As filed with the Securities and Exchange Commission on June 12, 1996.
Registration No. 33-01449
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-4/A
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
TEREX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 3550 34-1531521
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Address, including zip code, and telephone
number, including area code, of Registrant's
principal executive offices)
--------------------------
CLARK MATERIAL HANDLING COMPANY
(Exact name of Co-Registrant as specified in its charter)
Kentucky 3550 61-1107574
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
172 Trade Street
Lexington, Kentucky 40510
(606) 288-1200
(Address, including zip code, and telephone
number, including area code, of Co-Registrant's
principal executive offices)
--------------------------
TEREX CRANES, INC.
(Exact name of Co-Registrant as specified in its charter)
Delaware 3530 06-1423889
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
c/o Terex Corporation
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Address, including zip code, and telephone
number, including area code, of Co-Registrant's
principal executive offices)
<PAGE>
PPM CRANES, INC.
(Exact name of Co-Registrant as specified in its charter)
Delaware 3550 39-1611683
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
Atlantic Center for Business and Industry
Highway 501 East
Conway, South Carolina 29526
(803) 349-6900
(Address, including zip code, and telephone
number, including area code, of Co-Registrant's
principal executive offices)
--------------------------
KOEHRING CRANES, INC.
(Exact name of Co-Registrant as specified in its charter)
Delaware 3550 06-1423888
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
106 12th Street S.E.
Waverly, Iowa 50677
(319) 352-3920
(Address, including zip code, and telephone
number, including area code, of Co-Registrant's
principal executive offices)
--------------------------
CMH ACQUISITION CORP.
(Exact name of Co-Registrant as specified in its charter)
Delaware 3530 39-1738520
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
c/o Terex Corporation
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Address, including zip code, and telephone
number, including area code, of Co-Registrant's
principal executive offices)
--------------------------
CMH ACQUISITION INTERNATIONAL CORP.
(Exact name of Co-Registrant as specified in its charter)
Delaware 3530 39-1738521
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
c/o Terex Corporation
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Address, including zip code, and telephone
number, including area code, of Co-Registrant's
principal executive offices)
--------------------------
Marvin B. Rosenberg, Esq.
Terex Corporation
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies To:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Stuart A. Gordon, Esq.
Eric I Cohen, Esq.
(212) 541-2000
--------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box:
--------------------------
The Registrant and the Co-Registrants hereby amend this Registration
Statement on such date or dates as may be necessary to delay its effective date
until the Registrant and the Co-Registrants shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
TEREX CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K Showing
Location in Prospectus of Items of Form S-4
Item Number and Caption Heading or Subheading in Prospectus
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus Facing Page of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information Prospectus Summary; Risk Factors; The
Company; Summary Consolidated
Financial Data; Selected Consolidated
Financial Data
4. Terms of the Transaction The Exchange Offer; Description of the
Notes and the Guarantees; Certain
Federal Income Tax Consequences
5. Pro Forma Financial Information Not Applicable
6. Material Contacts with the
Company Being Acquired Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters Not Applicable
8. Interests of Named Experts
and Counsel Legal Matters; Experts
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Not Applicable
B. INFORMATION ABOUT THE REGISTRANTS
10. Information with Respect to
S-3 Registrants Not Applicable
11. Incorporation of Certain
Information by Reference Not Applicable
12. Information with Respect to S-2
or S-3 Registrants Not Applicable
13. Incorporation of Certain
Information by Reference Not Applicable
14. Information with Respect to
Registrants Other Than
S-3 or S-2 Registrants Prospectus Summary; Summary
Consolidated Financial Data; The
Company; Selected Consolidated
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Description of the Notes and
the Guarantees; Consolidated Financial
Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies Not Applicable
16. Information with Respect to S-2
or S-3 Companies Not Applicable
17. Information with Respect to
Companies Other Than S-2
or S-3 Companies Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations
are to be Solicited Not Applicable
19. Information if Proxies, Consents
or Authorizations are Not to be
Solicited, or in an Exchange
Offer Management; Certain Transactions
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 12, 1996
OFFER TO EXCHANGE
all outstanding
Series A 13 1/4% Senior Secured Notes due 2002
($250,000,000 principal amount outstanding)
for
Series B 13 1/4% Senior Secured Notes due 2002
of
TEREX CORPORATION
Payment of Principal and Interest Unconditionally Guaranteed by
Terex Cranes, Inc.
PPM Cranes, Inc.
Koehring Cranes, Inc.
Clark Material Handling Company
CMH Acquisition Corp.
CMH Acquisition International Corp.
---------------------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 p.m., NEW YORK CITY TIME,
ON ________________, 1996, UNLESS EXTENDED.
---------------------------------
Terex Corporation, a Delaware corporation ("Terex" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal" which, together with the Prospectus, constitute the "Exchange
Offer"), to exchange its outstanding Series A Senior Secured Notes due 2002 (the
"Old Notes"), of which an aggregate of $250 million in principal amount is
outstanding as of the date hereof, for an equal principal amount of its Series B
Senior Secured Notes due 2002 (the "New Notes"). The form and terms of the New
Notes will be the same as the form and terms of the Old Notes except that the
New Notes will have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and, therefore, will not bear legends restricting the
transfer thereof. The New Notes will be entitled to the benefits of the
Indenture (the "Indenture"), dated as of May 9, 1995, among the Company, the
Guarantors and United States Trust Company of New York, as trustee, governing
the Old Notes. The New Notes and the Old Notes are sometimes collectively
referred to herein as the "Notes." The Old Notes are, and the New Notes will
continue to be, unconditionally and irrevocably guaranteed by present and future
Material Subsidiaries (as defined herein) of the Company that are Restricted
Subsidiaries (as defined herein) (other than Terex Equipment Limited, the
Company's wholly owned Scottish subsidiary ("TEL"), Clark Material Handling
Company GmbH, the Company's wholly owned German subsidiary ("CMHC Germany"),
P.P.M. S.A., the Company's French subsidiary, and any other present or future
Restricted Subsidiary organized under the laws of a foreign country), including,
without limitation, Terex Cranes, Inc., a Delaware corporation ("Terex Cranes"),
PPM Cranes, Inc., a Delaware corporation ("PPM Cranes"), Koehring Cranes, Inc.,
a Delaware corporation ("Koehring Cranes"), Clark Material Handling Company, a
Kentucky corporation ("CMHC"), CMH Acquisition Corp., a Delaware corporation
("CMH Acquisition"), and CMH Acquisition International Corp., a Delaware
corporation ("International"). Such companies are collectively referred to
herein as the "Guarantors." See "The Exchange Offer" and "Description of the
Notes and the Guarantees."
(continued on next page)
---------------------------------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED BY ELIGIBLE HOLDERS
IN EVALUATING THE EXCHANGE OFFER
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1996.
<PAGE>
The Company will accept for exchange any and all Old Notes which are validly
tendered and not withdrawn prior to 5:00 p.m, New York City time, on
__________________, 1996 (if, when and as extended, the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date, pursuant to the procedures described herein.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions which may be waived by the Company. See "The Exchange Offer."
For example, Old Notes may be tendered only in integral multiples of $1,000.
After consummation of the Exchange Offer, the Company may offer to purchase any
Notes at any price or prices which the Company deems appropriate, although the
Company is not obligated and has no present intention to do so.
The New Notes will bear interest at 13 1/4% per annum from the date of original
issue. Interest on the New Notes will be payable semi-annually, in arrears, on
May 15 and November 15 of each year, commencing November 15, 1996. Holders of
Old Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with and at the time of the first interest payment on the
New Notes. Interest on the Old Notes accepted for exchange will cease to accrue
upon issuance of the New Notes being exchanged therefor.
The New Notes will not be redeemable prior to May 15, 2000, except that the
Company may, at its option, redeem up to one-third of the original principal
amount of the New Notes at the redemption prices set forth in the Indenture plus
accrued interest through the date of redemption, with the net proceeds of
certain sales of common stock of the Company or any Restricted Subsidiary (as
defined herein). From and after May 15, 2000, the New Notes will be redeemable
at the option of the Company, in whole or in part, at the redemption prices set
forth in the Indenture plus accrued interest to the date of redemption. Upon a
Change of Control (as defined herein), the Company is required, subject to
certain conditions, to offer to purchase the New Notes at 101% of the principal
amount thereof together with accrued interest to the date of purchase. See
"Description of the Notes and the Guarantees."
Except as otherwise set forth herein, the Old Notes are and the New Notes will
be secured by a first priority security interest in (i) substantially all of the
assets of the Company and the Guarantors, other than cash and cash equivalents
(except that as to accounts receivable and inventory, and proceeds thereof and
certain related rights, such security interest are subordinated to liens
securing obligations under any Revolving Credit Facility (as defined herein) to
which any of them are obligors), (ii) property, plant and equipment of certain
of the Restricted Subsidiaries organized outside of the U.S. and (iii) the
Capital Stock (as defined herein) of, and certain intercompany notes from, all
Subsidiaries (as defined herein) of the Company owned by the Company or any
Material Subsidiary (as defined herein). In addition, the Old Notes are and the
New Notes will initially be secured by a security interest in inventory of
certain foreign Restricted Subsidiaries; provided, however, if any European
subsidiary of the Company enters into a working capital or revolving credit
facility, the Company is permitted to secure such facility with accounts
receivable and/or inventory of such Subsidiary and the security interest
securing the Old Notes and the New Notes will be released to the extent required
by the terms of any such facility. All of the assets of the Company, the
Guarantors and the Restricted Subsidiaries described above are collectively
referred to herein as the "Collateral"). See "Description of the Notes and the
Guarantees."
Prior to this Exchange Offer, there has been no public market for the Old Notes.
The Company does not intend to list the New Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the New Notes will develop. To the
extent that a market for the New Notes does develop, the market value of the New
Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition and
other conditions. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face value.
See "Risk Factors -- Lack of Public Market."
Based on previous interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters to third parties,
the Company believes that the New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by a holder thereof (other than broker-dealers, as set forth below,
and any holder that is an "affiliate" of the Company (within the meaning of Rule
405 under the Securities Act)), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the New Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders of Old Notes wishing
to accept the Exchange Offer must represent to the Company that such conditions
have been met.
<PAGE>
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes if such New Notes were received in exchange
for Old Notes that were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. The Company has agreed that, for a period of 90 days after
the Expiration Date, it will use its best efforts to make this Prospectus, as it
may be amended or supplemented from time to time, available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
Neither the Company nor any Guarantor will receive any proceeds from the
Exchange Offer. The Company has agreed to pay the expenses of the Exchange
Offer. No underwriter is being used in connection with the Exchange Offer.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION................................. 2
PROSPECTUS SUMMARY.................................... 3
RISK FACTORS.......................................... 10
THE COMPANY........................................... 13
THE EXCHANGE OFFER.................................... 14
USE OF PROCEEDS....................................... 20
CAPITALIZATION........................................ 21
SELECTED CONSOLIDATED FINANCIAL DATA.................. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 25
BUSINESS.............................................. 36
MANAGEMENT............................................ 44
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS........................... 52
CERTAIN TRANSACTIONS.................................. 54
DESCRIPTION OF THE NOTES AND THE GUARANTEES........... 55
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............... 71
PLAN OF DISTRIBUTION.................................. 71
LEGAL MATTERS......................................... 72
EXPERTS............................................... 72
---------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL OR BOTH TOGETHER, NOR ANY EXCHANGE MADE
HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
Neither this Prospectus nor the accompanying Letter of Transmittal nor both
together constitute an offer to sell or a solicitation of an offer to buy any
security other than the New Notes offered hereby, nor does it constitute an
offer to sell or a solicitation of an offer to buy any securities offered hereby
to any person in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified or in which it is unlawful to make such offer or solicitation to such
person.
Until , 1996 (90 days after the date of the Exchange Offer), all dealers
offering transactions in the New Notes, whether or not participating in this
Exchange Offer, may be required to deliver a Prospectus.
<PAGE>
AVAILABLE INFORMATION
Terex Corporation is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports, proxy statements and other information
statements with the Commission. Such reports, proxy statements and other
information statements can be inspected and copied at the public reference
facilities maintained by the Commission at its offices at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may also be obtained by mail from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company's Common Stock, par value $.01 per share (the "Common Stock"), is
listed on the New York Stock Exchange (the "NYSE"), and reports, proxy
statements and other information statements concerning the Company may also be
inspected at the NYSE.
