4.4 Financial Statements
(a) The Company will deliver to each holder of record of
Privately Outstanding Securities within 90 days after the end of
each fiscal year of the Company and within 45 days after the end
of each of the first three quarters of each fiscal year, the
consolidated financial statements of the Company, including
notes thereto (and, (i) with respect to annual statements, an
auditors' report by an accounting firm of established national
reputation and (ii) with respect to all other statements, a
certification by the chief financial officer of the Company, to
the effect that such statements (A) have been prepared in a
manner consistent with the most recently delivered audited
financial statements and in accordance with GAAP for interim
financial information and with the instructions to Form 10-Q and
Regulations S-X, (B) contain all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation
thereof and (C) present fairly the financial position of the
Company and its consolidated Subsidiaries as of the dates
thereof and the results of their operations for the periods then
ended) and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations," in each case comparable to
that which is (or would have been) required to appear in annual
or quarterly reports of the Company filed under Section 13 or
15(d) of the Exchange Act.
(b) The Company shall, from time to time, deliver such
additional information regarding the financial position or
business of the Company and its Subsidiaries as the holders of a
majority of the outstanding Privately Outstanding Securities may
reasonably request. Each Purchaser severally agrees that any
such information obtained by such Purchaser shall be
confidential and shall be kept confidential by such Purchaser
unless (i) disclosure of such information is required by court
or administrative order or pursuant to the request of a
regulatory body having jurisdiction over such Purchaser, (ii)
disclosure of such information, in the written opinion of
counsel to such Purchaser, is required by law, (iii) such
information becomes generally available to the public other than
as a result of a disclosure or failure to safeguard by such
Purchaser or (iv) such information becomes available to such
Purchaser from a source other than the Company. In addition, no
such information shall be used by such Purchaser as the basis
for any market transactions in securities of the Company or its
Subsidiaries in violation of law.
4.5 ERISA Compliance
Promptly upon becoming aware of any (i) "reportable event" (as
defined in section 4043(b) of ERISA) with respect to which the
30 day notice requirement set forth in Section 4043(a) of ERISA
has not been waived by the PBGC that occurs or has occurred in
connection with any Pension Plan, (ii) "complete withdrawal" or
"partial withdrawal" (within the meaning of sections 4203 and
4205 of ERISA) from a "Multiemployer Plan" (as defined in
section 3(37) of ERISA), (iii) "prohibited transaction" (as
defined in section 406 of ERISA or section 4975 of the Code),
(iv) "accumulated funding deficiency" (as defined in section 412
of the Code), (v) lien (within the meaning of section 412(n) of
the Code or 302(f) of ERISA), or (vi) requirement to provide
security under section 401(a)(29) of the Code or section 307 of
ERISA in connection with any "employee benefit plan" maintained
or contributed to by the Company or any of its ERISA Affiliates
or any trust created thereunder, that could, singly or in the
aggregate, result in a liability that could have a Material
Adverse Effect, the Company shall furnish to each holder of
Privately Outstanding Securities a written notice specifying the
nature thereof and what action the Company or any of its
Subsidiaries, the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or any other relevant party is taking or
proposes to take with respect thereto.
4.6 No Bond Necessary
Notwithstanding anything to the contrary contained in any
provisions of the Securities or the Documents, a holder of
Privately Outstanding Securities shall not be required to post
any bond (but such holder may be required to enter into an
indemnity agreement, at the Company's request, reasonably
satisfactory to the Company) if such holder certifies that a
Privately Outstanding Security has been lost, destroyed or
wrongfully taken and demands that the Company issue a
replacement therefor.
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Purchaser as
follows:
5.1 Organization, Standing and Qualification
(a) The Company and each of its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; has all requisite
power and authority to own or lease, and operate its properties
and assets, and to carry on its business as now conducted and as
proposed to be conducted; and is duly qualified or licensed to
do business and is in good standing in all jurisdictions in
which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where
the failure to so qualify or be licensed would not, singly or in
the aggregate, have a Material Adverse Effect.
(b) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the other
Documents, to issue, sell and deliver the Securities and the
Warrant Shares upon exercise of the Warrants, to perform its
obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby.
(c) As of the Closing, the only direct or indirect
subsidiaries of the Company will be (i) those set forth below
the caption "Subsidiaries" on Schedule 5.1 hereof (collectively,
the "Subsidiaries") and (ii) subsidiaries that are inactive,
none of which has any material assets or liabilities, contingent
or otherwise. Except as aforesaid, none of the Company or any
of its Subsidiaries owns, directly or indirectly, any of the
capital stock or other equity securities of any other Person
other than as set forth on Schedule 5.1. Except as set forth on
Schedule 5.1, all of the issued and outstanding shares of
capital stock of the Subsidiaries have been validly issued,
fully paid and nonassessable and are, and as of the Closing will
be, owned by the Company free and clear of all Liens.
5.2 Capitalization
(a) The total authorized capital stock of the Company
consists of (i) 30,000,000 shares of Common Stock, 9,953,067
shares of which are validly issued and outstanding, and (ii)
10,000,000 shares of preferred stock, $.01 par value per share,
none of which will be issued or outstanding prior to the
Closing. Each share of the Company's capital stock that is
issued and outstanding has been duly authorized and validly
issued, and is fully paid and nonassessable.
(b) Except (i) for this Agreement, the Shares and the
Warrants and (ii) as set forth on Schedule 5.2(b) hereto, there
are no outstanding (x) securities convertible into or
exchangeable for any capital stock of the Company or any
Subsidiary, (y) options, warrants or other rights to purchase or
subscribe for capital stock of the Company or any Subsidiary or
securities convertible into or exchangeable for capital stock of
the Company or any Subsidiary, or (z) contracts, commitments,
agreements, understandings, arrangements, calls or claims of any
kind relating to the issuance of any capital stock of the
Company or any Subsidiary, any such convertible or exchangeable
securities or any such options, warrants or rights.
(c) The Shares (i) are duly authorized by the Company's
Charter Documents, (ii) have been duly authorized to be issued
by the Board of Directors of the Company in contemplation of
their issuance in accordance with the terms of this Agreement,
(iii) will, when issued in accordance with the terms of this
Agreement, and payment received by the Company therefor, be duly
and validly issued, fully paid and nonassessable, and free and
clear of all Liens and rights of others whatsoever created by,
or due to any action or inaction on the part of, the Company, or
any of its Affiliates and (iv) will not be subject to any
restrictions on transfer or sale except as provided by
applicable securities laws and this Agreement.
(d) The shares of Common Stock issuable upon conversion of
the Shares (the "Conversion Shares") (i) are duly authorized by
the Company's Charter Documents, (ii) have been duly authorized
to be issued and adequately reserved for by the Board of
Directors of the Company in contemplation of conversion of the
Shares in accordance with the terms of the Certificate of
Designation, (iii) will, when issued in accordance with the
terms of the Certificate of Designations, be duly and validly
issued, fully paid and nonassessable, and free and clear of all
Liens and rights of others whatsoever created by, or due to any
action or inaction on the part of, the Company, or any of its
Affiliates and (iv) will not be subject to any restrictions on
transfer or sale except as provided by applicable securities
laws and this Agreement.
(e) The shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") (i) are duly authorized by the
Company's Charter Documents, (ii) have been duly authorized to
be issued and adequately reserved for by the Board of Directors
of the Company in contemplation of exercise of the Warrants in
accordance with the terms of the Warrant Agreement, (iii) will,
when issued in accordance with the terms of the Warrant
Agreement, and payment received by the Company therefor,
pursuant to the exercise of the Warrants, be duly and validly
issued, fully paid and nonassessable, and free and clear of all
Liens and rights of others whatsoever created by, or due to any
action or inaction on the part of, the Company or any of its
Affiliates, and (iv) will not be subject to any restrictions on
transfer or sale except as provided by applicable securities
laws, this Agreement and the Warrant Agreement.
(f) Except for the Registration Rights Agreements, the Warrant
Agreement and as set forth on Schedule 5.2(f) hereof, neither
the Company nor any Subsidiary has entered into an agreement to
register its securities under the Securities Act.
5.3 Authorization of Agreement and Other Documents
The execution and delivery of this Agreement and the other
Documents and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Company's
Board of Directors and no other proceedings on the part of the
Company or its stockholders are necessary for the execution and
delivery of this Agreement or the other Documents by the Company
or the consummation of the transactions contemplated hereby or
thereby. This Agreement is, and, as of the Closing Date, each
of the Documents to which the Company is a party will be, a
valid and binding obligation of the Company, enforceable in
accordance with its terms, except as such enforcement may be
subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors
rights and remedies generally and (ii) general principles of
equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
5.4 No Violation
(a) Neither the Company nor any of the Subsidiaries is (i) in
violation of its respective Charter Documents or (ii) in default
in the performance of any obligation, agreement or condition
contained in an Applicable Agreement, which default would,
singly or in the aggregate, have a Material Adverse Effect.
There exists no condition that, with the passage of time or
otherwise, would (x) constitute a violation of such Charter
Documents or (y) result in a default under an Applicable
Agreement, which default would, singly or in the aggregate, have
a Material Adverse Effect or (z) result in the imposition of any
penalty or the acceleration of any indebtedness that would,
singly or in the aggregate, have a Material Adverse Effect.
(b) Neither the execution or delivery by the Company of this
Agreement or the other Documents, the issuance, sale or delivery
of the Securities, the performance by the Company of its
obligations under this Agreement and the other Documents, nor
the consummation of the transactions contemplated hereby or
thereby will (i) constitute a breach or violation under the
Charter Documents of the Company or any of its Subsidiaries;
(ii) conflict with, violate, constitute a breach or violation of
or a default (with the passage of time or otherwise) under,
require the consent of any Person under, result in the
termination of, accelerate the performance required by or result
in the imposition of a Lien on any properties or assets of the
Company or any of the Subsidiaries or an acceleration of
indebtedness pursuant to, any Applicable Agreement; or (iii)
constitute a violation of any Applicable Law, except in the case
of clauses (ii) and (iii) above, such breaches, violations,
defaults, terminations, accelerations or creation of Liens
which, singly or in the aggregate, would not have a Material
Adverse Effect.
(c) The Company believes that it will not be in default in any
material respect in the performance of any obligation, agreement
or condition contained in any of the Loan Documents on December
31, 1993. Based on the information available to the Company on
the date hereof, (i) after giving effect to the pro forma
effects of the transactions contemplated by the Documents (but
without giving effect to write-ups in the book value of assets
during the fiscal year ended December 31, 1993), the Company's
pro forma Adjusted Tangible Net Worth (as defined in the Senior
Indenture) on the date hereof is not less than $15,000,000 and
(ii) as of the date hereof, and after giving effect to (A) the
current and forseeable operations of the Company, (B) any
currently anticipated extraordinary charges or write-downs in
the book value of assets (but without giving effect to (x)
write-ups in the book value of assets during the fiscal year
ended December 31, 1993 or (y) sales of assets (other than in
the ordinary course of business) during the period from the date
hereof through December 31, 1993) and (C) the transactions
contemplated by the Documents, the Company's Adjusted Tangible
Net Worth on December 31, 1993 will not be less than
$15,000,000. Based upon the foregoing, the Company will not be
required to make a Net Worth Offer (as defined in the Senior
Indenture) with respect to the two consecutive fiscal quarters
ending on December 31, 1993.
5.5 Outstanding Indebtedness
The pro forma capitalization table in the Placement Memorandum
sets forth and identifies in reasonable detail all long-term
indebtedness of the Company on a consolidated basis to be
outstanding immediately after giving effect to the transactions
contemplated hereby. Except as set forth in such table, neither
the Company nor any of the Subsidiaries will have any material
liabilities or obligations of any nature, absolute, accrued,
contingent or otherwise, other than contingent liabilities not
reflected in such table that either (i) are reflected in Note N
of the Audited Financial Statements or (ii) would not, singly or
in the aggregate, have a Material Adverse Effect.
5.6 Financial Statements
(a) The Financial Statements present fairly the financial
position of the Company and its consolidated subsidiaries as of
the dates thereof and the results of their respective operations
for the periods then ended. The Audited Financial Statements
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP") for
year-end financial information and with the instructions to Form
10-K and Regulations S-X. The Unaudited Financial Statements
(i) have been prepared in a manner consistent with the Audited
Financial Statements and in accordance with GAAP for interim
financial information and with the instructions to Form 10-Q and
Regulations S-X and (ii) contain all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation
thereof.
(b) Since September 30, 1993, there has been no material
adverse change in the properties, business, prospects,
operations, earnings, assets, liabilities or condition
(financial or otherwise) of the Company and its subsidiaries (a
"Material Adverse Change"), taken as a whole, from that set
forth in the Latest Unaudited Financial Statements. The
Purchasers acknowledge that a continuation of the consolidated
operating losses recognized by the Company will not constitute a
Material Adverse Change.
(c) On a consolidated basis, the Company has no liabilities
or obligations (absolute, accrued, contingent or otherwise),
except (i) liabilities reflected in the Audited Financial
Statements and Latest Unaudited Financial Statements, (ii) other
liabilities incurred in the ordinary course of business,
consistent with past practices, since the date of said financial
statements and (iii) contingent liabilities not reflected in the
Audited Financial Statements in accordance with GAAP. On a
consolidated basis, the Company has no unusual material forward
or material long-term commitments or material unrealized or
anticipated losses from any unfavorable commitments, except as
reflected in the Audited Financial Statements and Latest
Unaudited Financial Statements.
(d) The pro forma financial and other pro forma data included
in the Placement Memorandum have been prepared on a basis
consistent with the financial statements of the respective
companies from which they have been derived, except for the pro
forma adjustments specified therein, and are based on the good
faith estimates and assumptions of management of the Company
and, based on information available to the Company, the Company
has no reason to believe that such estimates and assumptions are
not reasonable.
5.7 Full Disclosure
(a) The Company has filed with the Commission its 1992 Annual
Report on Form 10-K, Forms 10-Q for the quarters ended March 31,
1993, June 30, 1993 and September 30, 1993, and amendments
thereto, and its proxy statement for the 1993 annual meeting of
stockholders (collectively, the "SEC Documents"), each of which,
as filed and amended, is included in the Placement Memorandum
and complied in all material respects with all applicable
requirements of the Exchange Act as in effect on the dates so
filed. None of the Placement Memorandum, any of the other
Documents, or the SEC Documents, as of their respective dates,
contained, or now contains, any untrue statement of a material
fact or omitted as of their respective dates, or now omits, a
material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) There is no fact known to the Company or any of the
Subsidiaries which the Company has not disclosed to the
Purchasers in writing that would, singly or in the aggregate,
have a Material Adverse Effect.
5.8 Litigation
Except for such Proceedings disclosed in the SEC Documents,
there is no Proceeding pending or, to the best knowledge of the
Company after due inquiry, threatened against or affecting the
Company or any of the Subsidiaries or any of their properties or
assets, except for such Proceedings which if finally determined
adversely to the Company or any of the Subsidiaries, would not,
in the reasonable opinion of the Company based on historical
results of Proceedings, singly or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of the
Subsidiaries is subject to any Applicable Law that could, singly
or in the aggregate, have a Material Adverse Effect.
