SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
[x ]
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1994
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
[ ] OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________.
Commission File Number 1-10702
TEREX CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 34-1531521
(State of incorporation) (I.R.S. Employer
Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880 (203) 222-7170
(Address of principal executive offices) (Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES [ ] NO [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $27.1 million based on the last sale price on
March 1, 1995.
The number of shares of the Registrant's Common Stock outstanding was
10,314,217 as of March 1, 1995.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1995 Terex Corporation Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the year covered by
this Form 10-K with respect to the 1995 Annual Meeting of Stockholders are
incorporated by reference into Part III.
TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended December 31, 1994
Page
PART I
Item 1 Business 3
Item 2 Properties 9
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security Holders 10
PART II
Item 5 Market for Registrant's Common Stock
and Related Stockholder Matters 11
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 8 Financial Statements and Supplementary Data 22
Item 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosures 23
PART III
Item 10 Directors and Executive Officers of the Registrant
*
Item 11 Executive Compensation *
Item 12 Security Ownership of Certain Beneficial
Owners and Management *
Item 13 Certain Relationships and Related Transactions *
PART IV
Item 14 Exhibits, Financial Statement Schedule
and Reports on Form 8-K 24
* Incorporated by reference from Terex Corporation Proxy Statement.
PART I
Terex Corporation, together with its consolidated subsidiaries, is hereinafter
referred to as "Terex," the "Registrant," or the "Company."
ITEM 1. BUSINESS
General
Terex is a global provider of capital goods and equipment used in the
manufacturing, distribution, mining, construction and infrastructure
industries.
The Company's operations began in 1983 with the purchase of Northwest
Engineering Company, the Company's original business and name. Since 1983,
management has expanded the Company's business through a series of nine
acquisitions. In 1988, Northwest Engineering Company merged into a subsidiary
acquired in 1986 named Terex Corporation, with Terex Corporation as the
surviving corporation. For the year ended December 31, 1994, consolidated
revenues of the Company amounted to $787 million. The Company's operations are
divided into two principal segments: Material Handling and Heavy Equipment.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies,
automated pallet trucks, industrial tow tractors and related replacement parts.
These products are used in material handling applications in a broad array of
manufacturing, distribution and transportation industries. The Material
Handling Segment consists of Clark Material Handling Company ("CMHC") and
certain affiliated companies (together with CMHC, "CMH") which were acquired by
the Company on July 31, 1992 from Clark Equipment Company (the "CMH
Acquisition").
The Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving, construction, lifting, material handling and aerial
lift equipment, and related components and replacement parts. These products
are used primarily by construction, mining, logging, industrial and government
customers in building roads, dams and commercial and residential buildings;
supplying coal, minerals, sand and gravel; and handling materials in the scrap,
refuse and lumber industries. The Heavy Equipment Segment consists of three
operating businesses: (i) the Terex Business, which manufactures off-highway
rigid and articulated haulers, scrapers and wheel loaders, (ii) the Unit Rig
division, which manufactures electric rear and bottom dump haulers, as well as
mechanical drive haulers and wheel loaders principally sold to the mining
industry and (iii) the Koehring Cranes and Excavators and Mark division, which
manufactures, among other products, mobile cranes under the brand name LORAIN
and aerial lift equipment under the brand name MARKLIFT.
For financial information about the Company's industry and geographic segments,
see Note N -- "Business Segment Information" in the Notes to the Consolidated
Financial Statements 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. See "Recent
Developments."
Material Handling Segment
CMH 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.
CMH's products are distributed through an established global dealer network
which includes more than 440 locations. Management believes CMH has the
largest installed fleet in North America, with over 250,000 units, and that
over 320,000 CMH trucks are presently in operation worldwide. Historically,
approximately 80% of CMH's revenues have been derived from new product sales
and approximately 20% of revenues have been derived from the sale of
replacement parts. CMH and its independent dealers sell to a diversified base
of customers in a variety of industries. CMH's headquarters and U.S.
manufacturing facilities are located in Lexington, Kentucky. CMH's
international manufacturing facilities are located in Mulheim-Ruhr, Germany.
CMH also owns a training and research center in Lexington, Kentucky.
The Company acquired CMH on July 31, 1992. Following the acquisition, CMH
began implementing initiatives intended to reduce its manufacturing and
operating costs. These initiatives have included consolidation of engineering,
manufacturing and parts facilities. In December 1993, CMH transferred its
parts supply operations to the Company's parts distribution center in
Southaven, Mississippi. During 1994, CMH completed the transfer of its light
IC lift truck chassis production from Korea to Lexington, Kentucky, closed its
manufacturing facility in Danville, Kentucky and closed its axle manufacturing
facility in Korea. In April 1994, the Company sold 100% of the stock of its
Drexel Industries, Inc. subsidiary ("Drexel"). Drexel, which is located in
Horsham, Pennsylvania, manufactures very narrow-aisle lift trucks.
CMH 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 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 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, with the largest market for
tow tractors being airport baggage handling.
CMH is a leading manufacturer of lift trucks in North America, although the
brand names of Hyster and Yale combined, both owned by Nacco Industries, Inc.,
account for production of more lift trucks annually. Other major North
American competitors include Toyota, Mitsubishi, Caterpillar and Komatsu in
both IC and electric riders, and Crown and Raymond in electric riders alone.
In Europe, CMH competes with the Linde Group, the European market leader, as
well as Hyster-Yale, Toyota and Jungheinreich. CMH also competes with a number
of specialty firms.
Heavy Equipment Segment
The Company is recognized as a significant competitor in the market for large
capacity haulers, scrapers, cranes and aerial lift equipment. However, the
Company is not a dominant manufacturer in the heavy equipment industry, which
is dominated in most segments by large, diversified firms, such as Caterpillar,
Dresser Industries and Komatsu, that have broader product lines and greater
financial resources. The Company also competes in this industry with a number
of specialty firms, whose products generally compete directly with one or more
of the Company's product lines.
Terex Business
The Company acquired the Terex Division in December 1986 and acquired Terex
Equipment Limited ("TEL"), a subsidiary of the Company located in Scotland, in
June 1987. The Terex Division and TEL are jointly hereinafter referred to as
the "Terex Business," which is headquartered in Motherwell, Scotland. 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 at its facility in
Motherwell, Scotland.
The Terex Business has two principal product lines: off-highway rigid and
articulated haulers and scrapers. A "hauler" is an off-road dump truck with a
capacity in excess of 25 tons. Haulers produced by the Terex Business have
capacities ranging from 25 to 85 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. The Terex
Business product line also includes wheel loaders although these are not
presently being manufactured. A "wheel loader" is a vehicle that loads
materials onto trucks, conveyors and similar equipment. The Terex Business
products perform a wide range of earthmoving functions in quarry and 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.
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.
Unit Rig
In July 1988, the Company purchased certain domestic and foreign assets and
operations of the business that now operates as the Unit Rig Division ("Unit
Rig"). Unit Rig is headquartered in Tulsa, Oklahoma.
Unit Rig's predecessor pioneered the development of the diesel electric drive,
rear dump hauling truck for use in open pit mining operations. The truck is
powered by a diesel engine driving an electric generator that provides power to
individual electric motors in each of the rear wheels. Unit Rig's current
LECTRA HAUL product line consists of a series of rear dump hauler trucks with
payload capacities ranging from 100 to 260 tons, and bottom dump haulers with
capacities ranging from 180 to 270 tons.
Unit Rig also produces the Dart line of wheel loaders and mechanical drive
haulers. This product line consists of the Dart 600C mechanical drive wheel
loader with 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. Unit Rig's major customers are mining companies in North and South
America, Asia, Africa and Australia. Approximately 70% of Unit Rig's sales are
export sales. Unit Rig's largest competitors are Caterpillar, Komatsu and
Dresser.
Koehring Cranes & Excavators and Mark Industries
In January 1987, the Company purchased certain assets and operations of the
business that now operates as the Koehring Cranes & Excavators Division
("Koehring"). 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. In
1994 the Company discontinued manufacturing hydraulic excavators except for
large scrap handlers where the Company maintains a meaningful market share.
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. See "Recent
Developments."
In December 1991, the Company acquired substantially all operating assets of
the business that now operates as the Mark Industries Division ("Mark"). Mark
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 is engaged in the manufacture and sale of aerial
lift equipment, including scissor lifts, boom lifts and a full line of
replacement parts. Scissor lifts and boom lifts are used for the repair,
maintenance and construction of buildings, manufacturing facilities and
equipment. These lifts are used in a wide variety of industrial applications,
such as installing and repairing electrical and plumbing fixtures; installing
drywall and ceilings; cleaning, repairing and painting production equipment;
maintaining refineries, chemical plants and aircraft; and performing common
construction tasks such as siding, insulation and structural member
installation. In 1993, the Company began to market Mark's products through the
Terex and CMH dealer networks to expand distribution opportunities. Mark's
largest competitor in the aerial lift industry is JLG Industries.
Northwest Engineering Company and BCP Construction Products
The Company currently manages the Northwest Engineering and BCP Construction
Products ("BCP," acquired in 1985) businesses from Koehring's location in
Waverly, Iowa. Northwest Engineering's products are "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. Northwest Engineering's competitors include
Link Belt, American and Manitowoc. BCP's products include the DYNAHOE
backhoe/loader as well as replacement parts for a variety of construction
machinery produced by BCP's predecessor, Bucyrus-Erie Company. BCP's
competitors include J. I. Case Company, John Deere and Caterpillar. The sale
of replacement parts for Northwest Engineering and BCP products constitutes the
most important part of these businesses.
Fruehauf Trailer Corporation ("Fruehauf")
In July 1989, the Company acquired certain assets and assumed certain
liabilities related to the trailer and maritime businesses of Fruehauf
Corporation. Fruehauf is a U.S. manufacturer and marketer of truck trailers
and related parts and has an international presence through its foreign license
arrangements and export sales.
Until July 1991, Fruehauf was wholly-owned and was included in the Company's
consolidated financial statements. In July 1991, Fruehauf completed a
recapitalization and consummated an initial public offering of 4,000,000 shares
of Fruehauf common stock (the "Fruehauf IPO"). Following the Fruehauf IPO and
as of December 31, 1991, the Company's ownership decreased to approximately 42%
of the outstanding Fruehauf common stock. Because of the existence of a voting
trust among Terex and certain individuals, the Company continued to have voting
control of Fruehauf and, accordingly, continued to account for Fruehauf as a
consolidated subsidiary in 1991. The voting trust terminated during 1992 and,
accordingly, the Company accounted for its ownership interest in Fruehauf using
the equity method in 1992 and 1993.
The Company's remaining ownership interest following the Fruehauf IPO was
further reduced during 1993 and 1994 as a result of Fruehauf equity issuances
and the sale of certain shares of Fruehauf common stock held by the Company.
As of December 31, 1994 the Company owned 486,622 shares, representing 1.6% of
outstanding Fruehauf common stock. During January 1995 the Company's ownership
was reduced to zero following the sale of the remaining shares.
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, including
the Comprehensive Environmental Response, Compensation and Liability Act, 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.
Research and Development
The Company maintains engineering staffs at several of its locations which
design 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 $10.5 million, $11.8 million and $6.7 million in
1994, 1993 and 1992, 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 materials are
normally available from multiple suppliers. Current and potential suppliers
are evaluated on a regular basis on their ability to meet the Company's
requirements and standards. During the first half of 1994, certain of CMH's
suppliers experienced difficulties in meeting CMH's production schedules. Such
difficulties, while not eliminated, were substantially alleviated in the second
half of 1994. Electric wheel motors and controls used in the Unit Rig product
line are currently supplied exclusively by General Electric Company.
Seasonal Factors
The Company markets a large portion of its products in North America and
Europe, and 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 normal winter slowdown of construction activity.
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
CMH markets original equipment and repair parts through a worldwide dealer
network. CMH currently has 94 independent North American dealers who operate
approximately 233 outlets, with all such dealer outlets providing both sales
and service. CMH's European distribution network consists of approximately 85
independent dealers and three company-owned dealers operating in 29 countries.
CMH dealers generally market the full CMH product line and maintain
comprehensive service capabilities. CMH operates a dealer service organization
designed to coordinate sales and promotional activities, provide ongoing dealer
training and facilitate dealer communications.
CMH products are sold through a system which enables customers to specify 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. CMH and
its dealers sell to a diversified customer base with no single customer
accounting for more than 4% of CMH's revenues.
The Heavy Equipment Segment, other than Unit Rig, markets original equipment
and repair parts through worldwide dealership networks. Unit Rig distributes
its products and services directly to customers primarily 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.
Backlog
The Company's backlog as of December 31, 1994 and 1993 was as follows:
December 31,
1994 1993
(in millions of dollars)
Material Handling $135.9 $152.7
Heavy Equipment 79.5 80.9
Total $215.4 $233.6
As described below under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," CMH experienced liquidity constraints
during 1993 which adversely affected CMH's ability to maintain production and
sales levels. Order bookings remained strong because of improved demand in the
North American forklift industry and, as a result, the Material Handling
Segment backlog increased to $152.7 million at December 31, 1993. The backlog
decreased during 1994 as CMH returned to full production.
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
represent primarily new equipment orders. Parts orders are generally filled on
an as-ordered basis, although parts orders backlog was also higher in 1993 as a
result of liquidity constraints as described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Patents, Licenses and Trademarks
Several of the trademarks and trade names of the Company, in particular the
TEREX, CLARK, KOEHRING, LORAIN, UNIT RIG, MARKLIFT, DYNAHOE and POWRWORKER
trademarks, are important to the business of the Company. The Company owns
and maintains trademark and patent registrations in countries where it conducts
business, and monitors the status of its trademark and patent registrations to
maintain them in force and renews them as required. The Company also takes
steps, including legal action, to protect its trademark, trade name and patent
rights when circumstances warrant such action.
Employees
As of December 31, 1994, the Company had approximately 2,850 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. The Company
is currently experiencing a strike at its distribution center in Southaven,
Mississippi, which has approximately 120 union employees. The Company is in
negotiation with the union and the facility is currently operating at full
capacity staffed with management and replacement workers. The strike is not
expected to have a material adverse impact on the Company's operations.
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 N -- "Business Segment
Information" in the Notes to the Consolidated Financial Statements.
Recent Developments
The Company has announced its plans to acquire, through a newly formed wholly
owned subsidiary of the Company ("Terex Cranes"), (i) substantially all of the
capital stock of P.P.M., S.A. ("PPM Europe") which is engaged in the mobile
crane and container stacker business in Europe primarily under the PPM brand
name, and (ii) all of the capital stock of Legris Industries, Inc. ("PPM North
America"), which is currently engaged in the mobile crane and container stacker
business in the United States, Singapore and Australia primarily under the P&H
brand name ("PPM North America" and, together with PPM Europe, "PPM"), from
Legris Industries, S.A. Simultaneously with the closing of the acquisition,
the Company will contribute to Terex Cranes substantially all of the assets,
subject to all of the liabilities, of Koehring and Mark.
The aggregate purchase price for PPM (including debt to be repaid immediately
after the acquisition and debt expected to remain outstanding) is approximately
577.0 French Francs (approximately $115.4 million). A portion of the purchase
price is payable by issuance of a redeemable non-interest bearing promissory
note of Terex Cranes in the amount of 8.0 million French Francs (approximately
$1.6 million) and 119.0 million French Francs (approximately $23.8 million) in
aggregate liquidation preference of preferred stock of Terex Cranes, bearing no
dividends. The note matures in seven years and may be paid in cash or, at the
option of Terex Cranes, in common stock of Terex Cranes. The purchase price is
subject to adjustment calculated by reference to the consolidated net asset
value of PPM as determined by an audit to be conducted following the
consummation of the acquisition.
The Company intends to finance the cash portion of the purchase price through
the sale to institutional investors of a new series of secured notes. Proceeds
from the sale of such notes will also provide funds to permit the Company to
redeem all of its existing Senior Secured Notes and Subordinated Notes. The
Company is also endeavoring to obtain expanded working capital lending
facilities. There is no assurance that the Company will be able to conclude
any of such financings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Factors Affecting Future Liquidity."
ITEM 2. 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
Terex
(Corporate
Offices) Westport, Connecticut (1) Office 14,898 sq. ft.
Terex
(Distribution Center) Southaven, Mississippi(1) Warehouse and light
manufacturing
505,000 sq. ft. (2)
Material Handling Segment
CMHC Lexington, Kentucky (1) Manufacturing,
warehouse and office
372,600 sq. ft.
CMHC Lexington, Kentucky Training and research
and development
43,000 sq. ft.
CMHC Lexington, Kentucky (1) Office 64,600 sq. ft.
CMHC Lexington, Kentucky (1) Manufacturing, warehouse
and test facility
59,500 sq. ft.
CMHC Chicago, Illinois (1) Office 9,100 sq. ft.
CMH Germany Mulheim-Ruhr, Germany Manufacturing,
engineering, power
generation, maintenance
and office
241,350 sq. ft.
CMH Germany Mulheim-Ruhr, Germany (1) Office 61,360 sq. ft.
CMH Germany Saarn, Germany (1) Warehouse 150,700 sq.ft.
Heavy Equipment Segment
Unit Rig Tulsa, Oklahoma Manufacturing and office
325,000 sq. ft.
Koehring Waverly, Iowa Manufacturing,
warehouse\ and office
383,000 sq. ft.
TEL Motherwell, Scotland Manufacturing, warehouse
and office
714,000 sq. ft. (3)
______________________________
(1) These facilities are either leased or subleased by the indicated
entity.
(2) Includes 239,400 sq. ft. of warehouse space currently leased to
others.
(3) Includes 148,500 sq. ft. of manufacturing space currently leased to
others.
CMH 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. CMH also
owns manufacturing and office facilities in Seoul and Banwael, Korea which were
closed in the fourth quarter of 1994 and are presently held for sale.
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. Koehring also owns a 66,000 square foot facility in
Waterloo, Iowa which is currently leased to others.
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.
ITEM 3. LEGAL PROCEEDINGS
In December 1992, a 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 then officers and directors, including Randolph W. Lenz, Marvin B.
Rosenberg and G. Chris Andersen, and certain of the underwriters of the
Fruehauf IPO, namely, PaineWebber Incorporated, Alex. Brown & Sons,
Incorporated and Wertheim Schroder & Co., Incorporated, in the United States
District Court for the Eastern District of Michigan, Southern Division, seeking
unspecified compensatory and punitive damages. The complaint alleges, among
other things, that, in connection with and following 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, and in
certain other documents publicly disseminated by Fruehauf subsequent to the
initial public offering. The plaintiffs then amended their complaint to
include claims based on the restatement of Fruehauf's 1989 and 1990 financial
statements. The defendants filed answers to the amended complaint denying its
material allegations, and asserting various affirmative defenses. A motion for
partial summary judgment against the defendants on the restatement claims is
currently pending. The Company has not recorded any loss provision for this
litigation. The Company has been participating in settlement discussions and,
based on an agreement in principal reached with the plaintiffs, believes that
this litigation will be resolved without any material adverse impact to the
Company.
As described in Note L -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements, the Company is involved in various other
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.
For information concerning other contingencies see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Contingencies and
Uncertainties."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "TEX."
Quarterly Market Prices
1994 1993
Fourth Third Second First Fourth Third Second First
High $8.75 $7.38 $8.00 $9.88 $9.25 $8.13 $10.75 $11.88
Low 6.00 4.25 5.13 6.13 6.38 6.25 6.63 9.13
No dividends were declared or paid in 1993 or 1994. As discussed in Note F --
"Long-Term Obligations" in the Notes to the Consolidated Financial Statements,
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, 1994. The terms of the
Company's outstanding Series A Cumulative Redeemable Convertible Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock") and Series B
Cumulative Redeemable Convertible Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock") also restrict the Company's ability to pay
cash dividends on the Common 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 March 1, 1995, there were 837 stockholders of record of the Company's
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands except per share amounts and employees)
Year Ended December 31,
1994 1993 1992 1991 1990
Summary of Operations
Net Sales $786,781 $670,309 $523,355 $784,194 $1,023,283
Income (loss)
from operations 3,361 (29,178) (4,125) (70,706) 12,193
Income (loss) before
extraordinary
items 1,170 (65,080) 2,915 (42,731) (39,243)
Net income (loss) 461 (66,544) 2,915 (42,731) (42,837)
Net income (loss)
applicable
to common (5,468) (66,696) 2,915 (42,731) (42,837)
Per Common and
Common Equivalent Share:
Income (loss) before
extraordinary
items (0.46) (6.55) 0.29 (4.31) (3.97)
Net income (loss) (0.53) (6.70) 0.29 (4.31) (4.33)
Working Capital
Current assets $278,152 $257,328 $319,235 $360,378 $421,170
Current
liabilities 221,578 187,780 222,014 234,752 169,053
Working capital 56,574 69,548 97,221 125,626 252,117
Property, Plant and Equipment
Net property, plant
and equipment $86,160 $97,537 $116,279 $70,295 $73,061
Capital
expenditures 12,717 11,549 5,382 4,098 8,707
Depreciation 13,709 12,139 7,074 7,477 7,323
Total Assets $401,616 $390,702 $477,356 $506,713 $584,352
Capitalization
Long-term debt and
notes payable,
including current
maturities $190,871 $218,039 $217,605 $223,051 $269,186
Redeemable convertible
preferred stock 17,262 10,480 --- --- ---
Stockholders'
investment (55,738) (62,261) (9,075) (4,141) 44,885
Book value
per share $(5.41) $(6.04) $(0.91) $(0.42) $4.54
Dividends per share
of Common Stock $--- --- --- $0.06 $0.05
Shares of Common
Stock outstanding
at year-end 10,303 10,303 9,949 9,923 9,893
Employees 2,851 2,930 3,056 6,980 8,000
The Selected Financial Data include the results of operations of CMH and Mark
from the dates of their acquisitions, July 31, 1992 and December 31, 1991,
respectively, and reflect the deconsolidation of Fruehauf as of January 1,
1992. The Selected Financial Data also give effect to Fruehauf's restatement,
in 1994, of its financial statements for the years 1989 through 1992 and
Terex's restatement, in 1994, of its financial statements for 1993. See a
further discussion of these matters in Note A -- "Significant Accounting
Policies -- Restatements and Reclassifications," Note B -- "Acquisitions" and
Note C -- "Investment in Fruehauf Trailer Corporation" in the Notes to the
Consolidated Financial Statements. Income (loss) before extraordinary items
and net income (loss) in 1992 include a $36.5 million gain on deconsolidation
of Fruehauf and in 1991 include a $56.0 million gain as a result of the
Fruehauf IPO. The Selected Financial Data for the years 1991 and 1990 are
derived from unaudited financial statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates in two industry segments: Material Handling and Heavy
Equipment. Prior to 1992, the Company operated in two industry segments:
Heavy Equipment and Trailer (Fruehauf). The Material Handling Segment
principally represents the operations of CMH, acquired on July 31, 1992 from
Clark Equipment Company. The CMH Acquisition was accounted for using the
purchase method; therefore, the CMH operating results have been included in the
Company's consolidated results of operations since August 1, 1992. As described
in Item 1. "Business - Fruehauf Trailer Corporation" and Note C -- "Investment
in Fruehauf Trailer Corporation" in the Notes to the Consolidated Financial
Statements, the Company accounted for its investment in Fruehauf using the
equity method in 1992 and 1993 and at fair value in 1994.
Results of Operations
1994 Compared with 1993
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses, severance charges and income (loss) from
operations, by segment, for the years ended December 31, 1994 and 1993. As
described in Note A -- "Significant Accounting Policies -- Restatements and
Reclassifications," the 1993 amounts have been restated.
Year Ended
December 31 Increase
1994 1993 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 472.7 $ 395.6 $ 77.1
Heavy Equipment 317.2 275.2 42.0
Eliminations (3.1) (0.5) (2.6)
Total $ 786.8 $ 670.3 $ 116.5
GROSS PROFIT
Material Handling $ 35.2 $ 16.0 $ 19.2
Heavy Equipment 48.0 32.5 15.5
Total $ 83.2 $ 48.5 $ 34.7
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling $ 42.4 $ 44.6 $ (2.2)
Heavy Equipment 28.4 29.6 (1.2)
General/Corporate 1.7 3.5 (1.8)
Total $ 72.5 $ 77.7 $ (5.2)
SEVERANCE CHARGES
Material Handling $ 6.7 $ --- $ 6.7
Heavy Equipment 0.6 --- 0.6
Total $ 7.3 $ --- $ 7.3
INCOME (LOSS) FROM OPERATIONS
Material Handling $ (13.9) $ (28.6) $ 14.7
Heavy Equipment 19.0 2.9 16.1
General/Corporate (1.7) (3.5) 1.8
Total $ 3.4 $ (29.2) $ 32.6
Net Sales
Sales in 1994 increased $116.5 million, or approximately 17%, over 1993.
Material Handling Segment sales were $472.7 million for 1994, an increase of
$77.1 million, or 19%, from $395.6 million for the prior year. Machine sales
increased $81.0 million and parts sales decreased $3.9 million. As a result,
the sales mix was approximately 19% parts in 1994 compared to 24% parts in
1993. Machine sales improved due to increased industry demand and increased
output resulting from production improvements and the easing of capital
constraints. Cash constraints in the second half of 1993 resulted in
production problems caused by a lack of supplies and materials during the last
half of 1993 and the opening months of 1994. Production improved in 1994
because of reorganization of work flows and other actions taken by
manufacturing management and because a working capital infusion in December
1993 allowed management to improve relations and schedule payment terms with
its key suppliers. Parts sales were affected by the cash constraints
previously discussed and by difficulties in assimilating the Material Handling
Segment's parts business into the Terex Parts Distribution Center during the
first half of 1994, leading to decreased parts availability. Parts sales
improved during the last half of 1994 as these difficulties were mitigated.
Material Handling Segment bookings for 1994 were $470.6 million, an increase of
$5.6 million from 1993. Machine order bookings for the year ended December
31, 1994 of $381.2 million increased $17.3 million or 5% compared to $364.0
million in the year earlier period. Bookings for parts sales for 1994, from
which the Company generally realizes higher margins than machine sales,
decreased $11.6 million, or 12%, from the year earlier period, primarily
because of decreased parts availability as discussed above. Material Handling
Segment backlog was $135.9 million at December 31, 1994 compared to $152.7
million at December 31, 1993. This change reflects the improvement in second
through fourth quarter sales resulting from the upward trend in production and
improved parts availability levels. As the Company maintains full production
in the Material Handling Segment United States operations and as parts
availability returns to normal levels, management expects that the backlog of
both machines orders and parts orders will be reduced during 1995.
In December 1994 CMHC introduced the Genesis 2- to 4-ton I.C. truck. The light
I.C. market, in which this product competes, represents approximately 60% of
the rider lift truck industry. Management believes this product is superior to
competitors' products in performance, reliability and operator comfort, and is
designed to achieve reduced production costs.
Heavy Equipment Segment sales increased $42.0 million, or 15%, to 317.2 million
in 1994 from $275.2 million in 1993. Machine sales increased $39.9 million and
parts sales increased $2.1 million. The sales mix was approximately 33% parts
in 1994 compared to 37% parts in 1993. Machine sales increased at all of the
Heavy Equipment Segment divisions, reflecting increased market share at
Koehring in a flat crane market, increased domestic construction industry
demand and improved sales volume outside the United States.
Heavy Equipment Segment bookings for 1994 were $315.8 million, an increase of
$45.2 million, or 17%, from 1993. Bookings for parts sales of $101.7 million,
from which the Company generally realizes higher margins than machine sales,
were comparable to bookings for 1993. Machine bookings for 1994 increased
$44.5 million, or 26%, from 1993, reflecting the factors discussed above.
Heavy Equipment Segment backlog was $79.5 million at December 31, 1994 compared
to $80.9 million at December 31, 1993, reflecting the improved shipments in
1994. Parts backlog was $7.9 million at December 31, 1994 compared to $10.0
million at December 31, 1993. This decrease resulted from increased parts
availability during 1994. As a result of the working capital infusion in
December 1993, the inventory availability for parts sales increased during 1994
and management expects that the backlog of parts orders will continue to be
reduced as working capital continues to be applied to improve parts inventory
availability.
Gross Profit
Gross profit for 1994 increased $34.7 million compared to 1993.
The Material Handling Segment's gross profit increased $19.2 million to $35.2
million for 1994 compared to $16.0 million for 1993. The gross profit
percentage in the Material Handling Segment increased to 7.4% for 1994 from
4.0% for 1993, reflecting cost reduction initiatives and production
improvements in the second through fourth quarters of 1994, somewhat offset by
comparatively lower sales and decreased manufacturing efficiency due to
shortages in manufacturing supplies and materials during the first quarter of
the year and the decrease in sales of replacement parts.
The Heavy Equipment Segment's gross profit increased $15.5 million to $48.0
million for 1994 compared to $32.5 million for 1993. Improved gross profit
from machine sales accounted for substantially all of the increase. The gross
profit percentage in the Heavy Equipment Segment increased to 15.1% for 1994
from 11.8% for 1993, reflecting the continuing effects of cost reduction
initiatives and improved manufacturing efficiency and increased absorption of
fixed costs due to higher levels of production as a result of increased sales.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses decreased to $72.5 million for
1994 from $77.7 million for 1993 as a result of cost reduction initiatives
throughout the Company. Material Handling Segment engineering, selling and
administrative expenses totaled $42.4 million for 1994 compared to $44.6
million for the prior year. Heavy Equipment Segment engineering, selling and
administrative expenses decreased to $28.4 million for 1994 from $29.6 million
for the prior year. Corporate administrative expense in 1994 includes a charge
of $2.2 million in connection with the termination, as of January 1, 1994, of
the Company's management contract with KCS Industries, L.P. ("KCS"), a
Connecticut limited partnership principally owned by certain officers of the
Company, offset by allocations to operating segments. Charges under the KCS
contract would have totaled approximately $2.7 million for the year ended
December 31, 1994 if it had not been terminated, and would have continued at
such rate until at least June 30, 1995. See Note M -- "Related Party
Transactions" in the Notes to the Consolidated Financial Statements for further
information.
Severance Charges
During the second quarter of 1994, the Company recorded a charge of $4.5
million related principally to severance costs in the Material Handling
Segment's North American and European operations. In June 1994, the Company
announced personnel reductions in plant supervision, engineering, marketing and
administration totaling approximately 160 employees. The Company also
reorganized certain marketing activities and closed several of its regional
sales offices in the United States. In December 1994, the Company announced
additional personnel reductions totalling approximately 90 employees in
conjunction with the closing of the Material Handling Segment's Korean plant
and certain branch sales offices in France. An additional $2.8 million charge
was recorded for costs, principally severance costs, associated with these
actions. When fully implemented, the Company expects that these actions will
reduce operating expenses in the Material Handling Segment by approximately $10
million annually.
Income (Loss) from Operations
The Material Handling Segment incurred a loss from operations of $7.2 million
for 1994, excluding the severance charge discussed above ($13.9 million
including the severance charge), compared to a loss of $28.6 million for 1993.
As discussed above, the decreases in sales and gross profit in the opening
months of 1994 reflected the difficulties in restoring full production due to
supplier problems. Income from operations was $3.5 million in the fourth
quarter of 1994, excluding the severance charge ($1.1 million including the
severance charge), compared to a loss of $10.7 million in the fourth quarter of
1993. Because of the production improvements achieved during 1994 and the
reduced operating expenses resulting from the actions described above,
management expects continued improvement in the Material Handling Segment's
income from operations during 1995.
Heavy Equipment Segment income from operations improved by $16.1 million to
$19.0 million for 1994 compared to $2.9 million in the prior year. This
improvement resulted from the increase in gross profit and the decrease in
engineering, selling and administrative expenses described above. As a result
of cost reductions, improvements in inventory management and consolidation of
model offerings, Koehring was profitable in 1994 after several years of losses.
On a consolidated basis, the Company achieved operating income of $10.7
million, excluding the severance charge discussed above, for 1994 ($3.4 million
income including the severance charge) compared to an operating loss of $29.2
million for the prior year.
Other Income (Expense)
Interest expense on a consolidated basis was $30.5 million for 1994 compared to
$31.2 million for 1993. The decrease in interest expense is primarily the
result of repayments of senior and subordinated debt partially offset by
increased borrowings under the Company's lending facilities.
The Company recognized equity in the net loss of Fruehauf of $0.7 million in
1993. As described in Note C -- "Investment in Fruehauf Trailer Corporation"
in the Notes to the Consolidated Financial Statements, the Company's carrying
value for its investment in Fruehauf was reduced to zero during 1992 and the
Company did not recognize any significant additional gains or losses with
respect to its investment in Fruehauf except as realized on transactions in
Fruehauf common stock. In December 1993, the Company sold 1,000,000 shares of
Fruehauf common stock and realized a gain of $3.0 million. During 1994 the
Company sold a total of 5,900,000 shares of Fruehauf common stock and realized
a gain of $26.0 million.
As a result of changing Mark's product offerings and distribution, the Company
recognized a charge to income of $4.7 million in the fourth quarter of 1993 to
write-off the remaining unamortized goodwill from the acquisition of Mark.
In 1994, the Company recorded a provision for state income taxes of $0.5
million in connection with the sale of Drexel. The balance of 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.
Extraordinary Items
During 1994, the Company repurchased a total of $27.3 million of Senior Secured
Notes. The Company recognized extraordinary losses totalling $0.7 million from
these transactions to write off unamortized discount and debt issuance costs.
In connection with terminating its previous bank lending agreement, the Company
recognized a charge of approximately $2.0 million in the second quarter of 1993
to write off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 million of Senior Secured Notes
for approximately $4.5 million, including accrued interest. The Company
recognized an extraordinary gain on this transaction of approximately $0.5
million, net of write-off of unamortized discount and debt issuance costs.
1993 Compared with 1992
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, 1993 and 1992. As described in Note
A -- "Significant Accounting Policies -- Restatements and Reclassifications,"
the 1993 amounts have been restated. Amounts shown for the Material Handling
Segment for 1992 represent activity for the five months subsequent to the CMH
Acquisition.
Year Ended
December 31 Increase
1993 1992 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 395.6 $ 241.0 $ 154.6
Heavy Equipment 275.2 282.4 (7.2)
Eliminations (0.5) --- (0.5)
Total $ 670.3 $ 523.4 $ 146.9
GROSS PROFIT
Material Handling $ 16.0 $ 22.5 $ (6.5)
Heavy Equipment 32.5 29.6 2.9
Total $ 48.5 $ 52.1 $ (3.6)
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling $ 44.6 $ 20.3 $ 24.3
Heavy Equipment 29.6 35.6 (6.0)
General/Corporate 3.5 0.3 3.2
Total $ 77.7 $ 56.2 $ 21.5
INCOME (LOSS) FROM OPERATIONS
Material Handling $ (28.6) $ 2.2 $ (30.8)
Heavy Equipment 2.9 (6.0) 8.9
General/Corporate (3.5) (0.3) (3.2)
Total $ (29.2) $ (4.1) $ (25.1)
Net Sales
Sales in 1993 increased $146.9 million, or approximately 28%, over 1992.
Material Handling Segment sales were $395.6 million for 1993 compared to $241.0
million for the last five months of 1992, an increase of $154.6 million. On a
pro forma basis, giving effect to the CMH Acquisition as of January 1, 1992,
sales decreased $133.9 million for 1993 from $529.5 million for 1992. Material
Handling Segment sales in the first quarter of 1993 were significantly lower
than in the fourth quarter of 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 light IC lift truck production from Korea to the U.S. and
Germany. In addition, the Material Handling Segment operations in the U. S.
experienced working capital constraints during 1993 which limited the Company's
ability to obtain materials and maintain production, adversely affecting sales
for 1993. Bookings remained strong because of improved demand in the North
American forklift industry. As a result of these factors, the Material
Handling Segment backlog was $152.7 million at December 31, 1993 compared to
$83.2 million at December 31, 1992 and $80.8 million at the July 31, 1992 CMH
Acquisition date.
Heavy Equipment Segment sales decreased $7.2 million in 1993 from 1992.
Machines and contract sales represented $3.3 million of the decrease and parts
sales represented $3.9 million of the decrease, as the sales mix remained
relatively consistent at approximately 37% and 38% parts in 1993 and 1992,
respectively. Unit Rig, the Heavy Equipment Segment division that principally
serves the mining industry, experienced a decrease in sales of $5.0 million to
$69.1 million in 1993 from $74.2 million in 1992. Unit Rig equipment sales
decreased $7.4 million, partially offset by a $2.4 million increase in parts
sales. The decrease in equipment sales reflects continuing low activity in the
mining industry as well as more aggressive pricing and financing by
competitors. Koehring, which serves the construction market, experienced a
decrease in sales of $16.3 million to $71.4 million for 1993 from $87.7 million
in 1992. Koehring machine and contract sales decreased $13.3 million and parts
sales decreased $3.0 million. 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 $11.3 million increase in sales by the
Terex Business to $132.7 million for 1993. Terex Business machine sales
increased $16.0 million, partially offset by a $4.7 million decrease in parts
sales.
Heavy Equipment Segment bookings in 1993 were $270.6 million, a decrease of
$45.2 million, or 14%, from 1992. Bookings for parts sales, from which the
Company realizes higher margins than machine sales, decreased $0.6 million or
0.6% in 1993. Machine and contract bookings decreased $44.6 million or 21%,
reflecting continuing weakness in the Heavy Equipment 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 Business 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 $80.9
million at December 31, 1993 compared to $85.4 million at December 31, 1992,
reflecting the decrease in bookings. Parts backlog was $10.4 million at
December 31, 1993 compared to $7.2 million at December 31, 1992. This increase
resulted primarily from liquidity constraints experienced during 1993 which
resulted in decreased parts inventory availability.
Gross Profit
Gross profit for 1993 decreased $3.6 million compared to 1992.
The Material Handling Segment's gross profit decreased $6.5 million to $16.0
million for 1993 compared to $22.5 million for the last five months of 1992 and
compared to $40.1 million on a pro forma basis for 1992. The gross profit
percentage in the Material Handling Segment decreased to 4.0% for 1993 compared
to 9.3% for the last five months of 1992. The decrease in gross profit
percentage reflects comparatively lower 1993 sales (compared to annualized 1992
sales) and decreased manufacturing efficiency due to working capital
constraints, somewhat offset by cost reduction initiatives.
The Heavy Equipment Segment's gross profit increased $2.9 million to $32.5
million for 1993 compared to $29.6 million for 1992. 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
included a $2.2 million provision for write-down of certain inventory at
Koehring in connection with management's decision to consolidate model
offerings. The gross profit percentage in the Heavy Equipment Segment
increased to 11.8% for 1993 compared to 10.5% for 1992, reflecting improved
manufacturing efficiency.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $77.7 million for
1993 from $56.2 million for 1992. Material Handling Segment engineering,
selling and administrative expenses totaled $44.6 million for 1993 compared to
$20.3 million for the last five months of 1992 and compared to $48.2 million on
a pro forma basis for 1992. Heavy Equipment Segment engineering, selling and
administrative expenses decreased to $29.6 million for 1993 from $35.6 million
for 1992 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 $3.2 million primarily as a result of increased legal and
accounting expenses which were not fully allocated to operating segments.
Income (Loss) from Operations
The Material Handling Segment incurred a loss from operations of $28.6 million
for 1993, compared to operating income of $2.2 million for the last five months
of 1992 and compared to an operating loss of $8.2 million on a pro forma basis
for 1992, primarily as a result of decreased sales. As discussed above, sales
and gross profit in 1993 reflect the effects of the Company's working capital
constraints.
Heavy Equipment Segment income (loss) from operations improved by $8.9 million
to $2.9 million income in 1993 from a $6.0 million loss in 1992, a favorable
change of 148%. This improvement resulted from the increase in gross profit
and the decrease in engineering, selling and administrative expenses. Except
for the Koehring division, the businesses comprising the Heavy Equipment
Segment reported income from operations for 1993. The losses at Koehring were
reduced as a result of continuing cost reductions, improvements in inventory
management and consolidation of model offerings.
On a consolidated basis, the Company experienced an operating loss of $29.2
million for 1993, compared to an operating loss of $4.1 million for 1992.
Other Income (Expense)
Interest expense on a consolidated basis was $31.2 million for 1993 compared to
$23.3 million for 1992. Terex sold $160 million principal amount of its 13%
senior secured notes due August 1, 1996 (the "Senior Secured Notes") on July
31, 1992. The proceeds of the Senior Secured Notes were used for the cash
portion of the CMH 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 1993 over 1992 is primarily the result of incremental
borrowings to finance the CMH 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 in
1993 compared to a gain from deconsolidation of Fruehauf of $32.8 million in
1992. As described in Note C -- "Investment in Fruehauf Trailer Corporation"
in the Notes to the Consolidated Financial Statements, the Company's carrying
value for its investment in Fruehauf has been reduced to zero and the Company
does not expect to recognize any significant additional gains or losses with
respect to its investment in Fruehauf except as realized on transactions in
Fruehauf common stock. In December 1993, the Company sold 1,000,000 shares of
Fruehauf common stock and realized a gain of $3.0 million.
As a result of changing Mark's product offerings and distribution, the Company
recognized a charge to income of $4.7 million in the fourth quarter of 1993 to
write-off the remaining unamortized goodwill from the acquisition of Mark.
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 financial statements.
Extraordinary Items
In connection with terminating its previous bank lending agreement, the Company
recognized a charge of approximately $2.0 million in the second quarter of 1993
to write off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 million of Senior Secured Notes
for approximately $4.5 million, including accrued interest. The Company
recognized an extraordinary gain on this transaction of approximately $0.5
million.
Liquidity and Capital Resources
General
The Company's businesses are capital intensive and require funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities as well as
financing of receivables from customers and dealers. The Company has
significant debt service requirements including semi-annual interest payments
on senior and subordinated debt as well as an annual sinking fund requirement
on subordinated debt.