The Company has filed with the Commission a Registration Statement on Form S-4
under the Securities Act with respect to the New Notes offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the New
Notes offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedules filed as
a part thereof, which may be inspected and copied at the public reference
facilities of the Commission referred to above. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the full text of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Company has agreed to make available to any prospective purchaser of the Notes
or beneficial owner of the Notes in connection with any sale thereof the
information required by Rule 144(d)(1) under the Securities Act, until such time
as the Company has either exchanged the Notes for securities identical in all
material respects which have been registered under the Securities Act or until
such time as the holders thereof have disposed of such Notes pursuant to an
effective registration statement filed by the Company.
The Company furnishes stockholders with annual reports containing audited
financial statements. The Company also furnishes its common stockholders with
proxy material for its annual meetings complying with the proxy requirements of
the Exchange Act.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Investors should carefully
consider the information set forth under the caption "Risk Factors."
The Company
Terex Corporation ("Terex" or the "Company") is a global provider of capital
goods and equipment used in the mining, commercial building, infrastructure,
manufacturing and construction industries. 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 acquisitions. In 1988, Northwest Engineering Company merged
into a subsidiary acquired in 1986 named Terex Corporation, with Terex
Corporation as the surviving corporation. The Company's Material Handling
Segment designs, manufactures and markets a complete line of internal combustion
("IC") and electric lift trucks, electric walkies, automated pallet trucks and
related components and replacement parts. Terex Trucks, formerly known as the
Company's Heavy Equipment Segment, designs, manufactures and markets heavy-duty,
off-highway, earthmoving and construction equipment and related components and
replacement parts. The Terex Cranes Segment designs, manufactures and markets
mobile cranes, aerial platforms, container stackers and scrap holders and
related components and replacement parts. See "The Company" and "Business."
The Terex Cranes Segment was established as a separate business segment as a
result of a significant acquisition in 1995. On May 9, 1995, the Company,
through Terex Cranes, Inc., a wholly owned subsidiary of the Company ("Terex
Cranes"), completed the acquisition (the "PPM Acquisition") of substantially all
of the shares of P.P.M. S.A., a societe anonyme ("PPM Europe"), from Potain
S.A., a societe anonyme, and all of the capital stock of Legris Industries,
Inc., a Delaware corporation which owns 92.4% of the capital stock of PPM
Cranes, Inc., a Delaware corporation ("PPM North America;" and PPM North America
together with PPM Europe collectively referred to as "PPM") from Legris
Industries S.A., a societe anonyme ("Legris France"). PPM designs, manufactures
and markets mobile cranes and container stackers primarily in North America and
Western Europe under the brand names of PPM, P&H (trademark of Harnischfeger
Corporation) and BENDINI. Concurrently with the completion of the PPM
Acquisition, the Company contributed the assets (subject to liabilities) of its
Koehring Cranes and Excavators and Marklift division to Terex Cranes. The former
division now operates as Koehring Cranes, Inc., a wholly owned subsidiary of
Terex Cranes ("Koehring"). Koehring manufactures mobile cranes under the LORAIN
brand name and aerial lift equipment under the MARKLIFT brand name. PPM and
Koehring comprise the Terex Cranes Segment.
Summary of Terms of the Exchange Offer
Registration Rights........ The Old Notes were sold by the Company (i) to
Qualified Institutional Buyers (as defined in Rule 144A under the
Securities Act) and (ii) to a limited number of other institutional
"Accredited Investors" (as defined in Rule 501(A)(1), (2), (3) or (7)
under the Securities Act) on May 9, 1995. Jefferies & Company, Inc.
and Dillon, Read & Co. Inc. were the initial purchasers of the Old
Notes (the "Initial Purchasers"). In connection with the sale of the
Old Notes, the Company and the Initial Purchasers entered into a
Registration Rights Agreement, dated as of May 9, 1995 (the
"Registration Rights Agreement"), providing for the Exchange Offer.
The Exchange Offer........ The Company is offering to exchange $1,000
principal amount of New Notes for each $1,000 principal amount of Old
Notes that are properly tendered and accepted for exchange. The
Company will issue the New Notes on or promptly after the Expiration
Date. As of May 21, 1996, there were 15 registered holders of Old
Notes and $250 million aggregate principal amount of Old Notes
outstanding. See "The Exchange Offer."
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, including "Exxon Capital
Holdings Corporation" (available May 13, 1988), "Morgan Stanley & Co.
Incorporated" (available June 5, 1991), "Mary Kay Cosmetics, Inc."
(available June 5, 1991) and "Warnaco, Inc." (available October 11,
1991), the Company believes that, except as described below, New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers, as set forth below, and any such
holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of
such holder's business and that such holder has no arrangement or
understanding with any person to participate in the distribution of
such New Notes and that such holder is not engaging in or intending to
engage in the distribution of New Notes. This Prospectus may be used
for an offer to resell or other retransfer of New Notes only as
specifically set forth herein. The Exchange Offer is not being made
to, nor will the Company accept surrenders for exchange from, holders
of Old Notes (i) in any jurisdiction in which the Exchange Offer or
the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction or (ii) if any holder is engaged
or intends to engage in a distribution of the New Notes. Each
broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of
Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. The Company has agreed that, for a period of 90
days after the Expiration Date, it will use its best efforts to make
this Prospectus, as it may be amended or supplemented from time to
time, available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." Any holder who tenders in the
Exchange Offer with the intention to participate, or for the purpose
of participating, in a distribution of the New Notes or who is an
"affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act) may not rely on the position of the staff of the
Commission enunciated in "Exxon Capital Holdings Corporation" or the
line of no-action letters referred to above and, in the absence of an
exemption therefrom, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction. Failure to comply with such requirements
in such instance may result in such holder incurring liability under
the Securities Act for which the holder is not indemnified by the
Company.
Expiration Date........ The Exchange Offer will expire at 5:00 p.m., New
York City time, on __________________, 1996, unless extended, in which
case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. The Company will accept for
exchange any and all Old Notes which are validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration
Date. The New Notes issued pursuant to the Exchange Offer will be
delivered on or promptly after the Expiration Date.
Interest on the New Notes
and Old Notes........ The New Notes will bear interest at the rate of 13
1/4% per annum and interest will be payable semi-annually in arrears
on May 15 and November 15, commencing on November 15, 1996, to holders
of record on the immediately preceding May 1 and November 1. Holders
of New Notes will receive interest on November 15, 1996 from the date
of initial issuance of the New Notes, plus an amount equal to the
accrued interest on the Old Notes exchanged therefor from the most
recent date to which interest has been paid to the date of exchange
thereof. Such interest will be paid with the first interest payment on
the New Notes. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the New Notes.
Procedures for Tendering
Old Notes........ Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the Old Notes and any
other required documentation, to United States Trust Company of New
York, as Exchange Agent (the "Exchange Agent"), at the address set
forth herein and in the Letter of Transmittal, prior to 5:00 p.m., New
York City time, on the Expiration Date or comply with the procedure
for book-entry transfer or the guaranteed delivery procedures
described herein and in the Letter of Transmittal. See "The Exchange
Offer -- Procedures for Tendering." By executing the Letter of
Transmittal, each holder will represent to the Company that, among
other things, (i) the New Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the
holder, (ii) neither the holder nor any such other person is engaging
in or intends to engage in a distribution of such New Notes, (iii)
neither the holder nor such other person has an arrangement or
understanding with any person to participate in the "distribution" of
such New Notes with the meaning of the Securities Act, and (iv)
neither the holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. See "The
Exchange Offer -- Purpose and Effect of the Exchange Offer."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender such Old Notes in
the Exchange Offer should contact such registered holder promptly and
instruct such registered holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on its own behalf,
such owner must, prior to completing and executing the Letter of
Transmittal and delivering his Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in its name or
obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time and may
not be able to be completed prior to the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery Procedures........ Holders of Old Notes who wish to
tender their Old Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights........ Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date by
furnishing a written or facsimile transmission notice of withdrawal to
the Exchange Agent containing the information set forth in "The
Exchange Offer -- Withdrawal of Tenders."
Certain Federal Income Tax
Consequences........ For a discussion of certain federal income tax
consequences relating to the exchange of the New Notes for the Old
Notes, see "Certain Federal Income Tax Consequences."
Exchange Agent........ United States Trust Company of New York is the
Exchange Agent. The address and telephone number of the Exchange Agent
are set forth in "The Exchange Offer -- Exchange Agent."
Consequences of Failure to Exchange........ The Old Notes that are not
exchanged for New Notes pursuant to the Exchange Offer will not have
any further registration rights and remain restricted securities.
Accordingly, such Old Notes may be resold only (i) to the Company
(upon redemption thereof or otherwise), (ii) pursuant to an effective
registration statement under the Securities Act, (iii) so long as the
Old Notes are eligible for resale pursuant to Rule 144A, to a
qualified institutional buyer within the meaning of Rule 144A under
the Securities Act in a transaction meeting the requirements of Rule
144A, or (iv) pursuant to another available exemption from the
registration requirements of the Securities Act, in each case in
accordance with any applicable securities laws of any state of the
United States. Old Notes that are not exchanged pursuant to the
Exchange Offer will remain outstanding, continue to accrue interest
and be entitled to distributions of principal and interest. However,
upon the earlier to occur of (i) the Expiration Date and (ii) the
effectiveness of a shelf registration statement covering the Old
Notes, the interest rate on the Old Notes will decrease to 13 1/4%
(from 13 3/4%) per annum.
Summary of Terms of the New Notes and the Guarantees
The Exchange Offer applies to $250 million aggregate principal amount of the Old
Notes. The form and terms of the New Notes will be the same as the form and
terms of the Old Notes, except that the New Notes will be registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof. The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture. See "Description of the Notes and the
Guarantees."
Issuer........ Terex Corporation.
Securities Offered........ $250 million aggregate principal amount of
13 1/4% Series B Senior Secured Notes due 2002.
Maturity......... May 15, 2002.
Interest Rate......... The New Notes will bear interest at 13 1/4% per
annum from the date of original issue.
Interest Payment Dates........ May 15 and November 15 of each year,
commencing November 15, 1996.
Collateral........ Except as otherwise set forth herein, the Old Notes are
and the New Notes will be secured by a first priority security
interest in (i) substantially all of the assets of the Company and the
Guarantors, other than cash and cash equivalents (except that as to
accounts receivable and inventory, and proceeds thereof and certain
related rights, such security interest shall be subordinated to liens
securing obligations under any Revolving Credit Facility to which any
of them are obligors), (ii) property, plant and equipment of certain
of the Restricted Subsidiaries organized outside of the U.S. and (iii)
the Capital Stock of, and certain intercompany notes from, all
Subsidiaries of the Company owned by the Company or any Material
Subsidiary. In addition, the Old Notes are and the New Notes will
initially be secured by a security interest in inventory of certain
foreign Restricted Subsidiaries; provided, however, if any European
subsidiary of the Company enters into a working capital or revolving
credit facility, the Company is permitted to secure such facility with
accounts receivable and/or inventory of such Subsidiary and the
security interest securing the Old Notes and the New Notes will be
released to the extent required by the terms of any such facility.
Ranking........ The Notes will rank pari passu in right of payment with all
existing and future senior Indebtedness (as defined herein) and senior
to all subordinated Indebtedness of the Company. In addition, upon any
distribution of assets of the Company pursuant to any insolvency,
bankruptcy, dissolution, winding up, liquidation or reorganization,
the payment of the principal of, and the premium, if any, and interest
on, the Notes will rank pari passu in right of payment with all
existing and future senior indebtedness. At March 31, 1996, the
aggregate principal amount of senior indebtedness of the Company was
$315.7 million, consisting of the $250 million aggregate principal
amount of the Old Notes and $65.7 million aggregate principal amount
outstanding under the Credit Facility (as defined herein). The
Indenture will limit, among other things, the incurrence or existence
of liens on the assets of the Company and its Restricted Subsidiaries
subject to certain exceptions.
Optional Redemption........ The New Notes are not redeemable prior to May
15, 2000, except that the Company may, at its option, redeem up to
one-third of the original principal amount of the New Notes at the
redemption prices set forth in the Indenture plus accrued interest
through the date of redemption, with the net proceeds of certain sales
of common stock of the Company or any Restricted Subsidiary. From and
after May 15, 2000, the Notes are redeemable at the option of the
Company, in whole or in part, at the redemption prices set forth in
the Indenture plus accrued interest to the date of redemption.