5.9 Labor Relations
Neither the Company nor any of the Subsidiaries has or is
engaged in any unfair labor practice that could, singly or in
the aggregate, have a Material Adverse Effect. There is (a) no
unfair labor practice complaint pending or, to the best
knowledge of the Company after due inquiry, threatened against
the Company or any of the Subsidiaries before the National Labor
Relations Board or any industrial tribunal and no grievance or
arbitration proceeding arising out of or under collective
bargaining agreements is so pending or, to the best of their
knowledge, threatened, (b) no strike, labor dispute, slowdown or
stoppage pending or, to the best knowledge of the Company after
due inquiry, threatened against the Company or any of the
Subsidiaries, and (c) no union representation question existing
with respect to the employees of the Company or any of the
Subsidiaries and no union organizing activities are taking
place, that could, singly or in the aggregate, have a Material
Adverse Effect.
5.10 Taxes
All tax returns required to be filed (after giving effect to
duly filed requests for extensions) by the Company or any of the
Subsidiaries in any jurisdiction (including foreign
jurisdictions) have been so filed, and all material taxes,
assessments, fees and other charges (including, without
limitation, withholding taxes, penalties, and interest) due or
claimed to be due from the Company or any of the Subsidiaries
have been paid, other than those being contested in good faith
or those currently payable without penalty or interest and for
which an adequate reserve or accrual has been established in
accordance with GAAP. There is no actual or proposed additional
tax assessments for any fiscal period against the Company or any
of the Subsidiaries that could, singly or in the aggregate, have
a Material Adverse Effect.
5.11 Burdensome Agreements
No Applicable Agreement contains any provisions that in the
ordinary course of business could, singly or in the aggregate,
have a Material Adverse Effect.
5.12 ERISA
The execution and delivery of this Agreement, the other
Documents and the sale of the Securities to be purchased by the
Purchasers will not, to the Company's knowledge, involve any
"prohibited transaction." To the Company's knowledge, neither
the Company nor any of its ERISA Affiliates is a "party in
interest" or a "disqualified person" except as to those employee
benefit plans set forth on Schedule 2.3. To the Company's
knowledge no condition exists or event or transaction has
occurred in connection with any Pension Plan that could result
in the Company or any such ERISA Affiliate incurring any
liability, fine or penalty which could, singly or in the
aggregate, have a Material Adverse Effect. With respect to any
Pension Plan that is subject to Title IV of ERISA, (a) the fair
market value of the assets of such Pension Plan equals or
exceeds the present value of the liabilities of such Pension
Plan (as determined in accordance with the actuarial methods and
assumptions set forth in the latest actuarial report for such
Pension Plan) except (i) as set forth on Schedule 5.12 hereto or
(ii) where the failure to so equal or exceed would not, singly
or in the aggregate, have a Material Adverse Effect and (b)
there exists no accumulated funding deficiency which would have,
singly or in the aggregate, a Material Adverse Effect.
5.13 Compliance with Laws
Neither the Company nor any of its Subsidiaries is in violation
of any Applicable Law, except for such violations that could
not, singly or in the aggregate, have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has failed to
obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership or operation of its
properties or the conduct of its business except for such
failures that could not, singly or in the aggregate, have a
Material Adverse Effect.
5.14 Governmental Consents
No consent, approval or authorization of, or filing,
registration or qualification with, any court or governmental or
regulatory body or authority is required in connection with, or
as a condition to, the execution and delivery of this Agreement
or any of the other Documents or the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the offer, issuance, sale or delivery of the
Securities at the Closing and the issuance of Warrant Shares
upon exercise of the Warrants), other than filings,
registrations or qualifications that may be required to be made
or obtained on or before the Closing Date and which shall have
been made or obtained on or before the Closing Date (copies of
which will be delivered to each Purchaser).
5.15 Governmental Regulations
None of the transactions contemplated by this Agreement
(including without limitation the use of the proceeds from the
sale of the Securities) shall violate or result in a violation
of Section 7 of the Exchange Act including, without limitation,
Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System. None of the Company or any of its
Subsidiaries is subject to regulation, or will become subject to
regulation upon the consummation of the transactions
contemplated by this Agreement and the other Documents, under
the Investment Company Act of 1940, as amended, the Public
Utility Holding Act of 1935, as amended, the Federal Power Act,
the Interstate Commerce Act, the Commodity Exchange Act or any
Federal or State statute or regulation limiting its ability to
incur or assume indebtedness for borrowed money.
5.16 Brokers
Neither the Company nor any of its Subsidiaries has dealt with
any broker, finder, commission agent or other Person (other than
the Placement Agent) in connection with the sale of the
Securities and the transactions contemplated by this Agreement
and the other Documents and neither the Company nor any of its
Subsidiaries is under any obligation to pay any broker's fee or
commission in connection with such transactions other than a fee
payable to the Placement Agent for investment banking services,
which fee is the sole obligation of the Company.
5.17 Private Offering
(a) Based in part on representations made by the Purchasers
and the Placement Agent, and assuming the correctness of such
representations, the sale of the Securities hereunder is exempt
from the registration and prospectus delivery requirements of
the Securities Act.
(b) In the case of each offer or sale of the Securities no
form of general solicitation or general advertising was used by
the Company or any of its officers, directors or employees
including, but not limited to, advertisements, articles, notices
or other communications published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees had been invited by any
general solicitation or general advertising. Purchasers are the
sole purchasers of the Securities. No securities of the same
classes as any of the Securities have been issued and sold by
the Company within the six-month period immediately prior to the
date hereof. The Company agrees that neither it, nor anyone
acting on its behalf, will, with the Company's knowledge, offer
any Securities so as to bring the issuance and sale of any of
the Securities within the provisions of Section 5 of the
Securities Act nor offer any similar securities for issuance or
sale to, or solicit any offer to acquire any of the same from,
or otherwise approach or negotiate with respect thereto with,
anyone if the sale of any of the Securities and any such
securities would be integrated as a single offering for the
purposes of the Securities Act.
5.18 Environmental Matters
Except as disclosed in the Placement Memorandum or as
otherwise would not, singly or in the aggregate, have a Material
Adverse Effect:
(a) The Company and its Subsidiaries have obtained all
permits, licenses, approvals and other authorizations that are
required with respect to the operation of its business, property
and assets under the Environmental Laws and is in compliance
with all terms and conditions of such required permits,
licenses, approvals and authorizations.
(b) The Company and its Subsidiaries are in compliance with
the Environmental Laws (including, without limitation,
compliance with standards, schedules and timetables therein).
(c) No real property or facility owned, used, operated,
leased, managed or controlled by the Company or any of its
Subsidiaries or, to their knowledge, any predecessor in
interest, is listed or proposed for listing on the National
Priorities List or the Comprehensive Environmental Response,
Compensation, and Liability Information System, both promulgated
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), or on any
comparable State or local list established pursuant to any
Environmental Law, and the Company and its Subsidiaries have not
received any notification of potential or actual liability or
request for information under CERCLA or any comparable State or
local law.
(d) No underground storage tank or other underground storage
receptacle, or related piping, is located on a facility or
property currently owned, operated, leased, managed or
controlled by the Company or its Subsidiaries.
(e) There have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing
or dumping, on-site or off-site) of Hazardous Materials by the
Company or its Subsidiaries or, to their knowledge, any
predecessor in interest at, on, under, from or into any facility
or real property owned, operated, leased, managed or controlled
by each such Person.
(f) The Company and its Subsidiaries have no liability,
absolute or contingent, under any Environmental Law and there is
no civil, criminal or administrative action, suit, demand,
hearing, notice of violation or deficiency, investigation,
proceeding, notice or demand letter pending or, to the best of
their knowledge after due inquiry, threatened against the
Company or its Subsidiaries under any Environmental Law.
(g) To the Company's knowledge, there are no events,
conditions, circumstances, activities, practices, incidents,
actions or plans that may interfere with or prevent compliance
by the Company or its Subsidiaries with any Environmental Law,
or that may give rise to any liability under the Environmental
Laws.
5.19 Patents, Trademarks, etc.
The Company and its Subsidiaries own, or are licensed under,
and have the rights to use, all material patents, trademarks,
trade names, copyrights, technology, know-how and processes
(collectively, "Intellectual Property") necessary for the
conduct of their businesses as set forth in the Placement
Memorandum, and the consummation of the transactions
contemplated by this Agreement and the other Documents will not
alter or impair any such rights. No claims have been asserted
by any person to the use of any Intellectual Property or
challenging or questioning the validity or effectiveness of any
license or agreement related thereto which would, singly or in
the aggregate, have a Material Adverse Effect. There is no
valid basis for any such claim and the use of such Intellectual
Property by the Company and the Subsidiaries does not infringe
on the rights of any person except where such infringements
would not, singly or in the aggregate, have a Material Adverse
Effect.
5.20 Title to and Condition of Properties
Each of the Company and its Subsidiaries (a) has good and
marketable title to all the real or heritable properties and
other assets (tangible, intangible or mixed) it purports to own,
free and clear of all Liens, except as set forth in the
Placement Memorandum or on Schedule 5.20 and (b) enjoys peaceful
and undisturbed possession under all leases to which it is a
party as lessee, except for such leases that the absence of
which, in the aggregate, could not have a Material Adverse
Effect. All leases and other agreements to which the Company or
any of its Subsidiaries is a party are valid and binding and in
full force and effect, no default has occurred or is continuing
thereunder, and no consent need be obtained from any Person in
respect of any such lease or agreement in connection with the
transactions contemplated by this Agreement and the other
Documents, which would, singly or in the aggregate, have a
Material Adverse Effect.
5.21 Survival of Representations and Warranties
All of the representations and warranties contained herein and
in the other Documents shall survive the execution and delivery
of this Agreement and the other Documents, any investigation by
the Purchasers and the issuance of the Securities.
SECTION 6. MISCELLANEOUS
6.1 Notices
All notices and other communications provided for or permitted
hereunder shall be in writing and shall be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made
by telecopier or (iii) one business day after being deposited
with a reputable next-day courier, postage prepaid, to the
parties as follows:
If to the Company:
Terex Corporation
500 Post Road East
Westport, Connecticut 06880
Attention: Marvin B. Rosenberg, Esq.
Secretary
Fax No.: (203) 222-7978
If to a Purchaser, to the address noted on the signature pages
hereto, with a copy to: Skadden, Arps, Slate, Meagher & Flom,
300 South Grand Avenue, Suite 3400, Los Angeles, California
90071, Attention: Michael A. Woronoff, Esq.
or to such other address as any party may have furnished to the
other parties in writing in accordance herewith.
6.2 Beneficiaries; Successors and Assigns
The provisions hereof have been and are made solely for the
benefit of the Company, the Purchasers and each of the
Indemnified Parties, and their respective successors and
assigns, and no other person shall acquire or have any right
hereunder or by virtue hereof. This Agreement shall be binding
upon and shall inure to the benefit of any and all successors,
assigns, heirs and personal representatives of the Company, the
Purchasers and each of the Indemnified Parties.
6.3 Amendment and Waiver
This Agreement may be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
be given, provided that the same are in writing and signed by
each Purchaser and the Company.
6.4 Counterparts
This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same
agreement.
6.5 Headings
The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
6.6 Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
6.7 Entire Agreement
This Agreement, together with the other Documents, is intended
by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This
Agreement, together with the other Documents, supersedes all
prior agreements and understandings among the parties with
respect to such subject matter.
6.8 Attorneys' Fees
In any action or proceeding brought to enforce any provision of
this Agreement or the other Documents, or where any provision
hereof or thereof is validly asserted as a defense, the
prevailing party, as determined by the court, shall be entitled
to recover reasonable attorneys' fees in addition to any other
available remedy.
6.9 Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall
use their best efforts to find and employ an alternative means
to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, illegal, void or
unenforceable.
6.10 Equitable Remedies
Each party hereto acknowledges and agrees that irreparable
harm, for which there may be no adequate remedy at law and for
which the ascertainment of damages would be difficult, would
occur in the event any of the provisions of this Agreement were
not performed in accordance with its specific terms or were
otherwise breached. Each party hereto accordingly agrees that
each other party hereto shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this
Agreement, or any agreement contemplated hereunder and to
enforce specifically the terms and provisions hereof or thereof
in any court of the United States or any State having
jurisdiction, in each instance without being required to post
bond or other security and in addition to, and without having to
prove the inadequacy of, other remedies at law.
6.11 Delivery
Each Purchaser hereby appoints the Placement Agent to accept
delivery of the Securities to be purchased by such Purchaser and
the other Documents to be delivered to such Purchaser at the
Closing and execute a receipt for such Securities and Documents
on such Purchaser's behalf.
6.12 Representations of Several Parties by a Single Firm of
Attorneys
Each Purchaser hereby confirms its consent to SASM&F acting as
(a) such Purchaser's special counsel hereunder, (b) special
counsel to the Other Purchasers, (c) special counsel to
Jefferies & Company, Inc., as Placement Agent for the Company,
and (d) special counsel to the Company. In connection with such
consent each Purchaser understands that (i) SASM&F has acted and
is currently acting as counsel to Jefferies & Company, Inc. and
anticipates that it will continue to act as counsel for
Jefferies & Company, Inc. in the future, (ii) SASM&F has, from
time to time, acted as legal counsel to the Company, is
currently acting as legal counsel to the Company in connection
with unrelated legal matters, and anticipates that it will
continue to act as counsel for the Company in the future, (iii)
as a result of the representations referred to in clauses (i)
and (ii), SASM&F may have obtained certain confidential
information regarding Jefferies & Company, Inc., the Company or
the Purchasers and (iv) in certain circumstances Jefferies &
Company, Inc., the Company or one or more of the Other
Purchasers may have interests that differ from yours. By giving
this consent each Purchaser expressly waives any claim of
conflict of interest on the part of SASM&F arising from such
representations.
6.13 Certain Other Matters
The Company hereby confirms that certain of the Purchasers may
be business or other trusts and that all persons dealing with
such Purchasers must look solely to such Purchaser and each such
Purchaser's property for enforcement of any claim against any
such Purchaser, as the trustees, officers, agents and
shareholders of any such Purchaser assume no personal liability
whatsoever in connection with the business of any such Purchaser
or for obligations entered into on behalf of any such Purchaser.
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart of this
Agreement and return such counterpart to the Company whereupon
this Agreement will become binding between us in accordance with
its terms.
Very truly yours,
TEREX CORPORATION
By:________________________
Marvin B. Rosenberg
Secretary
PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and Agreed as of the EACH PURCHASER EXECUTING
date first above written THIS SIGNATURE PAGE ON BEHALF
OF ONE OR MORE MANAGED
ACCOUNTS SHOULD PROVIDE
Name of Purchaser THE NAME OF, AND THE REQUESTED
INFORMATION WITH RESPECT TO,
EACH MANAGED ACCOUNT.