During 1994, the Company improved its inventory management practices and
lowered its percentage of past due receivables. The Company also extended the
term of its receivables-backed lending facility by two years through August,
1997 and increased the maximum borrowing amount through maturity to $25 million
($30 million through April 30, 1995).
The Company's sources of funds include funds provided by operations, borrowings
under a long term lending facility, a receivable discounting facility, and the
sale of certain of its non-strategic assets. The balance outstanding under its
U.S. Lending Facility was $24.1 million as of December 31, 1994, and the
additional amount the Company could have borrowed was $5.0 million as of that
date. The balance discounted under the credit facility of the Company's primary
overseas manufacturing operations was $11.9 million at December 31, 1994, the
maximum amount that could have been discounted as of that date.
Cash and cash equivalents totaled $9.7 million and $9.2 million at December 31,
1994 and December 31, 1993, respectively. Cash securing letters of credit
represents balances collateralizing letters of credit and performance bonds
issued for various business purposes and is not fully available for use in the
Company's operations. At December 31, 1994 and December 31, 1993 the unexpired
letters of credit were collateralized by a total of $6.7 million and $6.3
million in cash collateral accounts. These cash balances will be made
available to the Company as the underlying letters of credit expire.
Investing activities and asset sales
Net cash provided by investing activities of $36.8 million during the year
ended December 31, 1994 principally resulted from the sale of Fruehauf common
stock, proceeds from the sale of the Drexel business and proceeds from the
sale and leaseback of the Saarn property, offset by cash used to finance
capital expenditures.
Proceeds from the sale of Fruehauf common stock received during 1994 were
approximately $24.9 million. An additional $2.7 million of proceeds was
received in January and February 1995 from the sale of the Company's remaining
Fruehauf common stock. The Fruehauf common stock is collateral for the Senior
Secured Notes and the Subordinated Notes and, if the Company does not refinance
the Senior Secured Notes as described in "Business -- Recent Developments," the
Company intends to make offers to repurchase Senior Secured Notes with the
proceeds, pursuant to the Indenture for the Senior Secured Notes, as described
below.
In April 1994, the Company completed the sale of 100% of the stock of its
Drexel subsidiary, a non-strategic business, for $12.5 million. Net proceeds
were $10.3 million in cash and $0.3 million in the form of a note due December
15, 1994 and bearing interest at 6%. The Company recognized a gain of
approximately $4.7 million on the sale. The Company has reinvested the net
proceeds of the sale of Drexel in the Company's business.
In November 1994, the Company closed a sale-leaseback transaction for the Saarn
property, the Material Handling Segment's parts distribution center in Germany.
The Company received net proceeds of 16.1 million German marks (approximately
$10.0 million) and will lease the facility under the terms of a five year lease
for a total rental of 2.9 million German marks (approximately $1.9 million) per
year. In December 1994, the Company sold a closed facility in Danville,
Kentucky for net proceeds of $2.6 million (approximately book value). The
German and Danville properties were collateral for the Senior Secured Notes and
the Subordinated Notes and, if the Company does not refinance the Senior
Secured Notes as described in "Business -- Recent Developments," the Company
intends to make an offer to repurchase Senior Secured Notes, pursuant to the
indenture for the Senior Secured Notes, as described below.
Capital expenditures in the year ended December 31, 1994 were $12.7 million
compared with $11.5 million in 1993. Management estimates that capital
expenditures will be approximately $12 million in 1995. Capital expenditures
as in the past will continue to be for new product development and upgrades of
existing plants.
Operating activities
Net cash of $9.2 million was used in operating activities during the year ended
December 31, 1994, principally to fund operating losses and interest payments.
The cash used by operations decreased compared to 1993 as the effects of cost
reductions and the reduction in interest expense were realized. During 1994,
CMHC paid a total of approximately $13.9 million to certain vendors under
agreements to freeze the balances due such vendors as of November 1993
(totaling approximately $12.9 million) for payment in monthly installments and
to establish normal credit terms for new purchases in 1994.
Financing activities
Net cash used by financing activities of $28.3 million during the year ended
December 31, 1994 resulted from the principal repayment of debt offset by
borrowings of $12.9 million under the Lending Facility entered into during
1993.
During 1994, as a result of sales of Fruehauf common stock, the Company
repurchased $27.3 million of the Senior Secured Notes, pursuant to the
indenture for the Senior Secured Notes. In addition to such offers to
repurchase, the Company made a scheduled sinking fund payment on the
Subordinated Notes of $8.4 million in May 1994 and paid $6.1 million in May
1994 on the maturity of the note issued to the seller in connection with the
CMH Acquisition.
Debt covenants and other liquidity restrictions
The indentures governing the Senior Secured Notes and Subordinated Notes
require, among other things, that the Company maintain certain levels of
tangible net worth (the "Net Worth Covenants") and collateral (the "Collateral
Covenants"). 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 Covenants 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 Senior Secured Notes or such
greater amount as would be necessary to bring the Company into compliance with
the Collateral Covenants. If any offer to repurchase Notes were required to be
made as a result of noncompliance with the Covenants 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 could result in a material adverse impact on the Company.
The Company was in compliance with the Net Worth Covenants and the
Collateral Covenants at December 31, 1994 and throughout 1994. As discussed
below, the Company is seeking to refinance the Senior Secured Notes and the
Subordinated Notes during 1995. Even if the Company is not successful in such
refinancing, the Company believes that, based on management's current
estimates, it will be in compliance with its covenants with respect to the
Senior Secured Notes and Subordinated Notes over the next twelve months.
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, and place
limitations on change in control of Terex.
Factors affecting future liquidity
The Company experienced significant operating losses in the first quarter of
1994. Results improved in the second through fourth quarters of 1994 and the
Company generated income from operations of $3.4 million for the year and $6.3
million for the quarter ended December 31, 1994.
During 1994 the Company took significant actions to reduce its overall cost
structure and improved liquidity by selling non-strategic assets to repay debt
and lower interest costs. During 1994, the Company repaid $35.7 million of
its Senior Secured Notes and Subordinated Notes, which will result in interest
expense savings of $4.7 million on an annual basis. In June 1994, the Company
announced personnel reductions in plant supervision, engineering, marketing and
administration totaling approximately 160 employees in the Material Handling
Segment's North American and European operations. The Company also reorganized
certain marketing activities and closed several of its regional sales offices
in the United States. The Company recorded a $4.5 million charge in the second
quarter of 1994 for severance costs associated with these actions. In December
1994, the Company announced additional personnel reductions totaling
approximately 90 employees in conjunction with the closing of the Material
Handling Segment's Korean plant and certain branch sales offices in France. An
additional $2.8 million charge was recorded for costs, principally severance
costs, associated with these actions. When fully implemented, the Company
expects that these actions will reduce operating expenses in the Material
Handling Segment by approximately $10 million on an annual basis.
The Company's interest payment requirements for 1995 total approximately $23.2
million on the Senior Secured Notes, the Subordinated Notes and the Lending
Facility, of which amount approximately $10.9 million has been paid as of
March 1, 1995. The Company's principal repayment requirements for 1995 include
approximately $8.3 million in June 1995 for a scheduled sinking fund payment on
the Subordinated Notes. In addition, as a result of the sale of certain real
estate collateral in November and December 1994, 500,000 shares of Fruehauf
common stock in December 1994 and the remaining 486,622 shares of Fruehauf
common stock in January 1995 as described above, pursuant to the indenture for
the Senior Secured Notes, the Company intends to offer to repurchase
approximately $16.0 million of the Senior Secured Notes in the second quarter
of 1995.
The Senior Secured Notes mature on August 1, 1996 and the Subordinated Notes
mature on July 1, 1997. The Company is currently seeking to refinance the
Senior Secured Notes and Subordinated Notes during 1995; however, there is no
assurance that it will be successful in this regard. See "Business -- Recent
Developments." If the refinancing is not completed, management intends to
pursue alternative refinancing opportunities, including replacement or
additional working capital based lending facilities; however, management has
not identified any specific sources of such alternative financing.
If the Company does not refinance the Senior Secured Notes and Subordinated
Notes and does not arrange additional financing before the principal repayments
of Senior Secured Notes and Subordinated Notes discussed above are due, the
Company intends to fund such repayments from operations. The need to use funds
from operations for $24.3 million of debt repayments in the second quarter of
1995 could adversely affect the Company's operations by affecting its ability
to meet its operating payment obligations, including payments to vendors, on a
timely basis in the second quarter, although management believes that continued
improvement in cash flow from operations would allow the Company to return to
normal payment terms during the second half of 1995.
Contingencies and Uncertainties
The Internal Revenue Service is currently examining the Company's Federal tax
returns for the years 1987 through 1989. In December 1994, the Company
received an examination report from the IRS proposing a substantial tax
deficiency based on this examination. The examination report raises a variety
of issues, including the Company's substantiation for certain deductions taken
during this period, the Company's utilization of certain net operating loss
carryovers ("NOL's") and the availability of such NOL's to offset future
taxable income. If the IRS were to prevail on all the issues raised, the
amount of the tax assessment would be approximately $56 million plus interest
and penalties. If the Company were required to pay a significant amount to
resolve such assessment, it would have a material adverse impact on the Company
and could exceed the Company's resources. The Company is preparing its
administrative appeal to the examination report. Although management believes
that the Company will be able to provide adequate documentation for a
substantial portion of the deductions questioned by the IRS and that there is
substantial support for the Company's past and future utilization of the NOL's,
the ultimate outcome of this matter is subject to significant legal and factual
issues. If the Company's positions are upheld, management believes that the
amounts due would not exceed amounts previously paid or provided; however, the
Company's NOL's could be reduced. No additional accruals have been made for
any amounts which might be due as a result of this matter because the possible
loss ranges from zero to $56 million plus interest and penalties and the
ultimate outcome cannot presently be determined.
The Securities and Exchange Commission (the "Commission") in March of 1994
initiated a private investigation, which included the Company, to determine
whether violations of certain aspects of the Federal securities laws have taken
place. The Company is cooperating with the Commission in its investigation and
it is not possible at this time to determine the outcome of the Commission's
investigation.
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, including
the Comprehensive Environmental Response, Compensation and Liability Act, 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. The Company may also have contingent responsibility for
liabilities of certain of its present and former subsidiaries with respect to
environmental matters if such subsidiaries were to fail to discharge their
obligations to the extent that such liabilities arose during the period in
which the Company was a controlling shareholder.
INTERNATIONAL OPERATIONS
The Material Handling Segment operates its Clark Material Handling GmbH
subsidiary in Mulheim, Germany which manufactures forklifts for sale in the
European market. During the fourth quarter of 1994, the Company closed its
facility in Seoul, Korea which primarily manufactured light IC transaxles that
were then shipped to the Lexington, Kentucky facility to be included in the
light IC trucks.
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 eight owned or leased
locations outside of the United States for parts distribution.
Export sales from the Company's domestic operations were $89.6 million, $82.4
million, and $92.3 million in 1994, 1993 and 1992, respectively. See Note N --
"Business Segment Information" in the Notes to the Consolidated Financial
Statements.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Unaudited Quarterly Financial Data
Summarized quarterly financial data for 1994 and 1993 are as follows (in
thousands, except per share amounts):
1994
Fourth Third Second First
Net sales $213,431 $207,062 $198,250 $168,038
Gross profit 25,698 22,782 19,502 15,177
Income (loss) before
extraordinary items 531 1,209 10,254 (10,824)
Net income (loss) 219 1,045 10,021 (10,824)
Net income (loss) to
applicable common (1,369) (472) 8,577 (12,204)
Per share:
Primary
Income (loss) before
extraordinary items $ (0.10) $ (0.03) $ 0.64 $ (1.18)
Net income (loss) (0.13) (0.05) 0.62 (1.18)
Fully diluted
Income (loss) before
extraordinary items $ (0.10) $ (0.03) $ 0.60 $ (1.18)
Net income (loss) (0.13) (0.05) 0.59 (1.18)
1993
Fourth Third Second First
Net sales $150,799 $164,052 $172,261 $183,197
Gross profit 25,698 11,545 13,257 16,192
Income (loss) before
extraordinary items (21,988) (15,046) (15,647) (12,399)
Net income (loss) (21,449) (15,046) (17,650) (12,399)
Net income (loss) to
applicable common (21,601) (15,046) (17,650) (12,399)
Per share:
Primary
Income (loss) before
extraordinary items $ (2.22) $ (1.51) $ (1.57) $ (1.25)
Net income (loss) (2.17) (1.51) (1.77) (1.25)
Fully diluted
Income (loss) before
extraordinary items $ (2.22) $ (1.51) $ (1.57) $ (1.25)
Net income (loss) (2.17) (1.51) (1.77) (1.25)
The accompanying unaudited quarterly financial data of the Company have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-K and Item
302 of Regulation S-K. 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.
In 1994, the Company recognized gains of $4.6 million in the first quarter,
$15.5 million in the second quarter, $4.3 million in the third quarter and $1.6
million in the fourth quarter as a result of the sale of a total of 5,900,000
shares of Fruehauf common stock. The Company recognized a gain of $4.7 million
from the sale of Drexel in the second quarter of 1994. The Company recorded
severance charges of $4.5 million in the second quarter of 1994 and $2.8
million in the fourth quarter of 1994, and a related pension curtailment gain
of $0.9 million in the fourth quarter of 1994.
As a result of changing Mark's product offerings and distribution, the Company
recognized a charge to income of $4.7 million in the fourth quarter of 1993 to
write-off the remaining unamortized goodwill from the acquisition of Mark. The
Company recognized a gain of $3.0 million in the fourth quarter of 1993 as a
result of the sale of 1,000,000 shares of Fruehauf common stock.
Net income (loss) has been reduced by Preferred Stock accretion for purposes of
calculating earnings per share amounts. See Note I - "Preferred Stock."
As described in Note A -- "Significant Accounting Policies -- Reclassifications
and Restatements," the financial statements for the fourth quarter 1993 have
been restated. The quarterly data shown above reflects the restatement. The
following is a reconciliation of originally reported results to restated
results:
1993 Fourth Quarter
Net Loss Per Share
As originally reported $(17,566) $ (1.78)
Restatement (3,883) (0.39)
Restated $(21,449) $ (2.17)
See Item 14 - "Exhibits, Financial Statement Schedules and Reports on Form 8-K"
for the Company's Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Items 10 through 13 is incorporated by reference to
the definitive Terex Corporation Proxy Statement to be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedules.
See "Index to Consolidated Financial Statements and Financial Statement
Schedule" on Page F-1.
(3) Exhibits
See "Index to Exhibits" on Page E-1.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TEREX CORPORATION
By: /s/ Ronald M. DeFeo March 31, 1995
Ronald M. DeFeo,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
/s/ Randolph W. Lenz Chairman of the Board March 31, 1995
Randolph W. Lenz and Director
/s/ Ronald M. DeFeo President, Chief Executive March 31, 1995
Ronald M. DeFeo Officer and Director
(Principal Executive Officer)
/s/ Ralph T. Brandifino Senior Vice President and March 31, 1995
Ralph T. Brandifino Chief Financial Officer
(Principal Financial Officer)
/s/ Richard L. Evans Controller March 31, 1995
Richard L. Evans (Principal Accounting Officer)
/s/ Marvin B. Rosenberg Senior Vice President, March 31, 1995
Marvin B. Rosenberg General Counsel, Secretary
and Director
/s/ G. Chris Andersen Director March 31, 1995
G. Chris Andersen
/s/ Bruce I. Raben Director March 31, 1995
Bruce I. Raben
/s/ David A. Sachs Director March 31, 1995
David A. Sachs
/s/ Adam E. Wolf Director March 31, 1995
Adam E. Wolf
------------------------------------------------------------------------------
TEREX CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Financial Statement Schedule
Page
Terex Corporation and Subsidiaries
Report of Independent Accountants F-2
Consolidated Statement of Operations F-3
Consolidated Balance Sheet F-4
Consolidated Statement of Stockholders' Investment F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Schedule II-- Valuation and Qualifying Accounts F-30
All other schedules for which provision is made in the applicable regulations
of the Securities and Exchange Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the consolidated financial statements listed in the Index to
Consolidated Financial Statements and Financial Statement Schedule on page F-1
and referred to under Item 14(a)(1) and (2) present fairly, in all material
respects, the financial position of Terex Corporation and its subsidiaries at
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note O to the consolidated financial statements, the Company is
required to make significant principal repayments during 1995 and is currently
seeking to refinance its long term debt obligations.
As discussed in Notes A and C to the consolidated financial statements, the
1993 and 1992 financial statements have been restated.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 28, 1995
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
Year Ended December 31,
1994 1993 1992
NET SALES $ 786,781 $ 670,309 $ 523,355
COST OF GOODS SOLD 703,622 621,816 471,242
Gross profit 83,159 48,493 52,113
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES
Third parties 70,200 74,793 53,390
Related parties 2,245 2,878 2,848
72,445 77,671 56,238
SEVERANCE CHARGES 7,353 --- ---
Income (loss) from operations 3,361 (29,178) (4,125)
OTHER INCOME (EXPENSE)
Interest income 587 1,149 1,666
Interest expense (30,492) (31,246) (23,320)
Amortization of debt issuance costs (2,300) (3,369) (1,694)
Gain on sale of Fruehauf stock 26,043 3,009 ---
Equity in net loss of Fruehauf --- (677) (3,714)
Gain from deconsolidation of Fruehauf --- --- 36,518
Gain on sale of Drexel business 4,742 --- ---
Gain on sale of property,
plant and equipment 260 2,601 363
Write-off of Mark goodwill --- (4,718) ---
Other income (expense) - net (245) (2,493) (2,712)
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS 1,956 (64,922) 2,982
PROVISION FOR INCOME TAXES (786) (158) (67)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 1,170 (65,080) 2,915
EXTRAORDINARY LOSS ON
RETIREMENT OF DEBT (709) (1,464) ---
NET INCOME (LOSS) 461 (66,544) 2,915
LESS PREFERRED STOCK ACCRETION (5,929) (152) ---
INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ (5,468) $(66,696) $ 2,915
PER COMMON AND COMMON EQUIVALENT SHARE:
Loss before extraordinary items $ (0.46) $ (6.55) $ .29
Extraordinary loss on
retirement of debt (0.07) (0.15) ---
Net income (loss) $ (0.53) $ (6.70) $ .29
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
IN PER SHARE CALCULATION 10,303 9,953 9,945
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands except per share amounts)
ASSETS
December 31,
1994 1993
CURRENT ASSETS
Cash and cash equivalents $ 9,727 $ 9,183
Cash securing letters of credit 6,688 6,263
Trade receivables (less allowance
of $6,114 in 1994 and $7,478 in 1993) 91,717 74,028
Net inventories 164,245 163,838
Other current assets 5,775 4,016
Total Current Assets 278,152 257,328
LONG-TERM ASSETS
Property, plant and equipment - net 86,160 97,537
Debt issuance costs and
intangible assets - net 8,604 12,645
Other assets 28,700 23,192
TOTAL ASSETS $ 401,616 $ 390,702
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Notes payable $ 2,078 $ 2,909
Current portion of long-term debt 25,806 19,799
Trade accounts payable 112,213 85,350
Accrued compensation and benefits 10,823 8,162
Accrued warranties and product liability 27,629 27,226
Accrued interest 8,969 10,698
Accrued income taxes 1,328 1,415
Other current liabilities 32,732 32,221
Total Current Liabilities 221,578 187,780
NON CURRENT LIABILITIES
Long-term debt, less current portion 162,987 195,331
Accrued warranties and product liability 31,846 33,959
Accrued pension 16,456 20,270
Other 7,225 5,143
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Liquidation preference $36,578 in 1994
and $30,108 in 1993 17,262 10,480
COMMITMENTS AND CONTINGENCIES (Note L)
STOCKHOLDERS' INVESTMENT
Warrants to purchase common stock 17,564 16,851
Common Stock, $0.01 par value--
authorized 30,000 shares;
issued and outstanding 10,303
in 1994 and 1993 103 103
Additional paid-in capital 40,127 40,127
Accumulated deficit (108,395) (102,927)
Pension liability adjustment (1,778) (4,173)
Unrealized holding gain on
equity securities 1,825 ---
Cumulative translation adjustment (5,184) (12,242)
Total Stockholders' Investment (55,738) (62,261)
TOTAL LIABILITIES
AND STOCKHOLDERS' INVESTMENT $ 401,616 $ 390,702
The accompanying notes are an integral part of these financial statements.
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(in thousands)
Cumu-
Addi- Pension Unre- lative
tional Accumu- Liabi- alized Trans-
Common Paid-in lated lity Holding lation
Warrants Stock Capital Deficit Adjustment Gain Adjustment Total
BALANCE AT
DECEMBER 31,
1991 $ --- $ 99 $37,496 $(39,146) $(8,233) $ --- $5,643 $(4,141)
Exercise
of stock
options --- --- 274 --- --- --- --- 274
Net income --- --- --- 2,915 --- --- --- 2,915
Pension
liability
adjustment --- --- --- --- 3,781 --- --- 3,781
Translation
adjustment --- --- --- --- --- --- (11,904) (11,904)
BALANCE AT
DECEMBER 31,
1992 --- 99 37,770 (36,231) (4,452) --- (6,261) (9,075)
Exercise
of stock
options --- --- 38 --- --- --- --- 38
Issuance of
Warrants
(Note I) 16,851 --- --- --- --- --- --- 16,851
Pension
Contribution
(Note J) --- 4 2,319 --- --- --- --- 2,323
Net loss --- --- --- (66,544) --- --- --- (66,544)
Accretion
of carrying
value of
redeemable
preferred
stock to
redemption
value
(Note I) --- --- --- (152) --- --- --- (152)
Pension
liability
adjustment --- --- --- --- 279 --- --- 279
Translation
adjustment --- --- --- --- --- --- (5,981) (5,981)
BALANCE AT
DECEMBER 31,
1993 16,851 103 40,127 (102,927) (4,173) --- (12,242) (62,261)
Issuance
of Warrants
(Note I) 713 --- --- --- --- --- --- 713
Net income --- --- --- 461 --- --- --- 461
Accretion
of carrying
value of
redeemable
preferred
stock to
redemption
value
(Note I) --- --- --- (5,929) --- --- --- (5,929)
Pension
liability
adjustment --- --- --- --- 2,395 --- --- 2,395
Unrealized
holding
gain on
equity
securities
(Note C) --- --- --- --- --- 1,825 --- 1,825
Translation
adjustment --- --- --- --- --- --- 7,058 7,058
BALANCE AT
DECEMBER 31,
1994 $17,564 $103 $40,127$(108,395) $(1,778) $1,825$(5,184)$(55,738)
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,
1994 1993 1992
OPERATING ACTIVITIES
Net income (loss) $ 461 $ (66,544) $ 2,915
Adjustments to reconcile net income
(loss) to net cash from (used in)
operating activities:
Depreciation 13,709 12,139 7,074
Amortization and write-off of
debt issuance costs, goodwill
and other intangibles 3,388 10,261 2,746
Extraordinary loss on
retirement of debt 709 1,464 ---
Gain on sale of Fruehauf stock (26,043) (3,009) ---
Equity in net loss of Fruehauf --- 677 3,714
Gain from deconsolidation
of Fruehauf --- --- (36,518)
Gain on sale of Drexel business (4,742) --- ---
Gain on sale of property,
plant and equipment (260) (2,601) (363)
Other noncash charges (804) 99 1,796
Increase (decrease) in cash
due to changes in operating
assets and liabilities net of
the effects of acquisitions
of businesses:
Cash securing letters of credit (425) 5,216 (11,479)
Trade receivables (17,564) 1,708 18,806
Net inventories 77 30,312 49,176
Other current assets 143 2,061 (512)
Trade accounts payable 24,379 (5,141) 7,187
Accrued compensation
and benefits 3,277 (3,567) (6,821)
Accrued warranties and
product liabilities 296 (3,356) 4,590
Accrued interest (1,729) (1,121) 7,763
Accrued income taxes (78) (604) 940
Other assets (306) (123) (7,928)
Other liabilities (3,728) (24,075) (21,318)
Net cash from (used in)
operating activities (9,240) (46,204) 21,768
INVESTING ACTIVITIES
Acquisitions of businesses,
net of cash acquired --- --- (86,544)
Capital expenditures (12,717) (11,549) (5,382)
Advances to Fruehauf --- (677) (3,714)
Proceeds from sale of excess assets 3,295 11,306 1,513
Proceeds from sale of Fruehauf stock 24,943 2,464 ---
Proceeds from sale of Drexel business 10,289 --- ---
Proceeds from sale-leaseback of
Saarn property 9,981 --- ---
Other - net 1,000 1,823 248
Net cash from (used in)
investing activities 36,791 3,367 (93,879)
FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements 12,947 11,931 (55,753)
Principal repayments of long-term debt (41,524) (12,450) (9,109)
Proceeds from issuance of
preferred stock and warrants --- 27,179 ---
Proceeds from issuance of
long-term debt --- --- 151,890
Other - net 249 44 2,258
Net cash from (used in)
financing activities (28,328) 26,704 89,286
Effect of exchange rate changes on
cash and cash equivalents 1,321 (355) (2,396)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 544 (16,488) 14,779
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 9,183 25,671 10,892
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 9,727 $ 9,183 $ 25,671
The accompanying notes are an integral part of these financial statements.
-------------------------------------------------------------------------------
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
(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 owned subsidiaries ("Terex" or
the "Company"). All material 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%.
Investments in affiliates in which the Company has an ownership interest of
less than 20% are accounted for on the cost method or at fair value in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
"Accounting for Certain Investments in Debt and Equity Securities."
Cash and Cash Equivalents. Cash equivalents consist of highly liquid
investments with original maturities of three months or less. The carrying
amount of cash and cash equivalents approximates their fair value.
Cash Securing Letters of Credit. The Company has certain cash and cash
equivalents that are not fully available for use in its operations. Certain
international operations collateralize letters of credit and performance bonds
with cash deposits. In addition, certain provisions of the Company's previous
lending agreement with a commercial bank required that amounts be deposited in
a cash collateral account to collateralize letters of credit issued by that
bank. Although Terex has entered into a new lending facility which replaced
the previous lending arrangement, Terex will continue to utilize letters of
credit issued under the previous lending arrangement until their expiration.
These cash balances will be made available to the Company as the underlying
bonds and letters of credit expire.
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 international subsidiaries and certain domestic inventories.
Approximately 50% and 49% of consolidated inventories at December 31, 1994 and
1993, respectively, are accounted for under the LIFO method.
Debt Issuance Costs. Debt issuance costs associated with securing the
Company's financing arrangements are capitalized and amortized over the life of
the respective debt agreement. Capitalized debt issuance costs related to debt
that is retired early are charged to expense at the time of retirement.
Unamortized debt issuance costs totaled $3,271 and $6,283 at December 31, 1994
and 1993, respectively. During 1994, 1993 and 1992, the Company amortized
$2,300, $3,369 and $1,694, respectively, of capitalized debt issuance costs; in
addition, $601 and $2,162 of such costs were charged to extraordinary loss on
retirement of debt in 1994 and 1993, respectively.
Intangible Assets. Intangible assets include the excess of purchase price over
the fair value of identifiable net assets of acquired companies, which is being
amortized on a straight-line basis over 15 years, and costs allocated to
patents, trademarks and other specifically identifiable assets arising from
business combinations, which are amortized on a straight-line basis over the
respective estimated useful lives not exceeding seven years. Unamortized
intangible assets totaled $5,222 and $6,362 at December 31, 1994 and 1993,
respectively, net of accumulated amortization of $2,388 and $1,377 at December
31, 1994 and 1993, respectively. Amortization of intangible assets of $1,140,
$1,612 and $599 in 1994, 1993 and 1992, respectively, is included in
Engineering, Selling and Administrative Expenses. Intangible assets are
periodically assessed for impariment of value and any loss is recognized upon
impairment.
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.
Revenue Recognition. Revenue and costs are generally recorded when products
are shipped and invoiced to either independently owned and operated dealers or
to 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 specified by the customer in the sales documents. In such
cases, the units are invoiced under the Company's customary billing terms,
title to the units and risks of ownership pass 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 records 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 accruals 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 B -- "Acquisitions"), are presented on a discounted basis. The
related discount of approximately $8,100 at each of December 31, 1994 and 1993,
computed using an 8.0% discount rate, 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 approximately $3,200, $4,000 and $1,300 in 1994, 1993 and 1992,
respectively. The remainder of the Company's product liability accruals are
presented on a gross settlement basis. Product liability payments, including
expenses, are estimated to approximate $10,000 per year.
Non Pension Postretirement Benefits. The Company adopted SFAS No. 106
"Employers Accounting for Postretirement Benefits other than Pensions" on
January 1, 1993. The statement requires accrual of the obligation to provide
future benefits to employees during the years that the employees provide
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. The Company elected the
delayed recognition method of adoption, and the effect of adoption of the new
standard was not material to the Company's financial statements. (See Note K
-- "Retirement Plans.")
Foreign Currency Translation. 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 income (expense) -- net. Net foreign
exchange losses were $235, $825 and $2,413 in 1994, 1993 and 1992,
respectively.
Foreign Exchange Contracts. The Company uses foreign exchange contracts to
hedge recorded balance sheet amounts related to certain international
operations and firm commitments that create currency exposures. The Company
does not enter into speculative contracts. Gains and losses on hedges of
assets and liabilities are recognized in income as offsets to the gains and
losses from the underlying hedged amounts. Gains and losses on hedges of firm
commitments are recorded on the basis of the underlying transaction. At
December 31, 1994 and 1993, the Company had no outstanding foreign exchange
contracts.
Environmental Policies. Environmental expenditures that relate to current
operations are either expensed or capitalized depending on the nature of the
expenditure. 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. Such amounts are not
material at December 31, 1994 and 1993.
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 are included in Engineering,
Selling and Administrative Expenses and amounted to $10,462 in 1994, $11,822 in
1993 and $6,741 in 1992.
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 Operations.
Income Taxes. The Company adopted SFAS No. 109, "Accounting for Income Taxes"
on January 1, 1993. SFAS No. 109 retains the basic concepts of SFAS No. 96, the
Company's former method of accounting for 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. SFAS No. 109 further requires that the Company
record a valuation allowance for deferred tax assets if realization of such
assets is dependent on future taxable income. The effect of adoption of the
new standard was not material to the Company's financial statements. (See Note
H -- "Income Taxes.")
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.
Restatements and Reclassifications. The consolidated financial statements for
the year ended December 31, 1992 have been restated as a result of Fruehauf
Trailer Corporation's ("Fruehauf") restatement of its financial statements as
described in Note C -- "Investment in Fruehauf Trailer Corporation." The
consolidated financial statements for the year ended December 31, 1993 have
been restated to reflect the correction of various vendor accounts, resulting
from the resolution of unreconciled items, at the Material Handling Segment.
The accompanying consolidated financial statements reflect the effects of the
restatements as follows:
As
Previously Restatement As
Reported Effect Restated
Stockholders' Investment,
December 31, 1991
(cumulative effect of
restatements for 1989
through 1991) $ 59,881 $(64,022) $ (4,141)
Net income (loss), year ended
December 31, 1992 (57,175) 60,090 2,915
Change in translation adjustment,
year ended December 31, 1992 (12,929) 1,025 (11,904)
Stockholders' Investment,
December 31, 1992 (6,168) (2,907) (9,075)
Net income (loss), year ended
December 31, 1993 (62,661) (3,883) (66,544)
Change in translation adjustment,
year ended December 31, 1993 (8,962) 2,981 (5,981)
Stockholders investment,
December 31, 1993 $(58,452) $ (3,809) $(62,261)
Net income (loss) per share:
Year ended December 31, 1992 $ (5.75) $ 6.04 $ 0.29
Year ended December 31, 1993 $ (6.31) $ (0.39) $ (6.70)
Certain amounts shown for 1992 and 1993 have been reclassified to conform to
the 1994 presentation.
NOTE B -- ACQUISITIONS
Clark Material Handling Company - On July 31, 1992, the Company acquired Clark
Material Handling Company ("CMHC") and certain affiliate companies (together
with CMHC, "CMH") from Clark Equipment Company (the "CMH Acquisition"). CMH is
engaged in the design, manufacture and marketing of internal combustion ("IC")
and electric forklift and lift trucks and related parts and equipment. The
purchase price of the CMH Acquisition was $91,090, which was funded by $85,000
of cash and a $6,090 note to the seller.
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 ($4,009) is
included in Debt Issuance Costs and Intangible Assets and is being amortized on
a straight-line basis over 15 years.
The operating results of CMH have been 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 CMH 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 CMH Acquisition.
Unaudited Pro Forma
For the Year Ended
December 31,1992
Net sales $811,859
Loss from operations (14,452)
Net loss (16,423)
Net loss per common share $ (1.65)
The unaudited pro forma consolidated results do not represent actual operating
results. The Company is actively reorganizing the operations of CMH by
consolidating manufacturing and distribution operations. Consequently, the pro
forma results are not necessarily indicative of the Company's future
operations.
Mark Industries - In December 1991, the Company purchased substantially all
operating assets of Mark Industries ("Mark"), a manufacturer of aerial lift
equipment, for $5,865. The acquisition of Mark 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 Mark
purchase price allocation was completed in 1992. The excess of the purchase
price over the fair value of the net assets acquired totaled $5,550 and was
originally being amortized on a straight-line basis over 12 years. In late
1993 the Company introduced several new aerial lift models under the CMH brand
name and began to market these products through the Terex and CMH dealer
networks. Management made a determination that the goodwill related to the
December 1991 acquisition, primarily associated with the Mark name and dealer
network, had been impaired as a result of the above factors and, accordingly,
the Company wrote off the remaining balance of $4,718 in 1993.
NOTE C-- INVESTMENT IN FRUEHAUF TRAILER CORPORATION
Accounting for Investment
Prior to an initial public offering of 4,000,000 shares of Fruehauf common
stock in July of 1991 (the "Fruehauf IPO"), Fruehauf was a wholly-owned
subsidiary of the Company. Following the IPO and as of December 31, 1992, the
Company owned approximately 42% of the outstanding common stock of Fruehauf.
Pending the consummation of certain 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 in 1991. The voting trust terminated during 1992 and, accordingly,
the Company accounted for its ownership interest in Fruehauf using the equity
method in 1992 and 1993.
In August 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 $25,000 credit facility and $20,500 of new
equity (the "Fruehauf Restructuring"). As a result of the Fruehauf
Restructuring the Company's ownership of Fruehauf decreased to approximately
26% in August 1993. As part of the Fruehauf Restructuring, Terex confirmed its
agreement with Fruehauf to accept 2,251,167 shares of Fruehauf common stock in
payment of $13,507 of intercompany indebtedness which Fruehauf owed to Terex.
These shares were received by Terex in December 1993.
Because Fruehauf had experienced significant losses since 1990 and continued to
have a stockholders' deficit after the new equity investment described above
under "Fruehauf Restructuring," Terex's carrying value for its investment in
Fruehauf was reduced to zero. Terex also recognized a contingent obligation of
approximately $3,000 with respect to guaranties by Terex of certain obligations
of Fruehauf. This amount was reduced to $2,000 in 1994 as a result of the
expiration of certain of the guarantees.
In December 1993, the Company sold 1,000,000 shares of Fruehauf common stock
and realized a gain and aggregate proceeds of $3,009, reducing its ownership to
approximately 22.6% (6,386,622 shares) at December 31, 1993. In February 1994
the Company sold an additional 1,000,000 shares of Fruehauf common stock for
$4,620, reducing its remaining ownership interest in Fruehauf to 19.1%.
Because the Company's ownership interest was below 20% and because the Company
intended to sell the remaining shares, management concluded that use of the
equity method was no longer appropriate for the Company's investment in
Fruehauf and classified the Company's remaining shares of Fruehauf common stock
as shares available for sale under SFAS No. 115. During the remainder of 1994
the Company sold an additional 4,900,000 shares of Fruehauf common stock for
$21,423 and the Company's remaining ownership interest in Fruehauf at December
31, 1994 was 486,622 shares of common stock or approximately 1.6% of Fruehauf's
outstanding common stock. As required by SFAS 115 for assets held for sale,
the investment was valued at $1,825 at December 31, 1994, with an equivalent
amount presented as a component of stockholders' investment. The Company sold
the remaining shares of Fruehauf common stock in January 1995 for $796.
Restatement of Fruehauf Financial Statements
In March 1994, Fruehauf announced that it would revise the allocation of the
purchase price paid by Terex in its 1989 acquisition of Fruehauf. In March
1995, Fruehauf restated its financial statements for 1989 through 1992 for
revisions in the accounting treatment for Fruehauf's maritime operations,
certain liabilities included in the opening purchase price allocation and the
valuation of certain assets in the opening purchase price allocation. Because
Fruehauf was included as a consolidated subsidiary in the Company's
consolidated financial statements for 1989 through 1991 and was accounted for
on the equity method for 1992 and 1993, the restatements by Fruehauf also
resulted in the restatement of Terex's consolidated financial statements for
1989 through 1992. There was no significant effect on Terex's 1993 financial
statements because Terex's investment in Fruehauf had been reduced to zero
during 1992 and use of the equity method had been suspended. See Note A --
"Significant Accounting Policies -- Restatements and Reclassifications."
NOTE D -- INVENTORIES
Inventories consist of the following:
December 31,
1994 1993
Finished equipment $ 26,812 $ 27,157
Replacement parts 69,932 62,150
Work-in-process 13,520 14,351
Raw materials and supplies 57,894 65,165
167,158 168,823
Less: Excess of FIFO inventory value
over LIFO cost (2,913) (4,985)
Net inventories $164,245 $ 163,838
In 1994 and 1993, certain inventory quantities were reduced, resulting in the
liquidation of LIFO inventory quantities carried at lower costs prevailing in
prior years. The effects of such liquidations were to decrease cost of goods
sold by $2,072 in 1994 and $167 in 1993.
NOTE E -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
1994 1993
Property $ 8,335 $ 12,157
Plant 32,249 41,711
Equipment 83,419 73,918
124,003 127,786
Less: Accumulated depreciation (37,843) (30,249)
Net property, plant and equipment $ 86,160 $ 97,537
NOTE F -- LONG-TERM OBLIGATIONS
December 31,
1994 1993
Long-term debt is summarized as follows:
Senior Secured Notes bearing interest
at 13%, due August 1, 1996
("Senior Secured Notes") $ 127,219 $ 154,173
Secured Senior Subordinated Notes
bearing interest at 13.5%,
due July 1, 1997 ("Subordinated
Notes") 24,546 32,702
Lending Facility maturing
August 24, 1997 24,064 10,165
Secured promissory note bearing
interest at prime rate,
due July 31, 1994 --- 6,090
Secured term note bearing interest
at 9.0% payable in equal semiannual
installments from August 1994
to February 1998 587 740
Capital lease obligations (Note G) 12,377 11,130
Other --- 130
Total long-term debt 188,793 215,130
Current portion of long-term debt 25,806 19,799
Long-term debt, less current portion $ 162,987 $ 195,331
Senior Secured Notes and Subordinated Notes
The Senior Secured Notes, totaling $127,673 principal amount outstanding at
December 31, 1994, were issued during July 1992 for a total of $160,000 in
conjunction with the CMH Acquisition and a refinancing of the Company's bank
debt. Proceeds from the issuance of the Senior Secured Notes were used for the
cash portion of the CMH Acquisition purchase price ($85,000), for the
settlement of all amounts outstanding under its previous credit facility
($58,000), and for working capital and transaction costs. Interest on the
Senior Secured Notes is due semiannually on February 1 and August 1.
The indenture for the Senior Secured Notes requires that proceeds from the
sale of collateral must be used to make an offer to repurchase, at par, an
equivalent amount of Senior Secured Notes. During 1994, as a result of sales
of 5,400,000 shares of Fruehauf common stock during 1994 and 1,000,000 shares
in the last quarter of 1993, the Company repurchased $27,327 principal amount
of the Senior Secured Notes. The Company realized an extraordinary loss of
$709 on the repurchases in conjunction with the accelerated write off of
related discount and debt issuance costs.
In December 1993, the Company repurchased in the open market $5,000 principal
amount of Senior Secured Notes for approximately $4,544, including accrued
interest, and had such notes cancelled as of December 31, 1993. The Company
realized an extraordinary gain from the early extinguishment of debt of $539,
net of unamortized debt discount and debt issuance costs.
The provisions of the Senior Secured Notes registration rights agreement
required that the Company file a registration statement to register the Senior
Secured Notes, or to effect an exchange offer of registered notes for such
notes, with the Securities and Exchange Commission by November 30, 1992, which
registration was to become effective no later than March 1, 1993. The
registration has not become effective and, as a result, Terex is incurring
liquidated damages until such filing becomes effective. Terex incurred such
liquidated damages in the amount of $715 and $768 during 1994 and 1993,
respectively, which are included in interest expense.
The Subordinated Notes, totalling $24,915 principal amount outstanding at
December 31, 1994, were initially issued as unsecured subordinated notes for a
total amount of $50,000. The notes have annual sinking fund requirements of
$8,333 due July 1 which commenced in 1992, and mature in 1997. Interest on the
Subordinated Notes is due semiannually on January 2 and July 1. In 1992, in
conjunction with the issuance of the Senior Secured Notes, the holders of
Subordinated Notes were granted a secondary security interest in certain of the
Company's assets.
The Senior Secured Notes are secured by substantially all of the Company's
inventory and property, plant and equipment, and were secured by the Company's
investment in Fruehauf common stock. The Subordinated Notes are secured by a
secondary secured position in substantially the same assets. Certain
non-financial covenants of 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, and also
place limitations on change of control. The Company's principal shareholder
has pledged shares of the Common Stock owned by him as collateral for loans.
If such loans are not paid when due, the pledgee may have the right to sell the
shares of the Common Stock pledged to it in satisfaction of such 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 repurchase the Senior Secured Notes and the Subordinated Notes.
The financial covenants of the indentures require, among other things, that the
Company comply with the Net Worth Covenants and the Collateral Covenants. 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 Covenants 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 Senior Secured Notes or such greater amount as would be necessary
to bring the Company into compliance with the Collateral Covenants. If the
Company were not to be in compliance with such covenants, there could result a
material adverse impact on the Company.