Guarantors........ Present and future Material Subsidiaries of the Company
that are Restricted Subsidiaries (other than TEL, CMHC Germany,
P.P.M., S.A., and any other present or future Restricted Subsidiary
organized under the laws of a foreign country), including, without
limitation, Terex Cranes, PPM Cranes, Koehring Cranes, CMHC, CMH
Acquisition and International.
Change of Control........ Upon a Change of Control, the Company is
required, subject to certain conditions, to offer to purchase the New
Notes at 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase.
Covenants........ The Indenture under which the New Notes will be issued
will limit, among other things and subject to certain exceptions, (i)
the incurrence of additional debt or the issuance of Disqualified
Stock (as defined herein) by the Company or its Restricted
Subsidiaries, (ii) the payment of dividends on, and redemption of,
Equity Interests (as defined herein) and certain other restricted
payments, (iii) asset sales, (iv) consolidations, mergers or transfers
of all or substantially all the Company's assets, (v) transactions
with affiliates, and (vi) the occurrence or existence of liens.
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be considered
in connection with the Exchange Offer and an investment in the New Notes.
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in millions except per share amounts)
<TABLE>
<CAPTION>
The following summary consolidated financial data is derived from the Selected
Consolidated Financial Data appearing elsewhere in this Prospectus.
As of and
for the
Three Months
Ended
March 31, As of and for the Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations (1)
Net Sales $ 282.0 $ 214.2 $ 1,030.2 $ 786.8 $ 670.3 $ 523.4 $ 784.2
Income (loss)
from operations 10.8 6.0 21.4 3.4 (33.9) (4.1) (70.7)
Income (loss) before
extraordinary items 0.5 (1.9) (27.7) 1.2 (65.0) 2.9 (42.7)
Per share:
Income (loss) before
extraordinary items (0.13) (0.35) (3.37) (0.46) (6.55) 0.29 (4.31)
Ratio of earnings to combined
fixed charges and preferred
stock accretion (2) 1.0x (3) (3) 1.0x (3) 1.2x (3)
Total Assets $ 627.6 $ 412.3 $ 626.9 $ 401.6 $ 390.7 $ 477.3 $ 506.7
Capitalization
Long-term debt and notes
payable, including
current maturities $ 341.3 $ 192.1 $ 337.5 $ 190.9 $ 218.0 $ 217.6 $ 223.0
Stockholders' deficit (100.2) (56.6) (98.8) (55.7) (62.3) (9.1) (4.1)
Dividends per share $ --- $ --- $ --- $ --- $ --- $ --- $ 0.06
<FN>
(1) The Summary Consolidated Financial Data include the results of operations of
PPM CMHC and certain affiliated companies (together with CMHC, "CMH") and the
Company's aerial lift division, Mark Industries ("Mark"), from the dates of
their acquisitions, May 9, 1995, July 31, 1992 and December 31, 1991,
respectively, and reflect the deconsolidation of a former subsidiary, Fruehauf
Trailer Corporation ("Fruehauf"), as of January 1, 1992. Income (loss) before
extraordinary items in 1992 includes a $36.5 gain on deconsolidation of Fruehauf
and in 1991 includes a $56.0 gain as a result of an initial public offering of
Fruehauf common stock.
(2) For purposes of determining the ratio of earnings to combined fixed charges
and preferred stock accretion, earnings are defined as income from continuing
operations before income taxes, minority interest, extraordinary items and fixed
charges. Fixed charges consist of interest on indebtedness, preferred stock
accretion, amortization of debt issuance costs and rental expense representative
of the interest factor.
(3) The ratio of earnings to combined fixed charges and preferred stock
accretion is less than 1.0 for these periods. The deficiency amounts are $1.8
for the three months ended March 31, 1995, $27.7 for 1995, $64.2 for 1993 and
$46.0 for 1991.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
In addition to other matters described in this Prospectus, the following should
be carefully considered in connection with the Exchange Offer and an investment
in the New Notes:
Significant Leverage
The Company is highly leveraged. At March 31, 1996 the Company had approximately
$341.3 million of indebtedness and stockholders' deficit of $100.2 million.
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing"). The Refinancing included the private
placement to institutional investors of $250 million of Old Notes, repayment of
the Company's existing senior secured notes and senior subordinated notes,
totaling approximately $152.6 million principal amount, and entry into a new
credit facility to replace the Company's existing lending facility in the U.S.
This substantial leverage has several important consequences, including the
following: (i) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of principal of, and interest on, its
indebtedness, (ii) the covenants contained in the Company's indebtedness impose
certain restrictions on the Company which, among other things, will limit its
ability to borrow additional funds or to dispose of assets, (iii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired, and (iv) the Company's ability to withstand competitive
pressures, adverse economic conditions and adverse changes in governmental
regulations, to make acquisitions, and to take advantage of significant business
opportunities that may arise, may be negatively impacted. The Company's ability
to meet its debt service obligations and to reduce its total indebtedness will
be dependent upon future performance, which will be subject to general economic
conditions, its ability to achieve cost savings and other financial, business
and other factors affecting the operations of the Company, many of which are
beyond its control. The Company has historically sustained significant losses
and, prior to the Refinancing, net cash from operating activities was
insufficient to meet the Company's debt service requirements, which the Company
funded primarily from asset sales. If the Company is unable to generate
sufficient cash flow from operations in the future to service its debt, it may
be required to refinance all or a portion of such debt, including the New Notes,
or to obtain additional financing. However, there can be no assurance that any
refinancing would be possible or that any additional financing could be
obtained.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for discussion of the Company's
efforts to improve its capital structure and reduce its outstanding
indebtedness.
Consequences of Failure to Exchange; Old Notes Subject to Restrictions
on Transfer; Possible Adverse Effect on Trading Market for Old Notes
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws. In general, the Old Notes may not be offered
or sold unless registered under the Securities Act and applicable state laws, or
pursuant to an exemption therefrom. The Company does not intend to register the
Old Notes under the Securities Act and, after consummation of the Exchange
Offer, will not be obligated to do so. In addition, any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes may be deemed to have received restricted securities and, if
so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent Old Notes are tendered and accepted for exchange in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Old Notes
could be adversely affected. See "The Exchange Offer."
Holders Responsible for Compliance with Exchange Offer
Procedures; No Notice of Defects or Irregularities
Issuance of the New Notes in exchange for Old Notes pursuant to the Exchange
Offer will be made only after a timely receipt by the Company of such Old Notes,
a properly completed and duly executed Letter of Transmittal and all other
required documents. Therefore, holders of Old Notes desiring to tender such Old
Notes in exchange for New Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to the tender of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted for exchange will, following the consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof and,
upon consummation of the Exchange Offer, the Company's obligation to register
the Old Notes will terminate. See "The Exchange Offer."
Collateral
In the event of a default under the Notes, the proceeds from the sale of the
collateral securing the Notes may not be sufficient to satisfy the Company's
obligations under the Notes in full. The amount to be received upon such a sale
would be dependent upon numerous factors including the condition, age and useful
life of the collateral at the time of such sale, the timing and the manner of
the sale, and whether the assets were being sold as part of an ongoing business.
In addition, the book value of the collateral should not be relied upon as a
measure of realizable value.
Fraudulent Conveyance or Transfer; Possible Invalidation
or Subordination of Company Obligations
The incurrence by the Company of indebtedness could be affected by various laws
for the protection of creditors, including, without limitation, laws governing
fraudulent conveyances and transfers. A court could find that the Company did
not receive fair consideration or reasonably equivalent value for the issuance
of the Old Notes, or upon the exchange thereof for New Notes, and that at the
time of such issuance the Company (i) was insolvent, (ii) was rendered insolvent
by reason thereof, (iii) was engaged in a business or transaction for which the
assets remaining in the hands of the Company constituted unreasonably small
capital, or (iv) intended to incur or believed it would incur debts beyond its
ability to pay such debts as they mature, thereby rendering the Company's
indebtedness, and the Company's obligations in connection with the issuance of
the New Notes, avoidable.
A finding that the issuance of the New Notes constituted a fraudulent conveyance
or transfer would permit the court to invalidate the Company's obligations under
the New Notes or subordinate repayment of the New Notes to all other obligations
of the Company.
The measure of insolvency for purposes of the test for determining whether the
Company was insolvent varies depending upon the law of the jurisdiction that is
being applied. Generally, a debtor will be considered insolvent if the sum of
its debts is greater than all of its property at a fair valuation or if the
present fair salable value of its assets is less than the amount that would be
required to pay its probable liability on its existing debts (including
contingent liabilities) as they become absolute and matured. There can be no
assurance of which test a court would apply to determine whether the Company was
"insolvent" at the time of the issuance of the New Notes or that a court would
not find the Company to have been insolvent under such test.
The obligations of any Guarantor under the Indenture and the grant by any
Restricted Subsidiary of a security interest under the Collateral Agreements (as
defined herein) may be subject to review under applicable fraudulent transfer or
similar laws, in the event of the bankruptcy or other financial difficulty of
any such person. In the United States, under such laws, if a court in a lawsuit
by an unpaid creditor or representative of creditors of any such person, such as
a trustee in bankruptcy or any such person as debtor in possession, were to find
that at the time such person incurred its obligations under its guarantee or
pledged its assets, it (i) received less than fair consideration or reasonably
equivalent value therefor, and (ii) either (a) was insolvent, (b) was rendered
insolvent, (c) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital, or (d) intended to
incur or believed that it would incur debts beyond its ability to pay as such
debts matured, such court could avoid such obligations under its guarantee
and/or the security interest in its assets and direct the return of any amounts
paid with respect thereto. Moreover, regardless of the factors identified in the
foregoing clauses (i) and (ii), a court could take such action if it found that
the guarantee was entered into or the security interest granted with actual
intent to hinder, delay, or defraud creditors. The measure of insolvency for
purposes of the foregoing will vary depending on the law of the jurisdiction
being applied. Generally, however, an entity would be considered insolvent if
the sum of its debts (including contingent or unliquidated debts) is greater
than all of its property at a fair valuation or if the present fair salable
value of its assets is less than the amount that would be required to pay its
probable liability on its existing debts as they become absolute and matured.
Net Operating Loss Carryovers and Other Tax Issues
The Internal Revenue Service (the "IRS") 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 portion of the assessment, it
could have a material adverse impact on the Company and could exceed the
Company's resources. The Company has filed 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 the resolution of significant legal and factual issues. If the
Company's positions prevail on the most significant issues, management believes
that the amounts due would not exceed amounts previously paid or provided;
however, even under such circumstances, it is possible that the Company's NOL's
could be reduced to some extent. 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 or estimated.
In addition, Randolph W. Lenz has retired as Chairman of the Company. Although
his retirement agreement places certain restrictions on his ability to sell his
shares of Common Stock in the Company, in the event that Mr. Lenz is able to
sell a substantial portion of his shares in the Company, such sale, in
combination with the issuance of certain common stock purchase warrants on
December 20, 1993 and subject to the effects of other changes in share ownership
of the Company, could result in a change in control for tax purposes. Such a
change in control for tax purposes could possibly result in a significant
reduction in the amount of NOL's available to the Company to offset future
taxable income.
SEC Investigation
The Securities and Exchange Commission (the "Commission") in March of 1994
initiated a private investigation, which included the Company and certain of its
then affiliates, 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.
Industry Cyclicality and Substantial Competition
Sales of products to be manufactured and sold by the Company have historically
been subject to substantial cyclical variation extending over a number of years
based on general economic conditions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The markets in which the Company competes are highly competitive. The Company
must remain competitive in the areas of quality, price, product line, ease of
use, safety, comfort and customer service. Many of the Company's competitors
have greater financial resources than the Company. See "Business" for further
discussion.
Foreign Operations
The Company's products are sold in over 50 countries around the world and,
accordingly, a substantial portion of the revenues of the Company are generated
in foreign currencies, while the costs associated with these revenues are only
partially incurred in the same currencies. Consequently, the Company has a net
exposure to fluctuations between the U.S. dollar and such foreign currencies,
which impacts the financial performance of the Company. Although revenues and
costs of the Company may be partially hedged, currency movements will impact the
Company's financial performance in the future. In addition, international
operations are subject to a number of potential risks, including, among others,
currency exchange controls, transfer restrictions and rate fluctuations, trade
barriers, the effects of income and withholding tax, and governmental
expropriation.