By:
Name:
Title:
Address for Notice: Mail Payment Notices to:
Telephone:
Telephone:
Telecopy:
Nominee (if different than
name of Purchaser)
Designated Physical Delivery
Bank: Instructions:
Address:
ABA No:
Account
No.:
Attention:
Number of Shares to be
purchased by you:
Number of Warrants to be
purchased by you:
WARRANT REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of December 20, 1993, by and among Terex
Corporation, a Delaware corporation (the "Company"), and the
persons whose signatures appear on the execution pages of this
Agreement.
This Agreement is made pursuant to the Purchase Agreements,
dated as of the date hereof, among the Company and the
Purchasers named therein (collectively the "Purchase
Agreement"). In order to induce the Purchasers to enter into
the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution
of this Agreement is a condition to the Closing under the
Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without definition shall have
their respective meanings set forth in the Purchase Agreement.
As used in this Agreement, the following terms shall have the
following meanings:
Advice: See Section 5 hereof.
Common Stock: The common stock, par value $.01 per share, of
the Company.
Effectiveness Date: The 90th day following the Closing Date.
Filing Date: The 30th day following the Closing Date.
Initial Shelf Registration: See Section 3 hereof.
Losses: See Section 7 hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
Registrable Securities: The Warrants and the Warrant Shares
(as defined in the Warrant Agreement) issuable upon the exercise
of the Warrants in accordance with the terms of the Warrant
Agreement, in each case unless acquired by the holder thereof
pursuant to an effective Registration Statement or Rule 144.
Registration Statement: Any registration statement of the
Company that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar or successor rule
or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or any similar or successor
rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may
be amended from time to time, or any similar or successor rule
or regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Shelf Registration: The Initial Shelf Registration and any
Subsequent Shelf Registration.
Special Counsel: Skadden, Arps, Slate, Meagher & Flom,
special counsel to the Purchasers, or any other substitute
special counsel chosen by the holders entitled to vote a
majority of the Registrable Securities.
Subsequent Shelf Registration: See Section 3 hereof.
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
Warrants: The 1,300,000 Common Stock Purchase Warrants issued
and sold pursuant to the Warrant Agreement and the Purchase
Agreement.
Warrant Agreement: The Warrant Agreement, dated as of the
Closing Date, by and between the Company and the Warrant Agent
named therein.
2. Holders of Registrable Securities.
Whenever a number or percentage of Registrable Securities is
to be determined hereunder, each then outstanding Warrant shall
be deemed to be equal to the number of shares of Common Stock
into which such Warrant is then convertible.
3. Shelf Registration
(a) Initial Shelf Registration. The Company shall cause a
Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration") to be
filed on or prior to the Filing Date. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form
available to the Company, permitting registration of such
Registrable Securities for resale by the holders of the
Registrable Securities in the manner or manners designated by
them (including, without limitation, one or more underwritten
offerings). The Company shall not permit any securities other
than the Registrable Securities to be included in the Shelf
Registration. The Company shall use its best efforts to cause
such Registration Statement to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep
the Initial Shelf Registration continuously effective under the
Securities Act until there are no longer any Registrable
Securities outstanding.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during which Registrable
Securities remain outstanding, the Company shall use its best
efforts to obtain the withdrawal of any order suspending the
effectiveness thereof at the earliest possible moment, and in
any event shall, to the extent possible, within 30 days of such
cessation of effectiveness, amend the Shelf Registration in a
manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional
"shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Securities (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed,
the Company shall use its best efforts to cause the Subsequent
Shelf Registration to become effective as soon as practicable
after such filing and to keep such Registration Statement
continuously effective until there are no longer any Registrable
Securities outstanding.
(c) Supplements and Amendments. The Company shall supplement
and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration, if required by
the Securities Act.
4. Hold-Back Agreements
The Company agrees not to effect any public or private sale or
distribution (including a sale pursuant to Regulation D under
the Securities Act) of any Common Stock, or any securities
convertible into or exchangeable or exercisable for such Common
Stock (except pursuant to any offering to directors, officers
and employees of the Company and its subsidiaries pursuant to
any Company benefit plan as defined in Rule 405 of Regulation C
under the Securities Act), during the 10 days prior to, and
during the 90-day period beginning on, (A) the effective date of
any Registration Statement filed pursuant to Section 3 hereof
unless the holders entitled to vote a majority of Registrable
Securities to be included in such Registration Statement consent
or (B) the commencement of an underwritten public distribution
of Registrable Securities, where the managing underwriter so
requests.
5. Registration Procedures
In connection with the Company's registration obligations
pursuant to Section 3 hereof, the Company shall effect such
registrations to permit the sale of such Registrable Securities
in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) Prepare and file with the SEC, as soon as practicable
after the date hereof but in any event prior to the Filing Date,
a Registration Statement or Registration Statements on any
appropriate form under the Securities Act available for the sale
of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution
thereof, and cause each such Registration Statement to become
effective and remain effective as provided herein; provided,
however, that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto the Company
shall (i) at least five (5) Business Days prior to filing with
the SEC, furnish to the holders of the Registrable Securities,
the Special Counsel, the managing underwriters, if any, and
their counsel copies of all such documents, which documents will
be subject to the review of such holders, the Special Counsel,
such underwriters and their counsel, and (ii) upon reasonable
notice during normal business hours make available for
inspection by such persons copies of all such financial and
other information and books and records of the Company, and
cause the officers, directors and employees of the Company,
Company counsel and independent certified public accountants of
the Company, to respond to such inquiries, as shall be
necessary, in the opinion of respective counsel to such holders
and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not
file any such Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which the holders
entitled to vote a majority of the Registrable Securities
covered by such Registration Statement, the Special Counsel or
the managing underwriter, if any, shall reasonably object within
the first three Business Days of said 5 Business Day period and
in writing, specifying such objections and the actions such
persons believe are necessary to eliminate such objections;
provided that the Company shall be permitted to take such
actions that are required to comply with applicable law. Each
holder of Registrable Securities agrees (i) to keep confidential
any non-public information relating to the Company received by
such holder pursuant to this Agreement and not disclose such
information (other than to an Affiliate and, in such case, the
holder will cause such Affiliate to respect the confidentiality
provisions of this Section 5(a)) and (ii) to abstain from
trading in any securities of the Company on the basis of
material, non-public information, in each case until such
information has been made generally available to the public and,
in the case of clause (i) above, unless the release of such
information is necessary to respond to inquiries of regulatory
authorities (including the National Association of Insurance
Commissioners, or similar organizations or their successors),
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or otherwise required by law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously
effective for the applicable period specified in Section 3;
cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth
in such Registration Statement as so amended or to such
Prospectus as so supplemented.
(c) Furnish to such selling holders, the Special Counsel and
the Underwriters, if any, without charge, (i) a copy of the
order of the Commission declaring such Registration Statement
and any post-effective amendment thereto effective and (ii) such
reasonable number of copies of such Registration Statement and
of each amendment and supplement thereto (in each case including
the documents incorporated therein by reference and all
exhibits), such reasonable number of copies of the Prospectus
included in such Registration Statement (including each
preliminary Prospectus), and such reasonable number of copies of
the final Prospectus as filed by the Company pursuant to Rule
424(b) under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as
such persons may reasonably request. The Company hereby
consents to the use of the Prospectus by each of the selling
holders of Registrable Securities and any underwriter in
connection with the offering and sale of the Securities covered
by the Prospectus.
(d) Notify the selling holders of Registrable Securities, the
Special Counsel and the managing underwriters, if any, promptly
(but in any event within five Business Days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental
authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other Federal or state
governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if at any time when a
Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the
representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by
Section 5(m) below cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding
for such purpose, (vi) of the happening of any event which makes
any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect
or which requires the making of any changes in a Registration
Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and (vii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement
would be appropriate.
(e) Use its best efforts to cause all of the Securities that
are to be included in a Registration Statement hereunder to be
registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and
operations of the Company to enable the holder or holders
thereof to consummate the disposition of the Registrable
Securities.
(f) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best
efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(g) If requested by the managing underwriters, if any, or the
holders entitled to vote a majority of the Registrable
Securities being sold, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriters, if any, or such holders reasonably
request to be included therein to comply with applicable law and
(ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(h) Use its best efforts to register or qualify, and
cooperate with the selling holders of Registrable Securities,
the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any
seller or managing underwriter reasonably requests in writing;
keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all
other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; and if
Securities are offered other than through an underwritten
offering, cause its counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed
pursuant to this Section 5(h).
(i) Cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such
Registrable Securities to be registered in such names as the
managing underwriters, if any, or holders may reasonably request
at least two Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by
paragraph 5(d)(vi) or 5(d)(vii) above, as promptly as
practicable prepare a supplement or post-effective amendment to
each Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all shares of Common Stock
that are Registrable Securities covered by such Registration
Statement, upon issuance, to be (i) listed on each securities
exchange, if any, on which similar securities issued by the
Company are then listed, or (ii) authorized to be quoted on the
National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or the National Market System of NASDAQ if the
securities so qualify.
(l) Prior to the effective date of the Shelf Registration (i)
provide the transfer agent with printed certificates for the
Registrable Securities in a form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Securities.
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other actions in
connection therewith (including those reasonably requested by
the managing underwriters, if any, or the holders entitled to
vote a majority of the Registrable Securities being sold) in
order to expedite or facilitate the registration or disposition
of such Registrable Securities and, in such connection, whether
or not an underwriting agreement is entered into and whether or
not the registration is an underwritten registration, (i) make
such representations and warranties to the holders of such
Registrable Securities and the underwriters, if any, with
respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each
case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm
the same if and when reasonably requested; (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the
holders entitled to vote a majority of the Registrable
Securities being sold) addressed to each selling holder of
Registrable Securities and each of the underwriters, if any,
covering the matters customarily covered in opinions requested
in underwritten offerings; (iii) obtain "cold comfort" letters
and updates thereof (which letters and updates (in form, scope
and substance shall be reasonably satisfactory to the managing
underwriters, if any, and the Special Counsel or holders of a
majority of the Registrable Securities being sold) from the
independent certified public accountants of the Company (and, if
necessary, any other certified public accountants of any
subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or
is required to be, included in the Registration Statement),
addressed to each selling holder of Registrable Securities and
each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with
underwritten offerings; and (iv) deliver such documents and
certificates as may be requested by the holders entitled to vote
a majority of the Registrable Securities being sold, the Special
Counsel and the managing underwriters, if any, to evidence the
continued validity of the representations and warranties of the
Company and its Subsidiaries made pursuant to clause (i) above
and to evidence compliance with any customary conditions
contained in the underwriting agreement or other similar
agreement entered into by the Company. The above shall be done
at each closing under such underwriting or similar agreement or,
as and to the extent required thereunder.
(n) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering, and (ii) if
not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company, after the
effective date of a Registration Statement, which statements
shall cover said 12-month periods.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the
Company such information regarding such seller the distribution
of such Registrable Securities as the Company may, from time to
time, reasonably request in writing. The Company may exclude
from such registration the Registrable Securities of any seller
who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice
from the Company of the happening of any event of the kind
described in Section 5(d)(ii), 5(d)(iii), 5(d)(v), 5(d)(vi) or
5(d)(vii) hereof, such holder will forthwith discontinue
disposition of such Registrable Securities covered by such
Registration Statement or Prospectus until such holder's receipt
of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of
any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by
the Company whether or not any Registration Statement becomes
effective. Such fees and expenses shall include, without
limitation,
(i) all registration and filing fees (including, without
limitation, fees and expenses (x) with respect to filings
required to be made with the National Association of Securities
Dealers, Inc. in connection with an underwritten offering or if
otherwise required and (y) of compliance with state securities
or "blue sky" laws (including without limitation, reasonable
fees and disbursements of counsel for the underwriters or
selling holders in connection with "blue sky" qualifications of
the Registrable Securities and determination of the eligibility
of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriters, if any, or
holders of a majority of the Registrable Securities being sold
may designate)),
(ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in
a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in
any Registration Statement),
(iii) messenger, telephone, duplication, word processing and
delivery expenses,
(iv) fees and disbursements of counsel for the Company and
reasonable fees and disbursements of the Special Counsel for the
sellers of the Registrable Securities (subject to the provisions
of Section 6(b)),
(v) fees and disbursements of all independent certified
public accountants referred to in Section 5(m) hereof
(including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such
performance),
(vi) Securities Act liability insurance if the Company so
desires such insurance, and
(vii) fees and expenses of all other Persons retained by the
Company. In addition, the Company shall pay its internal
expenses (including without limitation all salaries and expenses
of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be
registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees
and expenses of any Person, including special experts, retained
by the Company.
(b) In connection with Shelf Registration hereunder, the
Company shall reimburse the holders of the Registrable
Securities being registered in such registration for (i) the
reasonable fees and disbursements of not more than one counsel
(in addition to appropriate local counsel approved by the
Company), chosen by the holders of a majority of the Registrable
Securities being registered and (ii) other reasonable and
necessary out-of-pocket expenses of the holders of Registrable
Securities incurred in connection with the registration of the
Registrable Securities.
(c) Notwithstanding any other provisions of this Section 6,
the Company shall not be required to pay the fees or
disbursements of any underwriters or managing underwriters of
Registrable Securities, counsel to such underwriters and
managing underwriters (other than as contemplated by Section
6(a)(i)) or any underwriting discounts and commissions payable
with respect to the Registrable Securities included in any such
Registration Statement or Registration Statements.
7. Indemnification
(a) Indemnification by the Company. The Company shall,
without limitation as to time, indemnify and hold harmless, to
the fullest extent permitted by law, each holder of Registrable
Securities, the officers, directors, agents and employees of
each of them, each Person who controls each such holder (within
the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, agents and
employees of such controlling persons, from and against any and
all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and reasonable
attorneys' fees) and expenses (including expenses of
investigation) (collectively, "Losses") as incurred, arising out
of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement,
Prospectus or form of Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising
out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as the same are based solely upon information furnished
in writing to the Company by such holder or reviewed and
approved in writing by such holder expressly for use therein.
The Company shall also indemnify each underwriter, selling
broker, dealer manager and similar securities industry
professional participating in the distribution, and each of
their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the
same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement in which a holder of
Registrable Securities is participating, such holder of
Registrable Securities shall furnish to the Company in writing
or review and approve in writing such information as the Company
reasonably requests for use in connection with any Registration
Statement or Prospectus and agrees to indemnify, to the fullest
extent permitted by law, the Company, its directors and
officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling persons, from
and against all Losses arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or
arising out of or based upon any omission of a material fact
required to be stated therein or necessary to make the
statements therein not misleading, to the extent, but only to
the extent, that such untrue statement or omission is contained
in any information so furnished in writing or reviewed and
approved in writing by such holder to the Company expressly for
use in such Registration Statement or Prospectus. In no event
shall the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount
of the proceeds (net of payment of all expenses) received by
such holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation or inquiry)
shall be brought or any claim shall be asserted against any
Person entitled to indemnification hereunder (an "indemnified
party"), such indemnified party shall promptly notify the party
or parties from which such indemnity is sought (the
"indemnifying parties") in writing, provided, however, that the
failure to so notify the indemnifying parties shall not relieve
the indemnifying parties from any obligation or liability except
to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to
appeal) that the indemnifying parties have been prejudiced
materially by such failure. All such fees and expenses
(including any fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding)
shall be paid to the indemnified party, as incurred, within 20
Business Days of written notice thereof to the indemnifying
party (regardless of whether it is ultimately determined that an
indemnified party is not entitled to indemnification hereunder).