The Company was in compliance with the Net Worth Covenants and the
Collateral Covenants at December 31, 1994 and throughout 1994. As discussed in
Note O -- "Liquidity, Financing and Severance Actions," the Company is seeking
to refinance the Senior Secured Notes and the Subordinated Notes during 1995.
Even if the Company is not successful in such refinancing, the Company believes
that, based on management's current estimates, it will be in compliance with
its covenants with respect to the Senior Secured Notes and Subordinated Notes
over the next twelve months.
Lending Facility
In May 1993, Terex entered into an agreement with a new lender which initially
provided short-term financing and currently provides long term financing (the
"Lending Facility"). The Lending Facility is secured by substantially all the
Company's domestic receivables and proceeds thereof. Interest on Lending
Facility borrowings is payable monthly at variable rates generally equal to
2.75% above the prime rate. During 1994, the agreement was amended to extend
the maturity date from August 24, 1995 to August 24, 1997. The agreement
currently provides for up to $30,000 of cash advances and guarantees through
April 30, 1995, and $25,000 thereafter through the extended maturity date. The
balance outstanding under the Lending Facility at December 31, 1994 was
$24,064. Accordingly, all outstanding borrowings are classified as Long Term
Debt in the accompanying Balance Sheet.
In conjunction with entering into the Lending Facility, the Company terminated
a former bank lending agreement and recognized, as an extraordinary item, a
charge of $2,003 to write off the unamortized debt issuance costs.
TEL Facility
In 1993, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "TEL Facility") which
provides up to pd 28,000 ($42,000) including up to pd 13,000 ($19,500) non-
recourse discounting of accounts receivable which meet certain credit criteria,
plus additional facilities for tender and performance bonds and foreign exchange
contracts. Interest rates vary between 1.0% - 1.5% above the financial
institution's Published Base Rate or LIBOR. The TEL Facility is collateralized
primarily by the related accounts receivable. The TEL Facility requires no
performance covenants. Proceeds from the TEL Facility are primarily used for
working capital purposes. Amounts discounted under facility were $11,900 and
zero at December 31, 1994 and 1993, respectively.
Secured Promissory Note
A portion of the CMH Acquisition was financed through a note to the seller in
the amount of $6,090 due July 31, 1994. Interest accrued at prime rate and was
payable quarterly. The seller note was secured by certain property, plant and
equipment. The note was paid in May 1994.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1994
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note G -- "Lease Commitments":
1995 $ 23,360
1996 121,237
1997 32,571
1998 71
1999 ---
Thereafter ---
Total $ 177,239
Based on quoted market values, the Company believes that the fair value of the
Senior Secured Notes and Subordinated Notes is approximately $121,289 and
$23,171, respectively, as of December 31, 1994. The Company believes that the
carrying value of its other borrowings approximates fair market value, based on
discounting future cash flows using rates currently available for debt of
similar terms and remaining maturities.
The Company paid $32,221, $31,805 and $15,602 of interest in 1994, 1993 and
1992, respectively.
The weighted average interest rate on short term borrowings outstanding was
10.2% at December 31, 1994 and 9.3% at December 31, 1993.
NOTE G -- 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. Net
assets under capital leases were $5,919 and $5,011 at December 31, 1994 and
1993, respectively, net of accumulated amortization of $2,856 and $3,352 at
December 31, 1994 and 1993, respectively.
The Company's Material Handling Segment also routinely enters into
sale-leaseback arrangements for 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 $8,014 of which $1,549 is current at December 31, 1994.
In connection with the original sale-leaseback arrangements underlying the
customer leasing program, the Company has an outstanding rental installment
obligation which is recorded based on the present value of minimum payments due
under the leases.
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1994 are as
follows:
Capital Operating
Leases Leases
1995 3,621 6,775
1996 3,059 5,910
1997 2,998 4,963
1998 2,542 3,333
1999 1,778 2,482
Thereafter 139 1,128
Total minimum obligations 14,137 24,591
Less amount representing interest 1,760
Present value of net minimum obligations 12,377
Less current portion 2,445
Long-term obligations $ 9,932
Noncash investing and financing activities include net capital lease
obligations of $1,144, $4,156 and $2,150 incurred in 1994, 1993 and 1992,
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 $7,405, $6,294 and $6,601 in 1994, 1993, and
1992, respectively.
In November 1994, the Company entered into a sale-leaseback transaction for
CMH's parts distribution center in Germany. The Company received net proceeds
of 16,500 German marks ($11,000) and will lease the facility under the terms of
a five year lease for a total rental of 2,900 German marks ($1,900) per year.
The Company realized a gain of 6,244 German marks ($4,029) which was deferred
and will be amortized as a reduction of rental expense over the lease term
($774 per year).
NOTE H -- INCOME TAXES
The components of Income (Loss) Before Income Taxes and Extraordinary Items are
as follows:
Year ended December 31,
1994 1993 1992
United States $ 12,355 $(67,455) $ 169
Foreign (10,399) 2,533 2,813
Income (loss) before income taxes
and extraordinary items $ 1,956 $(64,922) $ 2,982
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
1994 1993 1992
Current:
Federal $ --- $ --- $ ---
State 498 --- ---
Foreign 2,132 1,336 167
Utilization of foreign net operating
loss ("NOL") carryforward (1,844) (1,178) ---
Current income tax provision 786 158 167
Deferred:
Deferred federal income tax benefit --- --- (100)
Total provision for income taxes $ 786 $ 158 $ 67
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statement purposes. In accordance
with SFAS No. 109, "Accounting for Income Taxes," a valuation allowance has
been recognized. The tax effects of the basis differences and net operating
loss carryforward as of December 31, 1994 and 1993 are summarized below for
major balance sheet captions:
1994 1993
Net inventories $ (7,118) $ (4,343)
Fixed assets (9,564) (9,933)
Other (485) (202)
Total deferred tax liabilities (17,167) (14,478)
Receivables 1,376 2,136
Warranties and product liability 20,756 20,709
Investments 957 9,692
All other items 6,098 4,914
Benefit of net operating loss carryforward 126,573 114,109
Total deferred tax assets 155,760 151,560
Deferred tax assets valuation allowance (138,593) (137,082)
Net deferred tax liabilities $ --- ---
The valuation allowance for deferred tax assets as of January 1, 1993 was
$112,708. The net change in the total valuation allowance for the years ended
December 31, 1993 and 1994 were increases of $24,374 and $1,511, respectively.
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 Loss Before Income Taxes and Extraordinary Items. The reasons for
the difference are summarized below:
Year ended December 31,
1994 1993 1992
Statutory federal income tax rate $ 685 $(22,723) $ 1,014
Recognition of previously
unrecognized tax assets (4,333) --- ---
NOL with no current benefit --- 21,641 ---
Foreign tax differential on
income/losses of foreign subsidiaries 3,698 (627) (856)
Goodwill write-off --- 1,793 ---
State tax 498 --- ---
Other 238 74 (91)
Total provision for income taxes $ 786 $ 158 $ 67
The Company has not provided for U.S. federal and foreign withholding taxes on
$10,625 of foreign subsidiaries' undistributed earnings as of December 31,
1994, because such earnings are intended to be reinvested indefinitely. Any
income tax liability that would result had such earnings actually been
repatriated would likely be offset by utilization of NOL's. On repatriation,
certain foreign countries impose withholding taxes. The amount of withholding
tax that would be payable on remittance of the entire amount of undistributed
earnings would approximate $1,900.
At December 31, 1994, the Company had domestic federal net operating loss
carryforwards of $272,501. Approximately $93,765 of the remaining net
operating loss carryforwards are subject to special limitations under the
Internal Revenue Code, and the NOL's may be affected by the current IRS
examination discussed below.
The tax basis net operating loss carryforwards expire as follows:
Tax Basis Net
Operating Loss
Carryforwards
1995 24,041
1996 45,231
1997 8,004
1998 11,908
1999 ---
2000 4,581
2006 20,689
2007 35,661
2008 101,896
2009 20,490
Total $ 272,501
The Company also has various state net operating loss and tax credit
carryforwards expiring at various dates through 2009 available to reduce future
state taxable income and income taxes. In addition, the Company's foreign
subsidiaries have approximately $60,586 of loss carryforwards, $33,475 in
Germany, $17,748 in U.K. and $9,363 in other countries, which are available to
offset future foreign taxable income. The loss carryforwards in Germany and
U.K. are available without expiration. The loss carryforwards in other
countries of $7,271 are available without expiration, with the remaining $2,092
expiring in the years 1995 through 2000.
The Internal Revenue Service is currently examining the Company's federal tax
returns for the years 1987 through 1989. In December 1994, the Company
received an examination report from the IRS proposing a substantial tax
deficiency based on this examination. The examination report raises a variety
of issues, including the Company's substantiation for certain deductions taken
during this period, the Company's utilization of certain net operating loss
carryovers ("NOL's") and the availability of such NOL's to offset future
taxable income. If the IRS were to prevail on all the issues raised, the
amount of the tax assessment would be approximately $56 million plus interest
and penalties. If the Company were required to pay a significant amount to
resolve such assessment, it would have a material adverse impact on the Company
and could exceed the Company's resources. The Company is preparing its
administrative appeal to the examination report. Although management believes
that the Company will be able to provide adequate documentation for a
substantial portion of the deductions questioned by the IRS and that there is
substantial support for the Company's past and future utilization of the NOL's,
the ultimate outcome of this matter is subject to significant legal and factual
issues. If the Company's positions are upheld, management believes that the
amounts due would not exceed amounts previously paid or provided; however, the
Company's NOL's could be reduced. No additional accruals have been made for
any amounts which might be due as a result of this matter because the possible
loss ranges from zero to $56 million plus interest and penalties and the
ultimate outcome cannot presently be determined.
The Company made income tax payments of $790, $58 and $66 in 1994, 1993 and
1992, respectively.
NOTE I -- PREFERRED STOCK
The Company's certificate of incorporation was amended in October 1993 to
authorize 10,000,000 shares of preferred stock, $.01 par value per share. As
of December 31, 1994, a total of 1,289,800 shares of preferred stock are issued
and outstanding as described below.
Series A Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1994, the Company has 1,200,000 issued and outstanding
shares of Series A Cumulative Redeemable Convertible Preferred Stock (the
"Series A Preferred Stock"). These shares were issued as part of a private
placement on December 20, 1993 which also included the issuance of 1,300,000
Common Stock Purchase Warrants (the "Series A Warrants," see Note J --
"Stockholders' Investment"). The Series A Preferred Stock has a par value of
$.01 per share and an initial liquidation preference of $25.00 per share (the
"Liquidation Preference"). During the period from the issue date and ending at
the Accretion Termination Date (as defined below), the Liquidation Preference
will accrete at the rate of 13% per year until December 20, 1998, and 18% per
year thereafter. The Liquidation Preference totaled $34,321 at December 31,
1994.
After the Accretion Termination Date, the holders of the Series A Preferred
Stock are entitled to cumulative dividends, payable quarterly, as described
below. Each share of Series A Preferred Stock is convertible into 2.25 shares
of the Company's common stock (subject to adjustment in certain circumstances),
and is redeemable at the option of the Company on or after December 31, 1994 at
a price equal to the Liquidation Preference plus unpaid dividends provided that
a concurrent redemption of all outstanding Series A Warrants is made. The
Series A Preferred Stock is subject to a mandatory redemption requirement on or
before December 31, 2000 at a per share redemption price equal to the
Liquidation Preference on the date of redemption plus accrued but unpaid
dividends. The Series A Preferred Stock has no voting rights except when and
if dividends are in arrears as described below.
Commencing three months prior to the date the Company's indentures and loan
agreements allow the Company to declare and pay cash dividends on the Series A
Preferred Stock ("the Accretion Termination Date"), dividends will begin to
accrue at the rate of 13% per year through December 20, 1998, and at the rate
of 18% per year thereafter. After the Accretion Termination Date the holders
of the Series A Preferred Stock will be entitled to elect one additional
director of the Company if the Company fails to declare and pay the full amount
of dividends payable on any two dividend payment dates. Such holders will have
a right to elect two additional directors of the Company if the Company misses
four dividend payment dates.
The aggregate net proceeds to the Company for the Series A Preferred Stock and
the Series A Warrants issued on December 20, 1993 were $27,179. The Company
has allocated $10,328 and $16,851 of this amount to the Series A Preferred
Stock and the Series A Warrants, respectively, based on management's estimate
of the relative fair values of these securities at the time of their issuance,
using information provided by the Company's investment bankers. The difference
between the initially recorded amount and the redemption amount will be
accreted to the carrying value of the Series A Preferred Stock using the
interest method over the period from issuance to the mandatory redemption date,
December 31, 2000. In addition, the carrying value of the Series A Preferred
Stock will be further adjusted for increases in the Liquidation Preference
prior to the Accretion Termination Date as described above. The total
accretion recorded in 1994 and 1993 was $5,912 and $152, respectively.
Series B Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1994, the Company has 89,800 issued and outstanding shares
of Series B Cumulative Redeemable Convertible Preferred Stock (the "Series B
Preferred Stock"). These shares were issued to certain individuals on December
9, 1994 in consideration for the early termination of a contract between the
Company and KCS Industries, Inc., a Connecticut limited partnership ("KCS"), a
related party (see Note M -- "Related Party Transactions"). The transaction
also included the issuance of 106,950 Common Stock Purchase Warrants (the
"Series B Warrants," see Note J -- "Stockholders' Investment"). The Series B
Preferred Stock has a par value of $.01 per share and an initial liquidation
preference of $25.00 per share (the "Liquidation Preference"). During the
period from the issue date and ending at the Accretion Termination Date (as
defined below), the Liquidation Preference will accrete at the rate of 13% per
year until December 20, 1999, and 18% per year thereafter. The Liquidation
Preference totaled $2,257 at December 31, 1994.
After the Accretion Termination Date, the holders of the Series B Preferred
Stock are entitled to cumulative dividends, payable quarterly, as described
below. Each share of Series B Preferred Stock is convertible into 2.25 shares
of the Company's common stock (subject to adjustment in certain circumstances),
and is redeemable at the option of the Company on or after December 31, 1995 at
a price equal to the Liquidation Preference plus unpaid dividends provided that
a concurrent redemption of all outstanding Series B Warrants is made. The
Series B Preferred Stock is subject to a mandatory redemption requirement on or
before December 31, 2001 at a per share redemption price equal to the
Liquidation Preference on the date of redemption plus accrued but unpaid
dividends. The Series B Preferred Stock has no voting rights except when and
if dividends are in arrears as described below.
Commencing three months prior to the date the Company's indentures and loan
agreements allow the Company to declare and pay cash dividends on the Series B
Preferred Stock ("the Accretion Termination Date"), dividends will begin to
accrue at the rate of 13% per year through December 20, 1999, and at the rate
of 18% per year thereafter.
The Company has allocated $853 and $713 to the Series B Preferred Stock and the
Series B Warrants, respectively, based on management's estimate of the relative
fair values of these securities at the time of their issuance (equivalent to
the allocation used for the Series A Preferred Stock and Series A Warrants).
The difference between the initially recorded amount and the redemption amount
will be accreted to the carrying value of the Series B Preferred Stock using
the interest method over the period from issuance to the mandatory redemption
date, December 31, 2001. In addition, the carrying value of the Series B
Preferred Stock will be further adjusted for increases in the Liquidation
Preference prior to the Accretion Termination Date as described above. The
total accretion recorded in 1994 was $17.
NOTE J -- STOCKHOLDERS' INVESTMENT
Common Stock. The Company's certificate of incorporation was amended in
October 1993 to increase the number of authorized shares of common stock, par
value $.01 (the "Common Stock"), to 30,000,000. As of December 31, 1994,
there were 10,303,067 shares issued and outstanding. Of the 19,696,933
unissued shares at that date, 6,016,228 shares were reserved for issuance as
follows:
Conversion of Series A Preferred Stock (Note I) 2,700,000
Conversion of Series B Preferred Stock (Note I) 202,050
Exercise of Series A and Series B Warrants 3,005,950
Exercise of Stock Options 108,228
Total reserved for issuance 6,016,228
In December 1993, the Company issued 350,000 shares of Common Stock as a
contribution to two of the Company's pension plans. The Company valued these
shares at $2,323, based on 96.5% of the market price of the Common Stock on the
date of issuance.
Series A Warrants. In connection with the private placement of the Series A
Preferred Stock (see Note I -- "Series A Preferred Stock"), the Company issued
1,300,000 Series A Warrants. Each Series A Warrant may be exercised, in whole
or in part, at the option of the holder at any time before the expiration date
on December 31, 2000 and is redeemable by the Company under certain
circumstances. Upon the exercise or redemption of a Warrant, the holder
thereof shall be entitled to receive 2.23 shares of Common Stock. The exercise
price for the Warrants is $.01 for each share of Common Stock. The number of
shares of Common Stock issuable upon exercise or redemption of the Warrants is
subject to adjustment in certain circumstances.
Series B Warrants. In connection with the private placement of the Series B
Preferred Stock (see Note I -- "Series B Preferred Stock"), the Company issued
106,950 Series B Warrants. Each Series B Warrant may be exercised, in whole or
in part, at the option of the holder at any time before the expiration date on
December 31, 2001 and is redeemable by the Company under certain circumstances.
Upon the exercise or redemption of a Warrant, the holder thereof shall be
entitled to receive one share of Common Stock. The exercise price for the
Warrants is $.01 for each share of Common Stock. The number of shares of
Common Stock issuable upon exercise or redemption of the Warrants is subject to
adjustment in certain circumstances.
Stock Options. The Company maintains a qualified incentive stock option ("ISO")
plan 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, 1994,
26,062 stock options were available for grant under the plan.
The following table is a summary of stock options:
Number Exercise Price
of Options per Option
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
Granted 23,750 7.13 to 10.50
Exercised (3,750) 10.20
Canceled or expired (3,750) 14.80
Outstanding at December 31, 1993 75,916 $ 6.40 to 14.80
Granted 10,000 6.63
Exercised ---
Canceled or expired (3,750) 14.80
Outstanding at December 31, 1994 82,166 $ 6.40 to 14.80
Exercisable at December 31, 1994 54,251 $ 6.40 to 14.80
Long-Term Incentive Plan. In June 1994, the Company's board of directors
approved a Long-Term Incentive Plan (the "Plan") covering certain managerial,
administrative and professional employees and outside directors. The Plan
provides for awards to employees, from time to time and as determined by a
committee of outside directors, of cash bonuses, stock options, stock and/or
restricted stock. The total number of shares of the Company's common stock
available to be awarded under the Plan is 750,000, subject to certain
adjustments. In June 1994, options to purchase a total of 308,800 shares of
common stock at $5.50 per share and a total of 129,400 shares of restricted
common stock were granted to employees and outside directors. The Plan, and
the options and restricted stock granted thereunder, are subject to approval by
the Company's shareholders. Accordingly, these shares and options are not
considered to be outstanding and are not included in calculations of earnings
per share.
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 ("SAR"). As of December 31, 1994, there were
624,794 SAR's outstanding. Of the outstanding SAR's, 552,000 may be exercised
at the option of the holder thereof at any time through July 31, 1996. The
remaining 72,794 SAR's may be exercised through July 1, 1997. The SAR's
entitle the holder to receive the market appreciation in the Company's Common
Stock between $11.00 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, 1994, there was no reserve requirement necessary because the
Company's Common Stock price was below $11.00 per share.
Dividends. No dividends were declared or paid in 1994, 1993 or 1992. As
discussed in Note F -- "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, 1994. The terms of the Company's outstanding Series
A Preferred Stock and Series B Convertible Preferred Stock also restrict the
Company's ability to pay cash dividends on the Common Stock.
NOTE K -- RETIREMENT PLANS
Pension Plans
US Plans
The Company maintains four defined benefit pension plans covering certain
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. Participation in the plan for salaried
employees was frozen as of May 7, 1993, and no participants will be credited
with service following such date except that participants not fully vested will
be credited with service for purposes of determining vesting only. 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 generally 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 1994, 1993 and 1992:
Year Ended December 31,
1994 1993 1992
Service cost for benefits
earned during period $ 183 $ 449 $ 499
Interest cost on projected
benefit obligation 2,176 2,368 2,378
Actual (return) loss on plan assets (355) (2,128) (3,052)
Net amortization and deferral (1,150) 872 1,870
Curtailment (gain) loss --- (284) 58
Net pension expense $ 854 $ 1,277 $ 1,753
The following table sets forth the US plans' funded status and the amounts
recognized in the Company's financial statements at December 31:
1994 1993 1992
OverfundedUnderfunded Overfunded UnderfundedUnderfunded
Plans Plans Plans Plans Plans
Actuarial present value of:
Vested benefits $ 7,952 $ 19,041 $ 9,252 $ 22,450 $ 27,249
Accumulated
benefits $ 8,145 $ 19,119 $ 9,509 $ 22,657 $ 27,637
Projected
benefits $ 8,145 $ 19,119 $ 9,509 $ 22,657 $ 29,602
Fair value of
plan assets 9,268 14,723 9,711 14,641 19,929
Projected benefit
obligation
(in excess of)
less than
plan assets 1,123 (4,396) 202 (8,016) (9,673)
Unrecognized net
loss from past
experience different
than assumed 2,488 1,778 3,691 4,173 6,328
Unrecognized prior
service cost 470 --- 503 --- 920
Unrecognized
transition (asset) --- --- --- --- (324)
Adjustment to
recognize minimum
liability --- (1,778) --- (4,173) (4,988)
Pension asset
(liability)
recognized in the
balance sheet $ 4,081 $ (4,396) $ 4,396 $ (8,016) $ (7,737)
The expected long-term rate of return on plan assets was 9% for the periods
presented. The discount rate assumption was 8.5% for 1994, 7.0% for 1993 and
8.25% for 1992. The assumption for the rate of compensation increase, if
applicable per plan provisions, was 5.5% for 1992 and until May 7, 1993.
In accordance with the provisions of the SFAS No. 87, "Employers' Accounting
for Pensions," the Company has recorded an adjustment of $1,778 and $4,173 to
recognize a minimum pension liability at December 31, 1994 and 1993,
respectively. This liability is offset by a direct reduction of stockholders'
investment of $1,778 and $4,173 at December 31, 1994 and 1993, respectively.
Assets of Terex's pension plans were combined with assets of Fruehauf's pension
plans into a master trust (the "Master Trust") effective January 1, 1992. In
1993, the Master Trust acquired Terex Common Stock to be held in designated
accounts for the benefit of Fruehauf retirees. The fair value of the Terex
Common Stock held for the benefit of the Fruehauf retirees totaled
approximately $3.3 million at December 31, 1993. The Master Trust disposed of
this investment in Terex Common Stock in March 1994 for approximately $3.9
million.
In December 1993, Terex contributed 350,000 shares of Terex Common Stock, par
value $.01, to the Master Trust for the benefit of two of the Terex plans,
which were valued by Terex at $2,323 based upon 96.5% of the market value of
Terex Common Stock as quoted on the New York Stock Exchange on the day of
contribution. The market value of this investment was $2,450 at December 31,
1994.
In addition, the Master Trust held 6,000 Terex Common Stock Appreciation Rights
("Terex SAR's"), valued at $1.00 per right (total value of $6) at December 31,
1994 and 12,000 Terex SAR's, valued at $1.25 per right ($15 total) at December
31, 1993.
As of December 31, 1993 the Master Trust maintained a participation in
Fruehauf's Credit Facility with a market value of $1,954 (cost of $2,299). The
rights of the Master Trust were equivalent to those of the other lenders and
investors.
Effective September 1, 1994, the Fruehauf Trailer Corporation Master Retirement
Trust was created, and those investments held by the Master Trust allocable to
the Fruehauf pension plans were transferred to the Fruehauf Trailer Corporation
Master Retirement Plan Trust, including the investment in Fruehauf's Bank
Credit Facility. The investments in Terex Common Stock and Terex SAR's
remained in the Master Trust for the benefit of participants in Terex's pension
plans.
International Plans
TEL maintains a government-required defined benefit plan (which includes
certain defined contribution elements) covering substantially all of its
management employees. This plan is fully funded. Pension expense relating to
this plan was approximately $260, $228 and $208 for the years ended December
31, 1994, 1993 and 1992, respectively.
Certain of CMH's German employees are covered by noncontributory defined
benefit pension plans. The Company retained responsibility for such plans
after the Acquisition. CMH also maintains separate pension benefit plans for
certain German executive employees and for other staff. The executive pension
plans are based on final pay and service, and, in some cases, are dependent on
social security pensions while the other staff plans are based on fixed amounts
applied to the number of years service rendered. The plans are unfunded.
The components of consolidated pension expense for each of the reporting
periods covered by these financial statements is as follows:
Five months
Year Ended Year Ended ended
December 31, December 31, December 31,
1994 1993 1992
Current service cost $ 174 $ 201 $ 103
Interest cost 877 862 339
Net amortization and deferrals (820) 84 37
Defined benefit pension expense $ 231 $ 1,147 $ 479
The following table reconciles the funded status of the Company's defined
benefit pension plans to the amounts recognized on the Company's Consolidated
Balance Sheet:
December 31,
1994 1993
Accumulated benefit obligation,
including nonvested benefits
of $207 and $819 at
December 31, 1994 and 1993 $ 11,095 $ 12,220
Projected benefit obligation $ 11,152 $ 13,143
Unrecognized net gain/(loss) 1,902 (893)
Unrecognized transition
asset (liability) (665) (814)
Adjustment required to recognize
minimum liability --- 785
Accrued pension cost $ 12,389 $ 12,221
Discount rates of 7.5% in 1994 and 7% in 1993 were used to determine the
projected benefit obligation. During 1994, the Company significantly reduced
its German work force in connection with restructuring of its operations. As a
result, the Company realized a curtailment gain with respect to these plans,
which was recognized as a reduction of the unrecognized transition liability in
accordance with the provisions of SFAS 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Plans and for Termination of
Benefits." The Company changed certain assumptions used in the actuarial
valuation of the plans: the assumed rate of compensation increases is 0%
through 1999 and 2% thereafter (4% for all periods in the 1993 valuation); and
the assumed rate of cost of living adjustments of pensions in payment is 0%
through 1999 and 2% thereafter (3.5% for all periods in the 1993 valuation).
These changes in assumptions reflect the reductions in personnel and other
changes in the Company's operations, including changes in compensation
arrangements, implemented during 1994. These changes resulted in an actuarial
gain of $2,724. The gain in excess of 10% of the projected benefit obligation
is being amortized over 2 years; $908 was amortized as a reduction of pension
cost in 1994 and was recorded in the fourth quarter of 1994.
Saving Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. The Company
can, but is not obligated to, contribute to certain of these plans.
Other Postretirement Benefits
The Company provides postretirement health and life insurance benefits to
certain former salaried and hourly employees of Koehring. The Company adopted
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.
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 $4,476. Terex is amortizing this transition
obligation over 12 years, the average remaining life expectancy of the
participants. The liability of the Company, as of December 31, was as follows:
1994 1993
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $ 4,604 $ 4,522
Active participants --- ---
Total accumulated postretirement
benefit obligation 4,604 4,522
Unamortized transition obligation (3,730) (4,103)
Liability recognized in the
balance sheet $ 874 $ 419
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 includes the following components
for 1994 and 1993:
Year Ended December 31,
1994 1993
Service Cost $ --- $ ---
Interest cost 369 369
Net amortization 373 373
Total 742 742
The Company's postretirement benefit obligations are not funded. Net periodic
postretirement benefit expense for the year ended December 31, 1994 and 1993
was approximately $455 and $419 greater on the accrual basis than it would have
been on the cash basis.
Retiree health payments totaled $235 for the year ended December 31, 1992.
NOTE L -- LITIGATION AND CONTINGENCIES
In December 1992, a 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 then officers and directors, including Randolph W. Lenz, Marvin B.
Rosenberg and G. Chris Andersen, and certain of the underwriters of the initial
public offering of Fruehauf, namely, PaineWebber Incorporated, Alex. Brown &
Sons, Incorporated and Wertheim Schroder & Co., Incorporated, in the United
States District Court for the Eastern District of Michigan, Southern Division,
seeking unspecified compensatory and punitive damages. The complaint alleges,
among other things, that, in connection with and following the initial public
offering of Fruehauf, the defendants misrepresented Fruehauf's liquidity and
the status of compliance with Fruehauf's credit facilities at the time of the
Fruehauf IPO, and in certain other documents publicly disseminated by Fruehauf
subsequent to the initial public offering. The plaintiffs then amended their
complaint to include claims based on the April 1993 restatement of Fruehauf's
1989 and 1990 financial statements. The defendants filed answers to the
complaint denying material allegations of the complaint, as amended, and
asserting various affirmative defenses. A motion for partial summary judgment
against the defendants on the restatement claims is currently pending. The
Company has not recorded any loss provision for this litigation. The Company
has been participating in settlement discussions and, based on an agreement in
principal reached with the plaintiffs, believes that an agreement to settle
this litigation will be resolved without any material adverse impact to the
Company.
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 CMH, the Company and CMH
assumed both the outstanding and future product liability exposures related to
such operations. As of December 31, 1994, CMH had approximately 120 lawsuits
outstanding alleging damages for injuries or deaths arising from accidents
involving CMH products. Most of the foregoing suits are in various stages of
pretrial completion, and certain plaintiffs are seeking punitive as well as
compensatory damages. The Company is self-insured, up to certain limits, for
these product liability exposures, as well as for certain exposures related to
general, workers' compensation and automobile liability. 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, in the amount of
management's estimate of the Company's aggregate exposure for such 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 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 as used equipment at its estimated
net realizable value. Any resultant losses are charged against related
reserves. The guarantee under such floor plans aggregated $7,031 at December
31, 1994. The Company has recorded reserves based on management's estimates of
potential losses arising from these guarantees. Historically, the Company has
incurred only immaterial losses relating to these arrangements.
CMH has also given guarantees to financial institutions relating to capital
loans, residual guarantees and other dealer and customer obligations arising
out of the ordinary conduct of its business. Such guarantees approximated
$6,400 at December 31, 1994. 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,
CMH 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. Repurchase
agreements included in operating agreements with an independent financial
institution have been patterned after those included in the dealer sales
agreements, and provide for repurchase of inventory in certain circumstances of
dealer default on financing provided by the financial institution to the
dealer. Dealer inventory and rental asset financing of approximately $206,000
at December 31, 1994 were covered by those operating 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, CMH has incurred only immaterial losses relating to
these arrangements.
Terex's outstanding letters of credit totaled $6,687 which are cash
collateralized. 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.
As described in Note H -- "Income Taxes," the Internal Revenue Service is
currently examining the Company's federal tax returns for the years 1987
through 1989.
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. As of December 31, 1994 Terex has recognized liabilities for these
contingent obligations in the aggregate amount of $2,000, representing
management's estimate of the maximum potential losses which the Company might
incur.
NOTE M -- RELATED PARTY TRANSACTIONS
Under a contract dated July 1, 1987, as amended, KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), principally owned by Randolph W. Lenz,
Chairman of the Board and a principal stockholder of the Company, provided
administrative, financial, marketing, technical, real estate and legal services
to the Company and its subsidiaries until December 31, 1993. 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 and 1992, the Company made payments to KCS for fees of
$2,878 and $2,848, 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 terminated as of the close of business on December 31, 1993. 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
consideration of the termination of the contract, the Company issued 89,800
shares of the Company's Series B Cumulative Redeemable Convertible Preferred
Stock (valued at $853) and 106,950 Series B Warrants (valued at $713), the
terms of which are substantially similar to the terms of the Company's
outstanding Series A Preferred Stock and Series A Warrants, respectively. Of
such amounts, Mr. Lenz received 38,800 shares of preferred stock and warrants
exercisable for 15,700 shares of Terex Common Stock and Messrs. Langevin and
Rosenberg received 25,500 shares of preferred stock and warrants exercisable
for 45,625 shares of Terex Common Stock. In addition, Messrs. Lenz, Langevin
and Rosenberg received cash payments of $515, $82 and $82, respectively.
The Company, certain directors and executives of the Company, and KCS are named
parties in various legal proceedings. During 1994, 1993 and 1992, the Company
incurred $319, $351 and $59 of legal fees and expenses on behalf of the
Company, directors and executives of the Company, and KCS named in the
lawsuits.
On January 25, 1993, Terex entered into an agreement whereby KCS borrowed
$1,683 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.
In conjunction with the CMH 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 the Bank Lending Agreement. Mr. Raben, a director of the Company, is an
employee and officer of Jefferies & Company, Inc. ("Jefferies"), the investment
banking firm which acted as an exclusive placement agent for the Company in the
offering of the Senior Secured Notes and SAR's. Jefferies was paid fees of
$6,500 in 1992 for services performed as placement agent. Jefferies was also
the Company's placement agent for the December 1993 sale of the Series A
Preferred Stock and Series A Warrants for which Jefferies received fees
totalling $2,500 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 purchased 250,000 Series A Warrants and 180,000 shares of Series A
Preferred Stock from the Company in connection with the Company's private
placement on December 20, 1993.
David A. Sachs, a director of the Company, was affiliated with the Airlie Group
L.P. ("Airlie"), a limited partnership which owns approximately 9% of the
Company's Common Stock (including Common Stock issuable upon conversion of
Series A Preferred Stock) and 40,000 Warrants. Until May 1994, Mr. Sachs was
an employee of the investment firm of TMT-FW, Inc. which is one of two general
partners of the general partner of Airlie. During the time Mr. Sachs was
affiliated with Airlie, Airlie received all director fees to which Mr. Sachs
was entitled by reason of his service as a director of the Company ($6 in 1994
and $24 in 1993). On December 20, 1993, Airlie purchased 40,000 Warrants and
40,000 shares of Series A Preferred Stock from the Company as part of the
Company's private placement.
In 1992, the Board 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 in Southaven Mississippi. In November 1992, in
contemplation of the parts consolidation, Terex had transferred $2.0 million to
Fruehauf. As a result of a debt restructuring of Fruehauf, the proposed
arrangement was not effectuated and, in May 1993, Terex entered into an
agreement with an operating unit of Fruehauf, whereby such operating unit was
to 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. The operating
unit of the Fruehauf unit in question subsequently ceased operations. The
Company is in discussions with Fruehauf concerning the satisfaction of
Fruehauf's obligations under the May 1993 agreement.
The Company requires that all transactions with affiliates be on terms no less
favorable to the Company than could be obtained in comparable transactions with
an unrelated person. The Board is advised in advance of any such proposed
transaction or agreement and utilizes 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 outside directors. One of the responsibilities of the Audit
Committee is to review related party transactions.
NOTE N-- BUSINESS SEGMENT INFORMATION
The Company operates in two industry segments: Material Handling and Heavy
Equipment.
The Material Handling Segment, which was acquired during 1992 (see Note B --
"Acquisitions"), designs, manufactures and markets 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 Heavy Equipment Segment designs, manufactures and markets heavy-duty,
off-highway earthmoving, construction, lifting, material handling and aerial
lift equipment, and related components and replacement parts. Products include
haulers, scrapers, wheel loaders, crawlers, mobile cranes, excavators and
aerial lifts. Such products are used primarily by construction, mining,
logging, industrial and government customers in building roads, dams and
commercial and residential buildings; supplying coal, minerals, sand and
gravel; and handling materials in the scrap, refuse and lumber industries.
Industry segment information is presented below:
1994 1993 1992
Sales
Material Handling $ 472,652 $ 395,625 $ 240,940
Heavy Equipment 317,168 275,164 282,415
Eliminations (3,039) (480) ---
Total $ 786,781 $ 670,309 $ 523,355
Income (Loss) From Operations
Material Handling $ (13,983) $ (28,573) $ 2,177
Heavy Equipment 18,952 2,922 (5,929)
General/Corporate (1,608) (3,527) (373)
Total $ 3,361 $ (29,178) $ (4,125)
Depreciation and Amortization
Material Handling $ 11,024 $ 9,733 $ 4,068
Heavy Equipment 3,169 8,707 3,564
General/Corporate 2,904 3,960 2,188
Total $ 17,097 $ 22,400 $ 9,820
Capital Expenditures
Material Handling $ 7,860 $ 8,882 $ 3,129
Heavy Equipment 4,565 2,620 2,238
General/Corporate 292 47 15
Total $ 12,717 $ 11,549 $ 5,382
Identifiable Assets
Material Handling $ 194,985 $ 205,581 $ 247,813
Heavy Equipment 187,710 168,236 229,042
General/Corporate 18,921 16,885 501
Total $ 401,616 $ 390,702 $ 477,356
Geographic segment information is presented below:
1994 1993 1992
Sales
North America $ 557,114 $ 466,927 $ 369,394
Europe 240,670 211,726 149,970
All other 33,994 19,338 30,780
Eliminations (44,997) (27,682) (26,789)
Total $ 786,781 $ 670,309 $ 523,355
Income (Loss) From Operations
North America $ 6,255 $ (32,004) $ (11,968)
Europe (4,449) (722) 5,453
All other 374 2,320 1,351
Eliminations 1,181 1,228 1,039
Total $ 3,361 $ (29,178) $ (4,125)
Identifiable Assets
North America $ 250,559 $ 241,564 $ 363,252
Europe 167,538 150,006 122,877
All other 8,766 10,785 8,664
Eliminations (25,247) (11,653) (17,437)
Total $ 401,616 $ 390,702 $ 477,356
Sales between segments and 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 Material Handling Segment operations market their product primarily through
independent dealers and distributors. The Heavy Equipment Segment operations
market their products through independent dealers and distributors and directly
to the end user.
The Company is not dependent upon any single customer. No single customer
accounted for more than 10% of 1994, 1993 or 1992 consolidated net sales.
Export sales from U.S. operations were as follows:
Year ended December 31,
1994 1993 1992
North and South America $ 34,873 $ 28,838 $ 31,845
Europe, Africa and Middle East 15,122 20,689 38,191
Asia and Australia 39,574 32,837 22,311
$ 89,569 $ 82,364 $ 92,347
NOTE O -- LIQUIDITY, FINANCING AND SEVERANCE ACTIONS
The Company experienced significant operating losses in the first quarter of
1994. Results improved in the second through fourth quarters of 1994 and the
Company generated income from operations of $3,361 for the year and $6,268 for
the quarter ended December 31, 1994. During 1994 the Company has taken
significant actions to reduce its overall cost structure and improved liquidity
by selling non-strategic assets to repay debt and lower interest costs.
During 1994, the Company repaid $35,744 of high interest rate debt, which will
result in interest expense savings of approximately $4,700 on an annual basis.
In June 1994, the Company announced personnel reductions in plant supervision,
engineering, marketing and administration totaling approximately 160 employees
in the Material Handling Segment's North American and European operations. The
Company also reorganized certain marketing activities and closed several of its
regional sales offices in the United States. The Company recorded a $4,549
charge in the second quarter of 1994 for severance costs associated with these
actions. In December 1994, the Company announced additional personnel
reductions totaling approximately 90 employees in conjunction with the closing
of the Material Handling Segment's Korean plant and certain branch sales
offices in France. An additional $2,804 charge was recorded for costs,
principally severance costs, associated with these actions.
The indentures governing the Senior Secured Notes and Subordinated Notes
require, among other things, that the Company maintain certain levels of
tangible net worth (the "Net Worth Covenants") and collateral (the "Collateral
Covenants"). 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 Covenants at the end of any
calendar quarter, the Company must offer to repurchase, at par plus accrued
interest, $16,000 principal amount of the Senior Secured Notes or such greater
amount as would be necessary to bring the Company into compliance with the
Collateral Covenants. If any offer to repurchase Notes were required to be
made as a result of noncompliance with the Covenants 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 could result in a material adverse impact on the Company.
The Company was in compliance with the Net Worth Covenants and the
Collateral Covenants at December 31, 1994 and throughout 1994. During 1994,
the Company has taken actions to maintain compliance with the Net Worth
Covenants and Collateral Covenants, including the sale of its Drexel
subsidiary, shares of Fruehauf common stock and other assets, and plans to take
additional actions, if needed, to continue in compliance. As discussed below,
the Company is seeking to refinance the Senior Secured Notes and the
Subordinated Notes during 1995. In the event that the Company is not
successful in such refinancing, the Company believes that, based on
management's current estimates, it will be in compliance with its covenants
with respect to the Senior Secured Notes and Subordinated Notes over the next
twelve months.
The Company's interest payment requirements for 1995 total approximately
$23,200 on the Senior Secured Notes, the Subordinated Notes and the Lending
Facility, of which amount approximately $10,900 has been paid as of March 1,
1995. The Company's principal repayment requirements for 1995 include
approximately $8,247 in June 1995 for a required sinking fund payment on the
Subordinated Notes. In addition, as a result of the sale of certain real
estate collateral in November and December 1994, 500,000 shares of Fruehauf
common stock in December 1994 and the remaining 486,622 shares of Fruehauf
common stock in January 1995, pursuant to the indenture for the Senior Secured
Notes, the Company also intends to offer to repurchase approximately $15,923 of
the Senior Secured Notes in the second quarter of 1995.
The Senior Secured Notes mature on August 1, 1996 and the Subordinated Notes
mature on July 1, 1997. As discussed below, the Company is currently seeking
to refinance the Senior Secured Notes and Subordinated Notes during 1995;
however, there is no assurance that it will be successful in this regard. If
the refinancing is not completed, management intends to pursue alternative
refinancing opportunities, including replacement or additional working capital
based lending facilities; however, management has not identified any specific
sources of such alternative financing.
If the Company does not refinance the Senior Secured Notes and Subordinated
Notes and does not arrange additional financing before the principal repayments
of Senior Secured Notes and Subordinated Notes discussed above are due, the
Company intends to fund such repayments from operations. The need to use funds
from operations for $24,300 of debt repayments in the second quarter of 1995
could adversely affect the Company's operations by affecting its ability to
meet its operating payment obligations, including payments to vendors, on a
timely basis in the second quarter, although management believes that continued
improvement in cash flow from operations would allow the Company to return to
normal payment terms during the second half of 1995.