Lack of Public Market for the New Notes
The New Notes are being offered to the holders of the Old Notes. The Old Notes
were issued in May 1995 to the Initial Purchasers and resold in transactions not
requiring registration under the Securities Act or applicable state securities
laws, including sales pursuant to Rule 144A. The Old Notes are eligible for
trading in the Private Offerings, Resales and Trading through Automatic Linkages
(PORTAL) market. The New Notes are new securities for which there currently is
no market. The Company does not intend to apply for listing of the New Notes on
any securities exchange or for quotation through the National Association of
Securities Dealer Automated Quotation System. There can be no assurance that any
active market for the New Notes will develop. If a trading market develops for
the New Notes, future trading prices of such securities will depend on many
factors, inducing, among other things, prevailing interest rates, the Company's
results of operations and the market for similar securities.
<PAGE>
THE COMPANY
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 acquisitions.
In 1988, Northwest Engineering Company merged into a subsidiary acquired in 1986
named Terex Corporation, with Terex Corporation as the surviving corporation.
The Company's Material Handling Segment designs, manufactures and markets a
complete line of internal combustion and electric lift trucks, electric walkies,
automated pallet trucks and related components and replacement parts. Terex
Trucks, formerly known as the Company's Heavy Equipment Segment, designs,
manufactures and markets heavy-duty, off-highway, earthmoving and contruction
equipment and related components and replacement parts. The Terex Cranes Segment
designs, manufactures and markets mobile cranes, aerial platforms, container
stackers and scrap holders and related components and replacement parts.
The Terex Cranes Segment was established as a separate business segment as a
result of a significant acquisition in 1995. On May 9, 1995, the Company,
through Terex Cranes, a wholly owned subsidiary of the Company, completed the
PPM Acquisition. PPM designs, manufactures and markets mobile cranes and
container stackers primarily in North America and Western Europe under the brand
names of PPM, P&H (trademark of Harnischfeger Corporation) and BENDINI.
Concurrently with the completion of the PPM Acquisition, the Company contributed
the assets (subject to liabilities) of its Koehring and Marklift division to
Terex Cranes. The former division now operates as Koehring, a wholly owned
subsidiary of Terex Cranes. Koehring manufactures mobile cranes under the LORAIN
brand name and aerial lift equipment under the MARKLIFT brand name. PPM and
Koehring comprise the Terex Cranes Segment.
The Company has grown through acquisitions and has had considerable experience
in restructuring and operating capital goods manufacturers, particularly in the
off-road truck and construction and industrial equipment industries. Following
an acquisition, in order to improve profitability, the Company traditionally (i)
consolidates manufacturing operations, (ii) adjusts new equipment production
capacity to meet the actual level of demand in the marketplace, (iii) reduces
corporate overhead and (iv) emphasizes that portion of the business that yields
the highest margins, particularly the replacement parts business. More
specifically, this strategy involves elimination of marginally profitable or
unprofitable product lines, closing underutilized and inefficient plants,
liquidating excess inventories and substantially reducing personnel. See also
"Business."
The principal executive offices of the Company are located at 500 Post Road
East, Westport, Connecticut 06880 and its telephone number is (203) 222-7170.
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were sold by the Company on May 9, 1995 to the Initial Purchasers
with further distribution permitted only to (i) Qualified Institutional Buyers
(as defined in Rule 144A under the Securities Act) and (ii) a limited number of
other institutional "Accredited Investors" (as defined in Rule 501(A)(1), (2),
(3) or (7) under the Securities Act). In connection with the sale of the Old
Notes, the Company and the Initial Purchasers entered into the Registration
Rights Agreement which requires the Company (i) to cause the Old Notes to be
registered under the Securities Act or (ii) to file with the Commission a
registration statement under the Securities Act with respect to the New Notes of
the Company identical in all material respects to the Old Notes, and to use its
best efforts to cause such registration statement described in clause (ii) above
to become effective under the Securities Act. The Company is further obligated,
upon the effectiveness of the registration statement, to offer the holders of
the Old Notes the opportunity to exchange their Old Notes for a like principal
amount of New Notes, which will be issued without a restrictive legend and may
be reoffered and resold by the holder without restrictions or limitations under
the Securities Act. A copy of the Registration Rights Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made pursuant to the Registration Rights Agreement
to satisfy the Company's obligations thereunder. The term "Holder" with respect
to the Exchange Offer means any person in whose name Old Notes are registered on
the Company's books or any other person who has obtained a properly completed
bond power from the registered Holder.
By executing the Letter of Transmittal, each Holder will represent to the
Company, among other things, that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the Holder, (ii)
neither the Holder nor any such other person is engaging in or intends to engage
in a distribution of such New Notes, (iii) neither the Holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes within the meaning of the Securities Act, and
(iv) neither the Holder nor any such other person is an "affiliate," as defined
under Rule 405 promulgated under the Securities Act, of the Company or, if such
Holder is an "affiliate," that such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
In the event that any Holder of Old Notes cannot make the requisite
representations to the Company in order to participate in the Exchange Offer,
such Holder may be entitled to have such Holder's Old Notes registered in a
"shelf" registration statement on an appropriate form pursuant to Rule 415 under
the Securities Act. See "Description of the Notes and the Guarantees --
Registration Rights; Liquidated Damages."
Resale of New Notes
The Company has not requested and does not intend to request, an interpretation
by the staff of the Commission with respect to whether the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
sale, resold or otherwise transferred by any Holder without compliance with the
registration and prospectus delivery provisions of the Securities Act. Based on
an interpretation by the staff of the Commission set forth in no-action letters
issued to third parties, including "Exxon Capital Holdings Corporation"
(available May 13, 1988), "Morgan Stanley & Co. Incorporated" (available June 5,
1991), "Mary Kay Cosmetics, Inc." (available June 5, 1991) and "Warnaco, Inc."
(available October 11, 1991), the Company believes that, except as described
below, the New Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by any Holder
of such Notes (other than any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act and in the case of
broker-dealers, as set forth below) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. Any Holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes or who is an
affiliate of the Company cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K under the Securities Act. This Prospectus may be used for an
offer to resell, resale or other retransfer of New Notes only as specifically
set forth herein. Each broker-dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. Any resales or other transfers of New Notes
must also be conducted in compliance with applicable state securities or blue
sky laws. See "Plan of Distribution."
<PAGE>
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus and in
the Letter of Transmittal, the Company will accept for exchange any and all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
New Notes on or promptly after the Expiration Date in exchange for each $1,000
principal amount of outstanding Old Notes surrendered pursuant to the Exchange
Offer. Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms of
the Old Notes except the New Notes will be registered under the Securities Act
and hence will not bear legends restricting the transfer thereof. The New Notes
will evidence the same debt as the Old Notes. The New Notes will be issued under
and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
As of the date of this Prospectus, $250 million aggregate principal amount of
the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered Holders of Old Notes. There will be
no fixed record date for determining registered Holders of Old Notes entitled to
participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Old Notes which are not tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such Holders have under the Indenture and the Registration Rights
Agreement.
The Company shall be deemed to have accepted for exchange properly tendered Old
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 2.6(h)
of the Indenture. The Exchange Agent will act as agent for the tendering Holders
for the purposes of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of such other events set forth herein or otherwise, any such
unaccepted Old Notes will be returned, without expense, to the tendering Holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant
to the Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See " -- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
________________, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended. The Expiration Date shall not in
any event be extended to a date later than __________, 1996 (___ days after the
initial Expiration Date).
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the Holders an
announcement thereof, prior to 9:00 a.m., New York City time, on the next
business day after the immediately expired Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer,
if any of the conditions set forth below under " -- Conditions" shall not have
been satisfied, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the Holders. If the Exchange Offer is amended in a manner determined
by the Company to constitute a material change, the Company will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the amendment and the manner of disclosure to the registered Holders, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones news service.
Interest on the New Notes
The New Notes will bear interest at 13 1/4% per annum from the date of original
issue. Interest on the New Notes will be payable semi-annually, in arrears, on
May 15 and November 15 of each year, commencing on November 15, 1996. Holders of
New Notes will receive interest on November 15, 1996 from the date of initial
issuance of the New Notes, plus an amount equal to the accrued interest on the
Old Notes from the most recent date to which interest has been paid to the date
of exchange thereof for New Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
Conditions
Notwithstanding any other term of the Exchange Offer, the Company will not be
required to accept for exchange, or exchange any New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer which, in
the Company's sole judgment, might materially impair the ability of the Company
to proceed with the Exchange Offer, or
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule or regulation is interpreted by the staff of
the Commission, which, in the Company's sole judgment, might materially impair
the ability of the Company to proceed with the Exchange Offer, or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of these conditions
have occurred, the Company may (i) refuse to accept any Old Notes and return all
tendered Old Notes to the tendering Holders, (ii) extend the Exchange Offer and
retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of Holders who tendered such Old Notes to
withdraw their tendered Old Notes, or (iii) waive such unsatisfied conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn. If such waiver constitutes a material change to
the Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the Holders, if the Exchange Offer would otherwise expire during such five to
ten business day period.
Procedures for Tendering
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer. To
tender in the Exchange Offer, a Holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Old Notes and any
other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, either (i) Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, or (ii) a
timely confirmation of book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes, if such procedure is available, into the Exchange Agent's account at
the Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Old Notes, Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth below under " --
Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender by a Holder which is not withdrawn prior to the Expiration Date will
constitute an agreement between such Holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE OBTAINED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR AND ON BEHALF OF SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
such Old Notes should contact the registered Holder promptly and instruct such
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering of its Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in its name or
obtain a properly completed bond power from the registered Holder. The transfer
of registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, must be guaranteed by any Eligible Institution (as defined below) unless the
Old Notes tendered pursuant thereto are tendered (i) by a Holder who has not
completed the box entitled "Special Payment Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. In the event that signatures on a Letter of Transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantor must be a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature guarantee
programs identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the Holder of any
Old Notes listed therein, such Old Notes must be endorsed or accompanied by a
properly completed bond power, signed by such Holder as such Holder's name
appears on such Old Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Company shall be deemed to have accepted validly tendered Old Notes when, as
and if the Company has given oral or written notice thereof to the Exchange
Agent. Issuances of New Notes in exchange for Old Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) issued by an Eligible Institution will be
made only against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of receipt),
acceptance of tendered Old Notes and withdrawal of tendered Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Old Notes not properly tendered or any Old Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
While the Company has no present plan to acquire any Old Notes that are not
tendered in the Exchange Offer or to file a registration statement to permit
resale of any Old Notes that are not tendered pursuant to the Exchange Offer,
the Company reserves the right in its sole discretion to purchase or make offers
for any Old Notes that remain outstanding subsequent to the Expiration Date or,
as set forth above under " -- Conditions," to terminate the Exchange Offer and,
to the extent permitted by applicable law, purchase Old Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of certificates for such Old Notes or a timely Book-Entry
confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for exchange for any reason set forth in the terms and conditions of
the Exchange Offer or if Old Notes are submitted for a greater principal amount
than the Holder desires to exchange, such unaccepted or non-exchanged Old Notes
will be returned without expense to the tendering Holder thereof (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
Book Entry Transfer
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "-- Exchange Agent" on or prior to the Expiration Date or,
if the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder, the registered number(s) of such Old Notes and
the principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the Old Notes or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Old Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent
to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
<PAGE>
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the registered number or
numbers and principal amount of such Old Notes or, in the case of Old Notes
transferred by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited), (iii) be signed by the Holder in
the same manner as the original signature on the Letter of Transmittal by which
such Old Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have United States Trust
Company of New York, the trustee with respect to the Old Notes (the "Trustee"),
register the transfer of such Old Notes into the name of the person withdrawing
the tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly re-tendered. Any
Old Notes which have been tendered but which are not accepted for payment will
be returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
Exchange Agent
United States Trust Company of New York has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Registered or Certified Mail: By Overnight Courier:
United States Trust Company United States Trust Company
of New York of New York
P.O. Box 844 770 Broadway
Cooper Station, New York 10276 New York, New York 10003
Attention: Corporate Trust
Operations
By Hand: By Facsimile:
United States Trust Company of New York (212) 420-6152
65 Beaver Street Attention: Customer Service
New York, New York 10005
Attention: Ground Level Confirm by telephone:
Corporate Trust Operations (800) 548-6565
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone or in person by officers and regular employees of the
Company and its affiliates.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will be
paid by the Company and are estimated in the aggregate to be approximately
$278,200. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, certificates representing
New Notes or Old Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the Holder of the Old Notes tendered, or if tendered Old Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Consequences of Failure to Exchange
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will not have any further registration rights and remain restricted
securities. Accordingly, such Old Notes may be resold only (i) to the Company
(upon redemption thereof or otherwise), (ii) pursuant to an effective
registration statement under the Securities Act, (iii) so long as the Old Notes
are eligible for resale pursuant to Rule 144A, to a qualified institutional
buyer within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A, or (iv) pursuant to another available
exemption from the registration requirements of the Securities Act, in each case
in accordance with any applicable securities laws of any state of the United
States. Old Notes that are not exchanged pursuant to the Exchange Offer will
remain outstanding, continue to accrue interest and be entitled to distributions
of principal and interest. However, upon the earlier to occur of (i) the
Expiration Date and (ii) the effectiveness of a shelf registration statement
covering the Old Notes, the interest rate on the Old Notes will decrease to 13
1/4% (from 13 3/4%) per annum.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old Notes as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
FOR INFORMATION CONCERNING THE TAX CONSEQUENCES OF THE EXCHANGE OFFER AND OR
HOLDING THE NEW NOTES, SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATION.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's obligations
to the holders of the Old Notes under the Registration Rights Agreement entered
into in connection with the sale of the Old Notes. The Company will not receive
any cash proceeds from the issuance of the New Notes offered hereby. In
consideration for issuing the New Notes as contemplated in this Prospectus, the
Company will receive in exchange Old Notes in like principal amount, the forms
and terms of which are identical, in all material respects, to the New Notes.