The indemnifying party shall have the right, exercisable by
giving written notice to an indemnified party, within 20
Business Days after receipt of written notice from such
indemnified party of such action, claim or proceeding, to
assume, at its expense, the defense of any such action, claim or
proceeding, provided, however, that an indemnified party shall
have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless: (1) the
indemnifying party has agreed to pay such fees and expenses; or
(2) the indemnifying party shall have failed promptly to assume
the defense of such action, claim or proceeding and to employ
counsel reasonably satisfactory to such indemnified party in any
such action, claim or proceeding or fails to employ counsel
reasonably satisfactory to such indemnified party; or (3) the
named parties to any such action, claim or proceeding (including
any impleaded parties) include both such indemnified party and
the indemnifying party, and such indemnified party shall have
been advised by counsel that there may be one or more material
defenses available to such indemnified party that are in
conflict with those available to the indemnifying party (in
which case, if such indemnified party notifies the indemnifying
parties in writing that it elects to employ separate counsel at
the expense of the indemnifying parties, the indemnifying
parties shall not have the right to assume the defense thereof
and the reasonable fees and expenses of such counsel shall be at
the expense of the indemnifying party), it being understood,
however, that, the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings
in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for such indemnified
parties, unless in the judgment of counsel to one or more of
such indemnified parties, a conflict of interest may exist
between or among such indemnified parties with respect to such
action, claim or proceeding. Whether or not such defense is
assumed by the indemnifying party, such indemnifying party or
indemnified party will not be subject to any liability for any
settlement made without its consent (but such consent will not
be unreasonably withheld). No indemnifying party shall be
liable for any settlement of any such action or proceeding
effected without its written consent, but if settled with its
written consent, or if there be a final judgment for the
plaintiff in any such action, claim or proceeding, each
indemnifying party jointly and severally agrees subject to the
exception and limitations set forth above, to indemnify and hold
harmless each indemnified party from and against any loss or
liability by reason of such settlement or judgment. The
indemnifying party shall not consent to the entry of any
judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release, in form and
substance reasonably satisfactory to the indemnified party, from
all liability in respect of such action, claim or proceeding for
which such indemnified party would be entitled to
indemnification hereunder (whether or not any indemnified party
is a party thereto).
(d) Contribution. If the indemnification provided for in
this Section 7 is unavailable to an indemnified party under
Section 7(a) or 7(b) hereof in respect of any Losses or is
insufficient to hold such indemnified party harmless, then each
applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall, jointly and severally, contribute to
the amount paid or payable by such indemnified party as a result
of such Losses, in such proportion as is appropriate to reflect
the relative fault of the indemnifying party or indemnifying
parties, on the one hand, and such indemnified party, on the
other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, shall be determined
by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information
supplied by, such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include any reasonable legal or
other fees or expenses incurred by such party in connection with
any Proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 7(d),
an indemnifying party that is a selling holder of Registrable
Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the
amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
8. Rules 144 and 144A
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Company is not required to file such
reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A.
The Company will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities
Act pursuant to the exemptions provided by Rule 144 and Rule
144A. Upon the request of any holder of Registrable Securities,
the Company shall deliver to such holder a written statement as
to whether it has complied with such information and filing
requirements.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the holders of
a majority of such Registrable Securities included in such
offering.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each holder of Registrable
Securities, in addition to being entitled to exercise all rights
provided herein, in the Registration Rights Agreement or in the
Purchase Agreement or granted by law, including recovery of
damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of
the date hereof, and shall not, on or after the date of this
Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of holders of a
majority of the then outstanding Registrable Securities;
provided, however, that Sections 5(a) and 7 shall not be
amended, modified or supplemented, and waivers or consents to
departures from this proviso may not be given, unless the
Company has obtained the written consent of each holder of the
then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the
rights of holders of Registrable Securities whose securities are
being sold pursuant to a Registration Statement and that does
not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such
holders pursuant to such Registration Statement; provided,
however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing and shall be
deemed given (i) when made, if made by hand delivery, (ii) upon
confirmation, if made by telecopier or (iii) one business day
after being deposited with a reputable next-day courier, postage
prepaid, to the parties as follows:
(x) if to a holder of Registrable Securities, at the most
current address given by such holder to the Company in
accordance with the provisions of this Section 10(d), which
address initially is, with respect to each Purchaser, the
address set forth on his respective signature page attached
hereto with a copy to Skadden, Arps, Slate, Meagher & Flom, 300
South Grand Avenue, Los Angeles, California 90071, telecopy
number (213) 687-5600, Attention: Michael A. Woronoff, Esq.; and
(y) if to the Company, initially at 500 Post Road East,
Westport, Connecticut 06880, Telecopier Number (203) 222-7978,
Attention: Marvin B. Rosenberg, and thereafter at such other
address, notice of which is given in accordance with the
provisions of this Section 10(d);
or to such other address as any party may have furnished to the
other parties in writing in accordance herewith. Copies of all
such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the
Warrant Agent under the Warrant Agreement at the address
specified in such Warrant Agreement.
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted
assigns of each of the parties and shall inure to the benefit of
each current and future holder of any Registrable Securities.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE
COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto
shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid,
void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended
to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or
referred to herein, with respect to the registration rights
granted by the Company with respect to the securities sold
pursuant to the Purchase Agreement. This Agreement supersedes
all prior agreements and understandings among the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the prevailing party,
as determined by the court, shall be entitled to recover
reasonable attorneys' fees in addition to any other available
remedy.
(l) Securities Held by the Company or Its Respective
Affiliates. Whenever the consent or approval of holders of a
specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its
affiliates (as such term is defined in Rule 405 under the
Securities Act) (other than the Purchasers or subsequent holders
of Registrable Securities if such Purchasers or subsequent
holders are deemed to be such affiliates solely by reason of
their holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was
given by the holders of such required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
TEREX CORPORATION
By: /s/Marvin B. Rosenberg
Secretary
WARRANT REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE
Purchaser: ________________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
Address: ________________________________
________________________________
________________________________
Telephone: ________________________________
Telecopy: ________________________________
Telex: ________________________________
EACH PURCHASER EXECUTING THIS SIGNATURE PAGE ON BEHALF OF ONE OR
MORE MANAGED ACCOUNTS SHOULD PROVIDE THE NAME OF, AND THE
REQUESTED INFORMATION WITH RESPECT TO, EACH MANAGED ACCOUNT.
PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of December 20, 1993, by and among Terex
Corporation, a Delaware corporation (the "Company"), and the
persons whose signatures appear on the execution pages of this
Agreement.
This Agreement is made pursuant to the Purchase Agreements,
dated as of the date hereof, among the Company and the
Purchasers named therein (collectively, the "Purchase
Agreement"). In order to induce the Purchasers to enter into
the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution
of this Agreement is a condition to the Closing under the
Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without definition shall have
their respective meanings set forth in the Purchase Agreement.
As used in this Agreement, the following terms shall have the
following meanings:
Advice: See Section 5 hereof.
Common Stock: The common stock, par value $.01 per share, of
the Company.
Effectiveness Date: The 150th day following the Closing Date.
Effectiveness Period: See Section 3 hereof.
Filing Date: The 60th day following the Closing Date.
Initial Shelf Registration: See Section 3 hereof.
Losses: See Section 7 hereof.
Preferred Stock: The shares of Series A Cumulative Redeemable
Convertible Preferred Stock of the Company, $.01 par value per
share, being issued and sold pursuant to the Purchase Agreement.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
Registrable Securities: The shares of Preferred Stock and
shares of Common Stock issuable upon the conversion of the
Preferred Stock in accordance with the terms of the Certificate
of Designation, in each case unless acquired by the holder
thereof pursuant to an effective Registration Statement or Rule
144.
Registration Statement: Any registration statement of the
Company that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar or successor rule
or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or any similar or successor
rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may
be amended from time to time, or any similar or successor rule
or regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Shelf Registration: The Initial Shelf Registration and any
Subsequent Shelf Registration.
Special Counsel: Skadden, Arps, Slate, Meagher & Flom,
special counsel to the Purchasers, or any other substitute
special counsel chosen by the holders entitled to vote a
majority of the Registrable Securities.
Subsequent Shelf Registration: See Section 3 hereof.
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
2. Holders of Registrable Securities.
Whenever a number or percentage of Registrable Securities is
to be determined hereunder, each then outstanding share of
Preferred Stock shall be deemed to be equal to the number of
shares of Common Stock into which such share of Preferred Stock
is then convertible.
3. Shelf Registration
(a) Initial Shelf Registration. The Company shall cause a
Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration") to be
filed on or prior to the Filing Date. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form
available to the Company permitting registration of such
Registrable Securities for resale by the holders of the
Registrable Securities in the manner or manners designated by
them (including, without limitation, one or more underwritten
offerings). The Company shall not permit any securities other
than the Registrable Securities to be included in the Shelf
Registration. The Company shall use its best efforts to cause
such Registration Statement to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep
the Initial Shelf Registration continuously effective under the
Securities Act until the date that is 36 months from the date
such registration statement is first declared effective (subject
to extension pursuant to the last paragraph of Section 5 hereof)
(the "Effectiveness Period"), or such shorter period ending when
(i) all Registrable Securities covered by the Initial Shelf
Registration have been sold or (ii) a Subsequent Shelf
Registration covering all of the Registrable Securities has been
declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness
Period, the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness
thereof at the earliest possible moment, and in any event shall,
to the extent possible, within 30 days of such cessation of
effectiveness, amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional
"shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Securities (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed,
the Company shall use its best efforts to cause the Subsequent
Shelf Registration to become effective as soon as practicable
after such filing and to keep such Registration Statement
continuously effective for a period equal to the 36 months less
the aggregate number of days during which the Initial Shelf
Registration, and any Subsequent Shelf Registration, was
previously effective.
(c) Supplements and Amendments. The Company shall supplement
and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration, if required by
the Securities Act.
4. Hold-Back Agreements
The Company agrees not to effect any public or private sale or
distribution (including a sale pursuant to Regulation D under
the Securities Act) of any Common Stock, or any securities
convertible into or exchangeable or exercisable for such Common
Stock (except pursuant to any offering to directors, officers
and employees of the Company and its subsidiaries pursuant to
any Company benefit plan as defined in Rule 405 of Regulation C
under the Securities Act), during the 10 days prior to, and
during the 90-day period beginning on, (A) the effective date of
any Registration Statement filed pursuant to Section 3 hereof
unless the holders entitled to vote a majority of Registrable
Securities to be included in such Registration Statement consent
or (B) the commencement of an underwritten public distribution
of Registrable Securities, where the managing underwriter so
requests.
5. Registration Procedures
In connection with the Company's registration obligations
pursuant to Section 3 hereof, the Company shall effect such
registrations to permit the sale of such Registrable Securities
in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) Prepare and file with the SEC, as soon as practicable
after the date hereof but in any event prior to the Filing Date,
a Registration Statement or Registration Statements on any
appropriate form under the Securities Act available for the sale
of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution
thereof, and cause each such Registration Statement to become
effective and remain effective as provided herein; provided,
however, that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto the Company
shall (i) at least five (5) Business Days prior to filing with
the SEC, furnish to the holders of the Registrable Securities,
the Special Counsel, the managing underwriters, if any, and
their counsel copies of all such documents, which documents will
be subject to the review of such holders, the Special Counsel,
such underwriters and their counsel, and (ii) upon reasonable
notice during normal business hours make available for
inspection by such persons copies of all such financial and
other information and books and records of the Company, and
cause the officers, directors and employees of the Company,
Company counsel and independent certified public accountants of
the Company, to respond to such inquiries, as shall be
necessary, in the opinion of respective counsel to such holders
and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not
file any such Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which the holders
entitled to vote a majority of the Registrable Securities
covered by such Registration Statement, the Special Counsel or
the managing underwriter, if any, shall reasonably object within
the first three Business Days of said 5 Business Day period and
in writing, specifying such objections and the actions such
persons believe are necessary to eliminate such objections;
provided that the Company shall be permitted to take such
actions that are required to comply with applicable law. Each
holder of Registrable Securities agrees (i) to keep confidential
any non-public information relating to the Company received by
such holder pursuant to this Agreement and, not disclose such
information (other than to an Affiliate and in such case, the
holder will cause such Affiliate to respect the confidentiality
provisions of this Section 5(a)) and (ii) to abstain from
trading in any securities of the Company on the basis of
material, non-public information, in each case until such
information has been made generally available to the public and,
in the case of clause (i) above, unless the release of such
information is necessary to respond to inquiries of regulatory
authorities (including the National Association of Insurance
Commissioners, or similar organizations or their successors),
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or otherwise required by law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously
effective for the applicable period specified in Section 3;
cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth
in such Registration Statement as so amended or to such
Prospectus as so supplemented.
(c) Furnish to such selling holders, the Special Counsel and
the Underwriters, if any, without charge, (i) a copy of the
order of the Commission declaring such Registration Statement
and any post-effective amendment thereto effective and (ii) such
reasonable number of copies of such Registration Statement and
of each amendment and supplement thereto (in each case including
the documents incorporated therein by reference and all
exhibits), such reasonable number of copies of the Prospectus
included in such Registration Statement (including each
preliminary Prospectus), and such reasonable number of copies of
the final Prospectus as filed by the Company pursuant to Rule
424(b) under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as
such persons may reasonably request. The Company hereby
consents to the use of the Prospectus by each of the selling
holders of Registrable Securities and any underwriter in
connection with the offering and sale of the Securities covered
by the Prospectus.
(d) Notify the selling holders of Registrable Securities, the
Special Counsel and the managing underwriters, if any, promptly
(but in any event within five Business Days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental
authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other Federal or state
governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if at any time when a
Prospectus is required by the Securities Act to be delivered in
connection with the sales of the Registrable Securities, the
representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by
Section 5(m) below cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding
for such purpose, (vi) of the happening of any event which makes
any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect
or which requires the making of any changes in a Registration
Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and (vii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement
would be appropriate.
(e) Use its best efforts to cause all of the Securities that
are to be included in a Registration Statement hereunder to be
registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and
operations of the Company to enable the holder or holders
thereof to consummate the disposition of the Registrable
Securities.
(f) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best
efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(g) If requested by the managing underwriters, if any, or the
holders entitled to a majority of the Registrable Securities
being sold, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing
underwriters, if any, or such holders reasonably request to be
included therein to comply with applicable law and (ii) make all
required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the
Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(h) Use its best efforts to register or qualify, and
cooperate with the selling holders of Registrable Securities,
the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any
seller or managing underwriter reasonably requests in writing;
keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all
other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; and if
Securities are offered other than through an underwritten
offering, cause its counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed
pursuant to this Section 5(h).