The Company has announced its plans to acquire, through a newly formed wholly
owned subsidiary of the Company ("Terex Cranes"), (i) substantially all of the
capital stock of P.P.M., S.A. ("PPM Europe") which is engaged in the mobile
crane and container stacker business in Europe primarily under the PPM brand
name, and (ii) all of the capital stock of Legris Industries, Inc. ("PPM North
America"), which is currently engaged in the mobile crane and container stacker
business in the United States, Singapore and Australia primarily under the P&H
brand name ("PPM North America" and, together with PPM Europe, "PPM"), from
Legris Industries, S.A. Simultaneously with the closing of the acquisition,
the Company will contribute to Terex Cranes, substantially all of the assets,
subject to all of the liabilities of its Koehring and Mark divisions.
The aggregate purchase price for PPM (including debt to be repaid immediately
after the acquisition and debt expected to remain outstanding) is approximately
577,000 French Francs (approximately $115,400). A portion of the purchase
price is payable by issuance of a redeemable non-interest bearing promissory
note of Terex Cranes in the amount of 8,000 French Francs (approximately
$1,600) and 119,000 French Francs (approximately $23,800) in aggregate
liquidation preference of preferred stock of Terex Cranes, bearing no
dividends. The note matures in seven years and may be paid in cash or, at the
option of Terex Cranes, in common stock of Terex Cranes. The purchase price is
subject to adjustment calculated by reference to the consolidated net asset
value of PPM as determined by an audit to be conducted following the
consummation of the acquisition.
The Company intends to finance the cash portion of the purchase price through
the sale to institutional investors of a new series of secured notes. Proceeds
from the sale of such notes will also provide funds to permit the Company to
redeem all of its existing Senior Secured Notes and Senior Subordinated Notes.
The Company is also endeavoring to obtain expanded working capital lending
facilities. There is no assurance that the Company will be able to conclude
any of such financings.
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TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - 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, 1994:
Deducted from
asset accounts:
Allowance for
doubtful
accounts $ 7,478 $ 1,018 $ --- $(2,382) $ 6,114
Reserve for
excess and
obsolete
inventory 20,670 7,561 --- (7,154) 21,077
Totals $ 28,148 $ 8,579 $ --- $(9,536) $ 27,191
Year ended
December 31, 1993:
Deducted from
asset accounts:
Allowance for
doubtful
accounts $ 6,348 $ 1,713 $ --- $ (583) $ 7,478
Reserve for
excess and
obsolete
inventory 22,364 7,478 --- (9,172) 20,670
Totals $ 28,712 $ 9,191 $ --- $(9,755) $ 28,148
Year ended
December 31, 1992:
Deducted from
asset accounts:
Allowance for
doubtful
accounts $ 1,932 $ 642 $ 4,462 (2) $ (688) $ 6,348
Reserve for
excess and
obsolete
inventory 20,135 2,545 691 (3) (1,007) 22,364
Totals $ 22,067 $ 3,187 $ 5,153 $ (1,695) $ 28,712
(1) Utilization of established reserves, net of recoveries.
(2) Added with the acquisition of businesses.
(3) Includes balances reclassified to other accounts.
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INDEX TO EXHIBITS
3.1 Restated Certificate of Incorporation of Terex Corporation
(incorporated by reference to Exhibit 3.1 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
3.2 Restated Bylaws of Terex Corporation (incorporated by reference
to Exhibit 3.2 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
3.3 Certificate of Designation of Preferences and Rights of Series B
Cumulative Redeemable Convertible Preferred Stock ("Series B Preferred Stock")
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
(incorporated by reference to Exhibit 4.4 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
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 (incorporated by reference to Exhibit 4.5 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
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 (incorporated by reference to
Exhibit 4.8 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
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).
4.10 Bond 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).
4.11 Guarantee 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).
4.12 Bond 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).
4.13 Guarantee 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).
4.14 Mortgage, 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).
4.15 Mortgage, 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).
4.16 Mortgage, 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).
4.17 Mortgage, 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).
4.18 Mortgage, 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).
4.19 Gesellschaft (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).
4.20 Mortgage, 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).
4.21 Junior 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).
4.22 Junior 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).
4.23 Junior 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).
4.24 Junior 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).
4.25 Junior 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).
4.26 Junior 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).
4.27 Security 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).
4.28 Security 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).
4.29 Security 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).
4.30 Security 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).
4.31 Security 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).
4.32 Security 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).
4.33 Security 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).
4.34 Security 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).
4.35 Security 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).
4.36 First 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
(incorporated by reference to Exhibit 4.36 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
4.37 First 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
(incorporated by reference to Exhibit 4.37 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
4.38 First 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
(incorporated by reference to Exhibit 4.38 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
4.39 First 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 (incorporated by
reference to Exhibit 4.39 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.40 Warrant Agreement dated as of December 20, 1993 between Terex
Corporation and Mellon Securities Trust Company, as Warrant Agent (incorporated
by reference to Exhibit 4.40 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.41 Form of Series A Warrant (incorporated by reference to Exhibit
4.41 to the Form S-1 Registration Statement of Terex Corporation, Registration
No. 33-52297).
4.42 Form of Series A Preferred Stock certificate (incorporated by
reference to Exhibit 4.42 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
4.43 Form of Series B Warrant.*
4.44 Form of Series B Preferred Stock Certificate.*
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 1994 Terex Corporation Long Term Incentive Plan.*
10.3 Terex Corporation Employee Stock Purchase Plan.*
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 Tax 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).
10.13 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).
10.14 Trademark 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).
10.15 License 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).
10.16 Mortgage 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).
10.17 Loan 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).
10.18 Loan 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).
10.19 Continuing 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).
10.20 Continuing 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).
10.21 Amendment 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 (incorporated by reference to Exhibit 10.19
to the Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
10.22 Amendment 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 (incorporated by reference to
Exhibit 10.20 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.23 Termination, General Release and Waiver Agreement, dated as of
June 29, 1993, between Clark Material Handling Company and Gary D. Bello
(incorporated by reference to Exhibit 10.21 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 33-52297).
10.24 Form of Purchase Agreement dated as of December 20, 1993 between
Terex Corporation and the purchasers of Series A Warrants and shares of Series
A Preferred Stock of Terex Corporation (incorporated by reference to Exhibit
10.22 to the Form S-1 Registration Statement of Terex Corporation, Registration
No. 33-52297).
10.25 Registration Rights Agreement dated as of December 20, 1993
between Terex Corporation and the purchasers of Series A Warrants (incorporated
by reference to Exhibit 10.23 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
10.26 Registration Rights Agreement dated as of December 20, 1993
between Terex, Corporation and the purchasers of shares of Series A Preferred
Stock of Terex Corporation (incorporated by reference to Exhibit 10.24 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
10.27 Series B Preferred Stock Registration Rights Agreement.*
10.28 Agreement 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).
10.29 Management Agreement Amendment, dated January 1, 1993, between
KCS Industries, Inc. and Terex Corporation (incorporated by reference to
Exhibit 10.26 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
10.30 Management Agreement Termination Agreement, dated January 1,
1994, between KCS Industries, L.P. and Terex Corporation (incorporated by
reference to Exhibit 10.27 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
10.31 Amendment to Management Agreement Termination Agreement, dated
October 17, 1994, between KCS Industries , L.P. and Terex Corporation.*
10.32 Credit Facility, dated December 23, 1993, among Terex Equipment
Limited, Terex Corporation and Standard Chartered Bank (incorporated by
reference to Exhibit 10.28 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
10.33 Amended and Restated Stock Purchase Agreement by and between CMH
Acquisition Corp. and DAC Acquisition Corp. with respect to the sale of the
outstanding stock of Drexel Industries dated as of April 15, 1994. *
11.1 Computation of per share earnings.*
21.1 Subsidiaries of Terex Corporation (incorporated by reference to
Exhibit 21.1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52297).
23.1 Independent Accountants' Consent of Price Waterhouse LLP -
Stamford, Connecticut to Incorporation by Reference in Form S-8. *
As permitted by Securities and Exchange Commission regulations, copies of the
exhibits are not included in the Annual Report on Form 10-K furnished to
stockholders, except as otherwise indicated. Copies of such exhibits are
available to stockholders upon written request to the Company.
____________________
* Filed herewith.
CERTIFICATE OF DESIGNATION of
PREFERENCES AND RIGHTS
OF
SERIES B CUMULATIVE REDEEMABLE
CONVERTIBLE PREFERRED STOCK
OF
TEREX CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
Terex Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, hereby
certifies that the Board of Directors of the Corporation, at a meeting duly
called and held, did duly adopt the following resolutions:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article IV of the Corporation's Certificate of
Incorporation, as amended, a series of preferred stock of the Corporation be,
and it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series B
Cumulative Redeemable Convertible Preferred Stock (the "Series B Preferred
Stock"), to consist of 89,800 shares, par value $.01 per share, of which the
preferences and relative and other rights, and the qualifications, limitations
or restrictions thereof, shall be (in addition to those set forth in the
Corporation's Certificate of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph l 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 B Preferred Stock
under the Loan Agreements.
"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.
"Final Redemption Date" shall have the meaning set forth in paragraph 5(f)
below.
"Issue Date" shall mean the date that shares of Series B 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 B 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 B 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 B 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.
"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
B 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 B
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 paragraph 5(e)
below.
"Redemption Date" shall have the meaning set forth in paragraph 5(d)
below.
"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, including, without
limitation, the Series A Preferred Stock, ranking senior to the Series B
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, including, without limitation, the Series A Preferred Stock,
ranking senior to the Series B Preferred Stock in respect of the right to
receive assets upon any Liquidation.
"Series A Preferred Stock" shall mean the Series A Cumulative Redeemable
Convertible Preferred Stock, par value $.01 per share, of the Corporation.
"Series A Warrants" shall mean the Warrants exercisable into shares of
Common Stock that were issued on the date the Series A Preferred Stock was
first issued by the Corporation.
"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 B 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 Base 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 B 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 Base 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 B 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 B 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 B 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 B 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 B Preferred Stock shall cumulate as provided in paragraph
3(c) below.
(c) If, on any Dividend Payment Date, the holders of the Series
B 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 B 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 B 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 B 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 B 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 B 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 B 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 B 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 B
Preferred Stock shall not be redeemed in whole or in part prior to December 31,
1995. On and after December 31, 1995, the Series B 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 B 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 B Preferred Stock pursuant to this
paragraph 5(a) at any time unless all cumulative dividends on the Series B
Preferred Stock for all previous quarterly Dividend Periods have been paid or
declared and funds therefor set apart for payment.
(b) The Series B Preferred Stock may be redeemed prior to
December 31, 1995 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 B Preferred Stock on or prior to December 31, 2001 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 the Series B Preferred Stock may be redeemed
only if all of the outstanding Series A Preferred Stock has been redeemed prior
to such proposed redemption of the Series B Preferred Stock.
(d) Notice of every proposed redemption of Series B 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 B 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 B Preferred Stock and of the Redemption Date, (ii)
stating the place or places at which the shares of Series B Preferred Stock
called for redemption shall, upon presentation and surrender of the
certificates evidencing such shares of Series B 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 B Preferred Stock.
(e) The Corporation may not act as the redemption agent to
redeem the Series B 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 B 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 B 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 B
Preferred Stock called for redemption shall be entitled to all preferences and
relative and other rights accorded to such shares of Series B 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 B 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
B 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 B 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 B 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 B 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
B 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
B 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 B 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 B 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 B
Preferred Stock, or increase or decrease the number of shares of Series B
Preferred Stock authorized hereby;
(ii) authorize or issue shares of any class or series of
Senior 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; or
(iv) authorize, enter into, or consummate any transaction
that would constitute a deemed dividend to holders of the Series B Preferred
Stock under United States Federal tax laws (other than any deemed dividend by
reason of the operation of paragraph 3 above).
7. Conversion Rights: The Series B 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 B 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 B Preferred Stock into fully
paid and nonassessable shares of Common Stock upon the terms hereinafter set
forth. In case any share of Series B 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 B 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 B 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 B Preferred Stock of the Corporation the certificate or
certificates for the shares of Series B Preferred Stock so to be converted,
accompanied by written notice specifying the number of shares of Series B
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 B 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 B Preferred Stock covered by a certificate representing shares of Series
B 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 B 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 B Preferred Stock.
If more than one share of Series B 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 B Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock that would otherwise be
issuable upon conversion of any shares of Series B 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 B 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 B 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 B Preferred Stock or
Series A Preferred Stock or the exercise of Warrants or Series A 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 B 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 B 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 B 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 B 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 B 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 B 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 B 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 B 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 B 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 B Preferred Stock) and other governmental charges
attributable to the issuance or delivery of shares of Series B Preferred Stock
or of shares of Common Stock upon conversion of shares of Series B 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 B 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 B
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 B Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series B 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 B 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 B 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 B 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 B 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 B 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
B 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 B 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 B Preferred Stock issuable in
series undesignated as to series and may be redesignated and reissued.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Preferences and Rights of Series B Cumulative Redeemable
Preferred Stock of the Corporation to be duly executed this 9th day of
December, 1994.
TEREX CORPORATION
By: /s/ Ronald M. DeFeo_
Name: Ronald M. DeFeo
Title: President
Attest:
/s/ Marvin B. Rosenberg
Secretary
Warrant Certificate No. WB ___
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF
ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION, AND NEITHER THESE SECURITIES NOR ANY INTEREST OR
PARTICIPATION THEREIN MAY BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED
OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE RULES AND REGULATIONS
THEREUNDER AND APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, UNLESS A VALID
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
TEREX CORPORATION
WARRANT CERTIFICATE
Dated November __, 1994
Warrants to Purchase Common Stock
TEREX CORPORATION, a Delaware corporation (the "Company"), hereby
certifies that, for value received, __________________ ("Holder"), or
registered assigns, is the registered owner of _______ Warrants (the
"Warrants"), each of which will entitle the Holder thereof to purchase one
share, as adjusted from time to time as provided in Section 7, of the Common
Stock of the Company (the "Common Stock"; each such share being a "Warrant
Share" and all such shares being the "Warrant Shares") at the exercise price of
$.01 per share (herein, as adjusted from time to time as provided in Section 7,
the "Exercise Price") at any time on or after December 21, 1994 (the "Initial
Exercise Date") until and including December 31, 2000 (the "Expiration Date"),
all subject to the following terms and conditions:
Section 1. Registration of Warrants. The Company shall register each
Warrant, upon records to be maintained by the Company for that purpose, in the
name of the record holder of such Warrant from time to time. The Company may
deem and treat the registered holder of each Warrant as the absolute owner
thereof for the purpose of any exercise thereof or any distribution to the
holder thereof, and for all other purposes, and the Company shall not be
affected by the notice to the contrary. The Warrants represented by this
certificate are a portion of a series of warrants issued by the Company in
connection with the termination of that certain management contract dated July
1, 1987, as amended, between the Company and KCS Industries, L.P., a
Connecticut limited partnership ("KCS"). All such warrants included in such
issuance, including the Warrants, are referred to herein as the "KCS Warrants".
Section 2. Registration of Transfers and Exchanges: Restrictions on
Transfer. (a) Subject to the provisions of Section 10(b), the Company shall
register the transfer of any Warrants upon records to be maintained by the
Company for that purpose, upon surrender of this Warrant Certificate, with the
Form of Assignment attached hereto duly filled in and signed, to the Company at
the office specified in or pursuant to Section 3(c). Upon any such
registration of transfer, a new Warrant Certificate, in substantially the form
of this Warrant Certificate, evidencing the Warrants so transferred shall be
issued to the transferee and a new Warrant Certificate, in similar form,
evidencing the remaining Warrants not so transferred, if any, shall be issued
to the then registered holder thereof.
(b) This Warrant Certificate is exchangeable, upon the surrender
hereof by the holder hereof at the office of the Company specified in or
pursuant to Section 3(c), for new Warrant Certificates, in substantially the
form of this Warrant Certificate, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased hereunder,
each of such new Warrant Certificates to be dated the date of such exchange and
to represent the right to purchase such number of Warrant Shares as shall be
designated by said holder hereof at the time of such surrender.
Section 3. Duration and Exercise of Warrants. (a) Warrants shall be
exercisable by the registered holder thereof on any business day before 5:00
P.M., New York City time, at any time and from time to time on or after the
Initial Exercise Date to and including the Expiration Date. At 5:00 P.M., New
York City time, on the Expiration Date, each Warrant not exercised prior
thereto shall be and become void and of no value.
(b) Subject to the limitations set forth in subsection 3(c) and
to the other provisions of this Warrant Certificate, including adjustments to
the number of Warrant Shares issuable on the exercise of each Warrant and to
the Exercise Price pursuant to Section 7, the holder of each Warrant shall have
the right to purchase from the Company (and the Company shall be obligated to
issue and sell to such holder of a Warrant) at the Exercise Price one fully
paid Warrant Share which is non-assessable. Nothwithstanding anything to the
contrary herein contained, in the event that
(c) Subject to Sections 2(b), 4, 8 and 9, upon surrender of this
Warrant Certificate, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its office at 500 Post Road East,
Westport, Connecticut 06880, or at such other address as the Company may
specify in writing to the then registered holder of the Warrants, and upon
payment of the Exercise Price multiplied by the number of Warrant Shares then
issuable upon exercise of the Warrants being exercised in lawful money of the
United States of America, all as specified by the holder of this Warrant
Certificate in the Form of Election to Purchase, the Company shall promptly
issue and cause to be delivered to or upon the written order of the registered
holder of such Warrants, and in such name or names as such registered holder
may designate, a certificate for the Warrant Shares issued upon such exercise
of such Warrants. Any person so designated to be named therein shall be deemed
to have become holder of record of such Warrant Shares as of the Date of
Exercise of such Warrants.
The "Date of Exercise" of any Warrant means the date on which the
Company shall have received (i) this Warrant Certificate, with the Form of
Election to Purchase attached hereto appropriately filled in and duly signed,
and (ii) payment of the Exercise Price for such Warrant.
(d) Subject to the limitations set forth in subsection (c) of
this section, the Warrants evidenced by this Warrant Certificate shall be
exercisable, either as an entirety or, from time to time, for part of the
number of Warrants evidenced by this Warrant Certificate. If less than all of
the Warrants evidenced by this Warrant Certificate are exercised at any time,
the Company shall issue, at its expense, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, for the remaining number of
Warrants evidenced by this Warrant Certificate.
Section 4. Payment of Taxes. The Company will pay all taxes attributable
to the issuance of the Warrants and the Warrant Shares; provided, however, that
the Company shall not be required to pay any tax in respect of the transfer of
Warrants, or the issuance or delivery of certificates for Warrant Shares or
other securities in respect of the Warrant Shares upon the exercise of
Warrants, to a person or entity other than a then existing registered holder of
Warrants or an Affiliate of such registered holder. An "Affiliate" of any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with such
person or entity.
Section 5. Mutilated or Missing Warrant Certificate. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, upon request by the
registered holder of the Warrants the Company will issue, in exchange for and
upon cancellation of the mutilated Warrant Certificate, or in substitution for
the lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate,
in substantially the form of this Warrant Certificate, of like tenor and
representing the equivalent number of Warrants, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of this Warrant Certificate and, if requested
by the Company, indemnity also satisfactory to it.
Section 6. Reservation and Issuance of Warrant Shares. (a) The Company
will at all times after the Initial Exercise Date have authorized, and reserve
and keep available, free from preemptive rights, for the purpose of enabling it
to satisfy any obligation to issue Warrant Shares upon the exercise of the
Warrants, the number of Warrant Shares deliverable upon exercise of the
Warrants.
(b) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant Certificate, be (i) duly
authorized, fully paid and non-assessable, and (ii) free from all taxes with
respect to the issuance thereof and from all liens, charges and security
interests created by the Company.
Section 7. Adjustments of Warrant Shares and Exercise Price. (a) The
Exercise Price and the number and kind of Warrant Shares shall be subject to
adjustment from time to time upon the happening of certain events as provided
in this Section 7.
(b) If at any time prior to the exercise of the Warrants in full,
the Company shall (i) declare a dividend or make a distribution on the Common
Stock payable in shares of its capital stock (whether Common Stock or shares of
capital stock of any other class); (ii) subdivide, reclassify or recapitalize
its outstanding Common Stock into a greater number of shares; (iii) combine,
reclassify or recapitalize its outstanding Common Stock into a smaller number
of shares; or (iv) issue any shares of its capital stock by reclassification of
its Common Stock (including any such reclassification in connection with a
consolidation or a merger in which the Company is the continuing corporation),
the Exercise Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the holders of the Warrants shall be entitled to
receive the aggregate number and kind of share which, if the Warrants had been
exercised in full immediately prior to such event, such holders would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this Section 7(b) shall be made
successively immediately after the record date, in the case of a dividend or
distribution, or the effective date, in the case of a subdivision, combination,
recapitalization or recapitalization, to allow the purchase of such aggregate
number and kind of shares.
(c) If at any time prior to the exercise of the Warrants in full,
the Company shall fix a record date for the issuance or making a distribution
to all holders of Common Stock (including any such distribution to be made in
connection with a consolidation or merger in which the Company is to be the
surviving corporation) of evidences of its indebtedness, any other securities
of the Company or any cash, property or other assets (excluding a combination,
reclassification or recapitalization referred to in Section 7(b), regular cash
dividends or cash distributions paid out of net profits legally available
therefor and in the ordinary course of business) and subscription rights,
options or warrants for Common Stock or Common Stock equivalents (any such
nonexcluded event being herein called a "Special Dividend"), the Exercise Price
shall be decreased immediately after the record date for such Special Dividend
to a price determined by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the then current market price of the
Common Stock (as defined in Section 7(f)) on such record date less the fair
market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock or
of such subscription rights, options or warrants applicable to one share of
Common Stock and the denominator of which shall be such then current market
price per share of the Common Stock (as so determined). Any adjustment
required by this Section 7(c) shall be made successively whenever such a record
date is fixed and in the event that such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price that was in
effect immediately prior to such record date.
(d) 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 (as defined in
Section 7(f)) 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 number of Warrant Shares in effect
immediately prior to each such issuance shall immediately (except as provided
below) be increased by multiplying such number of Warrant Shares 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. This subsection (d) shall not apply to: (i) any transaction or
distribution for which an adjustment has been made pursuant to any other
subsection of this Section 7; (ii) 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 7; (iii) the conversion of shares of Series A Cumulative
Redeemable Convertible Preferred Stock of the Company, par value $.01 per share
("Series A Stock"), or the exercise of Common Stock Purchase Warrants issued on
the date the Series A Stock was first issued by the Company, or the conversion
of shares of Series B Cumulative Redeemable Convertible Preferred Stock of the
Company, par value $.01 per share, or the exercise of KCS Warrants issued by
the Company to certain executives of KCS in connection with the termination of
the management agreement between the Company and KCS; (iv) 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; or (v) Common Stock issued pursuant to a bona fide registered public
offering or private placement, the manager or managers of which are investment
banking firms.
(e) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to paragraph (b) of this Section 7, the Warrant
Shares shall simultaneously be adjusted by multiplying the number of Warrant
Shares initially issuable upon exercise of each Warrant by the Exercise Price
in effect on the day immediately preceding such adjustment and dividing the
product so obtained by the Exercise Price, as adjusted.
(f) For the purpose of any computation under this Section 7, the
current market price per share of the Common Stock at any date shall be deemed
to be the average of the daily closing per share prices for the 30 consecutive
trading days ending on such date (or, if such day is not a trading day, the
preceding trading day). The closing price for each day shall be the last sale
price regular way or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices regular way, in either
case on the principal national securities exchange on which the Common Stock is
admitted to trading or listing, or if not listed or admitted to trading on any
such exchange, the representative closing bid price as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information,
or if not so available, the fair market price as reasonably determined by the
Board of Directors.
(g) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least one cent
($.01) in such price; provided, however, that any adjustments which by reason
of this paragraph (g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 7 shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. Notwithstanding anything in this Section 7 to the
contrary, the Exercise Price shall not be reduced to less than the
then-existing par value of the Common Stock as a result of any adjustment made
hereunder.
(h) In the event that at any time, as a result of any adjustment
made pursuant to Section 7(b), the holders of the Warrants thereafter shall
become entitled to receive any shares of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 7(b) or this Section 7(h).
(i) In the case of an issue of additional Common Stock or Common
Stock equivalents for cash, the consideration received by the Company therefor,
after deducting therefrom any discount or commission or other expenses paid by
the Company for any underwriting of, or otherwise in connection with, the
issuance thereof, shall be deemed to be the amount received by the Company
therefor. The term "issue" shall include the sale or other disposition of
shares held by or on account of the Company or in the treasury of the Company
but until so sold or otherwise disposed of such shares shall not be deemed
outstanding.
(j) Notice of Adjustment. Whenever the number of Warrant Shares
or the Exercise Price is adjusted as herein provided, the Company shall prepare
and deliver forthwith to the holders of the Warrants a certificate signed by
its President, a Vice President, Treasurer or Secretary, setting forth the
adjusted number of shares purchasable upon the exercise of the Warrants and the
Exercise Price of such shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
(k) No Adjustment for Dividends. Except as provided in Section 7
of this Warrant Certificate, no adjustment in respect of any cash dividends
shall be made during the term of the Warrants or upon the exercise of the
Warrants.
(l) Form of Warrant After Adjustments. The form of this Warrant
Certificate need not be changed because of any adjustments in the Exercise
Price or the number or kind of the Warrant Shares, and Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant Certificate, as initially issued.
Section 8. No Stock Rights. No holder of this Warrant Certificate, as
such, shall be entitled to vote or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained herein be construed to confer
upon the holder of this Warrant Certificate, as such, the rights of a
stockholder of the Company or the right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of meetings or
other actions affecting stockholders (except as provided herein), or to receive
dividends or subscription rights or otherwise, except as a holder of Warrant
Shares.
Section 9. Fractional Warrant Shares. No fractional Warrant Shares or
scrip representing fractional Warrant Shares shall be issued upon the exercise
of any Warrant. With respect to any fraction of a share otherwise issuable
upon exercise hereof, the Company shall pay to the Warrant holder an amount in
cash equal to such fraction multiplied by the market price of Common Stock at
such time.
Section 10. No Registration of Warrants and Warrant Shares under
Securities Act. (a) Neither the Warrants nor the Warrant Shares have been
registered under the Securities Act of 1933, as amended (such Act, or any
similar Federal statute then in effect, being the "Act").
(b) The holder of this Warrant Certificate, by acceptance hereof,
represents that it is acquiring the Warrants with the intent of holding such
securities for investment for his own account and not with a view to
participating directly or indirectly in a distribution thereof, and agrees not
to sell, transfer, pledge or hypothecate any Warrants or any Warrant Shares
unless a registration statement is effective for such Warrants or Warrant
Shares under the Act or in the opinion of counsel to the Company such
transaction is exempt from the registration requirements of the Act.
Section 11. Notices. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
addressed, if to the registered owner hereof, to it at the address furnished by
the registered owner to the Company, and if to the Company, to it at 500 Post
Road East, Westport, Connecticut 06880, or to such other address as any party
shall notify the other party in writing, and shall be effective, in the case of
written notice by mail, three days after placement into the mails (first class,
postage prepaid), and in the case of other notice in writing, including by
telecopy, hand delivery or courier service, on the same day as received.
Section 12. Binding Effect. This Warrant Certificate shall be binding
upon and inure to the sole and exclusive benefit of the Company, its successors
and assigns, and the registered holder or holders from time to time of the
Warrants and the Warrant Shares.
Section 13. Survival of Rights and Duties. This Warrant Certificate
shall terminate and be of no further force and effect on the earlier of 5:00
P.M., New York City time, on the Expiration Date, or the date on which all of
the Warrants have been exercised, except that the provisions of Sections 4,
6(c), and 10 shall continue in full force and effect after such termination
date.
Section 14. Governing Law. This Warrant Certificate shall be construed
in accordance with and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be executed by its officer thereunto duly authorized as of the date hereof.
TEREX CORPORATION
By:___________________________
Title:
Attest:_________________________
Title:__________________________
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To Terex Corporation:
The undersigned hereby irrevocably elects to exercise ___________________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, ______________________ full shares of Common Stock issuable upon
exercise of said Warrants and delivery of $__________ in cash and any
applicable taxes payable by the undersigned pursuant to such Warrant
Certificate.
The undersigned requests that certificates for such shares be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
(Please print name and address)
If said number of Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to:
(Please print name and address)
Name of Holder:
Dated: _________, _____ (Print)
(By:)
(Title:)
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _________________________________ hereby sells,
assigns, and transfers to each assignee set forth below all of the rights of
the undersigned in and to the number of Warrants (as defined in and evidenced
by the foregoing Warrant Certificate) set opposite the name of such assignee
below and in and to the foregoing Warrant Certificate with respect to said
Warrants and the shares of Common Stock issuable upon exercise of said
Warrants:
Name of Assignee Address Number of Warrants
If the total of said Warrants shall not be all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not so assigned be issued in
the name of and delivered to the undersigned.
Name of Holder:
Dated: _________, _____ (Print)
(By:)
(Title:)
EXHIBIT 4.44
FORM OF SERIES B PREFERRED STOCK CERTIFICATE
DELAWARE
NUMBER SHARES
PB
TEREX CORPORATION
TOTAL AUTHORIZED ISSUE 89,800 SHARES
SERIES B CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK
$.01 PAR VALUE PER SHARE
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. THE
CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE
POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
This Certifies that ___________________________ is the registered holder of
___________________________ shares of the above named Corporation fully paid
and non-assessable transferable only on the books of the Corporation by the
holder hereof in person or by Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _____ day of _______________ A.D. 19__.
_______________________ __________________________
Marvin B. Rosenberg Ronald M. DeFeo
Secretary-Treasurer President
March 24, 1995
1994 TEREX CORPORATION
LONG-TERM INCENTIVE PLAN
Article I
Purpose
The purpose of the 1994 Terex Long-Term Incentive Plan (hereinafter referred to
as the "Plan") is to (a) advance the interests of Terex Corporation (the
"Corporation") and its stockholders by providing incentives and rewards to
those employees who are in a position to contribute to the long-term growth and
profitability of the Corporation and to outside directors; (b) assist the
Corporation and its subsidiaries and affiliates in attracting, retaining, and
motivating highly qualified employees and outside directors for the successful
conduct of their business; and (c) make the Corporation's compensation program
competitive with those of other major employers.
Article II
Definitions
2.1 A "Change in Control of the Corporation" shall be deemed to
occur in the event that any of the following circumstances have occurred:
(i) the direct and indirect holdings of Randolph W. Lenz
("RWL"), in the voting power or fair market value of the stock of the
corporation, fall below 20 percent, provided, however, that if such holdings of
RWL fall below 20 percent as a result of the voluntary sale or other voluntary
transfer by RWL of his shares of stock of the Corporation, solely for purposes
of the Plan, a Change in Control of the corporation shall not be deemed to
occur with respect to RWL;
(ii) any "person" or "group" within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act becomes the "beneficial owner", as
defined in rule 13d-3 under the Exchange Act, of more of the then outstanding
voting securities of the Corporation than are then held either directly or
indirectly by Randolph W. Lenz, otherwise than through a transaction or
transactions arranged by, or consummated with the prior approval of, the Board
of Directors; or
(iii) if during any period of 12 consecutive months (not
including any period prior to the adoption of this section), Present Directors
and/or New Directors cease for any reason to constitute a majority of the
Board.
For purposes of Section 2.1, the rules of Section 318(a) of the
Code and the regulations issued thereunder shall be used to determine stock
ownership.
For purposes of subsection (iii) of Section 2.1, "Present
Directors" shall mean individuals who at the beginning of such consecutive 12
month period were members of the Board of Directors and "New Directors" shall
mean any director whose election by the Board or whose nomination for election
by the Corporation's stockholders was approved by a vote of at least two-thirds
of the Directors then still in office who were Present Directors or New
Directors.
2.2 "Code" means the Internal Revenue Code of 1986, as now or
hereafter amended.
2.3 "Committee" means the committee established pursuant to Article
IV.
2.4 "Disability" means a Participant's inability to engage on any
substantial gainful activity because of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted,
or can be expected to last, for a continuous period of six (6) months or
longer.
2.5 "Employee" means all employees of the Corporation or of a
subsidiary or affiliate of the Corporation participating in the Plan, including
officers of the Corporation, as well as officers of the Corporation who are
also directors of the Corporation. However, an individual who is a member of
the Committee shall not be an "Employee" for the purposes of this Plan.
2.6 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
2.7 "Incentive Stock Option" means any stock option granted pursuant
to this Plan which is designated as such by the Committee and which complies
with Section 422 of the Code.
2.8 "Market Price" is the closing sale price of a share of Stock as
reported by the New York Stock Exchange on the last trading day immediately
prior to the date an option hereunder is exercised or such other date as the
value of a share of Stock is to be determined.
2.9 "Non-Qualified Stock Option" means any stock option granted
pursuant to this Plan which is not an Incentive Stock Option.
2.10 "Outside Director" means a member of the Board of Directors of
the Corporation who is a "disinterested person" within the meaning of Rule
16b-3(c)(2)(i) of the Exchange Act, and (ii) an "outside director" within the
meaning of Section 162(m) of the Code or any successor provision thereto (as
may be interpreted from time to time by Treasury Regulations promulgated
thereunder):
2.11 "Participant" means a Participant as defined in Article III.
2.12 "Restricted Stock" means Stock subject to restrictions on the
transfer of such Stock, conditions of forfeitability of such Stock, or any
other limitations or restrictions as determined by the Committee.
2.13 "Stock" means Stock as defined in Section 5.1.
ARTICLE III
Participation
The participants in the Plan ("Participants") shall be (a) those
Employees serving in a managerial, administrative, or professional position who
are selected to participate in the Plan by the Committee of the Board of
Directors of the Corporation named to administer the Plan pursuant to Article
IV and (b) Outside Directors.
ARTICLE IV
Administration
The Plan shall be administered and interpreted by a committee of two
or more members of the Board of Directors who are Outside Directors
(hereinafter referred to as the "Committee") appointed by the Board. If the
Board has appointed a Compensation Committee, the Committee shall be comprised
of the members of the Compensation Committee that are Outside Directors. All
decisions and acts of the Committee shall be final and binding upon all
Participants. The Committee shall: (i) determine the number and types of
awards to be made under the Plan; (ii) select the awards to be made to
Participants; (iii) set the option price, the number of options to be awarded,
and the number of shares to be awarded out of the total number of shares
available for award; (iv) delegate to the Chairman, President, Executive Vice
President and Chief Financial Officer (acting as a group) of the Corporation
the right to allocate awards among Employees who are not directors or officers
(as defined in Rule 16a-1(f) under the Exchange Act) of the Corporation, such
delegation to be subject to such terms and conditions as the Committee in its
discretion shall determine; (v) establish administrative regulations to further
the purpose of the Plan; and (vi) take any other action desirable or necessary
to interpret, construe or implement properly the provisions of the Plan.
ARTICLE V
Awards
5.1 Form of Awards. Awards under this Plan may be in any of the
following forms (or a combination thereof): (i) stock option awards in
accordance with Article VI; (ii) grants of Stock, including Restricted Stock,
in accordance with Article VII; or (iii) Performance Awards in accordance with
Article VIII. "Stock" shall mean the common stock, $.01 par value, of the
Corporation. All awards (other than Performance Awards) shall be made pursuant
to award agreements between the Participant and the Corporation. The
agreements shall be in such form as the Committee approves from time to time.
5.2 Maximum Amount Available. The total number of shares of Stock
(including Restricted Stock, if any) optioned or granted under this Plan during
the term of the Plan shall not exceed 750,000 shares except as increased or
otherwise adjusted in accordance with Section 5.3 . During the 10-year period
commencing on the effective date of this Plan, no Participant may be granted,
in the aggregate, awards which would result in the Participant receiving more
than 15% of the maximum number of shares available for award under the Plan.
Solely for the purpose of computing the total number of shares of Stock
optioned or granted under this Plan, there shall not be counted any shares
which have been forfeited if the Participant received no benefits of ownership
from the Stock and any shares covered by an option which, prior to such
computation, has terminated in accordance with its terms or has been canceled
by the Participant or the Corporation.
5.3 Adjustment in the Event of Recapitalization, Etc. In the event
of any change in the capital structure of the Corporation by reason of any
stock split, stock dividend, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change (including
the exercise of currently existing Warrants and the conversion of currently
existing Preferred Stock) or in the event of any special distribution to the
stockholders, the Committee shall make such equitable adjustments in the number
of shares and prices per share applicable to options then outstanding and in
the number of shares which are available thereafter for Stock Option Awards (as
defined in Section 6.1) or other awards, both under the Plan as a whole and
with respect to individuals, as the Committee determines are necessary and
appropriate. Any such adjustments shall be conclusive and binding for all
purposes of the Plan.
ARTICLE VI
Stock Options
6.1 Grant of Award. The Corporation may award options to purchase
Stock, including Restricted Stock, (hereinafter referred to as "Stock Option
Awards") to such Participants (other than Outside Directors) as the Committee,
or the Chairman, President, Executive Vice President and Chief Financial
Officer (acting as a group) of the Corporation, if the Committee in its
discretion delegates the right to allocate awards pursuant to Article IV,
authorizes and under such terms as the Committee establishes. The Committee
shall determine with respect to each Stock Option Award and designate in the
grant whether a Participant is to receive an Incentive Stock Option or a
Non-Qualified Stock Option.
6.2 Awards to Outside Directors. Any individual who is an Outside
Director on or after January 1, 1994 shall (a) after completing two years of
service as a member of the Board of Directors, be awarded an option to purchase
10,000 shares of Stock and (b) after completing five years of service as a
member of the Board of Directors, be awarded an option to purchase an
additional 10,000 shares of Stock. A stock option awarded under either clauses
(a) or (b) of the preceding sentence shall have a duration of five years
commencing on the date of the award. The option price of each share of Stock
subject to a Stock Option Award under this Section 6.2 shall be the closing
price of a share of Stock on the trading day immediately preceding the date of
the award as reported on the New York Stock Exchange. Years of service
completed shall include all years served whether prior to, or subsequent to,
the adoption of this Plan. Options awarded under this section 6.2 shall be
subject to the terms and conditions of Sections 6.4, 6.5 and 6.6 except to the
extent that the provisions of such Sections are inconsistent with the
provisions of this Section 6.2
6.3 Option Price. Except as otherwise provided in Section 6.2 and
this Section 6.3, the option price of each share of Stock subject to a Stock
Option Award shall be (i) determined by the Committee but shall be no less than
the closing price of a share of Stock on the trading day immediately preceding
the date the award is authorized as reported on the New York Stock Exchange and
(ii) specified in the grant. Notwithstanding the above to the contrary, (a)
the Committee may specify such other price as it deems appropriate and (b)) in
the Participant to whom an Incentive Stock Option is granted owns, at the time
of the grant, more than ten percent (10%) of the combined voting power of the
Corporation or a subsidiary of the Corporation, the option price of each share
of Stock subject to such grant shall be not less than one hundred ten percent
(110%) of the closing price described in the preceding sentence.
6.4 Terms of Option. A stock option by its terms shall not be
transferable by the Participant other than by will or the laws of descent and
distribution, and, during the Participant's lifetime, shall be exercisable only
by the Participant. A stock option by its terms also shall be of no more than
ten years' duration, except that an Incentive Stock Option granted to a
Participant who, at the time of the grant, owns Stock representing more than
ten percent (10%) of the combined voting power of the Corporation shall by its
terms be of no more than five years' duration. Except as otherwise provided in
Section 6.2, a stock option by its terms shall be exercisable only after the
earliest of: (i) such period of time as the Committee shall determine and
specify in the grant, but in no event less than one year following the date of
the grant of such award; (ii) the Participant's death or Disability; or (iii) a
Change in Control of the Corporation.
Except as otherwise provided in Section 6.2, an option is only
exercisable by a Participant while the Participant is in active employment with
the Corporation, or its subsidiary or affiliate, except (i) in the case of a
Participant's death or Disability; (ii) during a six-month period commencing on
the date of a Participant's termination of employment by the Corporation other
than for cause; (iii) during the three-year period commencing on the date of
the Participant's termination of employment, by the participant or the
Corporation, after a Change in Control of the Corporation, unless such
termination of employment is for cause; or (iv) if the Committee decides that
it is in the best interest of the Corporation to permit individual exceptions.
An option may not be exercised pursuant to this paragraph after the expiration
date of the option.
6.5 Exercise of Option. An option may be exercised with respect to
part or all of the shares subject to the option by giving written notice to the
Corporation of the exercise of the option. The option price for the shares for
which an option is exercised shall be paid on or within ten business days after
the date of exercise in cash, in whole shares of Stock owned by the Participant
prior to exercising the option, or in a combination of cash and such shares of
Stock or on such terms and conditions as the Committee determines. The value
of any share of Stock delivered in payment of the option price shall be its
Market Price on the date the option is exercised.
6.6 Dividends on Shares Covered By Options. The Committee may, in
its discretion, grant to Participants holding stock options the right to
receive with respect to each share covered by an option payments of amounts
equal to the regular cash dividends paid to holders of stock during the period
that the option is outstanding.
ARTICLE VII
Grants of Stock
The Committee may grant, either alone or in addition to other awards
granted under the Plan, shares of Stock (including Restricted Stock) to such
Participants as the Committee, or the Chairman, President, Executive Vice
President and Chief Financial Officer (acting as a group) of the Corporation,
if the Committee in its discretion delegates the right to allocate awards
pursuant to Section 4, authorizes and under such terms as the Committee
establishes. The Committee, in its discretion, may also make a cash payment to
a Participant granted shares of Stock under the Plan to allow such Participant
to satisfy tax obligations arising out of receipt of the Stock.