The Old Notes surrendered in exchange for New Notes will be retired and canceled
and cannot be reissued. Accordingly, issuance of the New Notes will not result
in any increase in the indebtedness of the Company. Proceeds from the sale of
the privately placed Old Notes were used to refinance the Company's then
outstanding senior secured notes and senior subordinated notes, to finance the
PPM Acquisition of and to pay transaction expenses incurred in connection with
the PPM Acquisition and the issuance of the Old Notes.
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company as
of March 31, 1996. The table should be read in conjunction with the consolidated
financial statements of the Company and the related notes thereto included
elsewhere in this Prospectus. See "The Company" and "Selected Consolidated
Financial Information."
(in millions)
Notes payable and long-term debt (including current portion):
Senior Secured Notes due May 15, 2002 (1)..................... $ 247.1
Credit Facility maturing May 9, 1998 (2)...................... 65.7
Other debt, including notes payable (3)....................... 28.5
----------
Total notes payable and long term debt...................... 341.3
----------
Minority interest, including redeemable
preferred stock of a subsidiary................................. 9.4
----------
Redeemable Convertible Preferred Stock............................. 25.8
----------
Stockholders' Deficit
Common Stock Purchase Warrants................................ 16.5
Common Stock ................................................. 0.1
Additional paid-in capital.................................... 41.9
Accumulated deficit........................................... (152.3)
Pension liability adjustment.................................. (2.7)
Unrealized holding gain on equity securities.................. 0.2
Foreign currency translation adjustment....................... (3.9)
----------
Total stockholders' deficit................................. (100.2)
----------
Total capitalization............................................... $ 276.3
==========
- ----------------
(1) Represents $250.0 million principal amount of Old Notes. See "Description of
the Notes and the Guarantees."
(2) The Credit Facility currently provides for revolving credit loans and
guarantees of letters of credit of up to $100 million and matures on May 9,
1998. The Credit Facility bears interest at a fluctuating rate based on 1.75%
per annum in excess of the prime rate or 3.75% per annum in excess of the
adjusted Eurodollar rate at the Company's option. Borrowings under the credit
facility are secured by a lien on substantially all of the Company's domestic
accounts receivable and inventory. See "The Credit Facility," below.
(3) See Note F -- "Long Term Obligations" of the Notes to Consolidated Financial
Statements, included elsewhere in this Prospectus, for a description of the
Company's other debt.
The Credit Facility
The Company currently has a secured revolving credit facility (the "Credit
Facility") with certain institutional lenders (the "Lenders"). Under the terms
of such facility, the Company and CMHC, Koehring and PPM North America, each a
subsidiary of the Company, (collectively, the "Borrowers") will have
availability, subject to the borrowing base limitations set forth below, in an
aggregate amount of up to $100 million. Subject to the terms and conditions set
forth in the Credit Facility, the Borrowers may borrow (in the form of revolving
loans and up to $15 million in outstanding letters of credit) an amount at any
time outstanding initially equalling the sum of the following: (i) 75% of the
net amount of eligible receivables (as defined in the Credit Facility) of the
Company, Koehring and PPM North America, plus (ii) 70% of the net amount of
eligible receivables of CMHC, plus (iii) the lesser of (a) 45% of the value of
eligible inventory (as defined in the Credit Facility) of the Borrowers or (b)
80% of the appraised orderly liquidation value of eligible inventory.
Each Borrower guarantees, on a joint and several basis, all of the obligations
of the other Borrowers under the Credit Facility, which obligations will
generally be secured by a first priority security interest in favor of the
Lenders in all of the receivables and inventory and certain related rights of
the Borrowers.
The outstanding principal amount of prime rate loans initially bears interest at
the rate of 1.75% per annum in excess of the prime rate and the outstanding
principal amount of Eurodollar rate loans initially bears interest at the rate
of 3.75% per annum in excess of the adjusted Eurodollar rate. The Credit
Facility contains covenants limiting the Borrowers' activities, including,
without limitation, limitations on the incurrence of indebtedness, liens, asset
sales, dividends and other payments, investments, mergers and related party
transactions.
The Credit Facility matures on May 9, 1998. The Lenders, at their option, may
extend the facility for one additional year. In the event that for any reason
the facility is terminated prior to the maturity date, the Borrowers must pay to
the Lenders a termination fee.
The foregoing description is a summary of the terms of the Credit Facility and
does not purport to be complete and is qualified in its entirety by reference to
the Loan and Security Agreement dated as of May 9, 1995 between the Lenders and
the Borrowers, a copy of which is filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in millions except per share amounts and employees)
Selected Financial Data
The Selected Financial Data include the results of operations of PPM, CMH and of
Mark from the dates of their acquisitions, May 9, 1995, July 31, 1992 and
December 31, 1991, respectively, and reflect the deconsolidation of Fruehauf
Trailer Corporation ("Fruehauf") as of January 1, 1992. 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 an initial public offering of Fruehauf common stock.
<TABLE>
<CAPTION>
The following data should be read in conjunction with the historical financial
statements of the Company and the related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. Operating results for interim periods are not
necessarily indicative of results for the entire fiscal year.
Three Months Ended
March 31, As of and for the Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations (1)
Net Sales $ 282.0 $ 214.2 $ 1,030.2 $ 786.8 $ 670.3 $ 523.4 $ 784.2
Income (loss) from operations 10.8 6.0 21.4 3.4 (33.9) (4.1) (70.7)
Income (loss) before
extraordinary items 0.5 (1.9) (27.7) 1.2 (65.0) 2.9 (42.7)
Net income (loss) 0.5 (1.9) (35.2) 0.5 (66.5) 2.9 (42.7)
Net income (loss)
applicable to common stock (1.4) (3.6) (42.5) (5.5) (66.7) 2.9 (42.7)
Per Common and
Common Equivalent Share:
Income (loss) before
extraordinary items (0.13) (0.35) (3.37) (0.46) (6.55) 0.29 (4.31)
Net income (loss) (0.13) (0.35) (4.09) (0.53) (6.70) 0.29 (4.31)
Ratio of earnings to
fixed charges (2) 1.0x (3) (3) 1.0x (3) 1.2x (3)
Total Assets $ 627.6 $ 412.3 $ 629.9 $ 401.6 $ 390.7 $ 477.3 $ 506.7
Capitalization
Long-term debt and
notes payable, including
current maturities $ 341.3 $ 92.1 $ 337.5 $ 190.9 $ 218.0 $ 217.6 $ 223.0
Minority interest,
including redeemable
preferred stock of a
subsidiary 9.4 --- 9.4 --- --- --- ---
Redeemable convertible
preferred stock 25.8 19.0 24.6 17.3 10.5 --- ---
Stockholders' deficit (100.2) (56.6) (98.8) (55.7) (62.3) (9.1) (4.1)
Dividends per share of
Common Stock $ --- $ --- $ --- $ --- $ --- $ --- $ (0.06)
Shares of Common Stock
outstanding at period end 10.6 10.3 10.6 10.3 10.3 9.9 9.9
Employees 3,350 2,763 3,600 2,851 2,930 3,056 6,980
<FN>
- --------------------
Notes to Selected Consolidated Financial Data
(1) The Selected Consolidated Financial Data include the results of
operations of PPM CMHC and certain affiliated companies (together with
CMHC, "CMH") and the Company's aerial lift division, Mark Industries
("Mark"), from the dates of their acquisitions, May 9, 1995, July 31,
1992 and December 31, 1991, respectively, and reflect the
deconsolidation of a former subsidiary, Fruehauf Trailer Corporation
("Fruehauf"), as of January 1, 1992. Income (loss) before
extraordinary items in 1992 includes a $36.5 gain on deconsolidation
of Fruehauf and in 1991 includes a $56.0 gain as a result of an
initial public offering of Fruehauf common stock.
(2) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before
income taxes, minority interest, extraordinary items and fixed
charges. Fixed charges consist of interest on indebtedness, preferred
stock accretion, amortization of debt issuance costs and rental
expense representative of the interest factor.
(3) The ratio of earnings to fixed charges is less than 1.0 for these
periods. The deficiency amounts are $1.8 for the three months ended
March 31, 1995, $27.7 for 1995, $64.2 for 1993 and $46.0 for 1991.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data
Summarized quarterly financial data for the three months ended March 31, 1996
and for the years 1995 and 1994 are as follows (in millions, except per share
amounts):
1996 1995 1994
First Fourth Third Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 282.0 $ 263.3 $ 283.3 $ 269.4 $ 214.2 $ 213.4 $ 207.1 $ 198.3 $ 168.0
Gross profit 34.7 33.7 32.5 25.9 23.1 27.2 24.7 21.6 17.4
Income (loss) before 0.5 (1.8) (7.8) (16.4) (1.9) 0.5 1.2 10.3 (10.8)
extraordinary items
Net income (loss) 0.5 (1.8) (7.8) (23.9) (1.9) 0.2 1.0 10.0 (10.8)
Income (loss) (1.4) (3.7) (9.6) (25.7) (3.6) (1.4) (0.5) 8.6 (12.2)
applicable to
common stock
Per share:
Primary
Income (loss)
before
extraordinary
items $ (0.13) $ (0.35) $ (0.93) $ (1.76) $ (0.35) $ (0.10) $ (0.03) $ 0.64 $ (1.18)
Net income (loss) (0.13) (0.35) (0.93) (2.48) (0.35) (0.13) (0.05) 0.62 (1.18)
Fully diluted
Income (loss)
before
extraordinary
items $ (0.13) $ (0.35) $ (0.93) $ (1.76) $ (0.35) $ (0.10) $ (0.03) $ 0.60 $ (1.18)
Net income (loss) (0.13) (0.35) (0.93) (2.48) (0.35) (0.13) (0.05) 0.59 (1.18)
</TABLE>
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 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. Certain 1995 and 1994 amounts have been reclassified to conform with the
1996 presentation.
In 1996, the Company recognized a gain of $2.4 million in the first quarter from
the sale of excess property in Scotland.
In 1995, the Company recognized a gain of $1.0 million in the first quarter as a
result of the sale of 486.6 thousand shares of Fruehauf common stock, recorded
severance and exit costs of $3.5 million and an extraordinary loss of $7.5
million on the retirement of debt in the second quarter.
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 5.9 million
shares of Fruehauf common stock. The Company recognized a gain of $4.7 million
from the sale of its Drexel Industries subsidiary in the second quarter of 1994.
The Company recorded severance charges of $4.5 million in the second quarter of
1994 and $2.9 million in the fourth quarter of 1994, and a related pension
curtailment gain of $0.9 million in the fourth quarter of 1994.
Net income (loss) has been reduced by Preferred Stock accretion for purposes of
calculating earnings per share amounts. See Note I -- "Preferred Stock" in the
Notes to the Company's Consolidated Financial Statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollar amounts except per share are in millions unless otherwise designated)
Results of Operations
The Company operates in three industry segments: Material Handling, Terex
Trucks, and Terex Cranes. The Terex Cranes segment results for periods prior to
May 1995 consist solely of Koehring's operations. Beginning with the first
quarter of 1996, the former heavy equipment segment, which consists of the Terex
business and Unit Rig division, is referred to as Terex Trucks.