(i) Cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such
Registrable Securities to be registered in such names as the
managing underwriters, if any, or holders may reasonably request
at least two Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by
paragraph 5(d)(vi) or 5(d)(vii) above, as promptly as
practicable prepare a supplement or post-effective amendment to
each Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all shares of Common Stock
that are Registrable Securities covered by such Registration
Statement, upon issuance, to be (i) listed on each securities
exchange, if any, on which similar securities issued by the
Company are then listed, or (ii) authorized to be quoted on the
National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or the National Market System of NASDAQ if the
securities so qualify.
(l) Prior to the effective date of the Shelf Registration (i)
provide the transfer agent with printed certificates for the
Registrable Securities in a form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Securities.
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other actions in
connection therewith (including those reasonably requested by
the managing underwriters, if any, or the holders entitled to
vote a majority of the Registrable Securities being sold) in
order to expedite or facilitate the registration or disposition
of such Registrable Securities and, in such connection, whether
or not an underwriting agreement is entered into and whether or
not the registration is an underwritten registration, (i) make
such representations and warranties to the holders of such
Registrable Securities and the underwriters, if any, with
respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each
case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm
the same if and when reasonably requested; (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the
holders entitled to vote a majority of the Registrable
Securities being sold) addressed to each selling holder of
Registrable Securities and each of the underwriters, if any,
covering the matters customarily covered in opinions requested
in underwritten offerings; (iii) obtain "cold comfort" letters
and updates thereof (which letters and updates (in form, scope
and substance shall be reasonably satisfactory to the managing
underwriters, if any, and the Special Counsel or holders of a
majority of the Registrable Securities being sold) from the
independent certified public accountants of the Company (and, if
necessary, any other certified public accountants of any
subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or
is required to be, included in the Registration Statement),
addressed to each selling holder of Registrable Securities and
each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with
underwritten offerings; and (iv) deliver such documents and
certificates as may be requested by the holders entitled to vote
a majority of the Registrable Securities being sold, the Special
Counsel and the managing underwriters, if any, to evidence the
continued validity of the representations and warranties of the
Company and its Subsidiaries made pursuant to clause (i) above
and to evidence compliance with any customary conditions
contained in the underwriting agreement or other similar
agreement entered into by the Company. The above shall be done
at each closing under such underwriting or similar agreement or,
as and to the extent required thereunder.
(n) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters on a firm
commitment or best efforts underwritten offering, and (ii) if
not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company, after the
effective date of a Registration Statement, which statements
shall cover said 12-month periods.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the
Company such information regarding such seller and the
distribution of such Registrable Securities as the Company may,
from time to time, reasonably request in writing. The Company
may exclude from such registration the Registrable Securities of
any seller who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice
from the Company of the happening of any event of the kind
described in Section 5(d)(ii), 5(d)(iii), 5(d)(v), 5(d)(vi) or
5(d)(vii) hereof, such holder will forthwith discontinue
disposition of such Registrable Securities covered by such
Registration Statement or Prospectus until such holder's receipt
of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of
any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus. In
the event the Company shall give any such notice, the time
period mentioned in Section 3(a) hereof shall be extended by the
number of days during the time period from and including the
date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j)
hereof or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by
the Company whether or not any Registration Statement becomes
effective. Such fees and expenses shall include, without
limitation,
(i) all registration and filing fees (including, without
limitation, fees and expenses (x) with respect to filings
required to be made with the National Association of Securities
Dealers, Inc. in connection with an underwritten offering or if
otherwise required and (y) of compliance with state securities
or "blue sky" laws (including without limitation, reasonable
fees and disbursements of counsel for the underwriters or
selling holders in connection with "blue sky" qualifications of
the Registrable Securities and determination of the eligibility
of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriters, if any, or
holders of a majority of the Registrable Securities being sold
may designate)),
(ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in
a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in
any Registration Statement),
(iii) messenger, telephone, duplication, word processing and
delivery expenses,
(iv) fees and disbursements of counsel for the Company and
reasonable fees and disbursements of the Special Counsel for the
sellers of the Registrable Securities (subject to the provisions
of Section 6(b)),
(v) fees and disbursements of all independent certified
public accountants referred to in Section 5(m) hereof
(including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such
performance),
(vi) Securities Act liability insurance if the Company so
desires such insurance, and
(vii) fees and expenses of all other Persons retained by the
Company. In addition, the Company shall pay its internal
expenses (including without limitation all salaries and expenses
of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be
registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees
and expenses of any Person, including special experts, retained
by the Company.
(b) In connection with Shelf Registration hereunder, the
Company shall reimburse the holders of the Registrable
Securities being registered in such registration for (i) the
reasonable fees and disbursements of not more than one counsel
(in addition to appropriate local counsel approved by the
Company), chosen by the holders of a majority of the Registrable
Securities being registered and (ii) other reasonable and
necessary out-of-pocket expenses of the holders of Registrable
Securities incurred in connection with the registration of the
Registrable Securities.
(c) Notwithstanding any other provisions of this Section 6,
the Company shall not be required to pay the fees or
disbursements of any underwriters or managing underwriters of
Registrable Securities, counsel to such underwriters and
managing underwriters (other than as contemplated by Section
6(a)(i)) or any underwriting discounts and commissions payable
with respect to the Registrable Securities included in any such
Registration Statement or Registration Statements.
7. Indemnification
(a) Indemnification by the Company. The Company shall,
without limitation as to time, indemnify and hold harmless, to
the fullest extent permitted by law, each holder of Registrable
Securities, the officers, directors, agents and employees of
each of them, each Person who controls each such holder (within
the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, agents and
employees of such controlling persons, from and against any and
all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and reasonable
attorneys' fees) and expenses (including expenses of
investigation) (collectively, "Losses") as incurred, arising out
of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement,
Prospectus or form of Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising
out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as the same are based solely upon information furnished
in writing to the Company by such holder or reviewed and
approved in writing by such holder expressly for use therein.
The Company shall also indemnify each underwriter, selling
broker, dealer manager and similar securities industry
professional participating in the distribution, and each of
their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the
same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement in which a holder of
Registrable Securities is participating, such holder of
Registrable Securities shall furnish to the Company in writing
or review and approve in writing such information as the Company
reasonably requests for use in connection with any Registration
Statement or Prospectus and agrees to indemnify, to the fullest
extent permitted by law, the Company, its directors and
officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling persons, from
and against all Losses arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or
arising out of or based upon any omission of a material fact
required to be stated therein or necessary to make the
statements therein not misleading, to the extent, but only to
the extent, that such untrue statement or omission is contained
in any information so furnished in writing or reviewed and
approved in writing by such holder to the Company expressly for
use in such Registration Statement or Prospectus. In no event
shall the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount
of the proceeds (net of payment of all expenses) received by
such holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation or inquiry)
shall be brought or any claim shall be asserted against any
Person entitled to indemnification hereunder (an "indemnified
party"), such indemnified party shall promptly notify the party
or parties from which such indemnity is sought (the
"indemnifying parties") in writing, provided, however, that the
failure to so notify the indemnifying parties shall not relieve
the indemnifying parties from any obligation or liability except
to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to
appeal) that the indemnifying parties have been prejudiced
materially by such failure. All such fees and expenses
(including any fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding)
shall be paid to the indemnified party, as incurred, within 20
Business Days of written notice thereof to the indemnifying
party (regardless of whether it is ultimately determined that an
indemnified party is not entitled to indemnification hereunder).
The indemnifying party shall have the right, exercisable by
giving written notice to an indemnified party, within 20
Business Days after receipt of written notice from such
indemnified party of such action, claim or proceeding, to
assume, at its expense, the defense of any such action, claim or
proceeding, provided, however, that an indemnified party shall
have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless: (1) the
indemnifying party has agreed to pay such fees and expenses; or
(2) the indemnifying party shall have failed promptly to assume
the defense of such action, claim or proceeding and to employ
counsel reasonably satisfactory to such indemnified party in any
such action, claim or proceeding or fails to employ counsel
reasonably satisfactory to such indemnified party; or (3) the
named parties to any such action, claim or proceeding (including
any impleaded parties) include both such indemnified party and
the indemnifying party, and such indemnified party shall have
been advised by counsel that there may be one or more material
defenses available to such indemnified party that are in
conflict with those available to the indemnifying party (in
which case, if such indemnified party notifies the indemnifying
parties in writing that it elects to employ separate counsel at
the expense of the indemnifying parties, the indemnifying
parties shall not have the right to assume the defense thereof
and the reasonable fees and expenses of such counsel shall be at
the expense of the indemnifying party), it being understood,
however, that, the indemnifying party shall not, in connection
with any one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings
in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for such indemnified
parties, unless in the judgment of counsel to one or more of
such indemnified parties, a conflict of interest may exist
between or among such indemnified parties with respect to such
action, claim or proceeding. Whether or not such defense is
assumed by the indemnifying party, such indemnifying party or
indemnified party will not be subject to any liability for any
settlement made without its consent (but such consent will not
be unreasonably withheld). No indemnifying party shall be
liable for any settlement of any such action or proceeding
effected without its written consent, but if settled with its
written consent, or if there be a final judgment for the
plaintiff in any such action, claim or proceeding, each
indemnifying party jointly and severally agrees subject to the
exception and limitations set forth above, to indemnify and hold
harmless each indemnified party from and against any loss or
liability by reason of such settlement or judgment. The
indemnifying party shall not consent to the entry of any
judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release, in form and
substance reasonably satisfactory to the indemnified party, from
all liability in respect of such action, claim or proceeding for
which such indemnified party would be entitled to
indemnification hereunder (whether or not any indemnified party
is a party thereto).
(d) Contribution. If the indemnification provided for in
this Section 7 is unavailable to an indemnified party under
Section 7(a) or 7(b) hereof in respect of any Losses or is
insufficient to hold such indemnified party harmless, then each
applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall, jointly and severally, contribute to
the amount paid or payable by such indemnified party as a result
of such Losses, in such proportion as is appropriate to reflect
the relative fault of the indemnifying party or indemnifying
parties, on the one hand, and such indemnified party, on the
other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, shall be determined
by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information
supplied by, such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include any reasonable legal or
other fees or expenses incurred by such party in connection with
any Proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 7(d),
an indemnifying party that is a selling holder of Registrable
Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the
amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
8. Rules 144 and 144A
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Company is not required to file such
reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A.
The Company will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities
Act pursuant to the exemptions provided by Rule 144 and Rule
144A. Upon the request of any holder of Registrable Securities,
the Company shall deliver to such holder a written statement as
to whether it has complied with such information and filing
requirements.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the holders of
a majority of such Registrable Securities included in such
offering.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each holder of Registrable
Securities, in addition to being entitled to exercise all rights
provided herein, in the Registration Rights Agreement or in the
Purchase Agreement or granted by law, including recovery of
damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of
the date hereof, and shall not, on or after the date of this
Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of holders of a
majority of the then outstanding Registrable Securities;
provided, however, that Sections 5(a) and 7 shall not be
amended, modified or supplemented, and waivers or consents to
departures from this proviso may not be given, unless the
Company has obtained the written consent of each holder of the
then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the
rights of holders of Registrable Securities whose securities are
being sold pursuant to a Registration Statement and that does
not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such
holders pursuant to such Registration Statement; provided,
however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing and shall be
deemed given (i) when made, if made by hand delivery, (ii) upon
confirmation, if made by telecopier or (iii) one business day
after being deposited with a reputable next-day courier, postage
prepaid, to the parties as follows:
(x) if to a holder of Registrable Securities, at the most
current address given by such holder to the Company in
accordance with the provisions of this Section 10(d), which
address initially is, with respect to each Purchaser, the
address set forth on his respective signature page attached
hereto with a copy to Skadden, Arps, Slate, Meagher & Flom, 300
South Grand Avenue, Los Angeles, California 90071, telecopy
number (213) 687-5600, Attention: Michael A. Woronoff, Esq.; and
(y) if to the Company, initially at 500 Post Road East,
Westport, Connecticut 06880, Telecopier Number (203) 222-7978,
Attention: Marvin B. Rosenberg, and thereafter at such other
address, notice of which is given in accordance with the
provisions of this Section 10(d);
or to such other address as any party may have furnished to the
other parties in writing in accordance herewith.
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted
assigns of each of the parties and shall inure to the benefit of
each current and future holder of any Registrable Securities.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE
COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto
shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid,
void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended
to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or
referred to herein, with respect to the registration rights
granted by the Company with respect to the securities sold
pursuant to the Purchase Agreement. This Agreement supersedes
all prior agreements and understandings among the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the prevailing party,
as determined by the court, shall be entitled to recover
reasonable attorneys' fees in addition to any other available
remedy.
(l) Securities Held by the Company or Its Respective
Affiliates. Whenever the consent or approval of holders of a
specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its
affiliates (as such term is defined in Rule 405 under the
Securities Act) (other than the Purchasers or subsequent holders
of Registrable Securities if such Purchasers or subsequent
holders are deemed to be such affiliates solely by reason of
their holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was
given by the holders of such required percentage.
PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
TEREX CORPORATION
By: /s/ Marvin B. Rosenberg
Secretary
PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE
Purchaser: ________________________________
By:________________________________________
Name:______________________________________
Title:_____________________________________
Address: ________________________________
________________________________
________________________________
Telephone: ________________________________
Telecopy: ________________________________
Telex: ________________________________
EACH PURCHASER EXECUTING THIS SIGNATURE PAGE ON BEHALF OF ONE OR
MORE MANAGED ACCOUNTS SHOULD PROVIDE THE NAME OF, AND THE
REQUESTED INFORMATION WITH RESPECT TO, EACH MANAGED ACCOUNT.
MANAGEMENT AGREEMENT AMENDMENT
THIS AGREEMENT amends the Management Agreement entered into as of the
1st day of July, 1987, by and between NORTHWEST ENGINEERING COMPANY, (now TEREX
CORPORATION), of 201 West Walnut Street, Green Bay, WI 54303, a Delaware
corporation (hereinafter referred to as "TEX"), and KCS INDUSTRIES, INC., a
Delaware corporation, of 500 Post Road East, Suite 320, Westport, CT 06880,
(hereinafter referred to as "KCS").
WHEREAS, TEX and KCS entered into a Management Agreement as of the
1st day of July, 1987 (the "Agreement"); and
WHEREAS, TEX wishes to continue to receive the services provided by
KCS to TEX under the Agreement; and
WHEREAS, KCS, effective Janaury 1, 1993, has decided to conduct its
business in the form of a limited liability compnay ("KCS INDUSTRIES, L.C.", a
Florida limited liability company) which acts as the general partner of a
related limited partnership ("KCS INDUSTRIES, L.P.", a Connecticut Limited
Partnership), and;
WHEREAS, the parties wish to substitute KCS INDUSTRIES, L.C. and/or
KCS INDUSTRIES, L.P. for KCS INDUSTRIES, INC. in the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties agree as follows:
(1) KCS as used in the Agreement shall mean KCS INDUSTRIES, L.C.
and/or KCS INDUSTRIES, L.P. as either of them may designate from time to time.
(2) All other terms of the Agreement shall remain in full force and
effect.