ARTICLE VIII
Performance Awards
The Committee may grant, either alone or in addition to other awards
granted under the Plan, cash bonus awards based on a Participant's job
performance ("Performance Awards") to such Participants as the Committee, or
the Chairman, President, Executive Vice President and Chief Financial Officer
(acting as a group) of the Corporation, if the Committee in its discretion
delegates the right to allocate awards pursuant to Section 4, authorizes and
under such terms as the Committee establishes. Performance awards may be paid
in cash or any other form of property as the Committee shall determine.
Performance Awards shall entitle the Participant to receive an award if the
measures of performance or other criteria established by the Committee are met.
The measures of performance or other criteria shall be established by the
Committee in its absolute discretion. The Committee shall determine the times
at which Performance Awards are to be made and all conditions of such awards.
Performance awards shall be subject to any applicable federal, state or local
withholding tax requirements.
ARTICLE IX
Withholding
In order to enable the Corporation to meet any application federal,
state or local withholding tax requirements arising as a result of the exercise
of a stock option, the grant of shares of Stock, or the vesting of Restricted
Stock, a Participant shall pay to the Corporation the amount of tax to be
withheld. In the alternative, the Participant may elect to satisfy such
obligation (i) by having the Corporation withhold shares that otherwise would
be delivered to the Participant pursuant to the exercise of the option, the
grant of Stock, or the vesting of Restricted Stock for which the tax is being
withheld, (ii) by delivering to the Corporation other shares of Stock owned by
the Participant prior to exercising the option, receiving the awarded shares,
or becoming vested in the Restricted Stock or (iii) by making a payment to the
Corporation consisting of a combination of cash and such shares of Stock. Such
an election shall be subject to the following: (a) the election shall be made
in such manner as may be prescribed by the Committee; (b) the election shall be
made prior to the date to be used to determine the tax to be withheld; and (c)
if the Participant is a person subject to Section 16 of the Exchange Act, the
election shall be irrevocable and shall not be made within six months after the
grant of the option, except that this six-month limitation shall not apply in
the event the Participant delivers to the Corporation previously owned shares
of Stock, and shall be made either at least six months prior to the date to be
used to determine the tax to be withheld or during a ten-day period beginning
on the third business day following the date of release of the quarterly or
annual summary statements of sales and earnings of the Corporation and ending
on the 12th business day following such date.
ARTICLE X
General Provisions
10.1 Any assignment or transfer of any awards without the written
consent of the Corporation shall be null and void.
10.2 Nothing contained herein shall require the Corporation to
segregate any monies from its general funds, or to create any trusts, or to
make any special deposits for any immediate or deferred amounts payable to any
Participant for any year.
10.3 Participation in this Plan shall not (i) affect the
Corporation's right to discharge a Participant or (ii) constitute an agreement
of employment between a Participant and the Corporation.
10.4 Restricted Stock may not be sold or transferred by the
Participant until any restrictions that have been established by the Committee
have lapsed.
10.5 The Participant shall have, with respect to Restricted Stock,
all of the rights of a stockholder of the Corporation, including the right to
vote the shares and the right to receive any dividends, unless the Committee
shall otherwise determine.
10.6 Upon a Participant's termination of employment during the
period any restrictions are in effect, all Restricted Stock shall be forfeited
without compensation to the Participant unless the Committee decides that it is
in the best interest of the Corporation to permit individual exceptions.
ARTICLE XI
Amendment, Suspension, or Termination
11.1 General Rule. The Board of Directors may suspend, terminate, or
amend the Plan, including but not limited to such amendments as may be
necessary or desirable resulting from changes in the federal income tax laws
and other applicable laws, but may not, without approval by the holders of a
majority of all outstanding shares entitled to vote on the subject at a meeting
of stockholders of the Corporation, (a) increase the total number of shares of
Stock that may be optioned or granted under the Plan or (b) amend any provision
of the Plan which, with respect to directors and officers (as defined in Rule
16a-1(f) of the Exchange Act) of the Corporation, materially modifies the
eligibility requirements, materially increases benefits or materially increases
the number of shares issuable. However, in no event shall any provision of the
Plan applicable to Stock option Awards to Outside Directors be amended more
often than once in any six-month period, except to comport to changes in the
Code, ERISA or the rules thereunder.
11.2 Compliance with Rule 16b-3. With respect to persons subject to
Section 16 of the Exchange Act, transactions under the Plan are intended to
comply with the requirements of Rule 16b-3 under the Exchange Act, as
applicable during the term of the Plan. To the extent that any provision of
the Plan or action by the Committee or its delegates fail to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Should the requirements of Rule 16b-3 change, the
Board of Directors may amend this plan to comply with the requirements of that
rule or its successor provision or provisions.
ARTICLE XII
Effective Date and Duration of the Plan
This Plan shall be effective on the date of the approval of the Plan
by the holders of a majority of the shares of Stock; provided, however, that
the adoption of the Plan is subject to such shareholder approval within 12
months before or after the date of adoption of the Plan by the Board of
Directors. The Plan shall be null and void and of no effect if the foregoing
condition is not fulfilled, and in such event each Stock Option Awards and
Stock grant hereunder shall, notwithstanding any of the preceding provisions of
the Plan, be null and void and of no effect.
TEREX CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Effective August 1, 1994
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TEREX CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Table of Contents
Page
Section 1. Purpose. . . . . . . . . . . . . . . . .1
Section 2. Term of the Plan . . . . . . . . . . . .1
Section 3. Eligible Employees . . . . . . . . . . .1
Section 4. Participation. . . . . . . . . . . . . .1
Section 5. Company Contributions. . . . . . . . . .6
Section 6. Eligible Employees' Accounts . . . . . .7
Section 7. Purchase of the Company's Common Stock .8
Section 8. Dividends. . . . . . . . . . . . . . . .10
Section 9. Changes in Shares of the
Company's Common Stock . . . . . . . .11
Section 10. Equal Rights and Privileges. . . . . . .11
Section 11. Limitations on Transfer. . . . . . . . .11
Section 12. Administration of the Plan . . . . . . .12
Section 13. Expenses . . . . . . . . . . . . . . . .12
Section 14. Designation of Custodian . . . . . . . .12
Section 15. Purchase of Shares Following
Termination of Participation . . . . .12
Section 16. Amendment or Termination of Plan . . . .13
Section 17. Responsibility . . . . . . . . . . . . .14
Section 18. Definitions. . . . . . . . . . . . . . .15
(a) "Account" . . . . . . . . . . . . .15
(b) "Base Pay". . . . . . . . . . . . .15
(c) "Board" . . . . . . . . . . . . . .15
(d) "Company" . . . . . . . . . . . . .15
(e) "Custodian" . . . . . . . . . . . .15
(f) "Eligible Employee" . . . . . . . .15
(g) "Plan". . . . . . . . . . . . . . .16
TEREX CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Section 1. PURPOSE
The purpose of the Terex Corporation Employee Stock Purchase Plan (the
"Plan") is to provide Eligible Employees of Terex Corporation (the "Company") a
means to purchase shares of the common stock of the Company, on favorable
terms, based upon a determination by the Company's Board of Directors (the
"Board") that ownership, by Eligible Employees, of the Company's common stock
will provide them with investment opportunities and increase their interest in
the welfare of the Company. Eligible Employees may purchase the Company's
common stock under the Plan using the periodic investments method described in
Section 4(a), or the strategic timed investments method described in Section
4(b).
Section 2. TERM OF THE PLAN
The Plan is effective August 1, 1994. The Plan will terminate on the
earlier to occur of:
(a) the date as of which the Board votes to terminate the Plan; or
(b) December 31, 1995.
Section 3. ELIGIBLE EMPLOYEES
All active employees of the Company are eligible to participate in the
Plan.
Section 4. PARTICIPATION
(a) Periodic investments. Any Eligible Employee may make periodic
investments in the Company's common stock under the Plan either through
automatic payroll deductions (as described in subsection (1), below) or
additional cash contributions (as described in subsection (2), below), or both.
(1) Periodic investments through automatic payroll deductions. Any
Eligible Employee may begin to make periodic investments in the Company's
common stock as of the first day of any pay period beginning during the
calendar year, if he furnishes a completed payroll deduction election form to
the Company's human resources department at least two weeks before that date.
The Company shall provide a payroll deduction election form for this purpose.
(A) Pay periods to which payroll deduction election applies.
The completed payroll deduction election form which the Eligible Employee
furnishes to the Company's human resources department under subsection (1),
above, shall apply to each pay period that begins at least two weeks after the
date the department receives the election form, and shall remain in effect
until it is either changed or revoked under subsection (E), below.
(B) Deduction of whole dollar amounts only. Any payroll
deduction election form that an Eligible Employee furnishes to the Company's
human resources department under subsection (1), above, shall specify the whole
dollar amount that will be deducted from his Base Pay each pay period and
deposited into his Account under the Plan.
(C) Minimum dollar amount of payroll deductions per payroll
period. The minimum dollar amount that an Eligible Employee may contribute, by
payroll deduction, to his Account under the Plan for each pay period, shall be
the amount that the Company specifies, in its sole discretion, from time to
time, during the term of the Plan.
(D) Maximum dollar amount of employee contributions per
calendar year. The maximum total dollar amount that an Eligible Employee may
contribute to his Account under the Plan for any calendar year, either through
automatic payroll deductions described in subsection (1), above, or additional
cash contributions described in subsection (2), below, shall be the amount that
the Company specifies, in its sole discretion, from time to time during the
term of the Plan.
(E) Change of payroll deduction election. Any Eligible
Employee who has elected, under subsection (1), above, to make payroll
deduction contributions to his Account under the Plan, may change the rate of
his payroll deduction contributions [subject to the limitations in subsections
(A) through (D), above] at any time during the calendar year by furnishing a
new payroll deduction election form to the Company's human resources department
at least two weeks before the first day of the first pay period for which he
intends the change to be effective, and the change shall remain in effect until
it is either further changed (pursuant to this subsection) or revoked under
subsection (F), below.
(F) Revocation of payroll deduction election. Any Eligible
Employee who has elected, under subsection (1), above, to make payroll
deduction contributions to his Account under the Plan, may revoke his payroll
deduction election at any time during the calendar year by furnishing a
completed payroll deduction revocation form to the Company's human resources
department at least two weeks before the first day of the first pay period for
which he intends the revocation to be effective. Any Eligible Employee who
revokes his payroll deduction election under this subsection (F) may enter into
a new payroll deduction election at any subsequent time, in accordance with
subsection (1), above.
(G) Suspension of payroll deductions if Base Pay for any pay
period is insufficient. If an Eligible Employee's Base Pay for any pay period
to which a payroll deduction election applies is less than his payroll
deduction amount for that period, the deduction for that period will not be
taken, and, if necessary, deduction(s) for any future pay period(s) to which
such payroll deduction election would otherwise apply will be suspended until
the first pay period for which the Eligible Employee's Base Pay equals or
exceeds the payroll deduction amount he had elected.
(2) Periodic investments through additional cash contributions. Any
Eligible Employee who has elected to make periodic investments in the Company's
common stock through automatic payroll deductions pursuant to subsection (1),
above, may make additional periodic investments in such stock through
additional cash contributions that he makes to his Account under the Plan by
means other than payroll deduction. The Company shall provide a form which the
Eligible Employee must use to make any such additional cash contribution.
(A) Time for making additional cash contributions. An Eligible
Employee may make additional cash contributions to his Account under the Plan
at any time during the calendar year. However, additional cash contributions
that the Eligible Employee makes during any given quarter in the calendar year
must be received by the Plan by the close of that quarter (March 31, June 30,
September 30, or December 31) if they are to be applied to the purchase of the
Company's common stock on (or as soon as administratively possible after) the
first business day following the close of such quarter.
(B) Contribution of whole dollar amounts only. Any additional
cash contribution that an Eligible Employee makes to his Account under the Plan
pursuant to subsection (2), above, must be made in a whole dollar amount, which
shall be specified on the form, described in subsection (2), above, that
accompanies the contribution.
(C) Minimum dollar amount of each additional cash contribution.
The minimum dollar amount of any additional cash contribution that an Eligible
Employee may contribute to his Account under the Plan at any time during the
calendar year, shall be the amount that the Company specifies, in its sole
discretion, from time to time during the term of the Plan.
(D) Maximum dollar amount of employee contributions per
calendar year. The maximum total dollar amount that an Eligible Employee may
contribute to his Account under the Plan for any calendar year, either through
automatic payroll deductions described in subsection (1), above, or additional
cash contributions described in subsection (2), above, shall be the amount that
the Company specifies, in its sole discretion, from time to time during the
term of the Plan.
(b) Strategic timed investments. Any Eligible Employee may make
strategic timed investments in the Company's common stock under the Plan,
either in addition to, or in lieu of, any periodic investments he makes in such
stock under subsection (a), above. An Eligible Employee may make strategic
timed investments at any time during the calendar year, in at least the minimum
dollar amount that the Company specifies, in its sole discretion, from time to
time during the term of the Plan, by purchasing shares of the Company's common
stock through the broker-dealer designated by the Company. Shares of the
Company's common stock that an Eligible Employee purchases through strategic
timed investments pursuant to this subsection (b), as well as any such shares
that he purchases through periodic investments under subsection (a), above,
shall be credited to his Account under the Plan in the manner described in
Section 6, below. Shares purchased under this subsection (b) must be held for
a period of at least six months before they can be sold.
Section 5. COMPANY CONTRIBUTIONS
The Company may, in its sole discretion, make company contributions to the
Accounts of Eligible Employees who contribute to their Accounts under Section
4(a) or 4(b), above. The Company shall determine, in its sole discretion, the
amount of any such Company contribution. Any contribution that the Company
makes on behalf of any Eligible Employee shall be credited to his Account under
Section 6(a), below, and shall be applied to the purchase of shares of the
Company's common stock under Section 7, below.
Section 6. ELIGIBLE EMPLOYEES' ACCOUNTS
(a) Establishment of Account. An Account will be established for each
Eligible Employee who makes contributions under Section 4(a) or 4(b), above.
The Eligible Employee's Account will be credited with (1) the contributions he
makes under Section 4(a) or 4(b), above, (2) any contributions that the Company
makes on his behalf under Section 5, above, and (3) the shares of the Company's
common stock that are purchased with his and the Company's contributions under
Section 7, below. No interest shall be credited to the contributions that are
held in any such Account for the period of time between the date they are
credited to the Account and the date they are applied to the purchase of such
shares.
(b) Periodic Account statements. Each Eligible Employee who makes
contributions under the Plan will receive an Account statement from the
Custodian, at such times and in such form as may be agreed upon by the Company
and the Custodian; provided, however, that the Custodian shall furnish an
Account statement to each such Eligible Employee no less frequently than
quarterly.
Section 7. PURCHASE OF THE COMPANY'S COMMON STOCK
(a) Time of purchase.
(1) Under the periodic investments method. Any contributions that
an Eligible Employee makes to his Account under the Plan for any calendar
quarter under Section 4(a), above, plus any contributions that the Company
makes with respect to those Eligible Employee contributions for that quarter
under Section 5, above, shall be applied to the purchase of shares of the
Company's common stock, on (or as soon as administratively possible after) the
first business day following the close of such quarter, at the purchase price
specified in subsection (b), below.
(2) Under the strategic timed investments method. Any contributions
that an Eligible Employee makes to his Account under the Plan for any calendar
year under Section 4(b), above, plus any contributions that the Company makes
with respect to those Eligible Employee contributions for that year under
Section 5, above, shall be applied to the purchase of shares of the Company's
common stock, on (or as soon as administratively possible after) the first
business day after any such contribution has been credited to his Account, at
the purchase price specified in subsection (b), below.
(b) Purchase price of the Company's common stock. The purchase price
that shall be paid, under subsection (a), above, for each share of the
Company's common stock that is purchased under this Plan on behalf of any
Eligible Employee shall be the price per share actually paid for the shares on
the New York Stock Exchange.
(c) Stock credited to Eligible Employee's Account. The shares of the
Company's common stock that are purchased under subsection (a), above, on
behalf of any Eligible Employee shall be credited to his Account under the Plan
as soon as administratively possible after the date the shares have been
purchased. As soon as such shares have been credited to the Eligible
Employee's Account, he shall have all of the rights and privileges afforded to
any other holder of the Company's common stock.
(d) Issuance of stock certificates. A stock certificate will not be
issued automatically to an Eligible Employee after shares of the Company's
common stock have been credited to his Account under subsection (c), above.
However, at any time after such shares have been credited to his Account, the
Eligible Employee may ask the Custodian to issue a stock certificate
representing any or all of the shares then credited to his Account. Any such
request must be made in writing. The Custodian or its agent(s) shall issue a
stock certificate to the Eligible Employee promptly after it receives his
written request.
Any such stock certificate shall be issued to the Eligible Employee in his
own name; provided, however, that if the Eligible Employee is married, the
stock certificate may be issued jointly, to the Eligible Employee and his
spouse, either as joint tenants with the right of survivorship or as tenants in
common, as the Eligible Employee may elect.
If an Eligible Employee wishes to sell any shares of the Company's common
stock that have been credited to his Account, he will not be required to secure
a stock certificate from the Custodian, evidencing his ownership of such
shares, if the sale is executed through the Custodian or its agent(s).
However, if the sale is to be executed by person(s) other than the Custodian or
its agent(s), then the Eligible Employee must secure a stock certificate from
the Custodian or its agent(s), evidencing his ownership of the shares he wishes
to sell; the Eligible Employee must request such stock certificate in writing,
and the Custodian or its agent(s) shall issue the certificate to the Eligible
Employee promptly after it receives his written request. Any shares of the
Company's common stock that are purchased under Section 4(b) must be held for a
period of at least six months before they can be sold.
Section 8. DIVIDENDS
Dividends that the Company declares on shares of its common stock will be
credited to each Eligible Employee's Account, in proportion to the number of
whole and fractional shares of the such stock that are credited to such
employee's Account on the record date for the payment of such dividends. Any
such dividends shall be reinvested, on (or as soon as administratively possible
after) the first business day following the close of each calendar quarter, in
shares of the Company's common stock, at the price per share then prevailing on
the New York Stock Exchange, unless the Eligible Employee elects to receive a
check for the dividends that the Company has declared during that calendar
quarter. An Eligible Employee who wishes to have any such dividends paid to
him, shall so inform the Custodian, in writing, at least 30 business days
before the last day of the calendar quarter, and the Custodian shall issue the
dividend check to the Eligible Employee as soon as administratively possible
after the close of the calendar quarter.
Section 9. CHANGES IN SHARES OF THE COMPANY'S COMMON STOCK
If the shares of the Company's common stock are subdivided or combined, or
if the Company declares a stock dividend, the maximum number of shares of the
Company's common stock which may thereafter be purchased under the Plan will be
proportionately increased or decreased, as the case may be, the terms relating
to the price at which such shares may be purchased and the amount of
contributions necessary to purchase them will be adjusted appropriately, and
such other action(s) will be taken as the Board determines to be necessary or
appropriate under the circumstances.
Section 10. EQUAL RIGHTS AND PRIVILEGES
All Eligible Employees who have purchased shares of the Company's common
stock under this Plan shall have the same rights and privileges as any other
holder of such shares.
Section 11. LIMITATIONS ON TRANSFER
The right granted to any Eligible Employee under this Plan to purchase
shares of the Company's common stock is not transferable by such employee other
than by will or the laws of descent and distribution, and during the Eligible
Employee's lifetime, the right to purchase shares of the Company's common stock
under this Plan shall be exercisable only by him.
Section 12. ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Company's Board, who may appoint
such agent(s) as it deems necessary or appropriate to assist it with the
operation and administration of the Plan.
Section 13. EXPENSES
The Company shall pay all of the administrative costs associated with the
Plan, including, without limitation, the Custodian's fees, and brokerage
expenses incurred in connection with the purchase (but not the sale) of shares
of the Company's common stock by Eligible Employees under the Plan.
Section 14. DESIGNATION OF CUSTODIAN
Subject to its right to terminate the designation at any time, the Company
has designated the Custodian as the custodian, recordkeeper, and transfer agent
for purposes of this Plan. The Company shall also designate the broker-dealer
selected for administration of the strategic timed investments under Section
4(b) above. The terms and conditions of the parties' relationship for this
purpose shall be set forth in a separate written agreement between them.
Section 15. PURCHASE OF SHARES FOLLOWING TERMINATION OF PARTICIPATION
If an Eligible Employee terminates his participation under this Plan,
either by ceasing to make contributions to his Account under the Plan under
Section 4, above, or by terminating his employment with the Company for any
reason (including death), then any contributions that are held in his Account
as of the effective date of such termination of participation will be applied
to the purchase of shares of the Company's common stock, on (or as soon as
administratively possible after) the first business day following the close of
the calendar quarter during which his termination of participation became
effective, and such shares will be credited to his Account as soon as
administratively possible after the close of that calendar quarter.
Section 16. AMENDMENT OR TERMINATION OF PLAN
(a) Amendment. The Company reserves the power at any time to amend this
Plan, through action of its Board; provided, however, that the Company shall
not have the power to amend the Plan in any manner that would increase the
duties or liabilities of the Custodian or affect its fees for services required
under the Plan, unless the Custodian consents thereto in writing.
(b) Termination. This Plan shall continue in effect until it terminates
pursuant to Section 2 above.
(c) Additional purchases of shares and issuance of stock certificates
upon Plan termination. If the Plan is terminated for any reason, then:
(1)(A) any contributions that have been made under Section 4(a)
above and that are held in any Eligible Employee's Account as of the effective
date of the Plan's termination will be applied to the purchase of shares of the
Company's common stock, on (or as soon as administratively possible after) the
first business day following the close of the calendar quarter during which the
Plan terminated, and such shares will be credited to his Account as soon as
administratively possible after the close of that calendar quarter; and
(B) any contributions that have been made under Section 4(b)
above and that are held in any Eligible Employee's Account as of the effective
date of the Plan's termination will also be applied to the purchase of shares
of the Company's common stock, on (or as soon as administratively possible
after) the first business day after such date; and
(2) any whole shares of the Company's common stock that are credited
to the Account of any Eligible Employee as of the effective date of the Plan's
termination, plus any such shares that have been purchased, under Section 7(a)
or subsection (c)(1), above, will be evidenced by a stock certificate, which
will be delivered to him (or his representative) as soon as administratively
possible following such termination.
Section 17. RESPONSIBILITY
Neither the Company, any member of the Board, the Custodian, nor any
broker through whom purchases or sales of stock are executed pursuant to this
Plan shall have any responsibility or liability, other than liabilities arising
under applicable federal or state securities laws, for any act or omission to
act, including, without limitation, any action taken with respect to the price,
time, quantity, or other terms and conditions of the purchase of shares of the
Company's common stock under the Plan. The Company's determination as to any
issue that may arise regarding the conduct or operation of the Plan shall be
final.
Section 18. DEFINITIONS
(a) "Account" means the account established by the Company under Section
6(a) of the Plan on behalf of each Eligible Employee who makes contributions
under Section 4.
(b) "Base Pay" means, with respect to each Eligible Employee and for each
pay period, his regular compensation (including commissions) earned from the
Company during such period, before any deductions or withholding of income or
employment taxes, and exclusive of (1) overtime pay, (2) bonuses, (3) expense
reimbursements, and (4) any other additional compensation.
(c) "Board" means the Board of Directors of the Company, as constituted
from time to time.
(d) "Company" means Terex Corporation, a Delaware corporation, and any
successor to all or a major portion of its assets or business which assumes the
Company's obligations under this Plan.
(e) "Custodian" means any bank, trust company, or other financial
institution, appointed by the Board under Section 14, that is qualified, under
applicable federal and state laws, including federal and state securities laws,
to serve as the custodian, recordkeeper, and transfer agent of shares of the
Company's common stock under this Plan.
(f) "Eligible Employee" means any individual who is actively employed by
the Company.
(g) "Plan" means the Terex Corporation Employee Stock Purchase Plan, as
set forth in this instrument and any amendments or supplements hereto.
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of December 9, 1994, by and among RANDOLPH W. LENZ
("Lenz"), DAVID J. LANGEVIN ("Langevin"), MARVIN B. ROSENBERG ("Rosenberg";
Lenz, Langevin and Rosenberg, collectively, the "Holders"), and TEREX
CORPORATION, a Delaware corporation (the "Company").
WHEREAS, pursuant to an agreement (the "Termination Agreement")
between KCS Industries, L.P., a Connecticut limited partnership, and the
Company dated January 1, 1994, as amended October 17, 1994, the Company agreed
to issue 38,800 shares of its Series B Cumulative Redeemable Convertible
Preferred Stock, par value $.01 per share (the "Preferred Stock"), and Warrants
(the "Warrants") to purchase 15,700 shares of the common stock of the Company,
par value $.01 per share (the "Common Stock") to Lenz, and 25,500 shares of
Preferred Stock and Warrants to purchase 45,625 shares of Common Stock to each
of Langevin and Rosenberg; and
WHEREAS, pursuant to the Termination Agreement, the Company agreed
that the Holders would be granted appropriate and standard registration rights
for registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the Preferred Stock and Warrants to be issued to the Holders and the
shares of Common Stock for which the Preferred Stock is convertible and the
Warrants are exercisable (the Preferred Stock, Warrants and Common Stock for
which they are convertible or exercisable, collectively, the "Registrable
Securities").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Filing Notice" shall have the meaning set forth in Section 3.1
hereof.
"Mandatory Registration Rights" shall mean the rights of the
Holders to have a registration statement filed by the Company with respect to
the Registrable Securities held by them in accordance with the provisions of
Section 2 hereof.
"Piggyback Registration Rights" shall mean the rights of the
Holders to have their Registrable Securities included in any registration
statement filed by the Company with respect to the sale of Securities by the
Company or by any other securityholders of the Company in accordance with the
provisions of Section 3 hereof.
"Registration Period" shall mean the period commencing on the
date hereof and ending at such time as the Holders do not own any Registrable
Securities.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean the equity securities of the Company.
"Selling Securityholders," when used with respect to a
registration statement, shall mean the Holders and any of the other holders of
Registrable Securities whose Registrable Securities are included in a
registration statement pursuant to an exercise by the Holders and other
securityholders of their registration rights.
"Underwriter(s)" shall mean any one or more investment banking
or brokerage firms to or through whom the Holders or the Company, as the case
may be, may offer and sell Registrable Securities pursuant to a transaction
requiring the filing of a registration statement under the Securities Act,
including one or more of such firms who shall manage such public offering
through such Underwriters and who are referred to herein as "Managing
Underwriter(s)."
2. Mandatory Registration Rights.
2.1 In addition to, and not in lieu of, the Piggyback
Registration Rights set forth under Section 3 hereof, the Company shall, during
the Registration Period, when requested to do so in writing by the Holders (the
"Request Date"), use its best efforts to prepare and file a registration
statement (on the then appropriate form or, if more than one form is available,
on the appropriate form selected by the Company) with the SEC under the
Securities Act, providing for the offering of the Registrable Securities by the
Holders and to use its best efforts to have such Registrable Securities
qualified for sale under state securities or blue sky laws, subject to the
provisions of this Section 2 and Sections 5 and 6 hereof. Further, the Company
shall use its best efforts to have such registration statement declared
effective by the SEC (within the meaning of the Securities Act) as soon as
practicable thereafter, and shall take all necessary action (including, if
required, the filing of any supplements or post-effective amendments to such
registration statement) to keep such registration statement effective to permit
the lawful sale of such Registrable Securities included thereunder for the
period of one (1) year, subject, however, to the further terms and conditions
set forth in Sections 2.5 through 5 hereof.
2.2 The Company shall only be required to file one registration
statement (as distinguished from supplements or pre-effective or post-effective
amendments thereto) pursuant to the provisions of this Section 2.
2.3 In the event that preparation of a registration statement
is commenced by the Company pursuant to the provisions of this Section 2, but
such registration statement is not filed with the SEC, either at the
determination of the Company or at the request of the Holders, for any reason,
the Company shall not be deemed to have satisfied its obligations pursuant to
the Mandatory Registration Rights provided in this Section 2.
2.4 The Company shall bear and pay all fees, costs and expenses
incident to such registration statement and incident to keeping it effective
and in compliance with all federal and state securities laws, rules, and
regulations (including, without limitation, registration fees, blue sky
qualification fees and expenses, exchange listing fees and expenses, legal
fees, including reasonable fees and expenses of one counsel (who shall be
reasonably acceptable to the Company) for the Holders, printing costs and costs
of any special audits or accounting fees), but excluding fees or disbursements
of accountants or other advisors for the Holders and any underwriting discounts
and commissions with respect to the Registrable Securities of the Holders and
any ordinary overhead expenses of the Holders. The Selling Shareholders shall
have the right to select the Underwriter and selling agents in connection with
such registration, provided such Underwriter and selling agents are reasonably
acceptable to the Company.
3. Piggyback Registration Rights.
3.1 If, at any time during the Registration Period, the Company
proposes to file a registration statement under the Securities Act with respect
to any proposed public offering by the Company or by any holders of any class
of Securities of the Company, the Company shall, not later than 30 days prior
to the proposed date of filing of such registration statement with the SEC
under the Securities Act, give written notice (a "Filing Notice") of the
proposed filing to the Holders which notice shall describe in detail the
proposed registration and distribution (including those jurisdictions where
registration under the securities or blue sky laws is intended). During the
Registration Period, the Holders may elect, by written notice to the Company
(which notice shall specify the aggregate type and number of Registrable
Securities proposed to be offered and sold by the Holders pursuant to such
registration statement and a general description of the manner in which the
Holders intend to offer and sell such Registrable Securities) given within 15
days after receipt of the Filing Notice from the Company, to have any or all of
the Registrable Securities owned by it included in such registration statement,
and the Company shall use its best efforts to include such Registrable
Securities in such registration statement. If the Managing Underwriter(s) or
Underwriters (in the case of an underwritten registration) should reasonably
object to the exercise of the Piggyback Registration Rights with respect to
such registration statement, then in the discretion of the Company, either:
(i) the Registrable Securities of the Holders shall
nevertheless be included in such registration statement subject to the
condition that the Holders may not offer or sell their Registrable Securities
included therein for a period of at least 90 days after the initial effective
date of such registration statement, whereupon the Company shall be obligated
to file one or more post-effective amendments to such registration statement to
permit the lawful offer and sale of such Registrable Securities for a
reasonable period thereafter; or
(ii) if the Company should reasonably determine that the
inclusion of such Registrable Securities, notwithstanding the provisions of the
preceding clause (i), would materially adversely affect the offering
contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer or none of the
Securities of the Selling Securityholders, then (x) the number of Securities of
the Selling Securityholders included in such registration statement, including
the Holders, shall be reduced pro-rata among such Selling Securityholders
(based upon the number of Securities requested to be included in the
registration), if the Company recommends the inclusion of fewer Securities, or
(y) none of the Securities of the Selling Securityholders shall be included in
such registration statement, if the Company recommends the inclusion of none of
such Securities; provided, however, that if Securities are being offered for
the account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of Securities intended to
be offered by holders of Securities than the fraction of similar reductions
imposed on such other persons or entities (other than the Company).
3.2 Unless otherwise required by law, rule or regulation, if
Registrable Securities owned by the Holders are included in such registration
statement, the Company shall bear and pay all fees, costs, and expenses
incident to such inclusion, including, without limitation, registration fees,
blue sky qualification fees and expenses, exchange listing fees and expenses,
legal fees, including reasonable fees and expenses of one counsel (who shall be
reasonably acceptable to the Company) for the Holders, but excluding fees or
disbursements of accountants or other advisors for the Holders, printing costs
and costs of any special audits or accounting fees and also excluding
underwriting discounts and commissions with respect to the Registrable
Securities of the Holders included therein and any ordinary overhead expenses
of the Holders.
3.3 The Holders shall have the right to exercise their
Piggyback Registration Rights pursuant to the provisions of this Section 3 on
any number of occasions that the Company shall determine to file a registration
statement.
3.4 The rights of the Holders under this Section 3 are solely
piggyback in nature, and nothing in this Section 3 shall prevent the Company
from reversing a decision to file a registration statement or from withdrawing
any such registration statement before it has become effective.
3.5 The Piggyback Registration Rights granted pursuant to this
Section 3 shall not apply to (a) a registration relating solely to employee
stock option, purchase or other employee plans, (b) a registration related
solely to a dividend reinvestment plan, or (c) a registration on Form S-4 or
Form S-8.
4. Information to be Furnished. In the event any of the
Registrable Securities are to be included in a registration statement under
Section 2 or 3, the Holders and the Company shall take the following actions:
4.1 The Holders will furnish to the Company all information
required by the Securities Act to be furnished by sellers of securities for
inclusion in the registration statement, together with all such other
information which the Holders have or can reasonably obtain and which
reasonably may be required by the Company in order to have such registration
statement become effective and such Registrable Securities qualified for sale
under applicable state securities laws.
4.2 The Company, before filing a registration statement,
amendment or supplement thereto, will furnish copies of such documents to legal
counsel selected by the Holders. In addition, the Company will make available
for inspection by the Holders, any Underwriter, attorney or other agent of the
Holders or any Underwriter all information reasonably requested by such
persons. All information provided to the Holders, any Underwriter or any
attorney or agent of the Holders or any Underwriter shall be kept strictly
confidential and secret by the Holders, such Underwriter or attorney or agent
of the Holders or such Underwriter.
4.3 The Company will promptly notify the Holders of the
occurrence of any event which renders any prospectus then being circulated
among prospective purchasers misleading because such prospectus contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements made, in light of the circumstances in which they were
made, not misleading, and the Company will amend the prospectus so that it does
not contain any material misstatements or omissions and deliver the number of
copies of such amendments to the Holders as the Holders may require.
4.4 In the event that the Selling Securityholders shall select
an Underwriter pursuant to Section 2.4 hereof, the Company will enter into
customary agreements (including an underwriting agreement in customary form)
and take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities.
4.5 The Company will furnish to the Holders and to each
Underwriter, if any, a signed counterpart, addressed to the Holders or such
Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a
comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Holders or the Managing Underwriter therefor may reasonably request.
4.6 The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
4.7 The Company will use its best efforts to cause all Common
Stock for which the Preferred Stock may be converted or for which the Warrants
may be exercised to be listed on each securities exchange on which the Common
Stock of the Company is then listed.
5. Conditions to Company's Obligations. The obligations of the
Company to cause the Registrable Securities owned by the Holders to be
registered under the Securities Act are subject to each of the following
limitations, conditions and qualifications:
(a) The Company shall not be obligated to file any
registration statement at any time if the Company would be required by the
staff of the SEC or the rules issued under the Securities Act to include
financial statements audited as of any date, or for any period ended, other
than the end of its fiscal year.
(b) The Company shall be entitled to postpone for a
reasonable period of time (but not in excess of 60 days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to Section 2 hereof, if the Company determines, in its reasonable
judgment, that such registration and offering would materially interfere with
any financing, acquisition, corporate reorganization or other material
transaction involving the Company, and the Company promptly gives the Holders
written notice of such determination.
(c) The Company may require, as a condition to fulfilling
its obligations to register the Registrable Securities under Sections 2 or 3
hereof, that the Holders execute reasonable and customary indemnification
agreements for the benefit of the Underwriters of the registration; provided,
however, that the Holders may not be required as such a condition to indemnify
the Underwriters except with respect to information relating to the Holders
either (i) furnished by the Holders for use in such registration statement or
(ii) contained in specific sections of the registration statement expressly set
forth in the applicable indemnification provisions.
(d) The Company shall not be required to fulfill any
registration obligations under this Agreement, if the Company provides the
Holders with an opinion of counsel stating that the Holders are free to sell in
the manner proposed by them the Registrable Securities that they desired to
register without registering such Registrable Securities or such Registrable
Securities can be freely transferred under Rule 144 of the Securities Act or
otherwise without registration in the open market in compliance with the
Securities Act.
6. Registration Under State Securities Laws. The Company shall use
its best efforts to register or qualify any Registrable Securities included in
a registration statement pursuant to Section 2 or 3 hereof under state "blue
sky" or similar securities laws in such jurisdictions as the Holders reasonably
request and to take such other action as may be reasonably necessary to enable
the Holders to sell their Registrable Securities in the jurisdictions where
such registration or qualification was made, provided that the Company will not
be required to qualify to do business in any jurisdiction in which it is not so
qualified or to execute a general consent to service of process in any
jurisdiction in which it has not executed such a consent.
7. Indemnification.
7.1 The Company will indemnify and hold the Holders and their
agents (including sales agents and Underwriters) harmless to the maximum extent
permitted by law, from and against any loss, claim, liability, damage or
expense (including attorneys' fees) resulting from a claim that any
registration statement, prospectus, or amendment thereof or supplement thereto,
which includes Registrable Securities to be sold by the Holders, contains a
material misstatement or omission, unless such claim is based upon information
relating to the Holders either (a) furnished in writing by or on behalf of the
Holders for use in the registration statement or prospectus or (b) furnished or
confirmed in writing by or on behalf of the Holders with the reasonable
expectation that such information would be used in the preparation thereof; and
the Holders will indemnify and hold harmless the Company, its officers,
directors, shareholders and agents and each person, if any, who controls
(within the meaning of the Securities Act or the Exchange Act) the Company
against any loss, claim, liability, damage or expense (including attorneys'
fees) resulting from any such claim relating to such information relating to
the Holders either (a) furnished in writing by or on behalf of the Holders for
use in the registration statement or prospectus or (b) furnished or confirmed
in writing by or on behalf of the Holders with the reasonable expectation that
such information would be used in the preparation thereof.
7.2 Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
under this Section 7 or otherwise to the extent such omission did not
materially prejudice the indemnifying party. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written notice,
which shall include its agreeing to indemnify the indemnified party regarding
such claim, delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there exists a conflict of interest between the
indemnifying party and any indemnified party or that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to, and inconsistent or in conflict with, those available to
the indemnifying party, the indemnified party or parties shall have the right
to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party pursuing the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the preceding sentence, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred to
in such clause (i) or (iii). No settlement of an action against any party
under this Section 7 shall bind the other party unless such other party agrees
in writing to the terms of such settlement (which agreement will not be
unreasonably withheld).
7.3 The obligation of the indemnifying party to indemnify the
indemnified party under this Section 7 shall, in each case, be in addition to
any liability which the indemnifying party may otherwise have hereunder or
otherwise at law or in equity.
7.4 If the indemnification provided for in this Section 7 from
the indemnifying party is applicable in accordance with its terms but for any
reason is held to be unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein,
then the indemnifying party, 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, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative faults of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative faults of such indemnifying
party and indemnified party 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 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. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Sections 7.1 and 7.2 hereof,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. Notwithstanding the
provisions of this Section 7.4, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and the Holders shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of the Holders were offered to the
public exceeds the amount of any damages which the Holders has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any other person.
8. Miscellaneous.
8.1 Amendments and Waivers. This Agreement may be modified or
amended only by a writing signed by the Company and the Holders.
8.2 No Waiver. No failure to exercise and no delay in
exercising, on the Company's or the Holders's part of any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
8.3 Survival of Agreements. All agreements, representations
and warranties contained herein in connection with the transactions
contemplated hereby shall survive the execution and delivery of this Agreement.
8.4 Applicability to Future Securities. For the purposes of
this Agreement, the term "Registrable Securities" shall include (i) any and all
Securities of the Company into which the Registrable Securities may be
exchanged or converted, (ii) any and all Securities which are distributed by
the Company to holders of Registrable Securities by reason of their ownership
of Registrable Securities and (iii) any and all Securities received by the
Holders by reason of their ownership of Registrable Securities pursuant to a
recapitalization, reclassification, stock split, merger, consolidation or other
business combination or other similar transaction involving the Company.
8.5 Rule 144. The Company covenants that, for so long as it may
otherwise be required to file reports under the Securities Act or the Exchange
Act, it will file any reports required to be filed by it under the Securities
Act and the Exchange Act and that it will take such further action as any
Shareholder may reasonably request, all to the extent required from time to
time to enable the Holders to sell Registrable Securities without registration
under the Securities Act within the limitations of the exemptions provided by
(a) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon
the request of the Holders, the Company will deliver to the Holders a written
statement as to whether it has complied with such requirements.
8.6 Lock-Up. The Company agrees not to effect any public sale
or distribution of any securities similar to those being registered in
accordance with Section 2 or 3 hereof, or any securities convertible into or
exchangeable or exercisable for such securities, during the 14 days prior to,
and during the 90-day period beginning on, the effective date of any
registration statement (except as part of such registration statement where the
Holders consents) or the commencement of a public distribution of Registrable
Securities; provided, however, that the provisions of this paragraph shall not
prevent the conversion or exchange of any securities pursuant to their terms,
or the terms of any agreement or instrument pursuant to which such securities
are issued, into or for other securities.
8.7 Binding Effect and Benefits. This Agreement shall be
binding upon and shall inure to the benefit of the Company and the Holders and
their respective successors and assigns.
8.8 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
8.9 Separability of Provisions. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
8.10 Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of laws provisions thereof. The descriptive headings of
the several sections and subsections hereof are for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
8.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute a single original instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
/s/ Randolph W. Lenz
Randolph W. Lenz
/s/ David J. Langevin
David J. Langevin
/s/ Marvin B. Rosenberg
Marvin B. Rosenberg
TEREX CORPORATION:
By: /s/ Ronald M. DeFeo
Name: Ronald M. DeFeo
Title: President
AMENDMENT TO CONTRACT TERMINATION AGREEMENT DATED JANUARY 1, 1994
AMENDMENT, made as of October 17, 1994, by and between TEREX CORPORATION, a
Delaware corporation ("Terex"), and KCS INDUSTRIES, L.P., a Connecticut limited
partnership ("KCS"), to that certain contract termination agreement dated
January 1, 1994 between Terex and KCS (the "Letter Agreement"), a copy of which
is attached hereto. All terms not otherwise defined herein shall have the
meanings set forth in the Letter Agreement.