Quarter Ended March 31, 1996
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 three months ended March 31, 1996 and 1995.
Three Months
Ended
March 31, Increase
1996 1995 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 108.8 $ 134.0 $ (25.2)
Terex Trucks 70.9 57.5 13.4
Terex Cranes 102.5 23.2 79.3
Eliminations (0.2) (0.5) 0.3
Total $ 282.0 $ 214.2 $ 67.8
GROSS PROFIT
Material Handling $ 11.3 $ 11.1 $ 0.2
Terex Trucks 9.1 8.7 0.4
Terex Cranes 14.9 3.3 11.6
Eliminations (0.6) --- (0.6)
Total $ 34.7 $ 23.1 $ 11.6
ENGINEERING, SELLING AND ADMINISTRATIVE
EXPENSES
Material Handling $ 8.8 $ 10.4 $ (1.6)
Terex Trucks 6.2 5.4 0.8
Terex Cranes 8.7 1.5 7.2
General/Corporate 0.2 (0.2) 0.4
Total $ 23.9 $ 17.1 $ 6.8
INCOME (LOSS) FROM OPERATIONS
Material Handling $ 2.5 $ 0.7 $ 1.8
Terex Trucks 2.9 3.3 (0.4)
Terex Cranes 6.2 1.8 4.4
General/Corporate (0.8) 0.2 (1.0)
Total $ 10.8 $ 6.0 $ 4.8
Net Sales
Sales increased $67.8, or approximately 32%, to $282.0 for the three months
ended March 31, 1996 over the comparable 1995 period, reflecting the acquisition
of PPM Cranes in the second quarter of 1995 and a strong sales quarter for Terex
Cranes overall, increased revenue at Terex Trucks, partially offset by an
expected slowdown in machine sales at the Material Handling Segment.
Material Handling Segment sales were $108.8 for the three months ended March 31,
1996, a decrease of $25.2 from $134.0 in the year earlier period. The sales mix
was approximately 23% parts in the three months ended March 31, 1996 compared to
17% in the comparable 1995 period. Machine sales decreased 26% and parts sales,
from which the Company generally realizes significantly higher margins than
machine sales, increased 9%.
Material Handling Segment bookings for the three months ended March 31, 1996
were $114.5, a decrease of $25.5, or 18%, from the year earlier period. Bookings
for parts sales for the three months ended March 31, 1996 increased 6% from the
year earlier period. Machine order bookings for the three months ended March 31,
1996 decreased 24% from the year earlier period. Material Handling Segment
backlog was $85.1 at March 31, 1996 compared to $141.9 at March 31, 1995. The
decrease in machine sales and bookings was anticipated and tracked trends in the
material handling industry as set forth in independent publications which report
on the industry. The Company adjusted its production schedule and material
procurement in anticipation of the slowdown in machine sales. The slowdown is
not anticipated to have an adverse effect on the profitability of the material
handling segment for 1996.
Terex Trucks sales increased $13.4 for the three months ended March 31, 1996
from the three months ended March 31, 1995. Machines sales increased 31%, and
parts sales increased 4%. The sales mix was approximately 32% parts for the
three months ended March 31, 1996 compared to 38% parts for the comparable 1995
period.
Terex Trucks bookings for the three months ended March 31, 1996 were $48.8, an
increase of $7.9, or 19%, from the year earlier period. Bookings for parts
sales, from which the Company generally realizes higher margins than machine
sales, decreased $4.0 from the three months ended March 31, 1995. Machine
bookings for the three months ended March 31, 1996 increased $11.9 from the
comparable 1995 period reflecting higher international orders. Backlog was $86.5
at March 31, 1996 compared to $88.8 at December 31, 1995 and $51.4 at March 31,
1995.
Terex Cranes sales were $102.5 for the three months ended March 31, 1996, an
increase of $79.3 from $23.2 in the year earlier period which did not include
the PPM business. Terex Cranes backlog was $59.8 at March 31, 1996, reflecting
the additional PPM backlog acquired, compared to $12.8 at March 31, 1995. The
increase in Terex Cranes sales was due to the addition of the PPM business,
growth in sales at the PPM business, and continued strong performance by
Koehring.
Gross Profit
Gross profit for the three months ended March 31, 1996 increased $11.6 compared
to the three months ended March 31, 1995.
The Material Handling Segment's gross profit of $11.3 for the three months ended
March 31, 1996, an increase of $0.2 from $11.1 for the prior year's period. The
gross profit percentage in the Material Handling Segment was 10% for the three
months ended March 31, 1996 and 8.3% for the comparable 1995 period. The
increase in profit was due to higher parts sales and therefore margins coupled
with improved manufacturing efficiencies.
Terex Trucks' gross profit increased $0.4 to $9.1 for the three months ended
March 31, 1996 compared to $8.7 for the comparable 1995 period. The gross profit
percentage in the Terex Trucks decreased to 13% for the three months ended March
31, 1996 from 15% for the three months ended March 31, 1995, primarily due to
the negative impact on Unit Rig of the inability of a major supplier to adhere
to its delivery schedule. This resulted in Unit Rig having to shut down
production for a period in March, with an estimated negative profit impact of
$0.8, due to lost sales volume and unabsorbed overhead. The Company understands
that the supplier has corrected the problem and it is not expected to recur.
Terex Cranes' gross profit increased $11.6 to $14.9 for the three months ended
March 31, 1996, compared to $3.3 for the prior year's period, reflecting the PPM
Acquisition, the effect of cost reduction actions put in place at PPM, and
improved performance at Koehring.
<PAGE>
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $23.9 for the
three months ended March 31, 1996 from $17.1 for the three months ended March
31, 1995, reflecting the effects of the PPM acquisition in May 1995. Material
Handling Segment engineering, selling and administrative expenses to $8.8 for
the three months ended March 31, 1996 from $10.4 for the comparable 1995 period.
Terex Trucks engineering, selling and administrative expenses increased to $6.2
for the three months ended March 31, 1996 from $5.4 for the comparable 1995
period primarily due to costs associated with a new parts sales office and a new
U.K. dealership. Terex Cranes engineering, selling and administrative expenses
increased to $8.7 for the three months ended March 31, 1996 from $1.5 for the
comparable 1995 period, reflecting the PPM acquisition in May 1995.
Income (Loss) from Operations
Material Handling Segment income from operations of $2.5 for the three months
ended March 31, 1996 represents a $1.8 improvement over the $0.7 income in the
comparable 1995 period. As discussed above, reduced costs contributed to the
increase in income from operations for the three months ended March 31, 1996.
Terex Trucks income from operations decreased by $0.4 to $2.9 for the three
months ended March 31, 1996 from $3.3 in the comparable 1995 period, primarily
due to the factors mentioned above under "Gross Profit".
Terex Cranes income from operations of $6.2 for the three months ended March 31,
1996 increased by $4.4 over the comparable 1995 period, primarily due to the
effect of cost control initiatives implemented at PPM during Terex's ownership
of that business, and continued strong performance by Koehring.
On a consolidated basis, the Company had operating income of $10.8 for the three
months ended March 31, 1996, compared to operating income of $6.0 for the
comparable 1995 period, for the reasons mentioned above.
Other Income (Expense)
Net interest expense increased to $11.4 for the three months ended March 31,
1996 from $6.7 in the comparable 1995 period as a result of incremental
borrowings associated with the PPM acquisition in May 1995. The Company realized
a gain in the three months ended March 31, 1996 of $2.4 from the sale of excess
property in Scotland. In 1995, the Company had a gain of $1.0 from the sale of
Fruehauf stock.
<PAGE>
1995 Compared with 1994
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, severance and exit costs, and income (loss) from
operations, by segment, for 1995 and 1994.
Year Ended
December 31, Increase
1995 1994 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 528.8 $ 472.7 $ 56.1
Terex Trucks 250.3 226.8 23.5
Terex Cranes 252.3 90.4 161.9
Eliminations (1.2) (3.1) 1.9
Total $ 1,030.2 $ 786.8 $ 243.4
GROSS PROFIT
Material Handling $ 44.6 $ 42.2 $ 1.7
Terex Trucks 35.9 33.8 2.1
Terex Cranes 35.2 14.2 21.0
Eliminations (0.5) --- (0.5)
Total $ 115.2 $ 90.9 $ 24.3
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling $ 38.1 $ 50.1 $ (12.0)
Terex Trucks 22.9 22.0 0.9
Terex Cranes 28.0 6.3 21.7
General/Corporate 1.3 1.7 (0.4)
Total $ 90.3 $ 80.1 $ 10.2
SEVERANCE AND EXIT COSTS
Material Handling $ 3.5 $ 6.8 $ (3.3)
Terex Trucks --- 0.6 (0.6)
Total $ 3.5 $ 7.4 $ (3.9)
INCOME (LOSS) FROM OPERATIONS
Material Handling $ 3.0 $ (13.9) $ 16.9
Terex Trucks 13.0 11.1 1.9
Terex Cranes 7.2 7.9 (0.7)
General/Corporate (1.8) (1.7) (0.1)
Total $ 21.4 $ 3.4 $ 18.0
Prior to the PPM Acquisition on May 9, 1995, the Company operated in two
industry segments during the periods presented herein: Material Handling and
Terex Trucks (formerly known as Heavy Equipment). The addition of the PPM
business to the Company's existing crane and aerial lift business has created
combined mobile crane operations sufficient in size to constitute a third
industry segment. The 1994 amounts presented above have been reclassified to a
three segment basis for consistency. The Terex Cranes results for periods prior
to May 1995 consist solely of Koehring's operations.
Net Sales
Sales increased $243.4 to $1,030.2, or approximately 31%, for 1995 versus 1994.
Material Handling Segment sales were $528.8 for 1995, an increase of $56.1 from
$472.7 in 1994. The sales mix was approximately 18% parts in 1995 compared to
19% in 1994. Machine sales increased 12%, primarily because of increased output
resulting from actions taken by management during 1994 and shipments of the new
Genesis line of IC trucks, introduced in December 1994. The light IC 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. Parts sales increased 6% because of improved
parts inventory availability partially offset by the adverse effects of a labor
strike at the Company's parts distribution center. The strike has not had a
material continuing effect on parts sales.
Material Handling Segment bookings for 1995 were $471.8, an increase of $13.0,
or 3%, from 1994. Backlog at the Material Handling Segment fell from $135.9 at
December 31, 1994 to $78.9 at December 31, 1995 as the Company maintained full
production in the Material Handling Segment United States operations and parts
availability returned to normal levels. As a result, the backlog of both
machines orders and parts orders was reduced during 1995.
Terex Trucks sales increased $23.5 for 1995 over 1994. Machines sales increased
8%, and parts sales increased 7%. The sales mix was approximately 35% parts for
1995 compared to 36% parts for 1994. Terex Trucks parts sales were also
adversely affected by the strike at the parts distribution center, but to a
lesser degree than the Material Handling Segment.
Terex Trucks bookings for 1995 were $271.3, an increase of $39.1, or 17%, from
1994. Terex Trucks backlog was $88.8 at December 31, 1995 compared to $67.8 at
December 31, 1994.
Terex Cranes sales were $252.3 for 1995, an increase of $161.9 from $90.4 in
1994 due primarily to the PPM Acquisition in May 1995. Terex Cranes backlog was
$85.3 at December 31, 1995, reflecting the additional PPM backlog, compared to
$11.7 at December 31, 1994.
Gross Profit
Gross profit of $115.2 for 1995 was $24.3, or 27%, higher than gross profit of
$90.9 for 1994.
The Material Handling Segment's gross profit increased $1.7 to $44.6 for 1995
compared to $42.9 for 1994. The gross profit percentage in the Material Handling
Segment was 8% for 1995 as compared to 9% for 1994. Favorable efficiencies due
to higher production and sales volumes and the effects of 1994 severance actions
were offset by additional costs associated with the start-up of production of
the new Genesis product line and manufacturing inefficiencies related to
vendors' continuing inability to meet demand.
Terex Trucks gross profit increased $2.1 to $35.9 for 1995 compared to $33.8 for
1994. The gross profit percentage in the Terex Trucks was 14% for 1995 and 15%
for 1994.