KCS INDUSTRIES, INC. TEREX CORPORATION
("KCS") ("TEX")
BY: /s/ Marvin B. Rosenberg BY: /s/ Randolph W. Lenz
Marvin B. Rosenberg Randolph W. Lenz
ITS: Vice President ITS: President
DATE: January 1, 1993 DATE: January 1, 1993
January 1, 1994
KCS Industries, L.P.
500 Post Road East
Westport, CT 06880
Re: Management Contract
Gentlemen:
We refer to that certain management contract (the
"Contract") dated July 1, 1987, between KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), and Terex Corporation,
a Delaware corporation ("Terex"), as amended, pursuant to which
KCS provides administrative, financial, marketing, technical,
real estate and legal services to Terex and its subsidiaries, as
well as providing assistance in the evaluation, negotiation and
consummation of potential acquisitions of other companies,
products and processes, as well as the development of new areas
of business for Terex. For the services of KCS pursuant to the
Contract, Terex pays KCS an annual fee, plus the reimbursement
of all out-of-pocket expenses incurred by KCS in fulfilling the
Contract.
Terex desires to suspend the management services
provided by KCS to Terex pursuant to the Contract (the
"Suspension") effective as of the close of business on
December31, 1993, such that KCS shall provide no further
services to, and receive no further fees or expenses from, Terex
thereunder after such date, except as may be otherwise set forth
below, and Terexdesires to terminate the Contract (the
"Termination") effective as of the close of business on December
31, 1993 upon the approval by the stockholders of Terex (the
"Terex Stockholders")of the Issuance (as defined below).
In consideration of the agreement of KCS to the
Suspension and the Termination of the Contract prior to the
expiration date of the Contract and otherwise than pursuant to
the terms of the Contract, Terex hereby agrees to issue (the
"Issuance"), subject to the approval of the Issuance by the
Terex Stockholders, 38,800 shares of its Series B Cumulative
Redeemable Convertible Preferred Stock (the "Preferred Stock")
and 38,800Common Stock Purchase Warrants (the "Warrants") to
Randolph W. Lenz, and 25,500 shares of Preferred Stock and
25,500 Warrants to each of David J. Langevin and Marvin B.
Rosenberg (Messrs. Lenz, Langevin and Rosenberg being
executives of KCS), with appropriate and standard registration
rights. The terms of the Preferred Stock will be substantially
similar to those of the Terex's Series A Cumulative Redeemable
Convertible Preferred Stock (the "Series A Stock"), although the
Preferred Stock will be junior in
payment of dividends and liquidation preference to the Series
AStock, and the terms of the Warrants will be substantially
similar to the terms of Terex's Common Stock Purchase
Warrantssold in Terex's private placement consummated on
December 20,1993. Terex also agrees, effective January 1, 1994,
to employ Messrs. Langevin and Rosenberg as executives of Terex
with such compensation as may be agreed upon by Terex and
Messrs. Langevinand Rosenberg, respectively.
Terex further agrees that if the Issuance is not
approved by the Terex Stockholders, (i) the suspension will be
of no further force or effect, (ii) the Termination will not
occur and (iii) the Contract will be restored in full force and
effect, all effective as of the date of the failure of the Terex
Stockholders to approve the Issuance, and Terex agrees that it
shall once again be obligated to pay all fees and expenses
pursuant to the terms of the Contract from that date forward.
Terex also agrees that if the Issuance is not approved by the
Terex Stockholders, it will endeavor to achieve an alternate
agreement with KCS to terminate the Contract.
TEREX CORPORATION
By:
Name: Ronald M. DeFeo
Title: President and
Chief Executive Officer
AGREED AND ACCEPTED:
KCS INDUSTRIES, L.P.
By: KCS INDUSTRIES, L.C.
as General Partner
By:
Name
(STANDARD CHARTERED letterhead)
The Directors,
TEREX EQUIPMENT LIMITED
Newhouse Industrial Estate,
Motherwell ML1 5RY.
The Directors,
TEREX CORPORATION,
500 Post Road East,
Suite 320,
Westport,
Connecticut, 06880 U.S.A.
(23 Dec), 1993
Dear Sirs
We are pleased to offer on an uncommitted basis the credit facilities set out
in the schedule hereto on the following terms and conditions:-
1. The facilities
Lender: Standard Chartered Bank
Borrowers: Terex Equipment Limited and Terex Corporation who
(each 'a borrower') shall be jointly and severally liable hereunder for
all liabilities howsoever arising under this Facility
Letter provided that the credit facilities set out in
the Schedule hereto shall be for the sole use of and
may only be drawn or utilized by Terex Equipment
Limited. The liability hereunder of the Borrowers
and each of them shall not be avoided, invalidated or
impaired and each Borrower shall be bound by the
terms of this Facility Letter and the Ancillary
Documentation notwithstanding that the other Borrower
who was intended to execute or to be bound by it may
not do or be so.
Availability of At the absolute discretion of the Bank, at the time
Facilities after the date of your acceptance of the terms of
this Facility Letter and satisfaction of the
conditions precedent contained in paragraph 2 below
until terminated in respect of all or any of the
credit facilities by either party on demand.
2. Conditions
The offer of these uncommitted credit facilities is subject to the
satisfaction of the following conditions on or before drawdown (all
documents to be in form and substance satisfactory to the Bank):-
(a) the valid acceptance of this Facility Letter by each of the
Borrowers in accordance with the terms hereof;
(b) the delivery of a certified copy of Minutes of a Meeting of the
Board of Directors in substantially the form attached hereto as
Annese G of each of the Borrowers or such other form of authority as
the Bank may agree approving the acceptance of this Facility Letter
and the execution of the Ancillary Documentation;
(c) the completion and delivery to the Bank by Terex Equipment Limited
of a Bank Mandate and Supplementary Mandate and Indemnity
substantially in the form set out as Annexe A to this Facility
Letter;
(d) the execution by Terex Equipment Limited of a debt purchase
agreement substantially in the form set out as Annexe B to this
Facility Letter;
(e) the execution by Terex Equipment Limited of an assignment in
security in favour of the Bank of the policy of insurance issued by
NCM Credit Insurance Limited in respect of the trade receivables
referred to in Part IV of the Schedule hereto and the delivery to
the Bank of a certified copy of that policy;
(f) the execution by Terex Equipment Limited in favour of the Bank of a
counter indemnity substantially in the form set out as Annexe C to
this Facility Letter in respect of the Bank's obligations under the
facility referred to in Part III of the Schedule hereto;
(g) the execution by Terex Equipment Limited of a Charge over Cash
Deposits in favour of the Bank substantially in the form set out as
Annexe D to this Facility Letter; and
(h) the execution of a ranking agreement containing (inter alia)
consents from United States Trust Company of New York and
Continental Bank N.S. with any existing secured creditors of Terex
Equipment Limited substantially in the form set out as Annexe H to
this Facility Letter in a form acceptable to the Bank; and
(i) a legal opinion addressed by Maclay Murray & Spens, solicitors to
Terex Equipment Limited, to the Bank confirming (inter alia) that
Terex Equipment LImited has full corporate capacity, power,
authority and legal right to enter into and perform its obligations
under this Facility Letter and the Ancillary Documentation and that
such documents are legal, valid and binding upon Terex Equipment
LImited and have been duly authorised, executed and delivered by it
substantially in the form set out as Annexe I to this Facility
Letter; and
(j) the execution of a Forex Netting and Close Out agreement between
Terex Equipment Limited and the Bank in respect of the forward
foreign exchange line referred to in Part V of the Schedule in a
form to be agreed; and
(k) the execution by Terex Equipment Limited of a Set-off agreement in
favour of the Bank substantially in the form set out as Annexe E to
this Facility Letter; and
(l) the execution by Terex Equipment Limited of an NCM debt purchase
agreement substantially in the form set out as Annexe F to this
Facility Letter or such other form to be agreed; and
(m) the execution by Terex Equipment Limited of an Assignment of
proceeds under letters of credit in connection with the discounting
of bills of exchange drawn under such letters of credit referred to
in Part I of the Schedule in a form to be agreed.
3. Representations and warranties
To induce the Bank to enter into this Facility Letter and to make the
facilities available hereunder, the Borrowers hereby jointly and
severally represent and warrant to the Bank that:-
(a) the Borrowers are duly incorporated under the laws and jurisdiction
of the states or countries in which they are respectively
incorporated and have full power to own their assets and carry on
their respective businesses in each applicable jurisdiction in which
they operate;
(b) each of the Borrowers has power to enter into and perform its
obligations under this Facility Letter and the Ancillary
Documentation and has taken all necessary corporate action to
authorise the execution thereof and the performance of its
obligations thereunder and this Facility Letter has been, and the
Ancillary Documentation will be, duly executed and delivered or as
the case may require, signed by the relevant Borrower and
constitutes, or will constitute when executed, its legal, valid and
binding obligation; and
(c) the execution, delivery and performance of this Facility Letter and
Ancillary Documentation does not and will not cause either of the
Borrowers to be in breach of any law or regulation to which it is
subject, any provision of its constitution or any agreement to which
it is a party and all governmental or other consents requisite for
such execution, delivery and performance have been obtained and are
in full force and effect; and
(d) each Borrower's execution, delivery and performance of this Facility
Letter and the Ancillary Documentation will not result in the
existence of, or oblige either of the Borrowers to create any
security interest in favour of any third party (other than the Bank)
over the whole or any part of its undertaking or assets, present or
future and there are no subsisting mortgages, charges or other
encumbrances affecting any of its or their undertaking, assets or
revenues other than the Existing Charges and those arising by
operation of law.
4. Financial information
4.1 While any amount is outstanding under any of the facilities or is capable
of being drawn hereunder, the Borrowers will supply the Bank with the
following financial information:-
(a) two copies of the annual audited consolidated accounts of Terex
Equipment Limited within four months of its financial year end and
two copies of the Form 10K for Terex Corporation within 10 days of
the filing of the same;
(b) a copy of the monthly management accounts of Terex Equipment Limited
within twenty eight days of each month end; and
(c) Form 10Q in respect of Terex Corporation within 10 days of the
quarterly filing of the same.
4.2 Terex Equipment Limited will, following delivery of the monthly
management accounts, if so requested by the Bank, meet with the Bank to
discuss the same and shall provide such further information relative to
its business and affairs as the Bank may reasonably request.
4.3 Terex Corporation will, following the delivery of the Form 10Q in respect
of the second quarter of each financial year, if so requested by the
Bank, meet with the Bank to discuss the same and will provide the Bank
with such further information relative to its business and affairs as the
Bank may reasonably request.
5. Covenants
Terex Equipment Limited hereby undertakes to the Bank that it will:-
(a) not create or permit to exist any lien, charge or security interest
over all or any part of its current and/or future assets other than
(i) as provided by this Facility Letter, (ii) the Existing Charges
(iii) security arising by operation of law and (iv) contractual
retention of title provisions relating to goods supplied in the
ordinary course of business to Terex Equipment Limited;
(b) if so required by the Bank enter into a "Preferred Supplier"
agreement in form and substance reasonably satisfactory to the Bank
and Terex Equipment limited under which the Bank would have first
option on any "ECGD" (e.g. Buyer Credit) business arising from
export business;
(c) procure that all consents, licences and approvals as may be required
by it for the performance of its obligations under this Facility
Letter and/or the Ancillary Documentation are obtained and
maintained in full force and effect.
6. Payments
(a) Each payment to be made by Terex Equipment Limited to the Bank
hereunder or under the Ancillary Documentation shall be made in the
currency of the relevant obligation in immediately available cleared
funds free and clear of and without deduction (subject to paragraph
(g) below) for or on account of any set off or counter-claim or any
taxes or other duties (save as may be required by law) during
banking hours on the due date for such payment to the Bank in the
case of a sterling payment, for the account of Standard Chartered
Bank, Manchester Sort Code 609103 and, in the case of a payment in a
currency other than sterling, to such other account as the Bank may
from time to time designate to Terex Equipment Limited in writing.
(b) If the due date for payment of any sum is not a Business Day then
such payment shall be made on the next following Business Day.
(c) Interest, commissions and fees shall be calculated, in the case of
sterling obligations, on the basis of a 365 day year and the actual
number of days elapsed and, in the case of obligations in currencies
other than sterling, on the basis of a 360 day year or such other
basis as is standard for the currency in question.
(d) any money payable under this Facility Letter which is not paid when
due by the Borrowers shall bear interest on a daily basis from the
due date to the date of actual payment. Interest shall be charged
at the rate per annum determined by the Bank to be equal to 2% above
the rate applicable in accordance with the Schedule hereto to such
amounts.
(e) If the Bank determines that by reason of circumstances affecting the
Bank or the relevant Londong Interbank Market adequate and
reasonable means do not exist for ascertaining the offered rates of
interest stated to apply hereunder such offered rates shall be
determines by reference to the cost of funds from such other sources
as the Bank may in its reasonable discretion from time to time
determine.
(f) The determination by the Bank of the amount of any interest
commission or fee shall, in the absence of manifest error, be
conclusive and binding on the Borrowers.
(g) If either of the Borrowers is compelled by law to withhold or deduct
any taxes or other duties from any sum payable hereunder, the sum so
payable by such Borrower shall be increased so as to result in the
receipt by the Bank of a net amount equal to the full amount
expressed to be payable hereunder.
7. Fees and expenses
(a) All proper legal fees and other costs and expenses and value added
tax thereon incurred by the Bank in connection with the enforcement
of its rights hereunder and/or the, preservation and enforcement of
the Bank's rights under the Ancillary Documentation will be payable
by the Borrowers jointly and severally to the Bank on request on a
full indemnity basis.
(b) The Borrowers will jointly and severally pay to the Bank in respect
of any utilisation of the credit facilities hereunder the
commissions, fees and expenses relating to such utilisation referred
to in Parts I to V of the Schedule hereto.
(c) The Borrowers shall pay to the Bank by 12 equal consecutive monthly
instalments an arrangement fee (subject to paragraph (f) below) of
pd55,000. The first instalment shall be payable on acceptance of
this Facility Letter and shall be non-refundable in any event. If
the conditions precedent to drawdown are not satisfied within one
month of the date of acceptance then provided no facilities are or
have been provided hereunder the Borrowers shall not be obliged to
pay subsequent instalments of such arrangement fee. If the Bank
(without prejudice to the uncommitted nature of the facilities) at
any time withdraws all or any of the credit facilities without the
agreement of the Borrowers within 12 months of the date of the
Borrowers acceptance hereof, the Borrowers shall not be required to
pay any subsequent instalments of such arrangement fee in respect of
subsequent months in that twelve month period. If the Borrowers
shall cancel all or any part of the credit facilities within 3
months of the date of their acceptance hereof or if the average
utilisation of the facilities referred to in Parts III and IV of the
Schedule hereto by the Borrowers falls below 25 per cent in any
three month period commencing one month after satisfaction of the
conditions specified in Clause 2 above the balance of the
arrangement fee then unpaid shall be immediately payable in full.