W I T N E S S E T H:
WHEREAS, Terex and KCS entered into the Letter Agreement to provide for the
Suspension and the Termination of the Contract prior to the expiration date of
the Contract; and
WHEREAS, the Letter Agreement set forth certain consideration to be issued by
Terex to Randolph W. Lenz, David J. Langevin and Marvin B. Rosenberg,
executives of KCS, in consideration of the agreement of KCS to the Suspension
and the Termination; and
WHEREAS, until the consummation of the Issuance, the expense recorded for the
total amount of the liability of Terex to KCS under the Contract remains and
Terex may not record the gain that will result from the issuance of the
consideration under the Letter Agreement with a resulting increase in net worth
to Terex; and
WHEREAS, under the rules of the New York Stock Exchange, unless the
consideration to be issued by Terex to Randolph W. Lenz, David J. Langevin and
Marvin B. Rosenberg is restructured, the Termination may not be currently
implemented, and
WHEREAS, Terex and KCS have determined it to be in the best interest of all
parties that the consideration to be issued to Messrs. Lenz, Langevin and
Rosenberg be restructured.
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the Letter Agreement is hereby amended as follows:
1. The second paragraph of the Letter Agreement is hereby amended by
deleting the reference to approval by the Terex Stockholders of the Issuance,
since, as restructured, approval by the Terex Stockholders will no longer be a
necessary condition precedent to the Suspension, Termination and Issuance, such
that the second paragraph shall now read in full as follows:
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 December 31, 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 Terex desires to
terminate the Contract (the "Termination") effective as of the close of
business on December 31, 1993.
2. The third paragraph of the Letter Agreement is hereby deleted in its
entirety and the following paragraphs are hereby inserted in its place:
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, as soon as practicable (the "Issuance"), (i) 38,800 shares of its Series
B Cumulative Redeemable Convertible Preferred Stock (the "Preferred Stock") and
Common Stock Purchase Warrants ("Warrants") to purchase 15,700 shares of the
common stock of Terex ("Common Stock") to Randolph W. Lenz, and (ii) 25,500
shares of Preferred Stock and Warrants to purchase 45,625 shares of Common
Stock 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 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 A
Stock.
Terex also agrees to pay to Mr. Lenz, as soon as practicable following the
"Warrant Ratio Determination Date" as determined pursuant to the Warrant
Agreement for the Common Stock Purchase Warrants of Terex sold inTerex's
private placement consummated on December 20, 1993 (the "Private Placement
Warrants"), an amount in cash equal to (x) the difference, if any, between (i)
the number of shares of Common Stock a holder would be entitled to receive upon
exercise of 38,800 Private Placement Warrants, less (ii) 15,700, multiplied by
(y) the closing price on the New York Stock Exchange of a share of Common Stock
on the Warrant Ratio Determination Date. If the amount determined pursuant to
clause (x)(i) of this paragraph is less than 15,700, then the Warrants received
by Mr. Lenz shall be adjusted so that the Common Stock which may be received
upon the exercise thereof shall equal such lesser number.
Terex also agrees to pay to each of Messrs. Langevin and Rosenberg, as soon as
practicable following the Warrant Ratio Determination Date, an amount in cash
equal to (x) the difference, if any, between (i) the number of shares of Common
Stock a holder would be entitled to receive upon exercise of 25,500 Private
Placement Warrants, less (ii) 45,625, multiplied by (y) the closing price on
the New York Stock Exchange of a share of Common Stock on the Warrant Ratio
Determination Date. (Such cash payments to Messrs. Langevin and Rosenberg, if
any, along with the cash payment to Mr. Lenz pursuant to the previous
paragraph, if any, collectively, the "Cash Payments".) If the amount
determined pursuant to clause (x)(i) of this paragraph is less than 45,625,
then the Warrants received by each of Messrs. Langevin and Rosenberg shall be
adjusted so that the Common Stock which may be received upon the exercise
thereof shall equal such lesser number.
Terex, in its sole discretion, may pay to any or all of Messrs. Lenz, Langevin
and Rosenberg all or any portion of the estimated Cash Payments at any time
prior to the Warrant Ratio Determination Date up to the maximum Cash Payment
equal to the amount they would have received assuming the date of payment were
the Warrant Ratio Determination Date, subject to adjustment of any such Cash
Payments made prior to the Warrant Ratio Determination Date in the event the
closing price on the Warrant Ratio Determination Date differs from that assumed
in making any such Cash Payments.
3. The fourth paragraph of the Letter Agreement is hereby deleted in its
entirety.
TEREX CORPORATION
By: /s/ Ronald M. DeFeo
Name: Ronald M. DeFeo
Title: President and COO
KCS INDUSTRIES, L.P.
By: KCS INDUSTRIES, L.C.
as General Partner
By: /s/ Randolph W. Lenz
Name: Randolph W. Lenz
Title: Manager
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CMH ACQUISITION CORP.
AND
DAC ACQUISITION CORP.
WITH RESPECT TO THE
SALE OF THE OUTSTANDING STOCK
OF DREXEL INDUSTRIES, INC.
DATED AS OF APRIL 15, 1994
TABLE OF CONTENTS
Section Page
1. Sale and Purchase of Shares. 1
2. Purchase Price. 2
2.1 The Purchase Price. 2
2.2 Payment of Purchase Price 2
2.3 Closing Statement of Net Worth;
Adjustment to Purchase Price 2
2.4 Royalty Payments 8
2.5 Clark Payments 9
3. Closing. 10
3.1 Date of Closing. 10
3.2 Termination. 10
4. Representations and Warranties of Seller. 11
4.1 Organization, Standing and Authority of Seller. 11
4.2 Authorization of Agreement. 11
4.3 Organization, Standing and
Qualification of Drexel; Subsidiaries. 11
4.4 Corporate Records. 12
4.5 Consents of Third Parties. 12
4.6 Capitalization. 12
4.7 Ownership of Shares. 13
4.8 Financial Statements. 13
4.9 Absence of Certain Liabilities and Changes. 14
4.10 Inventory. 16
4.11 Receivables. 16
4.12 Taxes. 17
4.13 List of Material Contracts, etc. 18
4.14 Absence of Defaults. 19
4.15 Agreements Regarding Employees. 19
4.16 Employee Benefit Plans. 20
4.17 Litigation; Compliance with Laws. 23
4.18 Real Property. 24
4.19 Tangible Personal Property;
Necessary Assets; Insurance. 25
4.20 Intellectual Property. 26
4.21 Environmental Matters. 27
4.22 Permits and Licenses. 31
4.23 Intercompany Transactions 31
4.24 Other Information 32
4.25 Terex's and Seller's Financial Condition 32
4.26 Sale Process 32
4.27 Powers of Attorney 33
4.28 Government Contracts 33
5. Representations and Warranties of Buyer. 35
5.1 Buyer's Organization. 35
5.2 Authorization of Agreement 35
5.3 Consents of Third Parties. 35
5.4 Litigation. 35
5.5 Investment. 36
5.6 Financing. 36
6. Further Agreements of the Parties. 36
6.1 Access to Information. 36
6.2 Conduct of the Business Pending the Closing. 36
6.3 [Intentionally Omitted]. 38
6.4 Other Action. 38
6.5. Notice by Buyer. 38
6.6 Expenses. 39
6.7 Publicity. 39
6.8 Transfer Taxes. 39
6.9 Supplements of Disclosure. 39
6.10 Preservation of Records. 39
6.11 Certain Post-Closing Assistance by Drexel. 40
6.12 Covenant not to Compete 40
6.13 Continuing Intercompany Agreements;
Supply of Proprietary Parts; Termination
of Drexel Production for Terex; Other
Intercompany Arrangements 42
6.14 Access to Dealer Network and Purchase of
Proprietary Parts 43
6.15 Intercompany Accounts 44
6.16 Buyer Floor Plan Financing 44
6.17 Environmental Matters 44
6.18 Lockboxes 46
6.19 Indentures 46
6.20 Drexel's Shipping Schedule 46
6.21 Enforcement of Rights 46
7. Conditions of Closing. 47
7.1 Conditions Precedent to Obligations of Buyer. 47
7.2. Conditions Precedent to Obligations of Seller. 47
8. Documents to be Delivered at the Closing. 50
8.1 Documents to be Delivered by Seller. 50
8.2 Documents to be Delivered by Buyer. 51
9. Indemnification and Related Matters. 51
9.1 Indemnification for Breaches of
Representations and Convenants, etc.. 51
9.2 Determination of Damages and Related Matters. 53
9.3 Other Indemnification by Terex and Seller. 53
9.4 Time and Manner of Certain Claims. 55
9.5 Defense of Claims by Third Parties. 56
9.6 Buyer's Knowledge 57
10. Tax Matters. 57
10.1 Tax Returns. 57
10.2 Section 338 Elections and Forms. 61
10.3 Liability for Taxes. 63
10.4 Certain Tax Payment Responsibility. 63
10.5 Tax Contests. 64
10.6 Refunds, Tax Credits. 65
10.7 Tax Sharing Agreements. 66
11. Miscellaneous. 66
11.1 Finders. 66
11.2 Entire Agreement. 66
11.3 Governing Law. 67
11.4 Schedules; Tables of Contents and Headings. 67
11.5 Notices. 67
11.6 Separability. 68
11.7 Waiver. 68
11.8 Binding Effect; Assignment. 68
11.9 Best Knowledge. 69
11.10 Counterparts. 69
11.11 WAIVER OF JURY TRIAL. 69
11.12 Set-Off. 69
SCHEDULES TO AGREEMENT
Schedule and
Section Number Description
2.3(a) Amount of Receivables to reduce Net Worth
2.3(f) Certain Drexel Receivables
4.5 Consents and Approvals
4.6 Subsidiaries
4.8 Balance Sheet of Drexel as of October 31, 1993
4.9 Exceptions to Warranty on Operation of Business in Ordinary
Course since the date of the Balance Sheet
4.12 Exceptions to Tax Warranty
4.15 Agreements Regarding Employees; Labor Disputes
4.17 Litigation
4.18 Part 1 Real Property Owned or Leased
4.18 Part 2 Permitted Liens
4.20 Patents and Trademarks
4.21 Environmental Citations
4.22 Exceptions to Permits and Licenses
4.23 Exceptions to Intercompany Transactions
4.27 Exceptions to Powers of Attorney
4.28 Government Contracts
6.2 Exceptions to Conduct of the Business Pending the Closing
6.14(b) Clark Proprietary Parts
7.1(f) Employment Agreements
EXHIBITS TO AGREEMENT
Exhibit Description Section Reference
A Balance Sheet of Drexel as of October 31, 1993, 4.8
as adjusted
B License Agreement
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
The parties to this Amended and Restated Stock Purchase Agreement (this
"Agreement"), dated as of this 15th day of April, 1994, are CMH ACQUISITION
CORP., a Delaware corporation ("Seller"), and DAC ACQUISITION CORP., a Delaware
corporation ("Buyer").
Drexel Industries, Inc. ("Drexel"), a Pennsylvania corporation and a
wholly-owned subsidiary of Seller, is engaged in the development, manufacture,
marketing and distribution of industrial forklift trucks.
Seller wishes to sell, and Buyer wishes to purchase, all the outstanding
capital stock of Drexel (the "Shares").
On March 10, 1994 the parties hereto entered into a Stock Purchase
Agreement (the "Original Agreement") pursuant to which Seller agreed to sell,
and Buyer agreed to purchase, the Shares subject to the terms and conditions
set forth therein.
The parties hereto desire to amend and restate the Original Agreement in
its entirety.
As used in this Agreement, the term "Business" shall mean all of the
businesses and operations conducted by Drexel taken as a whole.
It is therefore agreed that the Original Agreement be amended and restated
as follows:
1. Sale and Purchase of Shares. Subject to the terms and conditions of
this Agreement, at the closing referred to in Section 3 (the "Closing"), Seller
shall sell and transfer to Buyer, and Buyer shall purchase from Seller, the
Shares.
2. Purchase Price.
2.1 The Purchase Price. Subject to adjustment as provided for in
Section 2.3 below, the aggregate purchase price for the Shares shall be eleven
million six hundred twenty-six thousand nine hundred forty-five dollars
($11,626,945) (the "Purchase Price"). The Purchase Price shall be payable as
provided in Section 2.2.
2.2 Payment of Purchase Price. At the Closing, Buyer shall pay to
Seller the cash portion of the Purchase Price by wire transfer of immediately
available funds to an account designated by Seller.
2.3 Closing Statement of Net Worth; Adjustment to Purchase Price.
(a) No later than one (1) week prior to the Closing Date, Seller
shall cause to be prepared and delivered to Buyer an estimated balance sheet
for Drexel as of the close of business on the day immediately preceding the
Closing Date (the "Closing Balance Sheet") and a computation of Drexel's
estimated net worth as of the Closing Date (the "Closing Net Worth"). The
Closing Balance Sheet shall present fairly the expected financial position of
the Business as of the close of business on the day immediately preceding the
Closing Date, in conformity with generally accepted accounting principles
("GAAP") applied on a basis consistent with the Balance Sheet, except that the
Closing Balance Sheet will not contain footnotes or normal year-end adjustments
and shall be calculated after giving effect to the cancellation of accounts
contemplated by Section 6.14 hereof. The term "Closing Net Worth" shall mean
the difference between (i) the book value of the assets, set forth on the
Closing Balance Sheet, and (ii) the book value of the liabilities set forth on
the Closing Balance Sheet, as such values are determined in accordance with
GAAP. In calculating the Closing Balance Sheet, (a) the reserve for doubtful
accounts on the Closing Balance Sheet shall equal $138,707, and (b) the reserve
for environmental matters on the Closing Balance Sheet shall be reduced by the
amount paid or payable by Seller or Drexel to Dames & Moore in connection with
the measures to be performed by them pursuant to Section 6.16 hereof, up to a
maximum of $75,000. Buyer shall have the right to review all work papers and
procedures used to prepare the Closing Balance Sheet and the computation of
Closing Net Worth as of the Closing Date. The Closing Balance Sheet and the
computation of Closing Net Worth shall be computed in a manner consistent with
the Balance Sheet (as defined in Section 4.8 below). The Drexel receivables
set forth on Schedule 2.3(a) shall be assigned by Drexel to Seller, without
recourse, on the Closing Date and shall be excluded from the Closing Balance
Sheet.
(b) The computation of Closing Net Worth as of the Closing Date
delivered by Seller to Buyer shall be the Final Statement of Net Worth and
shall be conclusive and binding on the parties unless Buyer, prior to the
Closing Date, determines in good faith and notifies Seller in writing that
Buyer disputes any of the amounts set forth therein, specifying the nature of
each dispute and the basis therefor (the "Dispute Notice"). The parties shall
attempt in good faith to reach agreement resolving all of the disputes set
forth in the Dispute Notice prior to the Closing Date, in which event the
Closing Balance Sheet, as amended to the extent necessary to reflect the
resolution of all such disputes, shall be the definitive Closing Balance Sheet
and the computation of Net Worth shall be the Final Statement of Net Worth and
shall be conclusive and binding on the parties. If the parties are unable to
resolve any or all of such disputes prior to the Closing Date, however, then
for purposes of the Closing, the parties shall (i) use the lesser of $4,995,002
or the amount set forth as Closing Net Worth on the computation delivered by
Seller, (ii) make the appropriate adjustment to the Purchase Price on such
basis and the Closing shall then take place. Thereafter, either party may,
promptly after the Closing Date, submit all unresolved disputes to a nationally
recognized independent accounting firm mutually agreeable to the parties, which
firm shall not have had a material relationship with either Buyer, Terex
Corporation ("Terex") or Seller or their respective affiliates within the two
years preceding the appointment (the "Arbiter"), for resolution. If the
parties cannot agree on the selection of the independent accounting firm to act
as Arbiter, either party may request the American Arbitration Association to
appoint such a firm, and such appointment shall be conclusive and binding on
the parties. Promptly, but no later than 30 days after its acceptance of its
appointment as Arbiter, the Arbiter shall determine, based solely on
presentations by Buyer and Seller, and not by independent review, those items
in dispute and shall render a written report as to the resolution of each
dispute and the resulting calculation of the Closing Statement of Net Worth and
the Closing Balance Sheet. In resolving any disputed item, the Arbiter may not
assign a value to such item greater than the greatest value for such item
claimed by either party or less than the smallest value for such item claimed
by either party. The Arbiter shall have exclusive jurisdiction over, and
resort to the Arbiter as provided in this paragraph (b) shall be the sole
recourse and remedy of the parties against one another or any other person
(including the auditors) with respect to, any disputes arising out of or
relating to the Closing Balance Sheet and/or the Final Statement of Net Worth;
and the Arbiter's determination shall be conclusive and binding on the parties
and shall be enforceable in a court of law.
(c) The fees and expenses of Buyer and its representatives
shall be paid by Buyer. The fees and expenses of Seller and its
representatives shall be paid by Seller. The fees and expenses of the Arbiter
incurred in connection with the calculation of Closing Net Worth, if any, shall
be borne by the party whose calculation of Closing Net Worth is farthest from
that of the Arbiter, or, if the resolution does not substantially favor either
party, such costs shall be borne equally by Buyer and Seller.
(d) As used herein, the term "Final Statement of Net Worth"
shall mean (i) the computation of Closing Net Worth delivered with the Closing
Balance Sheet if no Dispute Notice is given by Buyer within the time period set
forth in paragraph (b) of this Section 2.3 or (ii) if the Dispute Notice is
timely given and all of the disputed items are resolved by mutual agreement of
the parties, the computation of Closing Net Worth, as amended, if necessary, to
reflect such resolution of all disputes, or (iii) if any or all of the disputed
items are submitted to the Arbiter for resolution, the computation of Closing
Net Worth, as amended, if necessary, to reflect any resolution of any disputes
by mutual agreement of the parties and the resolution of all other disputes by
the Arbiter.
(e) The parties hereby acknowledge that $4,995,002 is the
amount shown as Net Worth on the Balance Sheet (as hereinafter defined). If,
however, the Final Statement of Net Worth exceeds $4,995,002, the Purchase
Price shall be increased by the amount of such excess either at the Closing or
otherwise and Buyer shall pay Seller the amount of such excess in cash;
provided, however, that if the Final Statement of Net Worth exceeds $5,565,191,
Buyer shall pay to Seller an additional $570,189 in cash and shall pay the
remainder with a note (the "Buyer Note") which shall bear interest at a rate of
6% per annum and shall be payable on December 15, 1994; provided, further that
the cash portion of the purchase price to be paid by Buyer at the Closing will
be reduced by the Tax Amount and the amount of the Contingent Note (as such
terms are defined below) pursuant to Sections 2.3(g) and (h) (the "Adjusted
Cash Purchase Price"), and Buyer shall pay to Seller in cash the Adjusted Cash
Purchase Price and shall deliver the Buyer Note and the Contingent Note. If
the Final Statement of Net Worth is less than $4,995,002, the Purchase Price
shall be decreased by the amount of such shortfall at the Closing or otherwise
and, if subsequent to Closing, Seller shall pay Buyer the amount of such
shortfall. If the determination of Closing Net Worth is finally resolved after
the Closing Date, any payment made pursuant to this Section 2.3(e) shall be
made together with interest thereon from the Closing Date to the date of
payment at an interest rate equal to 6% per annum. Such payment shall be made
within two business days of the date on which the Final Statement of Net Worth
is determined by wire transfer of immediately available funds to an account
designated by the payee.
(f) In addition to the foregoing adjustments to the Purchase
Price, Seller hereby agrees that in connection with the receivables set forth
on Schedule 2.3(f), if any of such receivables are not collected in full by
Buyer by December 15, 1994, such amounts, to the extent not collected in full,
shall be deducted from amounts due under the Buyer Note, if any. If any amount
is deducted from the Buyer Note pursuant to this Section 2.3(f), Drexel shall
assign to Seller, without recourse, any remaining receivables listed on
Schedule 2.3(f) to the extent of the deduction from the Buyer Note with respect
to the receivables.
(g) A portion of the Purchase Price which would have otherwise
been paid in cash at the Closing shall not be paid at the Closing, but shall be
deferred (the "Tax Amount") by Buyer in order to pay certain Pennsylvania Taxes
for which Seller is obligated hereunder. No later than one (1) week prior to
the Closing Date, Seller shall deliver to Buyer Seller's best estimate of the
Section 338 Taxes (as hereinafter defined) based on Seller's calculation of the
Closing Balance Sheet together with reasonable detail explaining such
calculation of the Section 338 Taxes. Section 338 Taxes shall mean the amount
of Taxes payable by Drexel to Pennsylvania as a result of Buyer making a
Section 338(g) Election or a Section 338(h)(10) Election (as defined in Section
10.2 hereof) for which Taxes Seller has agreed to be liable pursuant to Section
10.3 hereunder. If Buyer reasonably disputes Seller's calculation, the parties
shall attempt in good faith to reach agreement on the amount of the Section 338
Taxes. If the parties are unable to resolve any or all disputes prior to three
days before the Closing Date, the parties shall appoint the Arbiter to resolve
the dispute. The Arbiter shall be given two days to make its determination of
the amount of the Section 338 Taxes. For purposes of resolving any such
dispute, the Arbiter will not take any position with respect to the calculation
of the Section 338 Taxes which the Arbiter believes is not more likely than not
to be sustained on the merits. The Tax Amount shall be equal to the amount of
the Section 338 Taxes as so agreed or as determined by the Arbiter (the
"Estimated Section 338 Taxes"). The Arbiter's determination shall be
conclusive and binding on the parties for the purpose of determining the
Estimated Section 338 Taxes.
At least 7 business days prior to the due date (determined
without regard to extensions) of Drexel's Pennsylvania Tax return (the "Due
Date") for its taxable period ending on the Closing Date, Seller shall deliver
to Buyer, for Buyer's review, an updated calculation of the Section 338 Taxes
(the "Revised Section 338 Taxes"), based on the Final Statement of Net Worth,
and prepared in a manner consistent with the calculation of the Estimated
Section 338 Taxes. Any disputes with respect to the calculation of the Revised
Section 338 Taxes which are unable to be resolved by the parties shall be
referred to the Arbiter. Notwithstanding anything to the contrary in Section
10.1(a), all returns prepared by Seller shall report income, gain, loss or
deduction with respect to transactions contemplated by this Agreement in a
manner consistent with the methodology used to calculate the Revised Section
338 Taxes.
On the Due Date Buyer shall (i) pay to Seller in cash the
excess, if any, of the Tax Amount over the amount of Revised Section 338 Taxes
and (ii) pay or cause to be paid to Pennsylvania an amount equal to the Revised
Section 338 Taxes which amount shall be credited against Seller's liability for
Taxes pursuant to Section 10.3 hereof (but nothing in this Section 2.3(g) shall
relieve Seller from liability under Section 10.3 for any additional Taxes
arising from Section 338 Elections and if the Revised Section 338 Taxes exceed
the amount of the Tax Amount, Seller shall pay Buyer the amount of such excess
in accordance with the provisions of Section 10 hereof). In addition, Buyer
shall pay to Seller interest on the Tax Amount at an interest rate of 10% per
annum, from the Closing Date until two and one half months after the Closing
Date. Interest on the Tax Amount shall be payable monthly on the last day of
each calendar month or, if such day is not a business day, the next succeeding
business day, and on the Due Date.
The fees and expenses of the Arbiter incurred in connection with
the calculation of the Estimated Section 338 Taxes and the Revised Section 338
Taxes, if any, shall be borne by the party whose calculation of the Estimated
Section 338 Taxes or Revised Section 338 Taxes, as the case may be, is farthest
from that of the Arbiter, or, if the resolution does not substantially favor
either party, such costs shall be borne equally by Buyer and Seller.
(h) The parties agree that $750,000 of the Purchase Price which
would have otherwise been paid in cash at the Closing shall not be paid in
cash, but shall be paid pursuant to a note (the "Contingent Note") from Buyer
to Seller in the principal amount of $750,000. The principal amount due under
the Contingent Note shall be subject to reduction as provided therein. Seller
shall have 90 days from the Closing Date to replace the Contingent Note with
substitute collateral reasonably acceptable to Buyer in its sole discretion;
provided, however, that the parties acknowledge and agree that either (i) an
irrevocable letter of credit for the direct benefit of Buyer drawn on a
commercial bank organized under the laws of the United States or any state
thereof reasonably acceptable to Buyer, containing terms for drawdown pursuant
to a certificate of Buyer stating that Buyer has complied with and is
authorized pursuant to the terms of the Contingent Note to expend such funds or
(ii) a surety bond issued by a nationally recognized bonding company reasonably
acceptable to Buyer, providing for payment of all Tank Environmental Costs (as
defined in the Contingent Note) payable by Buyer pursuant to the terms of the
Contingent Note, shall be deemed to be reasonably acceptable. Buyer agrees
that insurance from a nationally recognized insurance company reasonably
acceptable to Buyer which Buyer, in its sole reasonable discretion, determines
protects Buyer and Drexel against any possible exposure, liability and/or Tank
Environmental Costs to the same extent Buyer is protected under the terms of
the Contingent Note will be acceptable.
2.4 Royalty Payments. After the Closing Date, pursuant to the terms
of a separate License Agreement, a copy of which is attached hereto as Exhibit
B, Buyer agrees to cause Drexel to pay to Terex or its designee, a series of
annual royalty payments ("Royalty Payments") for the period commencing from the
Closing Date until December 31, 1994 and for each of calendar years 1995 and
1996 based upon the number of units sold annually by Drexel for each of such
periods to (i) commercial buyers ("Commercial Units") and (ii) federal, state
and local government buyers ("U.S. Government Units") of "sit-down rider"
models and "turret truck" models which are currently in production or in
development at Drexel. In particular and without limitation, no Royalty
Payments shall be made by Drexel in respect of any (i) "walking" units sold by
Drexel, whether or not currently in production or development at Drexel and
(ii) units sold by Drexel to which Drexel acquires the manufacturing rights
after the Closing Date. Drexel will make a Royalty Payment to Seller in an
amount equal to $1,000 per U. S. Government Unit sold, and $4,000 per
Commercial Unit sold, above the following thresholds (which shall not be
cumulative), if any, in each calendar year (commencing from the Closing Date in
the case of 1994):
1994 1995 1996
U.S. Government Units N/A 60 50
Commercial Units 250 225 250
; provided, however, that for the period from the Closing Date until December
31, 1994, the threshold of 250 Commercial Units shall be reduced by the number
of trucks actually shipped by Drexel in 1994 prior to the Closing Date. Drexel
will make such Royalty Payments within 30 days after the completion of each of
such calendar years.
2.5 Clark Payments. In consideration for the rights granted to
Drexel pursuant to Section 6.14 hereof, Buyer agrees to pay or cause Drexel to
pay to Clark Material Handling Company ("Clark") or its designee Four Hundred
Thousand ($400,000) dollars at any time, in Buyer's sole discretion, on or
before the date which is sixty (60) days after the Closing Date. Drexel shall
have the option, in its sole discretion, of paying such amount either in cash
or by the cancellation of an intercompany receivable owed by Clark to Drexel in
like amount.
3. Closing.
3.1 Date of Closing. The closing of the sale and purchase of the
Shares provided for in Section 1 shall take place at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004
(or at such other place as the parties may agree in writing) on a date mutually
designated by Seller and Buyer, but in no event later than (a) March 25, 1994,
(b) five (5) business days after the date when each of the conditions specified
in Article 7 has been fulfilled (or waived by the party entitled to waive that
condition) or (c) such later date specified by Seller prior to April 15, 1994.
The date on which the Closing is held is referred to in this Agreement as the
"Closing Date". At the Closing, the parties shall execute and deliver the
documents referred to in Section 8.
3.2 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written agreement executed by Seller and Buyer;
(b) by Buyer in writing, without liability to Buyer on account
of such termination (provided Buyer is not otherwise in default or in breach of
this Agreement), if the Closing shall not have occurred on or before April 15,
1994;
(c) by Seller in writing, without liability to Seller on
account of such termination (provided Seller is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred on or before
April 15, 1994; or
(d) by either Buyer or Seller, in writing, without liability to
the terminating party on account of such termination (provided the terminating
party is not otherwise in default or breach of this Agreement), if (i) there
shall have been a material breach by the other party of any of its
representations, warranties, covenants or agreements contained herein and (ii)
such breach cannot be remedied prior to Closing and if unremedied would result
in a failure to satisfy a condition to the terminating party's obligation to
consummate the transactions provided herein.
Upon such termination pursuant to this Section 3.2 neither of
the parties shall have any liability or further obligation arising out of this
Agreement except for any liability resulting from its breach of this Agreement.
Buyer's obligations under Section 6.1 shall survive the termination of this
Agreement.
4. Representations and Warranties of Seller. Seller represents and
warrants to Buyer that:
4.1 Organization, Standing and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
enter into and perform this Agreement. Terex is the record and beneficial
owner of all of the issued and outstanding shares of capital stock of Seller.
4.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller and this Agreement constitutes the valid
and binding obligation of Seller, enforceable against Seller in accordance with
its terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4.3 Organization, Standing and Qualification of Drexel;
Subsidiaries.
(a) Drexel is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
full corporate power and authority to carry on its business as now conducted
and to own, lease and operate its properties as now done. Drexel is qualified
to do business and is in good standing in each jurisdiction in which the nature
of its business or the properties owned or leased by it requires qualification,
except where the failure to be so qualified or in good standing would not have
a Material Adverse Effect. For purposes of this Agreement, "Material Adverse
Effect" shall mean a material adverse effect upon the assets, results of
operations or financial condition of Drexel.
(b) Drexel does not have any subsidiaries.
4.4 Corporate Records. The copies of the articles of incorporation
and by-laws of Drexel that have been delivered to Buyer are complete and
correct as of the date of this Agreement, and the minute books of Drexel that
have been exhibited to Buyer are complete and correct in all material respects
as of the date of this Agreement.
4.5 Consents of Third Parties. Subject to receipt of the releases,
consents and approvals referred to in Schedule 4.5 which will be obtained prior
to Closing, the execution, delivery and performance of this Agreement by Seller
will not (i) violate or conflict with the articles of incorporation or by-laws
of either of Seller or Drexel; (ii) conflict with, or result in the breach of,
termination of, or constitute a default under, any lease, agreement, commitment
or other instrument to which any of Terex, Seller or Drexel is a party or by
which any of Terex, Seller or Drexel or any of their respective properties is
bound; (iii) constitute a violation of any law, regulation, order, writ,
judgment, injunction or decree applicable to any of Terex, Seller or Drexel; or
(iv) result in the creation of any lien, charge or encumbrance upon the capital
stock, properties or assets of Drexel, other than violations, conflicts,
breaches, terminations, accelerations, defaults and creations specified in the
foregoing clauses (ii) through (iv) which do not have a Material Adverse Effect
or prevent consummation of the transactions contemplated hereby. No consent,
approval or authorization of any governmental authority is required on the part
of Terex or Seller in connection with the execution, delivery and performance
of this Agreement.
4.6 Capitalization. The authorized capital stock of Drexel consists
of 1,000 shares of Common Stock, par value one cent ($.01) per share, of which
100 shares are issued and outstanding. All of the outstanding shares of
capital stock of Drexel were duly authorized for issuance and are validly
issued, fully paid and non-assessable, free of preemptive rights and none of
such shares are held in treasury. There are no outstanding options or rights
of any kind to acquire any shares of any class of securities or any securities
convertible into any shares of any class of securities of Drexel, nor are there
any obligations to issue any such options, rights or securities. There are no
restrictions of any kind on the transfer of the Shares, except (i) as may be
imposed by applicable federal and state securities laws and (ii) as are
disclosed on Schedule 4.5 (which shall be discharged at the Closing). Drexel
does not own any capital stock or other interest in any other corporation or
business entity (except as set forth on Schedule 4.6), nor is Drexel subject to
any obligations or requirements to make any investment in any entity.
4.7 Ownership of Shares. Seller is, and at the Closing will be, the
record and beneficial owner of the Shares free and clear of any claim, lien,
security interest or other encumbrance ("Lien") except as disclosed on Schedule
4.5 which shall be discharged at Closing. At the Closing, Seller will transfer
and deliver to Buyer legal and valid title to all Shares, free and clear of any
Lien.
4.8 Financial Statements. Buyer has been furnished the unaudited
balance sheet of Drexel as of October 31, 1993 and December 31, 1992 (the
October 31, 1993 balance sheet is attached hereto as Schedule 4.8), and the
related unaudited statements of operations, income statements and changes in
financial position of Drexel for the interim 10 month period and fiscal year
then ended. The foregoing financial statements have been prepared in the
ordinary course, consistent with past practice in accordance with GAAP, except
that they do not contain footnotes, the interim financial statements do not
contain normal year-end adjustments, and the October 31, 1993 balance sheet
does not include any reserves for the matters set forth on Schedule 4.12 for
which Seller is responsible, and are true, complete and correct in all material
respects and fairly present the financial position and results of operations of
Drexel as of said dates and for the periods indicated. The October 31, 1993
balance sheet, as adjusted, is herein referred to as the "Balance Sheet" and is
attached hereto as Exhibit A.
4.9 Absence of Certain Liabilities and Changes. Except to the
extent reflected or reserved for in the Balance Sheet, there are no liabilities
or obligations, known or unknown, contingent or otherwise, material to Drexel
or the Business, except (i) liabilities or obligations incurred in the ordinary
course of business since the date of the Balance Sheet, (ii) any material
liabilities and obligations set forth on Schedule 4.9, and (iii) liabilities
and obligations which are being retained by Seller. Since the date of the
Balance Sheet, Drexel has operated the Business in the ordinary course and,
except as set forth on Schedule 4.9 or contemplated by Schedule 6.2, there has
not been:
(a) any change in the assets, business, financial condition or
results of operations of the Business that has had, or could reasonably be
expected to have, a Material Adverse Effect;
(b) any change in any of the assets, licenses, permits or
franchises of Drexel, or any change in the manner of conducting the Business,
that has had, or could reasonably be expected to have, a Material Adverse
Effect;
(c) any material damage, destruction or loss (whether or not
covered by insurance) to its physical properties that has had, or could
reasonably be expected to have, a Material Adverse Effect;
(d) any material change in the accounting methods or principles
of Drexel;
(e) any product failure of Drexel's products in connection with
the testing of any of such products under Drexel's Government Contracts (as
defined in Section 4.28) which failure could cause a material delay in Drexel's
delivery schedule under such agreements;
(f) any declaration, setting aside or payment of any dividend
on, or any other distribution with respect to, any capital stock of Drexel or
repurchase, redemption or other acquisition of any capital stock of Drexel;
(g) any payment by Drexel to Seller, or any charges by Seller
to Drexel, or any other transaction between the Seller and Drexel, except in
the ordinary course of business of Drexel consistent with past practice or set
forth on Schedule 4.9;
(h) any option to purchase, or other right to acquire, capital
stock or any security or other instrument convertible into capital stock of any
class of Drexel granted to any person;
(i) any issuance of shares of capital stock (including treasury
shares) of Drexel;
(j) any material transaction made by Drexel relating to its
assets or business (including the acquisition or disposition of assets) other
than in the ordinary course of business consistent with past practice;
(k) any incurrence, assumption or guarantee by Drexel of any
indebtedness or liability for or in respect of borrowed money or any commitment
to do the same other than borrowings in the ordinary course of business
consistent with past practice and set forth on Schedule 4.9 (other than
borrowings pursuant to its intercompany account with Seller or its affiliates);
(l) any Lien created or assumed by Drexel on any of its assets
other than a Permitted Lien (as such term is defined in Section 4.18);
(m) any grant of any severance or termination pay to any
executive officer or director of Drexel or any increase in compensation or
benefits payable by Drexel under existing employment agreements or severance or
termination pay policies to any of their employees other than (i) normal merit
increases for salaried employees, (ii) increases or grants required by
contracts disclosed pursuant hereto or by applicable law, or (iii) increases,
agreements and bonuses disclosed in Schedule 4.15;
(n) any employment, bonus or deferred compensation agreement
entered into between Drexel and any of its directors, officers or other
employees, other than as disclosed in Schedule 4.15;
(o) any amendment of the articles of incorporation or by-laws
of Drexel, except for amendments which are necessary to revise the number of
directors on the Board of Directors of Drexel;
(p) any entering into, amendment or termination of any material
contract, agreement, lease, franchise, security instrument, permit, or license
that has had, or could reasonably be expected to have, a Material Adverse
Effect;
(q) any change in its relationship with its suppliers,
customers, or distributors having material business dealings with it which
would, or could be reasonably likely to, have a Material Adverse Effect;
(r) any failure by Drexel to meet its current shipping schedule
which has had, or could reasonably be expected to have, a Material Adverse
Effect; or
(s) any existing agreement or arrangement made by Drexel to
take any action that would cause any representation or warranty in this Section
4 to be untrue or incorrect.
4.10 Inventory. The inventory of Drexel, including that shown on the
Balance Sheet, is of a quality and quantity usable in the ordinary course of
business of Drexel in all material respects, except for obsolete items or items
below standard quality as to which an adequate provision has been made on the
Balance Sheet. The value of all inventory items, including finished goods,
work-in-process and raw materials, has been recorded on the Balance Sheet at
the lower of cost (determined in accordance with the accounting inventory
valuation methods of Drexel) or fair market value.
4.11 Receivables. All receivables of Drexel which either are
reflected on the Balance Sheet or were created subsequent to the date of the
Balance Sheet have arisen from bona fide transactions in the ordinary course of
business and have been collected in full or are current, and Seller has no
reason to believe such receivables will not be collected in full or will be
fully collectible at their face amounts (less any applicable reserves reflected
on the Balance Sheet or thereafter established on a basis consistent with the
reserves reflected on the Balance Sheet).
4.12 Taxes. Except as set forth on Schedule 4.12, (a) all Tax
Returns (as defined in Section 10.1) which are required to be filed with
respect to any member of the Federal consolidated group, or any combined group
or unitary group of which Seller and Drexel are members (the "Drexel Group")
have been timely filed (giving effect to any extensions) and all Taxes (as
defined in Section 10.1) shown as due on such Tax Returns have been paid,
except for those Taxes the nonpayment of which would not have a Material
Adverse Effect; (b) all Tax Returns filed with respect to any member of the
Drexel Group with respect to Taxes are true and correct in all material
respects; (c) there are no tax rulings or pending requests for rulings from any
taxing authority with respect to the Drexel Group; (d) none of Drexel or any
member of the Drexel Group on behalf of Drexel (i) is required to make any
adjustment pursuant to Section 481(a) of the Code by reason of a change in
accounting method initiated by Drexel, or (ii) has knowledge that the Internal
Revenue Service has proposed any such adjustment or change in accounting
method; (e) there are no agreements (and no requests for any such agreements
are pending) in effect to extend (i) the time to file any Tax Return covering
any material Tax for which any member of the Drexel Group would be liable, or
(ii) the period of limitations for the assessment or collection of the Taxes
for which any member of the Drexel Group would be liable; (f) there is no
action, suit, proceeding, investigation, audit, claim or assessment pending or
proposed with respect to any Tax liability for which any member of the Drexel
Group could be liable which if adversely determined would have a Material
Adverse Effect; (g) all amounts required to be withheld or collected by any
member of the Drexel Group with respect to Taxes have been duly collected or
withheld and any such withheld amounts have either been duly and timely paid to
the proper governmental agencies or authorities or set aside in accounts for
such purposes except to the extent such amounts would not have a Material
Adverse Effect; (h) Drexel is and will be on the Closing Date a member of the
"selling consolidated group" within the meaning of the first sentence of
Section 338(h)(10)(B) of the Code; (i) except for the group of which Drexel is
presently a member and the group of which Clark Equipment Company was the
common parent, Drexel has not been a member of any affiliated group of
corporations within the meaning of Section 1504 of the Code; (j) no power of
attorney has been granted with respect to any matter relating to Taxes of any
member of the Drexel Group; (k) the accruals and reserves for Taxes and
deferred taxes with respect to the members of the Drexel Group on the Balance
Sheet and on the books and records of the members of the Drexel Group are
adequate in all material respects to cover all liabilities of the members of
the Drexel Group for Taxes and deferred taxes for periods through the date
thereof.
4.13 List of Material Contracts, etc. (a) Buyer has been provided
with, or has been provided access to, copies of (i) all commitments and
agreements for the purchase of any materials or supplies that involve an
expenditure by Drexel of more than $50,000 for any one contract; (ii) all
personal property leases under which Drexel is either lessor or lessee that
involve annual payments or receipts of $50,000 or more; (iii) all other orders,
leases, commitments, agreements and instruments (including, but not limited to,
mortgages, indentures and other agreements and instruments relating to
indebtedness for borrowed money) to which Drexel is a party or by which it or
its properties are bound that require annual payments by Drexel of more than
$50,000; (iv) all government contracts and all other agreements with customers
that involve an annual payment to Drexel of more than $50,000 for any one
contract; (v) all contracts or agreements which guarantee the performance,
liabilities or obligations of any other entity; (vi) all contracts or
agreements which restrict Drexel from competing in any line of business; (vii)
all fire, liability and other insurance carried by Drexel; and (viii) any other
contract or agreement which is material to the Business.
(b) Drexel has no agreements for the sale of multiple forklift
trucks at fixed prices which are unfavorable to Drexel which would have, or
could be reasonably likely to have, a Material Adverse Effect.
4.14 Absence of Defaults. Drexel is not in default under the terms
of any commitment or agreement, which default has had, or reasonably could be
expected to have, a Material Adverse Effect. Each of the plans, contracts,
arrangements, instruments or other agreements (collectively, "Contracts")
covered by Section 4.13 is valid and in full force and effect with respect to
Drexel, and to the best of Seller's knowledge, with respect to the other
parties thereto, and neither Seller nor Drexel has any reason to believe any
such Contracts are invalid with respect to such third parties. No party has
notified Terex, Seller or Drexel orally or in writing of its intention to cease
to perform any material services required to be performed by it or withhold any
material payment required to be made by it thereunder.