Terex Cranes gross profit increased $21.0 to $35.2 for 1995, compared to $14.2
for 1994, primarily reflecting the addition of the May through December 1995
results of the PPM businesses. The gross profit percentage for Terex Cranes was
14% for 1995 and 16% for 1994. The gross profit percentage decrease was
primarily due to costs related to integrating the PPM Acquisition into Terex
Cranes.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased to $90.3 for 1995
from $80.1 for 1994. Material Handling Segment engineering, selling and
administrative expenses decreased to $38.1 for 1995 from $50.1 for 1994,
primarily as a result of severance actions taken by management during the second
half of 1994. Terex Trucks engineering, selling and administrative expenses
increased to $22.9 for 1995 from $22.0 for 1994 as a result of costs associated
with the start-up of a new parts service business. Terex Cranes engineering,
selling and administrative expenses increased to $28.0 for 1995 from $6.3 for
1994 reflecting the PPM Acquisition in May 1995. Corporate administrative
expenses in 1994 included a charge of $2.2 in connection with the termination of
a management contract with KCS Industries, L.P. ("KCS"), a Connecticut limited
partnership principally owned by certain present and former officers of the
Company, offset by allocations to operating segments. See Note M -- "Related
Party Transactions" in the Notes to the Consolidated Financial Statements for
further information.
Severance and Exit Costs
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 in the second quarter of 1995 for severance
costs associated with these actions and additional costs associated with the
closing of certain administrative and warehouse facilities.
During the second quarter of 1994, the Company recorded a charge of $4.5
principally related 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 $4.5 charge represents severance costs
associated with these actions. 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
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 $2.9 charge was recorded for costs, principally severance
costs, associated with these actions.
Income (Loss) from Operations
The Material Handling Segment income from operations of $3.0 for 1995 represents
a $16.9 improvement over the $13.9 loss in 1994. As discussed above, increased
sales and reduced costs contributed to the improvement.
Terex Trucks income from operations improved by $1.9 to $13.0 for 1995 from
$11.1 in 1994, primarily as a result of reduced costs, offset by costs
associated with the start up of a new parts service business.
Terex Cranes income from operations of $7.2 for 1995 decreased by $0.7 versus
1994, primarily due to losses of the PPM businesses acquired in May 1995. As a
result of cost reductions, improvements in inventory management and
consolidation of model offerings, Koehring was profitable in 1994 and 1995 after
several years of losses.
On a consolidated basis, the Company realized operating income of $21.4 for
1995, compared to $3.4 for 1994.
Other Income (Expense)
Net interest expense increased to $38.7 for 1995 from $29.9 in 1994 as a result
of incremental borrowings associated with the PPM Acquisition in May 1995. The
Company realized gains of $1.0 and $26.0 from sales of Fruehauf common stock
during 1995 and 1994, respectively. The Company owns 250 thousand shares of
Fruehauf common stock which it received in settlement of certain obligations of
Fruehauf.
The Company recorded a charge of $3.0 in 1995 to recognize the impairment in
value of certain properties held for sale.
The Company also incurred net foreign exchange losses of $1.9, trademark-related
expenses of $1.3, and $0.6 of group retiree expenses during 1995.
The Company recorded a charge of $2.5 in 1995 for payments related to the
retirement of its former Chairman of the Board in August 1995, and future
payments related to the consulting obligations under the retirement agreement of
the former Chairman.
During 1995, the Company recorded no provision for income taxes. In 1994, the
Company recorded a provision for state income taxes of $0.5 in connection with
the sale of Drexel, in addition to the taxes on foreign royalties.
Extraordinary Items
The Company recorded a charge of $7.5 in 1995 to recognize a loss on the early
extinguishment of debt in connection with the May 1995 refinancing. During 1994,
the Company recognized extraordinary losses totaling $0.7 to write-off
unamortized discount and debt issuance costs when it repurchased $27.3 of its
old senior secured debt.
<PAGE>
1994 Compared with 1993
The table below is a comparison of net sales, gross profit, engineering,
selling, and administrative expenses, severance and exit costs and goodwill
write-off and income (loss) from operations, by segment, for 1994 and 1993.
Year Ended
December 31, Increase
1994 1993 (Decrease)
(in millions of dollars)
NET SALES
Material Handling $ 472.7 $ 395.6 $ 77.1
Terex Trucks 226.8 203.8 23.0
Terex Cranes 90.4 71.4 19.0
Eliminations (3.1) (0.5) (2.6)
Total $ 786.8 $ 670.3 $ 116.5
GROSS PROFIT
Material Handling $ 42.9 $ 22.3 $ 20.6
Terex Trucks 33.8 30.5 3.3
Terex Cranes 14.2 2.0 12.2
Total $ 90.9 $ 54.8 $ 36.1
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Material Handling $ 50.1 $ 50.9 $ (0.8)
Terex Trucks 22.0 19.5 2.5
Terex Cranes 6.3 10.1 (3.8)
General/Corporate 1.7 3.5 (1.8)
Total $ 80.1 $ 84.0 $ (3.9)
SEVERANCE AND EXIT COSTS AND
GOODWILL WRITE-OFF
Material Handling $ 6.8 $ --- $ 6.8
Terex Trucks 0.6 --- 0.6
Terex Cranes --- 4.7 (4.7)
Total $ 7.4 $ 4.7 $ 2.7
INCOME (LOSS) FROM OPERATIONS
Material Handling $ (13.9) $ (28.6) $ 14.7
Terex Trucks 11.1 11.0 0.1
Terex Cranes 7.9 (12.8) 20.7
General/Corporate (1.7) (3.5) 1.8
Total $ 3.4 $ (33.9) $ 37.3
Net Sales
Sales in 1994 increased $116.5, or approximately 17%, over 1993.
Material Handling Segment sales were $472.7 for 1994, an increase of $77.1, or
19%, from $395.6 for 1993. Machine sales increased $81.0 and parts sales
decreased $3.9. 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, an increase of $5.6
from 1993. Machine order bookings for 1994 of $381.2 increased $17.3 or 5%
compared to $364.0 in 1993. Bookings for parts sales for 1994, from which the
Company generally realizes higher margins than machine sales, decreased $11.6,
or 12%, from 1993, primarily because of decreased parts availability as
discussed above. Material Handling Segment backlog was $135.9 at December 31,
1994 compared to $152.7 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. The Company
maintained full production in the Material Handling Segment United States
operations and parts availability returned to normal levels. As a result, the
backlog of both machines orders and parts orders was reduced during 1995.
Terex Trucks sales increased $23.0, or 11%, to $226.8 in 1994 from $203.8 in
1993. Machine sales increased $21.6 and parts sales increased $1.4. The sales
mix was approximately 36% parts in 1994 compared to 39% parts in 1993. Machine
sales increased at all of the Terex Trucks divisions, reflecting increased
domestic construction industry demand and improved sales volume outside the
United States.
Terex Trucks bookings for 1994 were $232.2, an increase of $38.1, or 20%, from
1993. Bookings for parts sales of $77.6, from which the Company generally
realizes higher margins than machine sales, were comparable to bookings for
1993. Machine bookings for 1994 increased $42.2, or 38%, from 1993, reflecting
the factors discussed above. Terex Trucks backlog was $67.8 at December 31, 1994
compared to $62.3 at December 31, 1993, reflecting the improved shipments in
1994. Parts backlog was $6.1 at December 31, 1994 compared to $8.6 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 the backlog of parts
orders was reduced as working capital continues to be applied to improve parts
inventory availability.
Terex Cranes sales were $90.4 for 1994, an increase of $19.0 from $71.4 in 1993.
Machine sales increased 43% and parts sales increased 3%. The sales mix was
approximately 27% parts in 1994 compared to 33% parts in 1993.
Terex Cranes bookings were $83.6 for 1994, an increase of 9% from 1993. Machine
bookings increased 16%, and parts bookings increased by 1%.
Gross Profit
Gross profit for 1994 increased $36.1 compared to 1993.
The Material Handling Segment's gross profit increased $20.6 to $42.9 for 1994
compared to $22.3 for 1993. The gross profit percentage in the Material Handling
Segment increased to 9.1% for 1994 from 5.6% 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.
Terex Trucks gross profit increased $3.3 to $33.8 for 1994 compared to $30.5 for
1993. Improved gross profit from machine sales accounted for substantially all
of the increase. The gross profit percentage for Terex Trucks remained at 15.0%
for 1994 and 1993, reflecting the continuing effects of cost reduction
initiatives and improved manufacturing efficiency offset by a decrease in the
parts sale mix during 1994.
Terex Cranes gross profit increased $12.2 to $14.2 for 1994, compared to $2.0
for 1993. The gross profit percentage for Terex Cranes increased to 15.7% for
1994 from 2.8% in 1993 reflecting the continuing effects of cost reductions and
improved manufacturing efficiency.
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses decreased to $80.1 for 1994
from $84.0 for 1993 as a result of cost reduction initiatives throughout the
Company. Material Handling Segment engineering, selling and administrative
expenses totaled $50.1 for 1994 compared to $50.9 for 1993. Terex Trucks
engineering, selling and administrative expenses increased to $22.0 for 1994
from $19.5 for 1993. Terex Cranes engineering, selling and administrative
expenses decreased to $6.3 for 1994 compared to $10.1 for 1993. Corporate
administrative expense in 1994 includes a charge of $2.2 in connection with the
termination, as of January 1, 1994, of the Company's management contract with
KCS, offset by allocations to operating segments. See Note M -- "Related Party
Transactions" in the Notes to the Consolidated Financial Statements for further
information.
Severance and Exit Costs and Goodwill Write-off
In June 1994, the Company announced personnel reductions in plant supervision,
engineering, marketing and administration totaling approximately 160 employees
at the Material Handling Segment's North American and European operations. A
charge of $4.5 was recorded related to these actions. 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 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 $2.9 charge was recorded
for costs, principally severance costs, associated with these actions. As a
result of changing Mark's product offerings and distribution, Terex Cranes
recognized a charge to income of $4.7 in the fourth quarter of 1993 to write-off
the remaining unamortized goodwill from the acquisition of Mark.
Income (Loss) from Operations
The Material Handling Segment incurred a loss from operations of $7.1 for 1994,
excluding the severance charge discussed above ($13.9 including the severance
charge), compared to a loss of $28.6 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 in the fourth quarter of 1994, excluding the severance
charge ($1.1 including the severance charge), compared to a loss of $10.7 in the
fourth quarter of 1993.
Terex Trucks income from operations improved by $0.1 to $11.1 for 1994 compared
to $11.0 for 1993. This improvement resulted from the increase in gross profit
offset by the increase in engineering, selling and administrative expenses
described above.
Terex Cranes income from operations of $7.9 for 1994 improved by $20.7 over 1993
due to increased sales and cost reductions outlined 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.
Additionally, as discussed above, Terex Cranes recognized a charge to income of
$4.7 to write-off the remaining unamortized goodwill from the Mark acquisition.
On a consolidated basis, the Company achieved operating income of $10.8,
excluding the severance charge discussed above, for 1994 ($3.4 income including
the severance charge) compared to an operating loss of $33.9 for 1993.
Other Income (Expense)
Interest expense on a consolidated basis was $30.5 for 1994 compared to $31.2
for 1993. The decrease in interest expense was primarily the result of
repayments of the then outstanding 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 in 1993. In
December 1993, the Company sold 1.0 million shares of Fruehauf common stock and
realized a gain of $3.0. During 1994 the Company sold a total of 5.9 million
shares of Fruehauf common stock and realized a gain of $26.0.
In 1994, the Company recorded a provision for state income taxes of $0.5 in
connection with the sale of its former subsidiary, 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 of its old senior secured
notes. The Company recognized extraordinary losses totaling $0.7 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 in the second quarter of 1993 to write
off unamortized debt issuance costs.
In December 1993, the Company repurchased $5.0 of its old senior secured notes
for approximately $4.5, including accrued interest. The Company recognized an
extraordinary gain on this transaction of approximately $0.5, net of write-off
of unamortized discount and debt issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's businesses are working 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 debt
and monthly interest payments on its credit facility. Debt reduction and an
improved capital structure are major focal points for the Company. In this
regard, the Company regularly reviews its alternatives to improve its capital
structure and to reduce debt through debt financings, issuance of equity, assets
sales, including the sale of business units, or any combination thereof.
Currently, the Company has focused its attention on the sale of assets,
including business units, and has taken steps to explore the opportunities
available to it in this regard. It is the Company's intention that certain such
assets be sold during 1996, provided that favorable terms and conditions can be
attained.