(d) The Borrowers shall pay all present and future stamp, registration
and similar taxes or charges which may be payable in connection with
the execution, delivery, performance or enforcement of this Facility
Letter and/or the Ancillary Documentation. The Borrowers shall pay
or indemnify the Bank on demand against any and all liabilities
including penalties with respect to or resulting from delay or
omission to pay any such stamp, registration and similar taxes or
charges.
(e) The Borrowers shall pay the Bank on demand and in the currency in
which such amount shall have been demanded, made, suffered or
incurred under or in respect of any bond or guarantee and shall at
all times reimburse and indemnify the Bank and keep it indemnified,
as primary obligor and not merely as surety, and notwithstanding the
insufficiency, illegality or unenforceability of any bond or
guarantee, from and against all actions, proceedings, claims,
liabilities, damages, losses, costs, charges and expenses whatsoever
in relation to or arising out of each Bond and Guarantee.
(f) In relation to the facility to which part III of the Schedule refers
and to the provision by the Bank of advance payment bonds/guarantees
only, the Bank agrees to give consideration to the Borrowers
providing less than 100% cash cover in relation to such
bonds/guarantees provided that should in the reasonable opinion of
the Bank Terex Equipment Limited during 1994 derive an interest
related benefit of pd10,000 or more as directed result of such
reduction in required cash cover, the Borrowers shall pay the Bank
on demand an additional sum of pd5,000 by way of supplemental
arrangement fee.
8. Definitions and interpretation
(a) In this Agreement:
"Ancillary means the documentation to be entered into in
Documentation terms of this Agreement described more
particularly in Clause 2 hereof
"the Bank" means Standard Chartered Bank
"Borrowers" means, subject to paragraph 1 of this Facility
Letter, Terex Equipment Limited and Terex
Corporation all liabilities of whom shall be
joint and several
"Business Day" means a day (other than a Saturday or a Sunday)
on which clearing banks are open for business in
the City of London.
"Existing Charges" means (i) a standard security over subjects at
Newhouse Industrial Estate, Motherwell
registered in the Land Register of Scotland
under Title Number LAN1461 (the "Property")
dated 4th August 1992 in favour of United States
Trust Company of New York (ii) a floating charge
dated 31st July 1992 over the whole of the
property (including uncalled capital) from time
to time of Terex Equipment Limited in favour of
United States Trust Company of New York (iii) a
standard security over the Property dated 4th
August 1992 in favour of Continental Bank N.A.
and (iv) a floating charge dated 31st July 1992
over the whole of the property (including
uncalled capital) from time to time of Terex
Equipment Limited in favour of Continental Bank
N.A. (v) an assignation of debt in security
dated 9th June 1993 in favour of Barclays Bank
PLC
(b) References to "this Facility Letter" means the agreement resulting
from the acceptance by the Borrowers of this offer of facilities.
(c) References to any enactment shall be deemed to include references to
any enactment which amends, extends, consolidates or replaces the
same.
(d) Paragraph headings are for convenience only and shall not affect the
construction hereof.
(e) The singular shall include the plural and vice versa.
9. Notices
(a) Except as otherwise herein provided all notices, requests, demands
or other communications to or upon the parties hereto:-
(i) shall be given or sent by letter or by telefax transmission;
(ii) if given to the Bank shall be given to it at its address set
out in this letter or to such other address as it may
designate as its address from time to time by notice to the
Borrowers marked for the attention of W A Cromby Esq or the
manager of the Edinburgh branch of the Bank from time to
time.
(iii) if given to the Borrowers shall be given to Terex Equipment
Limited at its address set forth above or at such other
address as it may designate as its address from time to time
by notice to the Bank marked for the attention of the Finance
Director and, in the case of a notice terminating or making
demand for payment under any of the credit facilities or
making any material change to the terms of this Facility
Letter, to Terex Corporation at its address set forth above
or at such other address as it may designate as its address
from time to time by notice to the Bank marked for the
attention of the Treasurer.
(b) Any notice required to be "written" or "in writing" includes except
as otherwise provided herein, one given by telefax transmission in
accordance with the provisions of this Clause.
(c) The Bank may, but shall not be obliged to, rely upon and act in
accordance with any communication which may be or purport to be
given by telephone or telefax transmission on behalf of the
Borrowers by any person notified to the Bank by the Borrowers as
being authorised to give such communication without enquiry by the
Bank as to authority or identity of the person making or purporting
to make such communication. In consideration of the Bank acting in
accordance with the foregoing provisions of this sub-clause the
Borrowers hereby agree to indemnify the Bank and agree to keep the
Bank indemnified against all losses, claims, actions, proceedings,
damages, costs and expenses incurred or sustained by the Bank as a
result thereof.
10. Assignments
The Borrowers shall not be entitled to assign or transfer all or any part
of their rights, benefits or obligations hereunder. The Bank shall not
assign but may syndicate or allow others to participate in its rights and
benefits hereunder.
11. Confidentiality
11.1 Without prejudice to Clause 11.2 below, the Bank and each of the
Borrowers undertakes to keep confidential the terms of this Facility
Letter and any and all information received by any of them hereunder or
in connection herewith save as may be required by law or by any
regulatory authority.
11.2 The Bank may disclose to any prospective transferee or sub-participant of
all or any of its rights and benefits hereunder such information about
the Borrowers as shall have been made available to the Bank generally.
12. Illegality
If at any time, it is unlawful for the Bank to give effect to any of its
obligations hereunder it shall not thereafter be obliged to perform such
obligations and in relation to outstanding Bonds and/or Guarantees or any
other actual or contingent losses, claims or liabilities which the Bank
may suffer resulting from such illegality the Borrowers shall immediately
on demand pay the Bank cash collateral in an amount equal to and in the
same currency as the total amount outstanding under all such Bonds or
Guarantees (including Tender Bonds) or pursuant to any of the facilities
which may be made available hereunder in relation to which the Bank is
entitled to be reimbursed or indemnified.
13. Currency Indemnity
The Borrowers agree jointly and severally to indemnify the Bank against
any loss incurred by it as a result of any judgment or order being given
or made for the payment of any amount due under this Facility Letter and
such judgment or order being expressed in a currency other than that in
which the payment was due and as a result of any variation having
occurred in the rates of exchange between the date of any such amount
becoming due hereunder and the date of actual payment thereof.
14. Remedies and Waivers
No failure to exercise and no delay in exercising, on the part of the
Bank any right, remedy, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise thereof
or the exercise of any other right, remedy or power.
15. Invalidity of provisions
If at any time any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law neither the legality, validity
or the enforceability of the remaining provisions hereof shall in any way
be affected or impaired thereby.
16. Events of Default
If at any time and for any reason, whether within or beyond the control
of the Borrowers any of the following events should occur:-
(a) failure by a Borrower to pay in full the whole or any part of an
outstanding amount which is due for payment or to pay in full
interest or costs or any other monies payable in each case under the
terms of this Facility Letter and/or the Ancillary Documentation and
in each case within 3 days of the due date;
(b) failure by a Borrower to perform or comply with any other of its
obligations, undertakings or covenants under this Facility Letter
and, if that default is capable of remedy, it is not remedied within
12 Business Days after the Bank has given notice to the Borrower;
(c) if any financial indebtedness other than the financial indebtedness
of a Borrower hereunder exceeding pd500,000 (or its equivalent in any
other currency) shall be reason of default on the part of that
Borrower become due (other than any financial indebtedness which the
Borrower shall be contesting in good faith provided the Borrower is
capable of proving, if requested by the Bank, to the satisfaction of
the Bank that it is capable of discharging such liability without
adversely affecting its financial condition);
(d) if a Borrower shall suspend or threaten to suspend operations or if
all or a substantial part of its assets shall be nationalised,
expropriated or compulsorily acquired by any governmental or other
authority otherwise than on the basis of the payment of full
compensation or if that Borrower shall transfer or dispose or all or
a substantial part of its assets without the prior written consent
of the Bank (such consent not to be unreasonably withheld) and the
same will have a material adverse affect on that Borrower;
(e) if a petition shall be presented by or against a Borrower for its
voluntary or involuntary liquidation or dissolution, other than
voluntary liquidation approved by the Bank (such approval not to be
unreasonably withheld or delayed), or shall have a petition
presented for the appointment of an administrator or if a receiver
shall be appointed over any of the assets of the Borrower under any
law or regulation and such petition is not discharged within 12
Business Days of such petition;
(f) if a Borrower is deemed unable to pay its debts within the meaning
of section 123(1)(a), (b) or (e) or (2) of the Insolvency Act 1986;
(g) if any material written representation, warranty or statement of
fact made by or on behalf of a Borrower in this Facility Letter or
in any document furnished under or in connection with this Facility
Letter is incorrect in any material respect as at the date on which
it is made;
(h) if there shall occur in the reasonable opinion of the Bank, an
adverse change in the financial condition of, or the business
undertaken by a Borrower which would have a material adverse affect
on the ability of that Borrower to perform its obligations
hereunder;
(i) if there occurs in relation to a Borrower in any country or
territory in which it carries on business or to the jurisdiction of
whose courts any part of its assets is subject, any event which, in
the reasonable opinion of the Bank following the taking of
appropriate advice, appears in that country or territory to
correspond with or have an effect equivalent or similar to, any of
those mentioned in Clauses 16(e) and 16(f) hereof;
then the Bank may by notice to the Borrowers require the Borrowers to
secure the Bank to its satisfaction fully for such amount as the Bank
shall reasonable determine to be necessary against all actual or
contingent actions, proceedings, claims, liabilities, damages, losses,
costs, charges and expenses under or in connection with each guarantee
and/or bond (including tender bonds) outstanding under the facility
referred to in Part III of the Schedule and/or in connection with the
outstanding facilities provided under Part V of the Schedule hereto and
in relation to which it is entitled to be reimbursed or indemnified under
this Facility Letter, by payment of 100% cash collateral to the Bank.
The Borrowers shall also be obliged to provide 100% cash collateral to
the bank in respect of outstanding invoices or bills of exchange
discounted under Part IV of the Schedule hereto in the event the Bank
reasonably considers that such invoices or bills of exchange may not or
no longer be covered by the terms of the insurance policies issued by NCM
Credit Insurance Limited relating thereto such that the Bank may not make
a successful claim thereunder.
17. Law
This Facility Letter shall be governed by and construed in accordance
with the English law and each of the Borrowers hereby submits to the
jurisdiction of the English Courts but without prejudice to the rights of
the Bank to commence proceedings against the Borrowers in any other
jurisdiction.
18. Service of Process
The Borrowers each hereby irrevocably authorise and appoint Messrs
Anthony Murray and Laing of 10 Foster Lane, London EC2V 6HB (or such
other person being a firm of solicitors resident in England as the
Borrowers may from time to time by notice to the Bank substitute) ("the
Agent") to accept service of all legal process arising out of or in
connection with this Facility Letter and/or the Ancillary Documentation
and service on the Agent shall constitute service on the Borrower or
Borrowers.
The offer set forth above may be accepted by signing and returning the enclosed
copy hereof and is open for acceptance until 31st January 1994.
Yours faithfully
/s/ /s/ W. G. Galloway
For and on behalf of Standard Chartered Bank
Agreed and accepted on behalf of Terex Equipment Limited by
/s/ W. S. Buchan
Duly Authorised Signatory
pursuant to a board resolution
dated 23 Dec 1993
[date] 23 Dec 1993
Executed as a deed on behalf of Terex Corporation by
/s/ A. M. Boysan
Duly Authorised Signatory
pursuant to a board resolution
dated Dec 31, 1993
[date]
_______________________
Duly Authorised Signatory
pursuant to a board resolution
dated 1993
[date]
The Schedule
Part I
Discounting Facility
Facility: Discounting Facility
Facility Amount: pd3,000,000 (or currency equivalent
Purpose: (a) For the 100% discount, without recourse, of
bills of exchange accepted by the Bank drawn
under confirmed letters of credit, with a
maximum maturity of 180 Days
(b) For the 100% discount, without recourse, of
bills of exchange accepted by the drawees
(buyers) and avalised by acceptable banks, with
a maximum maturity of 180 Days
Beneficiary: Terex Equipment Limited
Minimum L/C Value: pd100,000 or currency equivalent
Maturities: Upon maturity of Bill of Exchange, maximum 180 Days
Discounting Bank: Standard Chartered Bank
Issuing Banks: Acceptable Banks to be subject to credit risk and
geographical restrictions determined by the Bank
Acceptance Commission: 0.1% per month payable from the date a facility
hereunder is utilised and in such currency as is
specified on the relevant bill of exchange
Commitment Fee: Nil
Discount Margin: 1% per annum over Bank's Published Base Rate or LIBOR
for the amount and for such period as may be agreed
between Terex Equipment Limited and the Bank. The
reference rate of interest to be agreed or else, if
not agreed, determined by the Bank.
Negotiation Fees: As per the Bank's Tariff
Security: Assignment of Proceeds under Letter of Credit
Part II
Debt Purchasing Facility
Facility: Debt Purchasing Facility
Facility Amount: pd2,500,000 (or currency equivalent)
Purpose: The discount, without recourse, of debts represented
or evidenced by invoices accepted payable by the UK
Ministry of Defence ("MoD")
Purchase Price: 100% of the face value
Beneficiary: Terex Equipment Limited
Minimum Value: pd100,000
Maturities: 45/60 Days Open Account
Commission Fee: pd30 plat per invoice
Interest: 1.5% per annum over the Bank's Published Base Rate
from time to time
Pre-Conditions: List of Authorised MoD Signatories to be supplied to
the Bank. Invoices to be accepted payable by MoD.
MoD to confirm it shall not exercise any set off
against amount payable under such invoice
Security: MoD signed invoice or MoD Guarantee
Documentation: Debt Purchase Agreement substantially in the form set
out in Annexe B to this Facility Agreement signed by
Terex Equipment Lmiited with the omission of those
provisions relating to recourse
Part III
General Bonding Line for Tender,
Performance and Retention Bonds/Guarantees
Facility: General bonding line for tender performance and
retention bonds/guarantees
Facility Amount: pd5,000,000 (or currency equivalent) Inner Limit for
Tender Bonds pd1m maximum
Purpose: To issue Tender, Performance, Advance Payment and
Retention Bonds/Guarantees in respect of contracts
won by Terex Equipment Ltd. Maximum period 12 months
Beneficiary: Acceptable beneficiaries to be subject to certain
geographical restrictions determined by the Bank
Minimum Bonding Amount: N/A
Counter Indemnity: Counter indemnity to be provided by Terex Equipment
Ltd substantially in the form set out in Annexe C
Maturities: Bonds may be issued at any time with Final Maturities
of up to 2 years
Commission Fees: 1.5% per annum on non cash backed Bonds
0.5% per annum on cash backed Bonds
Issuance Fee: Local costs in connection with the issuance of Bonds
to be for the account of Terex Equipment Limited
Pre-Conditions to To include inter alia:
Issuance of Bonds: (i) Satisfaction with wording and terms of Bonds
(ii) Satisfaction with Beneficiary and country of
issuance
Security: 100% cash collateral in respect of outstanding Bonds
(except Tender Bonds) for no less than the actual or
contingent liability of the Bank under such Bonds
from time to time secured by the charge of Cash
Deposits substantially in the form set out in Annexe
D to this Facility Letter
Part IV
NCM Insured Bill Advance/Discount Facility
Facility: NCM Insured Bill Advance/Discount Facility
Facility Amount: pd7,500,000 (or currency equivalent)
Purpose: To facilitate the discount of invoices or bills of
exchange drawn on various domestic or overseas buyers
covered by NCM Credit Insurance policy. Discounts
will be made on a non recourse basis subject to there
being a valid claim under the NCM insurance policy
following an event of non payment
Beneficiary: Terex Equipment Limited
Amount: Maximum 90% of the face value of each invoice/bill of
exchange
Maximum Amount: pd320,000 on any one invoice/or bill of exchange
Duration: No advance/discount beyond 180 days maximum
Commission Fee: pd30 per advance/discount plus bill collection
commission as per tariff
Interest: 1.5% per annum over base rate/LIBOR for the amount
and for such period as may be agreed between Terex
Equipment Limited and the Bank. The reference rate
of interest to be agreed on, if not agreed, to be
determined by the bank
Pre-Condition: Zero claims history to be established with NCM.