4.15 Agreements Regarding Employees. Drexel is not a party to or
bound by any employment agreement, arrangement or understanding or any
collective bargaining or other labor agreement, or any pension, retirement,
stock option, stock purchase, savings, profit sharing, deferred compensation,
retainer, consultant, bonus, group insurance or other incentive or welfare
contract, plan or arrangement except as set forth on Schedule 4.15. Set forth
on Schedule 4.15 is a complete list of all employees of Drexel with an annual
salary of $60,000 or more and the rates of such salary. There are no existing
or, to the best of Terex's and Seller's knowledge, threatened material labor
disputes, grievances, safety or discrimination matters, or charges of unfair
labor practices involving the employees of Drexel except as set forth on
Schedule 4.15 and Drexel has not engaged in any unfair labor practices. Drexel
(i) is in compliance in all material respects with all applicable federal,
state and local laws, rules and regulations (domestic and foreign) respecting
employment, employment practices, terms and conditions of employment and wages
and hours; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to employees except for
immaterial amounts; (iii) is not liable for any material arrears of wages or
any material taxes or any material penalty for failure to comply with any of
the foregoing; and (iv) other than routine payments to be made in the normal
course of business and consistent with past practices, is not liable for any
material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits.
4.16 Employee Benefit Plans. Schedule 4.15 lists all Employee
Benefit Plans and all Benefit Arrangements (each as defined in Section 6.3(a)).
With respect to each of such Employee Benefit Plans and Benefit Arrangements,
Seller has delivered to Buyer, as applicable, true and complete copies of any:
(a) plans and related trust documents and amendments thereto; (b) the most
recent summary plan descriptions, including all summaries of material
modifications relating thereto as required under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the two most recent annual
reports; (c) the two most recent actuarial valuations; and (d) the most recent
determination letter received from the Internal Revenue Service. With respect
to each Employee Benefit Plan and Benefit Arrangement: (i) Drexel is in
compliance in all material respects with the terms of such Employee Benefit
Plan or Benefit Arrangement and with the requirements prescribed by all
applicable statutes, orders or governmental rules or regulations including,
without limitation, ERISA and the Code; (ii) Drexel does not maintain or
contribute to and has not maintained or contributed to any "employee pension
benefit plan" (as that term is defined in ERISA) other than the Drexel
Industries, Inc. Retirement Plan and Trust (the "401(k) Plan"); (iii) by letter
dated September 4, 1991, the Internal Revenue Service has determined that the
401(k) Plan is a qualified plan and that its related trust is exempt from
taxation under Section 501(a) of the Code and nothing has occurred since such
date that would adversely affect such qualification or exemption or impair the
ability of the plan sponsor of the 401(k) Plan timely to amend the 401(k) Plan
so as to preserve such qualification or exemption. The 401(k) Plan is and has
been operated and administered in compliance with Section 401(a), (k) and (m)
of the Code; (iv) and set forth on Schedule 4.18, Part 2 there are no material
actions or proceedings (other than routine claims for benefits) pending or
threatened, with respect to any Employee Benefit Plan or Benefit Arrangement;
and (v) no "prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA, has occurred with respect to any Employee Benefit
Plan. No ERISA Affiliate (as defined herein) maintains or contributes to or
has maintained or contributed to an employee benefit plan that is or was
subject to Title IV of ERISA and Drexel can not be held jointly and severally
liable with an ERISA Affiliate for any losses, damages, costs and expenses,
excise taxes or penalties arising out of the funding, operation,
administration, withdrawal or partial withdrawal from, or termination of, an
employee benefit plan maintained or contributed to by an ERISA Affiliate.
ERISA Affiliate shall mean any business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with Drexel within the meaning of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with the Company under Section 414(o) of
the Code, or is under "common control" with Drexel, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under
any of the foregoing Sections. At no time since September 25, 1980 has Drexel
contributed to or been required to contribute to any multiemployer plan as
defined in Section 3(37) of ERISA (a "Multiemployer Plan"). No ERISA Affiliate
incurred any withdrawal liability (within the meaning of Section 4201 of ERISA)
to any Multiemployer Plan which has not been satisfied.
Drexel does not maintain or contribute to any Employee Benefit
Plan which provides, or has any liability to provide, life insurance, medical
or other employee welfare benefits to any Employee (as defined in Section
6.3(a)) upon his retirement or termination of employment, except as may be
required by law, and Drexel has never represented, promised or contracted
(whether in oral or written form) to any Employee (either individually or to
Employees as a group) that such Employee(s) would be provided with life
insurance, medical or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by law.
The execution of, and performance of the transactions
contemplated in this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any Employee
Benefit Plan, Benefit Arrangement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
In connection with the transactions contemplated by this
Agreement, no payment or benefit which will or may be made by Drexel with
respect to any Employee will be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code.
For the purpose of this Section, the following terms shall have
the meanings indicated:
(i) The term "Employees" shall mean all current employees
(and all employees on approved leaves of absence) of Drexel and the term
"Employee" shall mean any of the Employees.
(ii) The term "Employee Benefit Plan" shall mean each and
all "employee benefit plans" as defined in Section 3(3) of ERISA, maintained or
contributed to by Drexel or any predecessor or in which Drexel or any
predecessor participates or participated and which covers Employees.
(iii) The term "Benefit Arrangement" shall mean any
life and health insurance, hospitalization, holiday, vacation, sick pay, sick
leave, disability, tuition refund, service award, individual employment
contracts of Drexel providing employee or executive compensation or benefits to
Employees, other than Employee Benefit Plans.
4.17 Litigation; Compliance with Laws. (a) There are no judicial or
administrative actions, proceedings or investigations pending or, to the best
of Terex's or Seller's knowledge, threatened, that question the validity of
this Agreement or any action taken or to be taken by Terex or Seller in
connection with this Agreement. Except as set forth on Schedule 4.17, there is
no litigation, proceeding or governmental investigation pending, or to the best
of Terex's or Seller's knowledge, threatened, or any order, injunction or
decree outstanding, against Drexel or the Owned Property (as defined in Section
4.18) or Drexel's interest in the Leased Property (as defined in Section 4.18)
that, if adversely determined, could individually or in the aggregate, have a
Material Adverse Effect.
(b) Drexel, the Owned Property and Drexel's use of the Leased
Property and, to the best of Seller's knowledge, the owner's use of the Leased
Property, are in compliance in all material respects with all applicable laws,
regulations, ordinances, or any other applicable requirement of any
governmental body or court, except where the failure to comply therewith does
not and could not reasonably be expected to have a Material Adverse Effect, and
no notice has been received by Terex, Seller or Drexel alleging any such
violations, which violations in the aggregate would, or could be reasonably
likely to, have a Material Adverse Effect.
4.18 Real Property. (a) Schedule 4.18, Part 1 sets forth all of the
real property (x) owned in fee by Drexel (the "Owned Property"), and (y) leased
by Drexel (the "Leased Property"). Except as set forth on Schedule 4.18, Part
2, Drexel has good and marketable fee title to the Owned Property (including
all improvements and fixtures located thereon) free and clear of all Liens,
other than (i) those reflected or reserved against in the Balance Sheet, (ii)
those listed on Schedule 4.18, (iii) imperfections of title, easements,
pledges, charges, restrictions and encumbrances, including, without limitation,
survey matters, landlord's liens, mechanics' liens, repairmen's liens and other
similar liens, if any, that do not materially detract from the value of the
property subject thereto or materially interfere with the manner in which it is
currently being used in the Business, or materially impair the operations of
the Business, and (iv) taxes and general and special assessments not in default
and payable without penalty or interest, other than those being contested in
good faith (the liens referred to in clauses (i) through (iv) above and set
forth on Schedule 4.18, Part 2 being hereinafter referred to as "Permitted
Liens").
(b) There are no leases, subleases or other rights of occupancy
or use of any portion of the Owned Property or the Leased Property, other than
the lease creating Drexel's interest in the Leased Property (the "Lease"). The
Lease is valid and binding and in full force and effect. Neither Drexel, as
tenant under the Lease, nor, to the best of Seller's knowledge, the landlord
under the Lease, is in default of any material term, covenant or obligation
under the Lease. Drexel has not given or received any notice of default under
the Lease which remains uncured.
(c) No improvement located on the Owned Property or the Leased
Property nor the continued use and operation of any such improvement is in
violation of any zoning law, or statute, ordinance or regulation or restrictive
covenant applicable to the Owned Property or the Leased Property, as the case
may be, which violation would, or could be reasonably likely to, have a
Material Adverse Effect. No improvements located on the Owned Property or the
Leased Property depend on any variance, special exception or other special
municipal approval or any easement over property not included in the Owned
Property or the Leased Property, as the case may be, for their continuing
legality or use. None of the improvements located on the Owned Property or the
Leased Property encroaches in any material respect upon property of another
person and no improvement of any other person encroaches in any material
respect upon the Owned Property or the Leased Property.
(d) All water, sewer, gas, electricity, telephone, waste
disposal and other utilities required by law or necessary for the operation of
the Business are supplied to the Owned Property and the Leased Property, are
presently installed and operating, are not being supplied on a temporary or
limited basis, and are not being provided through immediately adjacent private
land except in accordance with valid permanent easements.
4.19 Tangible Personal Property; Necessary Assets; Insurance. (a)
All of the fixtures, machinery and equipment reflected in the Balance Sheet
(the "Tangible Personal Property") are in existence (except for dispositions
made since the date of the Balance Sheet in the ordinary course of business and
minor items not substantial in character) and are in generally usable condition
and repair (ordinary wear and tear which are not such as to materially
adversely affect the operation of the Business excepted) and are reasonably
suitable for the uses for which intended. Drexel has good title to, or holds
by valid and existing lease, all of the Tangible Personal Property, free and
clear of all Liens, other than (i) those reflected or reserved against in the
Balance Sheet, or (ii) Permitted Liens.
(b) Drexel's assets include all of the material assets (other
than those leased pursuant to leases which are presently in full force and
effect) which are currently being used in the conduct of the Business, and as
of the Closing Date such assets (including leased assets) will include all of
the assets necessary for the conduct of the Business as it is now being
conducted by Drexel.
(c) All physical properties and assets of Drexel are covered
by insurance policies against fire, casualty and other losses in reasonable
amounts and upon reasonable terms issued by companies believed by Drexel to be
responsible. Drexel carries, or is otherwise covered by, public liability
insurance, product liability insurance and workmen's compensation insurance in
reasonable amounts. Drexel has not failed to give any notice or present any
material claim under any insurance policy in due and timely fashion. There are
no material outstanding requirements by any insurance company that issued a
policy with respect to any of the assets of Drexel or by any Board of Fire
Underwriters or other body exercising similar functions or by any governmental
authority requiring any repairs to be done on or with respect to any of the
assets of Drexel or requiring any equipment or facilities to be installed on or
in connection with any of the properties or assets of Drexel, where failure to
comply would, or could reasonably be expected to, have a Material Adverse
Effect.
4.20 Intellectual Property. (a) Schedule 4.20 sets forth a list of
(x) all inventions which are the subject of issued letters patent or an
application therefor and all trademarks, trade names, service marks, copyrights
and designs which have been registered or for which an application for
registration is pending, and (y) all unregistered trademarks, trade names and
service marks which are material to the Business, in each case which are owned
and used or held for use by Drexel (the "Intellectual Property Right"),
specifying as to each, as applicable: (i) the nature of such Intellectual
Property Right; (ii) the owner of such Intellectual Property Right; (iii) the
jurisdictions by or in which such Intellectual Property Right has been issued
or registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers; and
(iv) material licenses, sublicenses and other agreements to which Drexel is a
party and pursuant to which any person is authorized to use such Intellectual
Property Right or any programs, trade secrets or know-how, or pursuant to which
Drexel is authorized to use any Intellectual Property Right or any programs,
trade secrets or know-how of any person which is material to its business.
Except as set forth on Schedule 4.20, Drexel is the sole and exclusive owner
of, with all right, title and interest in and to (free and clear of any lien),
the Intellectual Property Rights described in such list and has sole and
exclusive rights to the use thereof of the material covered thereby in
connection with the services or products in respect of which they are being
used, except to the extent where the failure to have exclusive rights to the
use thereof would not have a Material Adverse Effect. Except as set forth on
Schedule 4.20, to the best of Seller's knowledge, (i) Drexel owns or possesses
licenses or other valid rights to use all rights required to manufacture (A)
all of the products currently sold by Drexel and (B) all developmental products
for which as of the date hereof there are concrete plans to sell such products
in the future.
(b) Except as set forth on Schedule 4.20, Drexel (i) is not a
party in or to any claim, suit, action or proceeding relating to the Business
which involves a claim that Drexel or any product, process or method of
manufacture used by Drexel infringes any rights of any third party, and, to the
best of Seller's knowledge no such claim, suit, action or proceeding is
threatened, and (ii) does not have any knowledge of any existing material
infringement by another person of any of the Intellectual Property Rights or
any proprietary computer programs, trade secrets or know-how belonging to
Drexel. Except as disclosed on Schedule 4.20, no Intellectual Property Right
is subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by Drexel or restricting the licensing thereof by
Drexel to any person.
4.21 Environmental Matters. (a) Except as set forth in Schedule
4.21, Drexel (which, for the purposes of this Section 4.21, expressly includes
transferred, disposed of or discontinued operations of Drexel) has at all times
been operated, and is, in compliance in all material respects with all
applicable federal, state or local laws, rules, regulations, codes, ordinances,
orders, decrees, directives, permits, licenses and judgments relating to
Environmental Matters (as defined below), including all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in all applicable Environmental Laws (as
defined below), and has obtained and is in compliance in all material respects
with all permits, licenses, authorizations, registrations and all governmental
or other consents required by applicable Environmental Laws ("Environmental
Permits").
(b) Except as set forth in Schedule 4.21, there has been no
release or other dissemination at any time of any Hazardous Material (as
defined below) at, on, from, under or within any Real Property currently or
formerly owned, operated or leased by Drexel or any predecessor of Drexel,
other than pursuant to and in accordance with permits held by Drexel or any
such predecessor, which would have, or could reasonably be expected to have, a
Material Adverse Effect.
(c) Except as set forth in Schedule 4.21, neither Seller nor
its Affiliates (with respect to Drexel) nor Drexel has, directly through its
own personnel or facilities, transported, or permitted any person to transport,
for off-site disposal any Hazardous Material (i) in violation of any currently
or formerly applicable Environmental Permit or Environmental Law or (ii) to any
site listed or proposed for listing on the Comprehensive Environmental
Response, Compensation and Liability Information Systems ("CERLIS"), the
National Priorities List ("NPL"), or any similar list, pursuant to any
Environmental Law, in each case, which would have, or could reasonably be
expected to have, a Material Adverse Effect.
(d) Except as set forth in Schedule 4.21, there are no claims,
notices, civil, criminal or administrative actions, suits, hearings,
investigations, inquiries or proceedings pending or, to the best of Seller's
knowledge, threatened against Drexel or affecting Drexel that are based on or
related to any Environmental Matters or the failure to have any required
Environmental Permits.
(e) Except as set forth in Schedule 4.21, there are no past or
present conditions, events, circumstances, facts, activities, practices,
incidents, actions, omissions or plans that may: (i) interfere with or prevent
continued compliance by Drexel with Environmental Laws and the requirements of
Environmental Permits so as to have a Material Adverse Effect, or (ii) give
rise to any liability or other obligation under any Environmental Laws that may
require Drexel or Buyer to incur any actual or potential Environmental Costs
that would have a Material Adverse Effect, or (iii) to the best of Seller's
knowledge, be reasonably likely to form the basis of any claim, action, suit,
proceeding, hearing, investigation or inquiry against or involving Drexel based
on or related to any Environmental Matter.
(f) Except as set forth in Schedule 4.21, Drexel and, to the
extent relating to Drexel, Seller, have not received any notice or other
communication that any of them is or may be a potentially responsible person or
otherwise liable in connection with any waste disposal site allegedly
containing any Hazardous Materials, or other location used for the disposal of
any Hazardous Materials, or notice of any failure of Drexel or Seller to comply
in any material respect with any Environmental Law or the requirements of any
Environmental Permit.
(g) For the purposes of this Section, the following terms shall
have the meanings indicated:
"Environmental Costs" means, without limitation, any actual
cleanup costs, remediation, removal, or other response costs (which, without
limitation, shall include costs to cause Drexel to come into compliance with
Environmental Laws), investigation costs (including without limitation fees of
consultants, counsel, and other experts in connection with any environmental
investigation, testing, audits or studies), losses, liabilities or obligations
(including without limitation, liabilities or obligations under any lease or
other contract), payments, damages (including without limitation any actual,
punitive or consequential damages under any statutory laws, common law cause of
action or contractual obligations or otherwise, including without limitation
damages (i) of third parties for personal injury or property damage, or (ii) to
natural resources), civil or criminal fines or penalties, judgments, and
amounts paid in settlement arising out of or relating to or resulting from any
Environmental Matter.
"Environmental Laws" means, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. ss. 11001 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. ss. 6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
sect. 2601 et seq.,the Fed. Insecticide, Fungicide, and Rodenticide Act,7 U.S.C.
ss.136 et seq., the Clean Air Act,42 U.S.C. ss. 7401 et seq.,the Clean Water Act
(Federal Water Pollution Control Act), 33 U.S.C. ss. 1251 et seq., the Safe
Drinking Water Act, 42 U.S.C. ss. 300f et seq., the Occupational Safety and
Health Act, 29 U.S.C. ss. 641, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1801, et seq., as any of the above statutes have been or may
be amended from time to time, all rules, regulations, codes of practice and
guidance notes promulgated pursuant to any of the above statutes, and any other
federal, state or local law, statute, ordinance, rule or regulation governing
Environmental Matters, as the same have been or may be amended from time to
time, including any common law cause of action providing for any right or
remedy with respect to any Environmental Matter, and all applicable judicial or
administrative decisions, orders, or decrees.
"Environmental Matter" means any matter arising out of,
relating to, or resulting from pollution, contamination, protection of the
environment (including flora or fauna), human health or safety, health or
safety of employees, sanitation, noise and vibration and any matters relating
to emissions, discharges, disseminations, releases or threatened releases, of
Hazardous Materials into the air (indoor and outdoor), surface water,
groundwater, soil, land surface or sub-surface, buildings, facilities, real or
personal property or fixtures or otherwise arising out of, relating to, or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
"Hazardous Material" means any substance, including any
component thereof, and any matter that contains any such substance that is
regulated by, or may now or in the future form the basis of liability under,
any Environmental Laws, including, without limitation, any pollutants,
contaminants, toxic or hazardous or extremely hazardous substances, materials,
wastes, constituents or chemicals, petroleum or any by-products or fractions
thereof, any form of natural gas, U.S. Bevill Amendment materials, lead,
asbestos and asbestos-containing materials, polychlorinated biphenyl's ("PCBs")
and PCB-containing equipment, radon and other radioactive elements, infectious,
carcinogenic, mutagenic, or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives and urea formaldehyde foam insulation.
"Real Property" means any real property and improvements
owned, leased, used operated or occupied by Drexel or any of its predecessors
or present or former subsidiaries.
4.22 Permits and Licenses. Except as disclosed in Schedule 4.22,
Drexel has all material permits, licenses, franchises and other authorizations
necessary for the conduct of the Business as currently conducted, including,
without limitation, in connection with the use of the Owned Property and the
Leased Property, and all such permits, licenses, franchises and authorizations
are valid and in full force and effect, except where failure to obtain or
maintain in full force and effect such permits, licenses, franchises and
authorizations would not, or could not reasonably be expected to, have a
Material Adverse Effect.
4.23 Intercompany Transactions. Except as set forth on Schedule 4.23
or otherwise provided in this Agreement, Drexel is not a party to any contract,
lease, agreement or other arrangement with Seller or any of its affiliates
which will not terminate at the Closing Date.
4.24 Other Information. This Agreement and all certificates,
exhibits, schedules, lists and information furnished by or on behalf of Seller,
do not contain any untrue statement of a material fact or omit any material
fact necessary in order to make the statements contained herein or therein not
misleading.
4.25 Terex's and Seller's Financial Condition. As of the date of
this Agreement, the fair salable value of each of Terex's and Seller's assets,
respectively, exceeds the amount that will be required to pay each of such
party's probable liability on its existing debts as they become absolute and
matured. After the consummation of the sale of the Shares, each of Terex and
Seller will have sufficient capital to continue to conduct their respective
business and to meet their respective obligations as they mature.
4.26 Sale Process. Seller has retained S.G. Warburg & Co. Inc.
("Warburg") as its agent to conduct the process of the sale of the outstanding
stock of Drexel. After consultation with Warburg, Seller and Warburg
established a procedure which, Warburg advised Seller, was reasonably designed
to identify all of the parties Warburg reasonably believed would be the likely
purchasers of Drexel and who had the financial resources necessary to pay the
highest price for Drexel. Warburg advised Seller that it contacted all of
those parties and gave all of such parties a reasonable opportunity to
participate in the sale process. Terex, Seller and Warburg believe that the
Purchase Price is fair to Terex and Seller and their respective creditors and
equity security holders and that the aggregate consideration that Seller is
receiving pursuant to this Agreement is fair equivalent value for the Shares.
Seller received other proposals for the purchase of the Shares, none of which
would have permitted Seller to receive value which was materially better than
the consideration to be paid by Buyer, including the Royalty Payments, under
the terms of this Agreement, and Seller believes that Buyer's proposal is more
favorable to Seller than any other proposal because Seller believes that there
is a higher probability that Buyer will consummate the transaction and, if such
other parties could consummate the transaction, Buyer will do so on a more
timely basis than any other party which made a proposal to Seller.
4.27 Powers of Attorney. Except as set forth on Schedule 4.27, no
person has any power of attorney to act on behalf of Drexel in connection with
its properties or business affairs other than such powers to so act as normally
pertain to the officers thereof. All of the powers of attorney granted by
Drexel will be revoked as of the Closing Date.
4.28 Government Contracts. (a) Except as set forth on Schedule 4.28,
with respect to the agreements between Drexel and the federal government which
are set forth on Schedule 4.28 (the "Government Contracts"), there are no
material outstanding claims asserted in writing or, to the best of Seller's
knowledge, likely to be asserted by Drexel against the federal government or
another contractor under a Government Contract or subcontract. Except as set
forth on Schedule 4.28, there are no outstanding claims asserted in writing or
to the best of Seller's knowledge, likely to be asserted by the federal
government or another contractor against Drexel under a Government Contract or
subcontract. Except for the agreements set forth on Schedule 4.28 and except
for individual purchase orders for less than five (5) forklift trucks, Drexel
has no Government Contracts.
(b) Except as set forth on Schedule 4.28, Drexel has no:
(1) Government Contracts as to which it has failed to
comply with any term or condition in any material manner;
(2) Government Contracts under which work is being
performed, to the best of Seller's knowledge, without written contract
coverage;
(3) Government Contracts with funding ceilings which (i)
to the best of Seller's knowledge, have been exceeded or (ii) Drexel reasonably
anticipates will be exceeded; and
(4) fixed-price Government Contracts which Drexel
anticipates can only be or will be completed at a loss which would have a
Material Adverse Effect.
(c) Except as set forth on Schedule 4.28, since January 1,
1993, Drexel has not received any written governmental reports (or reports of
outside legal counsel which were submitted to any governmental authority)
arising from audits or other investigations of the contracts (past or present)
of Drexel that assert overcharging, defective pricing practices, CAS
noncompliance, or any other issues, except in each case for assertions, which,
if true, would not have a Material Adverse Effect.
(d) Except as set forth on Schedule 4.28, to the best of
Seller's knowledge, there are no pending or actual audits or investigations by
any Government agency or instrumentality concerning Government Contracts or
subcontracts of Drexel or any individual involved with such contracts. Except
as set forth on Schedule 4.28, there are no outstanding or anticipated claims
or obligations under any warranty provision of Drexel's Government Contracts
which would have a Material Adverse Effect. There are no pending debarment or
suspension proceedings involving Drexel, and Drexel is aware of no facts or
circumstances which could result in a debarment or suspension. The accounting
system of Drexel meets the requirements of the Federal Acquisition Regulation
and the Cost Accounting Standards in all material respects. Except as set
forth on Schedule 4.28, Drexel has title to, license or otherwise has the
lawful ability to use, all inventions, drawings, software, technical data,
know-how and the like necessary to perform its Government Contracts.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
5.1 Buyer's Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and has the
full corporate power and authority to enter into and to perform this Agreement.
5.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Buyer have been duly authorized by all
necessary corporate action of Buyer and this Agreement constitutes the valid
and binding obligation of Buyer enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditor's rights
in general and subject to general principals of equity (regardless or whether
such enforceability is considered in a proceeding in equity or at law).
5.3 Consents of Third Parties. The execution, delivery and
performance of this Agreement by Buyer will not (i) violate or conflict with
the certificate of incorporation or by-laws of Buyer; (ii) conflict with, or
result in the breach or termination of, or constitute a default under, any
lease, agreement, commitment or other instrument to which Buyer is a party or
by which it or its properties are bound; or (iii) constitute a violation by
Buyer of any law, regulation, order, writ, judgment, injunction or decree
applicable to Buyer other than violations, conflicts, breaches, terminations,
and defaults specified in the foregoing clauses (ii) and (iii) which could not
reasonably be expected to have a material adverse effect on Buyer's ability to
perform its obligations under this Agreement. No consent, approval or
authorization of any governmental authority is required on the part of Buyer in
connection with the execution, delivery and performance of this Agreement.
5.4 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of Buyer's knowledge,
threatened, that question the validity of this Agreement or any action taken or
to be taken by Buyer in connection with this Agreement. There is no
litigation, proceeding or governmental investigation pending or, to the best of
Buyer's knowledge, threatened, or any order, injunction or decree outstanding,
against Buyer that if adversely determined, would have a material adverse
effect upon Buyer's ability to perform its obligations under this Agreement.
5.5 Investment. Buyer is purchasing the Shares for investment
purposes and not with a view to the resale or distribution of the Shares, and
will not sell the Shares in violation of applicable federal or state securities
laws.
5.6 Financing. Buyer has received a commitment letter from General
Electric Capital Corporation ("GECC") pursuant to which GECC has committed to
provide Buyer with sufficient funds to enable Buyer to pay the Purchase Price
and related fees and expenses.
6. Further Agreements of the Parties.
6.1 Access to Information. Prior to the Closing, Buyer may make
such investigation of the business and properties of Drexel as Buyer may
desire, and upon reasonable notice Seller shall give to Buyer and its counsel,
accountants and other representatives reasonable access, during normal business
hours throughout the period prior to the Closing, to the property, books,
commitments, agreements, records, files and personnel of Drexel, and Seller
shall furnish to Buyer during that period all copies of documents and
information concerning Drexel as Buyer may reasonably request subject to
applicable law. Buyer shall hold, and shall cause its counsel, accountants and
other agents and representatives to hold, all such information and documents
confidential, except as required by law.
6.2 Conduct of the Business Pending the Closing. Until the Closing,
except as otherwise set forth in Schedule 6.2, each of Terex and Seller shall,
with respect to paragraphs (b), (h) and (l), comply with, and, with respect to
the remaining paragraphs of this Section, shall cause Drexel to comply with,
the provisions set forth below:
(a) Drexel shall operate the Business in the ordinary course
consistent with past practice and shall not make any material change in the
assets of the Business other than in the ordinary course consistent with past
practice;
(b) Terex and Seller shall notify Buyer of, and furnish to
Buyer, any information that Buyer may reasonably request with respect to the
occurrence of any event or the existence of any state of facts that would
result in any of Terex's or Seller's representations and warranties not being
true if they were made at any time prior to or as of the Closing Date;
(c) Drexel shall not (i) grant or agree to grant any severance
or termination pay to any executive officer or director, any bonuses to any
employee other than in the ordinary course of business consistent with past
practice, any general increase in the rates of salaries or compensation of its
employees or any specific increase to any employee except such as are in
accordance with regularly scheduled periodic increases, or (ii) provide for any
new pension, retirement or other employment benefits to any of its employees or
any increase in any existing benefits;
(d) Except for cash dividends and cash payments in respect of
intercompany accounts which are reflected on the Balance Sheet or the Closing
Balance Sheet, Drexel shall not declare, set aside or pay any dividends or
other distributions in respect of its capital stock or redeem, purchase or
otherwise acquire any of its capital stock or make any other payments to
Seller;
(e) Drexel shall not amend its articles of incorporation or
by-laws (other than to revise the number of members of its Board of Directors)
or enter into any merger or consolidation agreement;
(f) Drexel shall use reasonable efforts to maintain and
preserve the Business intact, to retain its present employees so that they will
be available to Buyer after the Closing and to maintain its relationships with
customers, suppliers and others so that those relationships will be preserved
after the Closing;
(g) Drexel shall not make any material change in its accounting
methods or principles;
(h) Neither Terex, Seller nor Drexel shall grant any option to
purchase, or other right to acquire, capital stock or any security or
instrument convertible into capital stock of any class of Drexel;
(i) Drexel shall not incur (other than through its intercompany
account with Seller or its affiliates), assume or guarantee any indebtedness or
liability for or in respect of borrowed money;
(j) Drexel shall not enter into, amend or terminate any
material contract, agreement, lease, franchise, security instrument, permit or
license;
(k) Drexel shall not sell, assign, voluntarily encumber, grant
a security interest in or license with respect to, or dispose of, any of its
material assets or properties, tangible or intangible, or incur any material
liabilities, except for sales and dispositions made in the ordinary course of
the Business; and
(l) Terex, Seller and Drexel shall maintain in full force and
effect all insurance specified in Schedule 4.13; it being understood that such
insurance will terminate after the Closing.
6.3 [Intentionally Omitted]
6.4 Other Action. Each of the parties shall use its best efforts to
cause the fulfillment at or prior to the Closing Date of all of the conditions
to their respective obligations to consummate the sale and purchase of the
Shares under this Agreement.
6.5. Notice by Buyer. Buyer shall promptly notify Seller and Terex
in writing of, and furnish to Seller and Terex any information that Seller or
Terex may reasonably request with respect to (i) the capitalization and
financing of Buyer and (ii) the occurrence of any event or the existence of any
state of facts that would result in any of Buyer's representations and
warranties not being true if they were made at any time prior to or as of the
Closing Date.
6.6 Expenses. Except as otherwise specifically provided in this
Agreement, Buyer, Seller and Terex shall bear their own respective expenses
incurred in connection with this Agreement and in connection with all
obligations required to be performed by each of them under this Agreement.
6.7 Publicity. Buyer, Seller and Terex shall consult with each
other before issuing any press release concerning the transactions contemplated
by this Agreement and, except as may be required by applicable law or any
listing agreement with or regulation or rule of any stock exchange on which the
securities of Terex or Buyer are listed or traded, will not issue any such
press release prior to such consultation. If Buyer, Seller or Terex is so
required to issue such press release it shall use reasonable efforts to inform
the other party hereto prior to issuing such press releases.
6.8 Transfer Taxes. Any sales, stock transfer taxes or other like
taxes or recording fees payable as a result of the sale of the Shares shall be
paid by Seller.
6.9 Supplements of Disclosure. For purposes of determining the
accuracy of the representations and warranties of Terex and Seller contained in
Article 4 and the fulfillment of the conditions precedent set forth in Section
7.1(a), the Schedules delivered by Terex and Seller shall be deemed to include
only that information contained therein on the date of this Agreement or as of
the date of such Schedule and as the same may be amended or supplemented by
Terex and Seller with Buyer's consent prior to the Closing Date.
6.10 Preservation of Records. Except as otherwise provided in
Section 10, Buyer agrees that it shall, at its own expense, preserve and keep
the records of Drexel acquired by it pursuant to this Agreement for a period of
five years from the Closing, or for any longer periods as may be required by
any government agency or ongoing litigation, and shall make such records
available to Terex and/or Seller as may be reasonably required by Terex and/or
Seller in connection with, among other things, any insurance claim, legal
proceeding, environmental matter or governmental investigation relating to
Seller or the Business. In the event Buyer wishes to destroy such records
after that time, it shall first give ninety days' prior written notice to Terex
and Seller and Terex and Seller shall have the right at their option and
expense, upon prior written notice given to Buyer within that ninety-day
period, to take possession of the records within one hundred twenty days after
the date of such notice to Buyer.
6.11 Certain Post-Closing Assistance by Drexel. Buyer agrees to
cause the appropriate personnel at Drexel, at no cost or expense to Seller, at
Seller's reasonable request, to prepare all accounting and related reports for
Drexel for periods up to the Closing Date, and to make available necessary
records, which are required by Seller in connection with the Seller's
preparation and/or filing of various financial, tax and accounting reports.
6.12 Covenant not to Compete. (a) For the period ending on the tenth
anniversary of the Closing Date, neither Terex nor Seller nor Clark Material
Handling Company, a Kentucky corporation ("Clark"), shall, and each of them
shall cause all of their affiliates not to, (i) engage (including through the
provision of management or advisory services or through a joint venture or
partnership) anywhere in the United States in the business of developing,
manufacturing, assembling, selling, marketing and/or distributing any type of
(X) dedicated "man-up" turret industrial forklift trucks, (Y) explosion-proof
("EX") industrial forklift trucks (as "EX" industrial forklift trucks are
defined in the Underwriters Laboratories Inc. "Standard for Safety Publication
UL 583" (1985)) or (Z) very narrow aisle industrial forklift trucks, other than
"man-down" turret forklift trucks, or (ii) utilize the trade secrets to be
transferred to the Buyer pursuant to this Agreement, to the extent not
currently used in Clark's business, or disclose to any affiliate or any other
person any such trade secrets not already in the possession of such person.
Clark shall not develop, manufacture, assemble, sell, market and/or distribute
a very narrow aisle combined stock picker/"man-up" turret industrial forklift
truck; provided, however, that Clark shall have the opportunity, commencing one
(1) year after the commercial introduction by Drexel of a very narrow aisle
combined stock picker/"man up" turret industrial forklift truck (the "Drexel
Combined Truck"), to purchase Drexel Combined Trucks from Drexel on terms and
conditions to be mutually agreed upon by Drexel and Clark. Clark shall have
the right to resell such Drexel Combined Trucks under the Clark name using the
Clark dealer network. Notwithstanding the foregoing, Drexel shall have no
obligation, express or implied, to sell Drexel Combined Trucks to Clark if
mutually agreeable terms cannot be arrived at.
(b) For the period ending on the tenth anniversary of the
Closing Date, neither Buyer nor Drexel shall engage (including through the
provisions of management or advisory services or through a joint venture or
partnership) anywhere in the United States in the business of developing,
manufacturing, assembling, selling, marketing and/or distributing any type of
"general purpose" industrial forklift trucks (assuming for the purposes of this
Agreement that "man-up" turret trucks, EX trucks or very narrow aisle trucks
are not "general purpose" industrial forklift trucks).
(c) The foregoing shall not preclude Terex or Clark, or their
respective affiliates, on the one hand, or Buyer or Drexel, on the other hand,
from acquiring an interest in any business, some of the operations of which
would otherwise violate the foregoing prohibitions (the "Competing Operations")
so long as (x) the annual revenues attributable to the Competing Operations do
not exceed 10 percent of the annual revenues of such business, and (y) the
acquiring entity divests itself of the Competing Operations as soon as
practicable, but in no event later than 12 months, after such acquisition. If
either Terex, Clark, or their respective affiliates, acquires an interest in
any business which includes Competing Operations, neither Terex, Clark nor
their respective affiliates shall use the Clark dealer network to sell or
distribute products of the Competing Operations.
(d) For the period ending on the fifth anniversary of the
Closing Date, neither Terex, Seller nor Clark nor any of their respective
subsidiaries shall induce or attempt to induce any employee of Drexel to leave
the employ of Drexel. In addition, for the same period, Drexel shall not
induce or attempt to induce any employee of Terex, Seller or Clark to leave the
employ of any of them.
(e) Without intending to limit the remedies available to the
parties, the parties hereby agree that damages at law would be an insufficient
remedy in the event of any breach by any party of this Section 6.12 and that
the non-breaching party shall be entitled to injunctive relief or other
equitable remedies in the event of any such breach (without the posting of a
bond or other security).
(f) If any of the provisions of this Section 6.12 are held to
be unenforceable because of the scope, term or area of their applicability,
then the court making such determination shall modify such scope, term or area
or all of them to the extent necessary to render this Section 6.12 enforceable
under applicable law, and such provisions shall then be enforced in such
modified form.
6.13 Continuing Intercompany Agreements; Supply of Proprietary Parts;
Termination of Drexel Production for Terex; Other Intercompany Arrangements.
(a) Buyer, Seller, Terex and Clark agree that for the period
ending on the fifth anniversary of the Closing Date, Terex shall cause Clark
to, and Clark shall, allow Buyer and Drexel reasonable access to, and an
unlimited right to use for its own business without restriction or payment
(except as otherwise provided herein), upon Buyer or Drexel's reasonable
request, Clark's source documentation material for all parts used by Drexel at
the time of the Closing Date in the conduct of the Business. In addition, for
the period ending on the fifth anniversary of the Closing Date, Terex shall
cause Clark to allow Buyer and Drexel reasonable access to, and an unlimited
right to use for its own business without restriction or payment, upon Buyer or
Drexel's reasonable request, Clark's parts numbering system for parts currently
being used by Drexel or currently planned to be used by Drexel.
(b) From the Closing Date until May 31, 1994, Drexel will
assemble model EC500S30 forklift trucks for Clark (up to a maximum of 36) that
Drexel is currently assembling in accordance with past practice, using parts
and inventory supplied to Drexel at its plant in Pennsylvania by Clark at
Clark's expense. During such period, Drexel will provide labor for the
assembly of such forklift trucks for a price equal to Drexel's fully-burdened
labor costs of producing such trucks (which is $31.60 per hour) plus 15%. To
the extent that Drexel is in the process of assembling a forklift truck for
Clark on May 31, 1994, which is not completed, Drexel shall complete such
truck; provided, that Clark has provided the necessary parts for such truck on
a timely basis consistent with past practice. Drexel shall bill Clark for each
truck and Clark shall pay such invoice within 30 days from the date of such
invoice. Terex shall use its best efforts to cause Clark to timely pay any
such invoices.
(c) For a period of not more than 6 months after the Closing
Date, at Buyer's reasonable request, Terex or its affiliates shall provide
certain administrative services to Drexel, including without limitation,
payroll and management information services. Terex or its affiliates, as the
case may be, shall provide such services to Drexel at its fully-burdened labor
cost plus 15% and shall bill Drexel on a monthly basis, and Drexel shall pay
such costs within 30 days from the date of such invoice.
6.14 Access to Dealer Network and Purchase of Proprietary Parts.
(a) Terex and Clark agree that they shall not, in any manner,
interfere with, or otherwise prevent, Drexel and Buyer from gaining access to,
or using, Clark's dealer network for the sale and distribution of Drexel's
products. Neither Terex nor Clark shall encourage or assist in network
discrimination against Drexel or Drexel's products in any manner which could
adversely effect Drexel's ability to sell its products through the Clark
network. After the Closing Date, representatives of Drexel shall have the
right to attend meetings of dealers held by Clark and Drexel shall have the
right to use Clark's computer "on-line" network to communicate with Drexel's
dealers.
(b) After the Closing Date, Drexel shall have the right to
continue purchasing those parts which are set forth on Schedule 6.14(b) which
are proprietary to Clark from Clark (for so long as Clark continues to
manufacture such parts) on a non-exclusive, royalty-free basis at prices which
are equal to Clark's standard manufacturing costs for such parts plus 15%.
Terex agrees to cause Clark to allow such purchases. Drexel shall also have
the right to purchase such parts from third parties on a non-exclusive,
royalty-free basis.
6.15 Intercompany Accounts. The intercompany accounts between
Drexel, on the one hand, and Terex, Seller or any of their affiliates, on the
other hand, shall be cancelled immediately prior to the Closing without
consideration, except that an intercompany account pursuant to which Clark owes
Drexel $400,000 shall remain outstanding (but shall not be included in the
Closing Net Worth). The remaining intercompany account between Drexel and
Clark of $400,000 shall be payable by Clark to Drexel within 90 days after the
Closing Date; provided, however, that in the event that Drexel shall not pay to
Clark the amount payable pursuant to Section 2.5 hereof within the time period
set forth therein, then the remaining intercompany account of $400,000 shall be
cancelled in full satisfaction of the amounts owed by Drexel to Clark pursuant
to Section 2.5 hereof.
6.16 Buyer Floor Plan Financing. Buyer shall use its best efforts to
enter into an agreement with Clark Credit Corporation ("Clark Credit") to
provide floor plan financing for Drexel after the Closing Date.
6.17 Environmental Matters. (a) Terex and Seller shall use their
best efforts to complete prior to the Closing Date each of the measures (other
than the removal of the 8,000 gallon fuel oil underground storage tank)
recommended by Dames & Moore in its letter addressed to GE Capital Corporate
Finance Group, Inc., dated February 17, 1994 (the "Dames & Moore Letter"). If
such measures are not completed by the Closing Date, the parties shall agree on
an amount to be placed in escrow in order to complete the necessary work only
to the extent the fees of Dames & Moore (or other environmental consultants, if
any) have not been prepaid and any amounts placed in escrow shall, to the
extent all funds paid to Dames & Moore are less than $75,000, be charged to the
reserve for environmental matters on the Closing Balance Sheet. The parties
acknowledge and agree that neither Terex nor Seller shall have an obligation to
remedy any matters discovered as a result of the completion of such measures in
order to satisfy the conditions to Closing and it being understood that Buyer
shall have no obligation to close if such conditions are not satisfied.
(b) Buyer may conduct, at its own expense, reasonable soil and
groundwater sampling at the Owned Property prior to the Closing Date. Buyer
shall not have or incur any obligations or liabilities of any kind whatsoever
(including, without limitation, any obligations or liabilities with respect to
any contamination or other condition which may exist on, under, or around the
Owned Property) in connection with or as a result of such sampling and
analysis. Within 10 days of the date hereof, Seller shall, and shall cause
Drexel to, provide Buyer and/or Buyer's representatives access to the Owned
Property in order to conduct such soil and groundwater sampling. The parties
acknowledge and agree that neither Terex nor Seller shall have an obligation to
undertake remedial or other actions to address any contamination or other
condition discovered as a result of such sampling and it being understood that
Buyer shall have no obligation to close in the event any such contamination or
other condition is not remediated or addressed by Seller and Terex prior to
Closing to the reasonable satisfaction of Buyer.
(c) Seller shall cause Drexel to use its reasonable efforts to
obtain the necessary permits to discharge waste from the Owned Property into
Horsham's municipal sewer system.
6.18 Lockboxes. Terex and Seller shall, and shall cause Drexel to,
make all necessary arrangements to provide that all payments for Drexel
forklift trucks to be received after the Closing Date shall be sent to Drexel
(and not to any lockboxes). Any funds received by Terex, Seller or any of
their affiliates after the Closing Date with respect to sales of Drexel
forklifts shall promptly be paid to Drexel.
6.19 Indentures. In connection with the consummation of the
transactions contemplated hereby, Terex shall comply in all material respects
with all of the provisions of (i) its Indenture (the "Senior Indenture"), dated
as of July 31, 1992, with United States Trust Company of New York, as Trustee,
including, without limitation, the provisions of Section 4.12 of the Senior
Indenture, and (ii) its Indenture (the "Junior Indenture"), dated as of June
30, 1987, as amended, with Continental Illinois National Bank and Trust Company
of Chicago, as Trustee, including, without limitation, the provisions of
Section 4.12 of the Junior Indenture.
6.20 Drexel's Shipping Schedule. Terex and Seller shall use their
best efforts, and shall cause Drexel to use its best efforts, to meet its
current shipping schedule for its forklift trucks.
6.21 Enforcement of Rights. Upon Buyer's request, Terex shall
enforce on Buyer's and Drexel's behalf, such indemnification rights with
respect to Drexel as are then available under the Tax Agreement dated as of
July 31, 1992 by and between Clark Equipment Company and Terex Corporation,
entered into pursuant to the Stock Purchase Agreement dated as of May 27, 1992,
by and between Clark Equipment Company and Terex Corporation and attached as
Exhibit 1.10(a) to such agreement, and shall pay over to Drexel any
indemnification amounts received under the Tax Agreement with respect to
Drexel.
7. Conditions of Closing.
7.1 Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the purchase under this Agreement is subject to the
fulfillment, prior to or at the Closing, or each of the following conditions
(any or all of which may be waived by Buyer):
(a) all representations and warranties of Terex and Seller to
Buyer contained herein shall be true and correct in all material respects when
made and at and as of the time of the Closing with the same effect as though
made again at and as of that time;
(b) Terex and Seller shall have performed and complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Terex and Seller prior to or at the
Closing;
(c) Buyer shall have been furnished with a certificate (dated
the Closing Date) executed by an officer of Seller certifying to the
fulfillment of the conditions specified in Sections 7.1(a) and 7.1(b);
(d) Buyer shall have been furnished with the affidavit of
Seller required by Section 1445 (b) (2) of the Code;
(e) there shall not be in effect any injunction or restraining
order issued by a court of competent jurisdiction in any action or proceeding
against the consummation of sale and purchase of the Shares pursuant to this
Agreement;
(f) the employment agreement listed on Schedule 7.1 (f) shall
have been terminated in a manner reasonably satisfactory to Buyer with no
liability to Drexel;
(g) (i) Neither Terex nor Seller shall have commenced any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(B) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, and neither
Terex nor Seller shall have made a general assignment for the benefit of its
creditors; or (ii) there shall not have been commenced against Terex or Seller
any case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall not have been commenced
against Terex or Seller any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) neither
Terex nor Seller shall have taken any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above;
(h) all consents, approvals, authorizations, assignments,
exemptions and waivers from third parties that shall be required in order to
enable Buyer to consummate the transactions contemplated hereby shall have been
obtained and/or assigned to Buyer without material condition (except for such
consents, approvals, authorizations, assignments, exemptions and waivers, the
absence of which would not prohibit consummation of such transactions or render
such consummation illegal or would have a Material Adverse Effect);
(i) all liens, charges, mortgages, encumbrances and other
security interests (other than Permitted Liens) on or affecting Drexel's assets
shall have been discharged in a manner satisfactory to Buyer in its sole
discretion and all agreements pursuant to which Drexel has pledged any of its
assets to secure its indebtedness or indebtedness of any of its affiliates,
including without limitation, the agreements set forth on Schedule 4.5, shall
have been terminated and Drexel and Buyer shall have no liability or obligation
with respect to any of such indebtedness, and evidence of such discharge and/or
termination and/or release of liability in a manner satisfactory to Buyer in
its sole discretion shall have been provided to Buyer;
(j) Buyer shall have been offered an agreement with Clark
Credit to provide floor plan financing to Buyer on terms and conditions
comparable to those currently provided to Drexel and Drexel's existing
agreement with Clark Credit shall have been terminated;
(k) Terex shall have delivered a letter to Buyer providing that
the Royalty Payments shall be subordinated to the payment of Buyer's senior
debt only if a party other than GECC and/or its affiliates acquires the senior
debt of Buyer and Buyer provides Seller with evidence reasonably satisfactory
to it that such subordination is required; and
(l) Terex and Seller shall have delivered to Buyer an opinion,
dated the Closing Date, of Robinson Silverman Pearce Aronsohn & Berman, to the
effect that (i) this Agreement has been duly and validly authorized by each of
Terex and Seller, (ii) Seller is the record owner of the Shares and has the
authority to transfer the Shares and upon transfer of the Shares based upon
review of the documents referred to in Schedule 4.5 and documents provided to
the Trustee in accordance with Terex's agreements, Buyer will acquire the
Shares free and clear of any of the Liens set forth on Schedule 4.5 and
Drexel's assets are free and clear of any of the Liens set forth on Schedule
4.5 and, (iii) the security agreements entered into by Drexel have been validly
terminated and, from and after the Closing Date, Drexel has no liability or
obligation thereunder.
7.2. Conditions Precedent to Obligations of Seller. The obligation
of Seller to consummate the sale under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Seller):
(a) all representations and warranties of Buyer to Seller
contained herein shall be true and correct in all material respects when made
and at and as of the time of the Closing with the same effect as though made
again at and as of that time;
(b) Buyer shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by it prior to or at the Closing;
(c) Seller shall have been furnished with a certificate (dated
the Closing Date) executed by an officer of Buyer certifying to the fulfillment
of the conditions specified in Section 7.2(a) and 7.2(b); and
(d) there shall not be in effect any injunction or restraining
order issued by a court of competent jurisdiction in an action or proceeding
against the consummation of the sale and purchase of the Shares pursuant to
this Agreement.
8. Documents to be Delivered at the Closing.
8.1 Documents to be Delivered by Seller. At the Closing, Seller
shall deliver, or cause to be delivered, to Buyer the following:
(a) stock certificates representing the Shares, duly endorsed
in blank or accompanied by stock transfer powers and with all requisite stock
transfer tax stamps attached;
(b) a copy of resolutions of the board of directors of each of
Terex and Seller authorizing the execution, delivery and performance of this
Agreement by each of them and a certificate of the secretary or assistant
secretary of each of them, dated the Closing Date, that such resolutions were
duly adopted and are in full force and effect;
(c) the certificate referred to in Section 7.1(c);
(d) the affidavit referred to in Section 7.1(d);
(e) the written resignations of the directors of Drexel as
Buyer shall request prior to Closing;
(f) the documents referred to in Section 7.1 (i);
(g) the letter referred to in Section 7.1(k); and
(h) the letter referred to in Section 9.3(a)(iii).
8.2 Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Seller the following:
(a) payment and evidence of the wire transfer referred to in
Section 2.2;
(b) a copy of the resolutions of the board of directors of
Buyer authorizing the execution, delivery and performance of this Agreement by
Buyer, and a certificate of its secretary or assistant secretary, dated the
Closing Date, that such resolutions were duly adopted and are in full force and
effect; and
(c) the certificate referred to in Section 7.2(c).
9. Indemnification and Related Matters.
9.1 Indemnification for Breaches of Representations and Covenants,
etc.
(a) Subject to the provisions of this Article 9, each of Terex
and Seller jointly and severally agree to indemnify and hold Buyer and its
affiliates, including Drexel after the Closing Date, and each of their
officers, directors, employees and agents (collectively, "Buyer Indemnified
Parties"), harmless from and against any and all liabilities, obligations,
damages, losses, deficiencies, Environmental Costs, costs and expenses
(including, without limitation, court costs and reasonable fees and
disbursements of counsel) (collectively, "Losses") relating to or resulting
from any of the following: (i) any breach of any of the representations or
warranties made or given by Seller or Terex in this Agreement; (ii) any failure
by Terex or Seller to perform any of its covenants or agreements contained in
this Agreement, except for such representations, warranties, covenants and
agreements related to Taxes (as defined in Section 10.1(a)), to the extent that
Buyer receives indemnification with respect thereto pursuant to Section 9.3 and
Section 10 hereof; and (iii) any Environmental Costs, other than Environmental
Costs incurred by Drexel or Buyer relating to or arising from the 8,000 gallon
underground storage tank (the "8,000 Gallon U.S.T.") formerly located at the
Owned Property, or any releases from the 8,000 gallon U.S.T., which are
indemnified against pursuant to the provisions of Section 9.3 hereof, or any
claims, actions, suits, proceedings or other allegations, whether contingent or
absolute, matured or unmatured, determined or undetermined, known or unknown
prior to the Closing Date, relating in any way to the presence of or exposure
to Hazardous Materials in any surface or subsurface soils, groundwater, surface
water, air or buildings, at, on, from, under or within any Real Property or any
other location, arising out of, relating to, resulting from or otherwise
attributable to activities, events, acts, omissions or conditions occurring or
existing on or prior to the Closing Date at any Real Property currently or
formerly owned, operated or leased by Drexel or any predecessor of Drexel. The
foregoing indemnity under clauses (ii)-(iii) above is in no way limited by the
information set forth on the Schedules to this Agreement.
(b) Subject to the provisions of this Article 9, Buyer agrees
to indemnify and hold each of Terex and Seller and their respective affiliates,
and each of their officers, directors, employees and agents (collectively,
"Seller Indemnified Parties"), harmless from and against any and all Losses
relating to or resulting from any of the following: (i) breach of any of the
representations, warranties made or given by Buyer in this Agreement, or (ii)
any failure by Buyer to perform any of its covenants or agreements contained in
this Agreement, except for such representations, warranties, covenants and
agreements related to Taxes, which matters are subject to Section 10.
9.2 Determination of Damages and Related Matters. In calculating
any amounts payable to any Buyer Indemnified Parties solely pursuant to Section
9.1(a) or payable to any Seller Indemnified Parties pursuant to Section 9.1(b),
Terex and Seller or Buyer, as the case may be, shall receive credit for (i) any
actual reduction in net tax liability as a result of the facts giving rise to
the claim for indemnification and any indemnification payments and insurance
payments, and (ii) any insurance recoveries. Terex and Seller, on the one
hand, and Buyer, on the other hand, shall have no liability for indemnification
under Section 9.1 unless the aggregate amount of the Losses to Buyer, on the
one hand, and Terex or Seller, on the other hand, from all claims finally
determined to arise under Section 9.1 exceeds $350,000 and, in such event,
Terex and Seller, on the one hand, and Buyer, on the other hand, shall be
required to pay only the amount by which such aggregate amount of claims
exceeds said amount in the aggregate but in no event in excess of $14,000,000.
For purposes of indemnification (and no other purpose) with respect to breaches
of representations and warranties contained herein, an event shall be deemed to
be "material" or to have a "Material Adverse Effect" if it results in a Loss
that exceeds $25,000. The indemnification provided for in this Section 9 and
in Section 10 shall, from and after the Closing, be the sole remedy for any of
the matters referred to herein and therein, respectively; it being expressly
understood and agreed that indemnification provided for in Sections 9.1 and 9.2
shall be without duplication for any matter for which indemnification is
provided for in Section 9.3 and in Section 10.
9.3 Other Indemnification by Terex and Seller. (a) Each of Terex
and Seller shall jointly and severally indemnify and hold harmless the Buyer
Indemnified Parties from and against any and all Losses incurred by any of
them, without regard as to time or the amount of such Losses, relating to or
arising from the following: (i) (a) any Taxes for which Terex or Seller is
liable pursuant to Paragraph 10.3, (b) any Taxes for or with respect to any
taxable period ending prior to or including the Closing Date by reason of
Drexel being severally liable for the taxes of Terex, Seller or any other
corporation that has been affiliated with Drexel or any of their respective
affiliates pursuant to Income Tax Regulation s. 1.1502-6 or any analogous state
or local tax provisions and (c) any breach of the representation and warranty
contained in Section 4.12(h); (ii) any claims, actions, suits, proceedings or
other allegations, by any person arising from or relating to any employee
benefit plan, program or arrangement of Terex, Seller or any of their
respective affiliates (other than Drexel) whether arising out of or relating to
any event or state of facts occurring or existing before, on or after the
Closing Date, and including, but not limited to, Losses arising under Title IV
of ERISA, Section 302 of ERISA and Sections 412 and 4971 of the Code; (iii) any
claims, actions, suits, proceedings or other allegations, whether contingent or
absolute, matured or unmatured, determined or undetermined, known or unknown
prior to the Closing Date, arising out of or relating to the matters referred
to in a letter to be delivered by Terex to Buyer at Closing pursuant to this
Section 9.3(a)(iii); and (iv) any Environmental costs incurred by Drexel or
Buyer relating to or arising from the 8,000 Gallon U.S.T. or any releases
therefrom, except that Terex and Seller shall not be obligated to indemnify the
Buyer Indemnified Parties to the extent of any reduction in the principal
amount of the Contingent Note (or in any collateral substituted for the
Contingent Note) due to Environmental Costs. The foregoing indemnity under
clauses (i)-(iv) above is in no way limited by the information set forth on the
Schedules to this Agreement.
(b) Buyer, Terex and Seller agree that with respect to each of
the actions set forth on Schedule 4.17 hereof, Terex and Seller shall jointly
and severally indemnify and hold harmless the Buyer Indemnified Parties for any
and all Losses incurred by any of the Buyer Indemnified Parties in excess of
$25,000 for each such action. Any Losses incurred by the Buyer Indemnified
Parties pursuant to this Section 9.3(b) which are not paid by Seller shall be
credited against the $350,000 amount referred to in Section 9.2 hereof.
9.4 Time and Manner of Certain Claims. (a) Except as otherwise
expressly provided herein, the representations and warranties set forth in this
Agreement shall survive until the first anniversary of the Closing Date and
Buyer, Terex and Seller shall be liable for damages under Sections 9.1(a) and
9.1(b) hereof arising from their respective breaches of their representations
or warranties only to the extent that notice of a claim therefor is asserted by
the other in writing and delivered prior to the expiration of one year from the
Closing Date. Any claim made prior to one year from the Closing Date shall
thereafter survive without limitation as to time and the party receiving such
claim shall remain liable with respect thereto. Any notice of a claim by
reason of any of the representations and warranties contained in this Agreement
shall state specifically the representations or warranties with respect to
which the claim is made, the general facts giving rise to the alleged basis for
the claim. Any claim made by any Buyer Indemnified Party pursuant to Section
9.3 hereof shall survive without limitation as to time.
(b) The covenants and agreements contained herein to be
performed or complied with at or after the Closing (other than the covenants
and agreements to indemnify pursuant to paragraph (a) above which shall expire
as set forth in paragraph (a) above) shall survive the Closing until the
expiration of the applicable statute of limitations.
9.5 Defense of Claims by Third Parties. (a) When a party seeking
indemnification hereunder (the "Indemnified Party") receives notice of any
claims made by third parties or has any other claim for indemnification
hereunder, the Indemnified Party shall give prompt written notice (a "Notice")
thereof to the other party (the "Indemnifying Party") stating the nature and
basis of such claim, provided, however, that failure of the Indemnified Party
to give the Indemnifying Party prompt notice as provided herein shall not
relieve the Indemnifying Party of any of its obligations hereunder, except to
the extent prejudiced thereby. Upon notice from the Indemnified Party, the
Indemnifying Party may, but shall not be required to, assume the defense of any
such claims brought by third parties ("Third Party Claims"), including its
compromise or settlement, and the Indemnifying Party shall pay all reasonable
costs and expenses thereof and shall be fully responsible for the outcome
thereof; provided, however, that in such case, the Indemnifying Party shall
have no obligation to pay any further costs or expenses of legal counsel of the
Indemnified Party thereafter incurred in connection with such defense. No
compromise or settlement in respect of any Third Party Claims may be effected
by the Indemnifying Party without the Indemnified Party's prior written consent
(which consent shall not be unreasonably withheld or delayed). The
Indemnifying Party shall give notice to the Indemnified Party as to its
intention to assume the defense of any such Third Party Claims within thirty
(30) days after the date of receipt of the Indemnified Party's notice in
respect of such Third Party Claims. If an Indemnifying Party does not, within
thirty (30) days after the Indemnified Party's notice is given, give notice to
the Indemnified Party of its assumption of the defense of the Third Party
Claims, the Indemnifying Party shall be deemed to have waived its rights to
control the defense thereof. If the Indemnified Party assumes the defense of
any Third Party Claims because of the failure of the Indemnifying Party to do
so in accordance with this Section 9.5, it may do so in such reasonable manner
as it may deem appropriate, and the Indemnifying Party shall pay all reasonable
costs and expenses of such defense. The Indemnifying Party shall have no
liability with respect to any compromise or settlement thereof effected without
its prior written consent (which consent shall not be unreasonably withheld or
delayed), unless the sole relief granted was equitable relief for which no
Indemnifying Party would have liability or to which no Indemnifying Party would
be subject.
(b) Notwithstanding the foregoing, with respect to any Third
Party Claim that the Indemnifying Party is defending, the Indemnified Party
shall have the right to retain separate counsel to represent it and the
Indemnifying Party shall pay the fees and expenses of such separate counsel if
there are conflicts that make it reasonably necessary for separate counsel to
represent the Indemnified Party and the Indemnifying Party.
9.6 Buyer's Knowledge. No investigation by Buyer or on its
behalf heretofore or hereafter conducted shall affect the representations,
warranties or indemnities of Seller under or pursuant to this Agreement.
10. Tax Matters.
10.1 Tax Returns. (a) Seller shall be responsible for the
preparation and timely filing of all "Tax Returns" (as hereinafter defined) of
Drexel relating to all "Pre-Closing Periods" (as hereinafter defined)
("Pre-Closing Tax Returns"). Such Tax Returns shall be prepared on a basis
consistent with those Tax Returns prepared for prior taxable periods, except as
otherwise required by law or regulation. If any of such Tax Returns cannot be
completed by Seller and filed until after the Closing Date, Buyer agrees to
cause the relevant officer(s) of Drexel to sign and file such Tax Returns after
they have been completed by Seller (and before the due date of such Tax
Returns), so long as such Tax Return(s) do not take any position for which
there is no "realistic possibility of being sustained on the merits" (as
defined for purposes of Section 6694 (a) (1) of the Code, or such equivalent
state or local standard) , and Seller agrees that such post-Closing execution
shall not detract from or otherwise affect Seller's liability for any Taxes
shown on such Tax Returns to the extent provided in Section 10.3 (a). "Tax
Return" shall mean any return, report, statement, estimate, declaration,
notice, form or other information or other document (including any related or
supporting information) supplied or required to be supplied to any taxing
authority in connection with the determination, assessment, collection,
administration or imposition of any Taxes. "Pre-Closing Periods" shall, with
respect to Drexel, mean and refer to any taxable period (or portion thereof)
ending at the close of the day of the Closing Date or at any time prior
thereto, and shall include for Federal, state, local or foreign Tax purposes,
any period which covers the deemed transfer of assets pursuant to a "Section
338(g) Election" or a "Section 338(h)(10) Election" (as such terms are
hereinafter defined) other than any period covered by a Straddling Return (as
hereinafter defined). "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, excise, employment,
property, sales, franchise, use and gross receipts, customs, estimated and
withholding taxes imposed by or payable to the United States or any state,
county, local or foreign government or subdivision or agency thereof, and shall
also include any interest, penalties or additions to tax attributable to such
assessments including penalties for the failure to file any Tax Return.
(b) Buyer shall be responsible for the preparation and timely
filing of all Tax Returns of Drexel for all taxable periods (or portions
thereof) other than Pre-Closing Periods of Drexel, including Straddling Returns
(as hereinafter defined) (such periods being hereinafter called "Post-Closing
Periods"). Buyer shall not permit Drexel to make any assertion or make any
election the effect of which would be to exclude Drexel from Seller's
consolidated federal Tax Return (or any consolidated or combined state, county
or local Tax Return of Seller's consolidated group) for any Pre-Closing Period
unless required by law or regulation.
(c) Buyer shall be responsible for the preparation and timely
filing of any Tax Returns of Drexel for taxable periods, if any, that begin
before the Closing Date and end after such Closing Date ("Straddling Returns").
Such Tax Returns shall be prepared on a basis consistent with those Tax Returns
prepared for prior taxable periods, except as otherwise required by law or
regulation, or, in the opinion (reasonably acceptable to Seller and its
counsel) of a reputable law firm (the "Law Firm"), by other applicable legal
authorities, and shall be subject to Seller's review and approval (which shall
not be unreasonably withheld or delayed) prior to being filed by Buyer. In the
event of a dispute with respect to any Straddling Return which is not resolved
prior to the due date of such Return, Buyer shall file the Return in the manner
it determines, provided that if any such dispute is resolved following the due
date of such Return in a manner inconsistent with the manner in which the
Return was filed, Buyer shall file an amended Return reflecting such
resolution. Seller shall provide Buyer with all necessary tax-related
information relating to the Pre-Closing Date Periods (as defined below) so that
Buyer can prepare such Straddling Returns. Seller shall pay to Buyer, as and
when required to do so under Section 10.4, so much of any Tax liability shown
on a Straddling Return as is properly allocable to the period ending on the
Closing Date (a "Pre-Closing Date Period"). The portion of Drexel's taxable
income, gain, loss and any resulting Tax shown on a Straddling Return which is
properly allocated to a Pre-Closing Date Period shall be determined by (i)
assuming that Drexel's taxable year ends as of the close of business on the
Closing Date, including within such Pre-Closing Date Period any income, gain or
loss resulting from any deemed transfer of assets pursuant to a Section 338(g)
Election, and (ii) except as otherwise provided by law or regulation or, in the
opinion (reasonably acceptable to Seller and its counsel) of the Law Firm, by
other applicable legal authorities, preparing Tax Returns based on the income,
gain and losses as so determined on a basis consistent with the methodology and
elections employed by Drexel in prior years as adjusted to reflect any
subsequent adjustments to such returns.
(d) Except as otherwise required by any then effective law or
regulation, or, in the opinion (reasonably acceptable to Seller and its
counsel) of the Law Firm by other applicable legal authorities, and except as
otherwise provided in Section 10.2, without the prior written consent of
Seller, Buyer shall not change or cause Drexel to change an annual accounting
period, adopt or change any accounting method, or amend any Pre-Closing Tax
Return if any such adoption, change or amendment would have the effect of
increasing the Tax liability of Drexel with respect to any Pre-Closing Period
or any Pre-Closing Date Period.
(e) Except for Tax Returns that cover the deemed transfer of
assets pursuant to a Section 338(g) Election and a Section 338(h)(10) Election
(each as defined in Section 10.2(a)), if, consistent with the provisions of
this Section 10, Seller desires to amend a Pre-Closing Tax Return, Buyer shall
cooperate in such matter to the extent reasonable. Seller shall indemnify and
hold Drexel and Buyer harmless against any increase in any Taxes, on an
after-tax basis, with respect to Post-Closing Periods resulting from any such
amendment.
(f) Seller shall retain all books, records, returns, schedules,
documents and all papers or relevant items of information relating to the
Federal, state, foreign or other Tax liability of Drexel for any Pre-Closing
Period, until the expiration of all statutes of limitations for claims to which
such documents may pertain. Thereafter, Seller shall have the right to dispose
of or destroy any of the items referred to in the preceding sentence, provided
that, as to any items identified by Buyer, Buyer shall have the right, at its
sole cost and expense, promptly to remove or obtain copies (or, if necessary,
originals) of such items and take whatever action Buyer may desire with respect
to such items. Notwithstanding the foregoing, Seller shall reasonably
cooperate with Buyer and furnish copies of any such items to Buyer, at Buyer's
sole cost and expense, upon written request.
10.2 Section 338 Elections and Forms. (a) With respect to Buyer's
acquisition of the Shares hereunder, Buyer may make an election under Section
338(g) of the Code, and the Treasury Regulations promulgated thereunder and
similar elections under applicable state, local and foreign laws (such election
being hereinafter called a "Section 338(g) Election"). With respect to
Seller's sale of the Shares hereunder, Seller agrees that if requested by
Buyer, Seller, together with Buyer, shall jointly make an election under
Section 338(h)(10) of the Code and the Treasury Regulations promulgated
thereunder and similar elections under applicable state, local and foreign laws
(such election being hereinafter called "Section 338(h)(10) Election"). Buyer
and Seller agree to report the transfers under this Agreement consistent with
any Section 338(g) Election and Section 338(h)(10) Election so made, and shall
take no position contrary thereto unless required by law to do so. For
purposes of this Agreement the terms Section 338(g) Election and Section
338(h)(10) Election shall include any deemed elections pursuant to Code
Sections 338(e) and 338(f).
(b) If Buyer makes a Section 338(h)(10) Election then (i) Buyer
shall be responsible (at its sole cost and expense) for the preparation and
timely filing of all statements and forms required under Section 338 of the
Code ("Section 338 Forms") in accordance with applicable tax laws and the terms
of this Agreement, (ii) Seller shall execute and deliver for filing a Form 8023
prepared by Buyer and execute and file, with its Federal Pre-Closing Tax Return
for the respective taxable year, a statement of election consistent with the
foregoing that is prepared and timely provided to Seller by Buyer (and Seller
shall file any similar statements required for state or other returns), and
(iii) Seller shall reasonably cooperate with Buyer in the preparation of Form
8023 or any appropriate state form. Seller shall pay all Taxes resulting from
any Section 338(g) Election or Section 338(h)(10) Election (except for Taxes
for which Buyer is liable pursuant to Section 10.3(b)) which payment shall be
made in accordance with Section 10.4.
(c) If Buyer makes a Section 338(h)(10) Election, the Purchase
Price shall be allocated in accordance with a schedule delivered by Buyer (the
"Section 338 Schedule"). The Section 338 Schedule shall be prepared by Buyer
and delivered to Seller within 180 days after the Closing Date. The allocation
of the Purchase Price in the Section 338 Schedule shall be as reasonably
determined by Buyer, shall be in accordance with the Treasury Regulations
prescribed under Code Section 338(b)(5) and shall be subject to Seller's review
and approval (which shall not be unreasonably withheld or delayed). For
purposes of this Section 10.2(c), Seller's withholding of approval shall not be
considered unreasonable if the allocation of the Purchase Price in the Section
338 Schedule would result in a net capital loss being realized by Seller as a
result of the transactions contemplated by this Agreement (and, as a
consequence, Seller would suffer a Tax cost). If Seller reasonably withholds
its approval with respect to an allocation of the Purchase Price, the parties
shall attempt in good faith to resolve such dispute. If the parties are unable
to resolve such dispute, the parties shall appoint the Arbiter to resolve the
dispute. The Arbiter's determination shall be conclusive and binding on the
parties. The Purchase Price shall be adjusted for liabilities or any amounts
considered under applicable tax laws to be additional purchase price received
by Seller or a reduction thereof. All allocations contained in the Section 338
Schedule, as adjusted (as discussed above), shall be adhered to by the parties
in preparing the Section 338 Forms and all relevant Tax Returns, information
reports and the documents and forms; provided, however, that in determining the
adjusted basis of Buyer with respect to Drexel's assets, Buyer may increase the
amount of the Purchase Price for any additional costs and expenses as may be
required by applicable tax laws.
10.3 Liability for Taxes. Seller and Buyer hereby covenant and agree
that, as between Seller and Buyer, and except as otherwise provided in Section
10.4:
(a) Except as otherwise provided in Section 10.3(b), Seller
shall be liable for all Taxes (including, without limitation, all Taxes
attributable to any deferred intercompany amounts, excess loss accounts or
similar items triggered as a result of the transactions contemplated hereby and
any amounts owing pursuant to any tax sharing or similar agreements) payable by
or with respect to Drexel or Seller (i) with respect to Pre-Closing Periods,
(ii) with respect to Pre-Closing Date Periods as determined in accordance with
Section 10.1(c), and (iii) resulting from a Section 338(g) Election or a
Section 338(h)(10) Election (including, without limitation, all Pennsylvania
State Taxes payable as a result of any such Election).
(b) If (i) Drexel is liable for any Federal, state, local or
foreign income taxes resulting from a Section 338(g) Election, and (ii) Buyer
has failed to make any available Section 338(h)(10) Election with respect to
Drexel, then (iii) Buyer shall be liable for such resulting Federal, state,
local or foreign income taxes but only to the extent of any such income taxes
which would not have been payable by Drexel had Buyer made such available
Section 338(h)(10) Election.
(c) Buyer shall be liable for and shall pay, or shall cause
Drexel to pay, and Seller shall not be required to pay or reimburse Buyer or
Drexel for, all Taxes payable by Drexel for all Post-Closing Periods, other
than Taxes for which Seller is responsible pursuant to Sections 10.1(e) and
10.3(a) above.
10.4 Certain Tax Payment Responsibility. Notwithstanding anything in
this Section 10 to the contrary, if Seller is liable under Section 10.3(a) for
any Taxes that are required to be reported on a Tax Return prepared by Seller,
Seller shall be responsible for paying such Taxes to the relevant taxing
authorities on or before the date that such Taxes are due. The amount of the
Revised Section 338 Taxes retained by Buyer and payable to Pennsylvania shall
be credited, without duplication, against the amounts owed by Seller. If Buyer
is liable under Section 10.3(b) or Section 10.3(c) for any Taxes that are
required to be reported on a Tax Return prepared by Buyer, Buyer shall be
responsible for paying such Taxes to the relevant taxing authorities on or
before the date such Taxes are due. If one party (the "Payor") is liable for a
Tax pursuant to Section 10.3 and such tax is required to be reported on a Tax
Return to be filed by the other party (the "Preparer") under Section 10.1,
including any Tax imposed as a result of any subsequent adjustment, the Payor
shall pay such Tax to the Preparer on or before the later of (i) two business
days before the date the Preparer intends to pay the Tax, provided the
Preparer's request for payment is in writing, is signed by an officer of the
Preparer and is accompanied by a copy of the applicable Tax Return and, if
necessary, a statement reflecting the calculation of the amount of the Tax for
which the Payor is liable, and, where applicable, (ii) the date on which the
review and approval procedure described in Paragraph 10.1(c) has been completed
and (iii) the due date of such payment. The Preparer shall remit, or cause to
be remitted, any amount paid to the Preparer by the Payor to the appropriate
taxing authority within five days after the Preparer receives such payment (but
in no event after the due date), and, if the Preparer does not so remit the
funds, such Tax shall become a liability of the Preparer for purposes of this
Agreement, and the Payor shall have no further liability hereunder with respect
to such Tax.
10.5 Tax Contests. Each of the parties hereto shall promptly notify
the other in writing upon receipt by either of them or any of their respective
affiliates of notice of any pending or threatened Income Tax (as hereinafter
defined) audits or assessments which may affect the Income Tax liabilities of
Drexel and for which such other party would be liable under this Paragraph 10.
Seller shall have the right to represent Drexel's interests in any Income Tax
matter, including any audit or administrative or judicial proceeding or the
filing of any amended return, involving an Income Tax liability of Drexel for
any Pre-Closing Period and for which Seller would be liable under this Section
10 (a "Tax Matter") and to employ counsel of its choice at its expense. Buyer
agrees that it will cooperate fully with Seller and its counsel in the defense
or compromise of any such Tax Matter. With respect to (i) any Tax Matter that
could affect the amount or timing of any Income Tax for which Buyer or any of
its affiliates is or may be responsible, Seller shall consult with Buyer with
respect to the handling and resolution of such Tax Matter, and shall not settle
or take any other action with respect to such Tax Matter without Buyer's
consent, which shall not be unreasonably withheld, and (ii) any Income Tax
matter (including any audit or administrative or judicial proceeding or filing
of any amended return) involving an Income Tax liability of Drexel for any
Post-Closing Period and for which Buyer would be liable under this Section 10,
that could affect the amount or timing of any Income Tax for any Pre-Closing or
Pre-Closing Date Period for which Seller or any of its affiliates is
responsible, Buyer shall consult with Seller with respect to the handling and
resolution of such Income Tax matter, and shall not settle or take any other
action with respect to such Income Tax matter without Seller's consent, which
shall not be unreasonably withheld. "Income Tax" shall mean any Federal,
State, local or foreign income, franchise or similar tax and in each instance
any interest, penalties or additions to tax attributable to such tax.
10.6 Refunds, Tax Credits. To the extent that Buyer or Drexel
receives a refund of, or an offset with respect to, Taxes or a Tax credit
arising from or with respect to the Pre-Closing Periods or Pre-Closing Date
Periods, Buyer shall, and shall cause Drexel to, pay to or reimburse Seller for
the amount of any such Tax refund or credit received net of any Taxes payable
by Buyer or Drexel on such Tax refund or credit. To the extent that Seller
receives a refund of, or an offset with respect to, Taxes or a Tax credit
arising from or with respect to any of the Post-Closing Periods (excluding
Pre-Closing Date Periods), Seller shall reimburse Buyer for the amount of any
such Tax refund or credit received net of any Taxes payable by Seller on such
Tax refund or credit.
10.7 Tax Sharing Agreements. As of the Closing Date, all Tax sharing
agreements or arrangements, whether or not written, to which Drexel is a party
shall be terminated with respect to Drexel and Drexel shall have no further
obligations thereunder. No payments shall be made by Drexel (whether by cash
payment, accounting entry or otherwise) under any such Tax sharing agreements
or arrangements during the period beginning on the date of the signing of this
Agreement and ending on the Closing Date other than payments attributable to
the operations of Drexel in the ordinary course for that period, so that, in
particular, no payments may be made with respect to any liability for deferred
intercompany amounts, excess loss accounts or similar items triggered as a
result of the transactions contemplated hereby.
11. Miscellaneous.
11.1 Finders. Buyer, Terex and Seller respectively represent and
warrant that they have not employed or utilized the services of any broker or
finder in connection with this Agreement or the transactions contemplated by
it, except that Terex and Seller have utilized the services of Warburg and
Terex and Seller shall be liable for any compensation payable to Warburg in
connection with the transactions contemplated by this Agreement. Terex shall
indemnify and hold harmless the Buyer Indemnified Parties from and against any
claim by Warburg without regard to the amount of any such claim.
11.2 Entire Agreement. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of all of the
terms of the arrangements between the parties with respect to the matters
provided for, supersedes any previous agreements and understandings between the
parties with respect to those matters (except as otherwise provided in Section
6.1), and cannot be changed or terminated orally.
11.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to conflicts of law principles thereof.
11.4 Schedules; Tables of Contents and Headings. Any matter
disclosed on any Schedule to this Agreement shall be deemed to have been
disclosed on all other Schedules to this Agreement to the extent that it should
have been disclosed on such other Schedule. The table of contents and section
headings of this Agreement and titles given to Schedules to this Agreement are
for reference purposes only and are to be given no effect in the construction
or interpretation of this Agreement.
11.5 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such address as a party may have
specified by notice given to the other party pursuant to this provision):
If to Seller to:
Terex Corporation
500 Post Road East
Westport, Connecticut 06880
Attention: General Counsel
With a copy to:
Robinson Silverman Pearce
Aronsohn & Berman
1290 Avenue of the Americas
New York, New York 10104
Attn: Stuart A. Gordon, Esquire
If to Buyer, to:
DAC Acquisition Corp.
c/o Drexel Industries, Inc.
P.O. Box 248
Horsham, Pennsylvania 19044
With a copy to:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attn: Corporate Finance Group - Equity
With a copy to:
Fried, Frank, Harris, Shriver and Jacobson
One New York Plaza
New York, New York 10004
Attn: Gary Cooperstein, Esq.
11.6 Separability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement which shall remain in full force and
effect.
11.7 Waiver. Any party may waive compliance by another with any of
the provisions of this Agreement. No waiver of any provision shall be
construed as a waiver of any other provision. Any waiver must be in writing.
11.8 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. Nothing in this Agreement shall create or be deemed to
create any third-party beneficiary rights in any person or entity, including,
without limitation, Employees, not a party to this Agreement. No assignment of
this Agreement or of any rights or obligation hereunder may be made by either
party (by operation of law or otherwise) without the prior written consent of
the other and any attempted assignment without the required consent shall be
void; provided, however, that no such consent shall be required of Buyer,
Terex or Seller to assign part or all of its rights under this Agreement to one
or more of its subsidiaries or affiliates, but no such assignment by Buyer,
Terex or Seller of its rights or obligations hereunder shall relieve Buyer,
Terex or Seller of any of its obligations under this Agreement.
11.9 Best Knowledge. As used in this Agreement "to the best of
Seller's knowledge" shall mean either actual knowledge possessed by an officer
of Seller or Drexel or knowledge which should reasonably have been possessed by
an executive officer of Seller or Drexel, and "to the best of Buyer's
knowledge" shall mean actual knowledge possessed by an executive officer of
Buyer or knowledge which should reasonably have been possessed by an officer of
Buyer.
11.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which shall
constitute one and the same Agreement.
11.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.
11.12 Set-Off. In connection with the additional payment
obligations of Buyer in connection with this Agreement, in addition to any
rights and remedies provided by law, Buyer shall have the right, without prior
notice to Terex or Seller, any such notice being expressly waived by Terex and
Seller to the extent permitted by law, to set-off and appropriate and apply
against such amount any and all amounts owed by Terex and/or Seller to Buyer,
whether matured or unmatured, in connection with this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
CMH ACQUISITION CORP.
By: /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Secretary
DAC ACQUISITION CORP.
By: /s/ Richard O. McKerr
Richard O. McKerr
Terex Corporation hereby agrees to be bound by the provisions of Articles
6, 9 and 10 hereof.
TEREX CORPORATION
By: /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Senior Vice President
Clark Material Handling Company hereby agrees to be bound by the
provisions of Sections 6.12, 6.13, 6.14 and 6.15 hereof.
CLARK MATERIAL HANDLING
COMPANY
By: /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Secretary
EXHIBIT 11.1
(Page 1 of 2)
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
In Thousands except per share amounts
Year Ended December 31,
1994 1993 1992
PRIMARY:
Income (loss) before
extraordinary item $ 1,170 $(65,080) $ 2,915
Less: Accretion of
Preferred Stock (5,929) (152) ---
Income (loss) before extraordinary item
applicable to common stock (4,759) (65,232) 2,915
Extraordinary loss on
retirement of debt (709) (1,464) ---
Net income (loss) applicable
to common stock $(5,468) $(66,696) $ 2,915
Weighted average shares outstanding
during the period 10,303 9,953 9,945
Assumed exercise of warrants at
ratio determined as of
December 31, 1994 0(a) 0(b) 0(b)
Assumed exercise of stock options 0(a) 0(a) 0(a)
Primary shares outstanding 10,303 9,953 9,945
Primary Income per common share
Income (loss) before
extraordinary item $(0.46) $(6.55) $ 0.29
Extraordinary loss (0.07) (0.15) ---
Net income (loss) $(0.53) $(6.70) $ 0.29
(a) Excluded from the computation because the effect is anti-dilutive.
(b) Not issued or outstanding during these periods.
-------------------------------------------------------------------------------
--
EXHIBIT 11.1
(Page 2 of 2)
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
In Thousands except per share amounts
Year Ended December 31,
1994 1993 1992
FULLY DILUTED:
Income (loss) before
extraordinary item $ 1,170 $(65,080) $ 2,915
Less: Accretion of
Preferred Stock (5,929) (152) ---
Income (loss) before extraordinary
item applicable to common stock (4,759) (65,232) 2,915
Add: Accretion of Preferred stock
assumed converted at beginning
of period 0 0 0
(4,759) (65,232) 2,915
Extraordinary loss on
retirement of debt (709) (1,464) ---
Net income (loss) applicable
to common stock $(5,468) $(66,696) $ 2,915
Weighted average shares outstanding
during the period 10,303 9,953 9,945
Assumed exercise of warrants
at ratio determined as of
December 31, 1994 0(a) 0(a) 0(b)
Assumed conversion of Preferred Stock 0(a) 0(b) 0(b)
Assumed exercise of stock options 0(a) 0(a) 3
Fully diluted shares outstanding 10,303 9,953 9,948
Fully Diluted Income per common share
Income (loss) before
extraordinary item $(0.46) $(6.55) $ 0.29
Extraordinary loss (0.07) (0.15) ---
Net income (loss) $(0.53) $(6.70) $ 0.29
(a) Excluded from the computation because the effect is anti-dilutive.
(b) Not issued or outstanding during these periods.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-21483) of Terex Corporation of our report dated
March 28, 1995 appearing on page F-2 of the Form 10-K.
Price Waterhouse LLP
Stamford, Connecticut
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TEREX
CORPORATION DECEMBER 31, 1994 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 9,727
<SECURITIES> 0
<RECEIVABLES> 97,831
<ALLOWANCES> 6,114
<INVENTORY> 164,245
<CURRENT-ASSETS> 278,152
<PP&E> 124,003
<DEPRECIATION> 37,843
<TOTAL-ASSETS> 401,616
<CURRENT-LIABILITIES> 221,578
<BONDS> 162,987
<COMMON> 103
17,262
0
<OTHER-SE> (55,841)
<TOTAL-LIABILITY-AND-EQUITY> 401,616
<SALES> 786,781
<TOTAL-REVENUES> 786,781
<CGS> 703,622
<TOTAL-COSTS> 703,622
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,492
<INCOME-PRETAX> 1,956
<INCOME-TAX> 786
<INCOME-CONTINUING> 1,170
<DISCONTINUED> 0
<EXTRAORDINARY> (709)
<CHANGES> 0
<NET-INCOME> 461
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
</TABLE>