Condition Subsequent: Audit of Terex Equipment Ltd., systems etc. by
Sedgwicks
Security: Assignment to the Bank of NCM Credit Insurance policy
Documentation: (a) General letter of set-off, Annexe E
(b) Agreement, as per Annexe F
Part V
Forward Foreign Exchange Line
Facility: Forward Foreign Exchange Line
Facility Amount: pd10,000,000 (or currency equivalent)
Purpose: To enable Terex Equipment Limited to mitigate the
effects of Foreign Exchange fluctuations by way of
Forward Contracts
Beneficiary: Terex Equipment Limited
Maximum Amount: pd10,000,000 (Gross)
Documentation: Forex netting and close out Agreement
Exhibit 11.1
TEREX CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31,
1992 1991 1990
PRIMARY
Average shares outstanding 9,945,484 9,913,517 9,849,311
Net effect of dilutive stock options
based on the treasury stock method
using average market price --- (1) --- (1) 39,404
Totals 9,945,484 9,913,517 9,888,715
Income (loss) before
extraordinary loss $(57,175,000) $(29,786,000) $8,245,000
Extraordinary loss on
retirement of debt --- --- (2,192,000)
Net income (loss) $(57,175,000) $(29,786,000) $6,053,000
Income (loss) per share before
extraordinary loss $(5.75) $(3.00) $0.83
Extraordinary loss per share on
retirement of debt --- --- (.22)
Net income (loss) per share $(5.75) $(3.00) $0.61
FULLY DILUTED
Average shares outstanding 9,945,484 9,913,517 9,849,311
Net effect of dilutive stock
options based on the treasury
stock method using year-end market
price when it is greater than
average market price --- (1) --- (1) 39,404
Totals 9,945,484 9,913,517 9,888,715
Income (loss) before
extraordinary loss $(57,175,000) $(29,786,000) $8,245,000
Extraordinary loss on
retirement of debt --- --- (2,192,000)
Net income (loss) $(57,175,000) $(29,786,000) $6,053,000
Income (loss) per share before
extraordinary loss $(5.75) $(3.00) $0.83
Extraordinary loss per share on
retirement of debt --- --- (.22)
Net income (loss) per share $(5.75) $(3.00) $0.61
(1) Not applicable as inclusion is anti-dilutive.
EXHIBIT 11.1
(continued)
TEREX CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Nine Months Ended
September 30,
1993 1992
PRIMARY:
Average shares outstanding 9,952,147 9,944,197
Net effect of dilutive stock options
based on the treasury stock method
using average market price (1) --- ---
Total 9,952,147 9,944,197
Income (loss) before
extraordinary loss $(43,092,000) $(38,611,000)
Extraordinary loss on
retirement of debt (2,003,000) ---
Net income (loss) $(45,095,000) $(38,611,000)
Per share, primary:
Income (loss) before extraordinary loss $(4.33) $(3.88)
Extraordinary loss on retirement of debt (.20) ---
Net income (loss) $(4.53) $(3.88)
FULLY DILUTED:
Average shares outstanding 9,952,147 9,944,197
Net effect of dilutive stock options
based on the treasury stock method
using period-end marketprice when
it is greater than averag price (1) --- ---
Total 9,952,147 9,944,197
Income (loss) before
extraordinary loss $(43,092,000) $(38,611,000)
Extraordinary loss on
retirement of debt (2,003,000) ---
Net income (loss) $(45,095,000) $(38,611,000)
Per share, fully diluted:
Income (loss) before extraordinary loss $(4.33) $(3.88)
Extraordinary loss on retirement of debt (.20) ---
Net income (loss) $(4.53) $(3.88)
(1) Not applicable as inclusion is anti-dilutive.
Exhibit 12.1
TEREX CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
9 months Ended
September 30, Year Ended December 31,
1993* 1992* 1991 1990 1989 1988
EARNINGS
Income before
taxes and
minority interest (44,902) (57,175) (38,640) 10,606 20,161 14,522
Adjustments:
Minority interest
in losses of
consolidated
subsidiaries (9,722)
Undistributed
(income) loss of
less than 50% owned
investments 677 35,045 (4,209) (7,480) (5,555)
Distributions from
less than 50% owned
investments 1,681 732 100
Fixed charges 30,165 27,214 35,617 54,167 39,120 15,016
Earnings (14,060) 5,084 (15,273) 58,025 53,826 29,538
FIXED CHARGES
Interest expense,
including debt discount
amortization 23,849 23,320 31,165 47,607 33,597 13,508
Amortization/writeoff
of debt
issuance costs 4,758 1,694 1,304 3,954 3,296 303
Portion of rental
expense representative
of interest factor 1,558 2,200 3,148 2,606 2,227 1,205
Fixed charges 30,165 27,214 35,617 54,167 39,120 15,016
RATIO OF EARNINGS
TO FIXED CHARGES (1) (1) (1) 1.1 1.4 2.0
AMOUNT OF EARNINGS
DEFICIENCY FOR
COVERAGE OF
FIXED CHARGES 44,225 22,130 50,890 0 0 0
(1) Less than 1.0x.
* Fruehauf deconsolidated as of January 1, 1992
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(Amounts in thousands)
Balance at
Beginning Amounts Balance at End of Period
Name of Debtor of Period Additions Collected Current Not Current
Year ended December 31,
1992 $--- $--- $--- $--- $---
Year ended December 31,
1991 $--- $--- $--- $--- $---
Year ended December 31,
1990
L. De Rubbo,
non-interest bearing
account receivable $120 $--- $120 $--- $---
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE IV--INDEBTEDNESS OF AND TO RELATED PARTIES--NOT CURRENT
(Amounts in thousands)
Indebtedness to
Balance at
Beginning Balance at
Name of Person of Year Additions Deductions End of Year
Year ended December 31, 1992
Receivable:
Fruehauf Trailer Corporation
-- Long-term receivable $--- $14,890 (2) $(14,890)(3) $---
Payable:
The Airlie Group L. P.
-- Promissory note $7,497 $--- $7,497 (1) $---
Year ended December 31, 1991
Payable:
The Airlie Group L. P.
-- Promissory note $15,875 $1,651 $10,029 $7,497
KCS Industries, Inc.
-- Promissory note 15,875 1,651 17,526 ---
Totals $31,750 $3,302 $27,555 $7,497
Year ended December 31, 1990
Payable:
The Airlie Group L. P.
-- Promissory note $13,129 $2,746 $--- $15,875
KCS Industries, Inc.
-- Promissory note 13,129 2,746 --- 15,875
Totals $26,258 $5,492 $--- $31,750
(1) As a result of the deconsolidation of Fruehauf as of January 1, 1992,
this note is no longer included in the Company's consolidated financial
statements.
(2) Includes $10,244 balance at beginning of year previously eliminated in
consolidation of Fruehauf.
(3) Carrying value adjusted to $-0- by a charge to "Equity in net income
(loss) of a ffiliate companies."
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in thousands)
Balance Additions
Beginning Charges to Balance End
of Year Earnings Other Deductions(1) of Year
Year ended December 31,
1992:
Deducted from asset
accounts:
Allowance for
doubtful accounts $4,142 $642 $4,462 (2) $(2,898) (4) $6,348
Reserve for excess
and obsolete
inventory 26,999 2,545 691 (3) (8,093) (4) 22,142
Reserve for assets
held for sale 4,293 --- --- (4,293) (4) ---
Totals $35,434 $3,187 $5,153 $(15,284) (4) $28,490
Year ended December 31,
1991:
Deducted from asset
accounts:
Allowance for
doubtful accounts $3,632 $821 $272 (3) $(583) $4,142
Reserve for excess
and obsolete
inventory 17,654 11,394 --- (2,049) 26,999
Reserve for assets
held for sale 2,895 3,725 --- (2,327) 4,293
Totals $24,181 $15,940 $272 $(4,959) $35,434
Year ended December 31,
1990:
Deducted from asset
accounts:
Allowance for
doubtful accounts $3,768 $622 $--- $(758) $3,632
Reserve for excess
and obsolete
inventory 10,330 9,670 --- (2,346) 17,654
Reserve for assets
held for sale 4,774 --- --- (1,879) 2,895
Totals $18,872 $10,292 $--- $(4,983) $24,181
(1) Utilization of established reserves, net of recoveries.
(2) Added with the acquisition of businesses.
(3) Includes balances reclassified to other accounts.
(4) Includes reductions resulting from the deconsolidation of Fruehauf as of
January 1, 1992 as follows:
Allowance for doubtful accounts $ (2,210)
Reserve for excess and obsolete inventory (6,864)
Reserve for assets held for sale (4,293)
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Amounts in thousands)
1992 1991 1990
Maintenance and repairs $3,130 $10,120 $12,321
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES
OTHER THAN RELATED PARTIES
(Amounts in thousands)
Balance at Balance
Beginning at End
Name of Debtor of Year Additions Deductions of Year
Year ended December 31, 1992:
KCS Industries, Inc.,
Promissory notes,
interest at prime,
due March 31, 1993 $ - $1,622 $ - $1,622*
- $1,622 $ - $1,622
Year ended December 31, 1991:
Promissory notes $ - $ - $ - $ -
$ - $ - $ - $ -
Year ended December 31, 1990:
Promissory notes $ - $ - $ - $ -
$ - $ - $ - $ -
* Entire amount repaid on January 25, 1993.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES - NOT CURRENT
(Amounts in thousands)
Indebtedness to
Balance at Balance
Beginning at End
Name of Person of Year Additions Deductions of Year
Year ended December 31, 1992:
Airlie Group Promissory
notes 7,497 - 7,497 * -
Terex Corporation
Long-term payable 10,244 4,646 - 14,890
$17,741 $4,646 $7,497 $14,890
Year ended December 31, 1991:
KCS Industries, Inc.
Promissory notes $15,875 $1,651 $17,526 $ -
Airlie Group
Promissory notes 15,875 1,651 10,029 7,497
Terex Corporation
Promissory notes 7,944 825 8,769 -
Terex Corporation Long-term
payable 6,309 3,935 - 10,244
$46,003 $8,062 $36,324 $17,741
Year ended December 31, 1990:
KCS Industries, Inc.
Promissory notes $13,129 $2,746 $ - $15,875
Airlie Group
Promissory notes 13,129 2,746 - 15,875
Terex Corporation Promissory
notes 6,565 1,379 - 7,944
Terex Corporation Long-term
payable 214 6,095 - 6,309
$33,037 $12,966 $ - $46,003
The Company held no long-term amounts receivable from related parties during
any of the periods presented.
* As a result of a default on the Company's credit facility, the related party
long-term payable has also been classified as current.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Amounts in thousands)
Balance at Balance
Beginning Additions at End
of Period at Cost Retirements Deductions of Year
YEAR ENDED December 31, 1992:
Property $35,281 $ - $ (713) $(17,303)* $17,265
Plant 39,910 1,165 (1,945) (12,843)* 26,287
Equipment 45,914 772 (1,638) (4,752)* 40,296
Total $121,105 $1,937 $(4,296) $(34,898) $83,848
YEAR ENDED December 31, 1991:
Property $38,648 $71 $(2,764) $ (674)* $35,281
Plant 68,586 610 (27,511) (1,775)* 39,910
Equipment 53,585 1,829 (2,730) (6,770)* 45,914
Total $160,819 $2,510 $(33,005) $ (9,219) $121,105
YEAR ENDED December 31, 1990:
Property $38,304 $412 $(68) $ - $38,648
Plant 68,596 139 (149) - 68,586
Equipment 50,894 3,014 (336) 13 53,585
Total $157,794 $3,565 $(553) $ 13 $160,819
* Includes the write-down of equipment due to the restructuring charge as well
as transfers to and from assets held for sale.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(Amounts in thousands)
Additions
Balance atCharged to Balance
Beginning Costs & at End
of Period Earnings Retirements Deductions of Year
YEAR ENDED December 31, 1992:
Plant $4,289 $906 $(339) $(1,842)* $3,014
Equipment 13,938 3,165 (948) (1,588)* 14,567
Total $18,227 $4,071 $(1,287) $(3,430) $17,581
YEAR ENDED December 31, 1991:
Plant $7,246 $1,520 $(6,716) $2,239* $4,289
Equipment 9,494 5,362 (1,936) 1,018* 13,938
Total $16,740 $6,882 $(8,652) $3,257 $18,227
YEAR ENDED December 31, 1990:
Plant $2,914 $1,186 $ - $3,146 $7,246
Equipment 3,078 5,150 - 1,266 9,494
Total $5,992 $6,336 $ - $4,412 $16,740
* Includes transfers to and from assets held for sale.
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in thousands)
Balance at Additions Balance
Beginning Charges to at End
of Period Earnings Other Deductions of Period
YEAR ENDED December 31, 1992:
Deducted from asset accounts:
Allowance for
doubtful accounts $2,210 $44 $ - $(206) $2,048
Reserve for excess
and obsolete
inventory 6,864 3,244 - (4,969) 5,139
Reserve for assets
held for sale 4,293 7,700 - (2,347) 9,646
Total $13,367 $10,988 $ - $(7,522) $16,833
YEAR ENDED December 31, 1991:
Deducted from asset accounts:
Allowance for
doubtful accounts $1,973 $151 $272 $(186) $2,210
Reserve for excess
and obsolete
inventory 2,478 6,421 - (2,035) 6,864
Reserve for assets
held for sale 2,895 3,725 - (2,327) 4,293
Total $7,346 $10,297 $272 $(4,548) $13,367
YEAR ENDED December 31, 1990:
Deducted from asset accounts:
Allowance for
doubtful accounts $2,000 $170 $ - $(197) $1,973
Reserve for excess
and obsolete
inventory - 2,478 - - 2,478
Reserve for assets
held for sale 4,774 - - (1,879) 2,895
Total $6,774 $2,648 $ - $(2,076) $7,346
FRUEHAUF TRAILER CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Amounts in thousands)
Year ended December 31,
1992 1991 1990
Maintenance and repairs $5,480 $7,421 $8,318