Net cash of $2.8 was used in operating activities during the three months ended
March 31, 1996. Net cash provided by investing activities was $1.6 during the
three months ended March 31, 1996 principally due to the sale of excess
property. Net cash provided by financing activities during the three months
ended March 31, 1996 was $5.2, primarily from use of the lending facility in the
U.K. Cash and cash equivalents totaled $12.7 at March 31, 1996.
The balance outstanding under the Credit Facility as of March 31, 1996 was
$65.7, and the additional amount the Company could have borrowed was $21.3 as of
that date. TEL entered into a new bank working capital facility in 1995, and PPM
Europe is in negotiations to secure a working capital facility in 1996.
Management intends to seek additional working capital financing facilities for
the Company's international operations to provide additional liquidity
worldwide.
Factors affecting future liquidity
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 million in the second quarter of 1995 for
severance costs associated with these actions and additional costs associated
with the closing of certain administrative and warehouse facilities.
As discussed below, the Company has refinanced its senior and subordinated debt,
established new credit facilities and borrowed additional funds to complete the
PPM Acquisition which will impact future operating results, sources of liquidity
and debt service requirements.
On May 9, 1995, the Company completed the refinancing and the PPM Acquisition.
The Refinancing included the private placement to institutional investors of
$250 of the Old Notes, repayment of the Company's old senior secured notes and
senior subordinated notes, totaling approximately $152.6 principal amount, and
entry into the Credit Facility to replace the Company's existing lending
facility in the U.S. The Indenture for the Old Notes places certain limits on
the Company's ability to incur additional indebtedness; permit the existence of
liens; issue, pay dividends on or redeem equity securities; utilize the proceeds
of assets sales; consolidate, merge or transfer assets to another entity; and
enter into transactions with affiliates. In connection with the issuance of the
Old Notes, the Company issued 1.0 million stock appreciation rights ("SARs")
entitling the holders to receive cash or Common Stock, at the option of the
Company, in an amount equal to the average closing sale price of the common
stock for 60 trading days prior to the date of exercise less $7.288 for each
SAR.
Approximately $92.6 of the proceeds of the Old Notes was used for the PPM
Acquisition, including the repayment of certain indebtedness of PPM required to
be repaid in connection with the acquisition. In addition, the acquisition costs
totaled approximately $5.0. The remainder of the purchase price consisted of the
issuance of redeemable preferred stock of Terex Cranes having an aggregate
liquidation preference of 127 French francs (approximately $26.1), subject to
adjustment. The purchase price is subject to adjustment calculated by reference
to the consolidated net asset value of PPM as determined by an audit as of the
date of closing. The preferred stock does not bear a dividend and, accordingly,
the Company has valued this stock at approximately $8.8 (discounted at 15%). The
Company has not yet reached agreement with the sellers about the amount of
purchase price adjustment but, based on work performed, the Company believes
that the amount of the preferred stock could ultimately be reduced.
The Company's Credit Facility provides the Company with the ability to borrow
(in the form of revolving loans and up to $15 in outstanding letters of credit)
up to $100. The Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory (including PPM). The amount of borrowings is
limited to the sum of the following: (i) 75% of the net amount of eligible
receivables, as defined, of the Company's U.S. businesses other than CMHC, plus
(ii) 70% of the net amount of CMHC eligible receivables, plus (iii) the lesser
of 45% of the value of eligible inventory, as defined, or 80% of the appraised
orderly liquidation value of eligible inventory less (iv) any availability
reserves established by the lenders. The Credit Facility expires May 9, 1998
unless extended by the lenders for one additional year. At the option of the
Company, revolving loans may be in the form of prime rate loans initially
bearing interest at the rate of 1.75% per annum in excess of the prime rate and
Eurodollar rate loans initially bearing interest at the rate of 3.75% per annum
in excess of the adjusted Eurodollar rate.
The Company made an interest payment of $17.2 on May 15, 1996 on the Old Notes.
The Company's debt service obligations for the remainder of 1996 include
approximately $17.2 on November 15, 1996 on the Notes and approximately $0.6
monthly on the Credit Facility. Management believes that, together with cash
generated from operations, the Refinancing provides the Company with adequate
liquidity to meet the Company's operating and debt service requirements. The
balance outstanding under the Credit Facility as of March 31, 1996 was $65.7,
and the additional amount the Company could have borrowed was $21.3 as of that
date. TEL entered into a new bank working capital facility in 1995, and PPM
Europe is in negotiations to secure a working capital facility in 1996.
Management intends to seek additional working capital financing facilities for
the Company's international operations to provide additional liquidity
worldwide.
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 plus interest and penalties. If the
Company were required to pay a significant portion of the assessment, it could
have a material adverse impact on the Company and could exceed the Company's
resources. The Company has filed 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 the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. 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
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated. A change in control of the Company for tax purposes
could possibly result in a significant reduction in the amount of NOL's
available to the Company to offset future taxable income.
The Commission in March of 1994 initiated a private investigation, which
included the Company and certain of its affiliates, 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. During 1995 the Company incurred $0.3 of legal fees and expenses
on behalf of the Company, directors and executives of the Company and KCS. In
general, under the Company's by-laws, the Company is obligated to indemnify
officer and directors, for all liabilities arising in the course of their duties
on behalf of the Company. To date, no officer or director has had legal
representation separate from the Company's legal representation, and no
allocation of the legal fees for such representation has been made.
The Company received a letter from the Department of Labor (the "DOL") in May of
1995, alleging that the Company's former Chairman of the Board, at the time a
fiduciary for the Company's retirement plans, violated certain provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") in making
certain investments which may have been imprudent and by possibly engaging in
prohibited transactions under ERISA. The Company and its former Chairman of the
Board are currently in discussions with the DOL concerning the allegations and
it is not possible at this time to determine the outcome of this matter;
however, the Company does not believe that the resolution of the allegations
will have a material adverse effect on the Company.
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
effect on the Company. When it is probable that a loss has been incurred and
possible to make reasonable estimates of the Company's liability with respect to
such matters, a provision is recorded for the amount of such estimate or for the
minimum amount of a range of estimates when it is not possible to estimate the
amount within the range that is most likely to occur.
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 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.
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 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, 1995, consolidated revenues of the Company
amounted to approximately $1,030.2 million. Prior to May 1995, the Company's
operations were divided into two principal segments: Material Handling and Heavy
Equipment, now known as Terex Trucks. On May 9, 1995, the Company completed the
PPM Acquisition. Together with Koehring, these businesses form the Terex Cranes
Segment.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies,
automated pallet trucks and related components and 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 CMH, which was acquired by the Company on July 31, 1992 from
Clark Equipment Company.
Terex Trucks, formerly known as the Company's Heavy Equipment Segment, designs,
manufactures and markets heavy-duty, off-highway earthmoving and construction
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. Terex Trucks consists of two operating
businesses: (i) the Terex Business, which manufactures off-highway rigid and
articulated haulers, scrapers and wheel loaders and (ii) Unit Rig, which
manufactures electric rear and bottom dump haulers, as well as mechanical drive
haulers and wheel loaders principally sold to the mining industry.
The Terex Cranes Segment designs, manufactures and markets mobile cranes, aerial
platforms, container stackers and scrap handlers and related components and
replacement parts. These products are used primarily for construction, repair
and maintenance of infrastructure, buildings and manufacturing facilities, for
material handling applications in the distribution and transportation industries
as well as in the scrap, refuse and lumber industries. Terex Cranes consists of
three operating businesses: (i) Koehring, which manufactures mobile cranes,
aerial lift platforms and scrap handlers, (ii) PPM North America, which
manufactures mobile cranes and container stackers under the brand name P&H (a
trademark of Harnischfeger) primarily in North America and (iii) PPM Europe,
which manufactures mobile cranes and container stackers primarily in Europe.
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 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company's strategy is to increase shareholder value through sustained
growing earnings.
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 and related replacement parts under the CLARK trademark. 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
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 Drexel Industries,
Inc. ("Drexel"). Drexel, which is located in Horsham, Pennsylvania, manufactures
very narrow-aisle lift trucks.
CMH currently offers 116 basic truck designs within five 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) and
electric walkies.
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.
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 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.
Terex Trucks
The Company is recognized as a significant competitor in the market for large
capacity haulers and scrapers. 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 Corporation, whose operations were subsequently
carried out as 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 sold under the TEREX trademark and as original
equipment manufactured to be sold under other brand names. 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.
Terex Cranes
Koehring
In January 1987, the Company purchased certain assets and operations of the
business that operated prior to the PPM Acquisition as the Koehring Cranes &
Excavators Division, which assets and operations were contributed to Koehring in
connection with the PPM Acquisition. 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 has three principal
competitors in the mobile crane market: Grove Manufacturing, Liebherr Werk
Ehingen and Link-Belt.
In December 1991, the Company acquired substantially all operating assets of the
business that operated prior to the PPM Acquisition as the Marklift 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.
The Company currently manages the Northwest Engineering and BCP Construction
Products ("BCP," acquired in 1985) businesses from Koehring's location in
Waverly, Iowa. The sale of replacement parts for Northwest Engineering and BCP
products, including the Dynahoe backhoe/loader, constitutes the most important
part of these businesses.
PPM Europe
On May 9, 1995, the Company acquired substantially all of the capital stock of
PPM Europe. PPM Europe was formed in 1966 by Potain, S.A., and is a leading
European designer, manufacturer and marketer of mobile cranes and container
stackers. PPM Europe consists of several subsidiaries throughout Europe,
including: PPM S.A. in France, Bendini SpA, an Italian rough terrain crane
producer, Brimont Agraire S.A., a specialized trailer manufacturer in France,
PPM Krane GmbH, a sales organization in Germany, and Baulift Baumaschinen Und
Krane Handels GmbH, a parts distributor in Germany. PPM Europe operates two
manufacturing facilities, its PPM manufacturing facility at Montceau les Mines
in central France and its Bendini manufacturing facility in northern Italy. PPM
Europe markets its products primarily in Europe, Africa and the Middle East
under the PPM and BENDINI brand names. PPM Europe's major competitors in mobile
cranes are Krupp Mobilkran, Grove Cranes Ltd. and Liebherr Werk Ehingen. PPM
Europe's major competitors in the container stacker market are Kalmar, Valmet
Belloti and Taylor.
PPM North America
On May 9, 1995, the Company acquired substantially all of the capital stock of
PPM North America. PPM North America, headquartered in Conway, South Carolina,
designs, manufactures and markets rough terrain cranes, truck cranes and
container stackers under the P&H brand name which is licensed from Harnischfeger
Corporation. PPM also markets mobile cranes and container stackers in the Far
East through its Singapore subsidiary and in Australia through its Australian
subsidiary. PPM North America has three main competitors in the mobile crane
market: Grove Manufacturing, Liebherr Werk Ehingen and Link-Belt.
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 $11.2 million, $10.5 million and $11.8 million in
1995, 1994 and 1993, 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 and cranes 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 93
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 Terex Business 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.
Terex Cranes distributes its products through a global network of over 300
independent dealers organized by product line. With respect to mobile cranes, in
North America both Koehring and PPM North America maintain extensive dealer
networks. The geographic strength of Koehring Cranes, which markets its mobile
cranes under the LORAIN brand name, centers in the midwest and mid-Atlantic
regions of the U.S. and the geographic strength of PPM North America, which
markets its mobile cranes under the P&H brand, centers in the southern and
western regions. PPM Europe's distribution is carried out under two brand names,
PPM and BENDINI, through a single distriubtion network comprised of both
distributors and a direct sales force.
Backlog
The Company's backlog as of March 31, 1996, December 31, 1995 and 1994 was as
follows:
March 31, December 31,
1996 1995 1994
(in millions of dollars)
Material Handling $ 85.1 $ 78.9 $ 135.9
Terex Trucks 86.5 88.8 67.8
Terex Cranes 59.8 85.3 11.7
Total $ 231.4 $ 253.0 $ 215.4
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.
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, POWERWORKER, P&H
(licensed by PPM North America from Harnischfeger Corporation), PPM,
HYPERSTACKER, SUPERSTACKER, BENDINI and GENESIS 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 March 31, 1996, the Company had approximately 3,350 employees. The Company
considers its relations with its personnel to be good. Approximately 33% of the
Company's employees are represented by labor unions which have entered into
various separate collective bargaining agreements with the Company. The Company
experienced a labor strike at its parts distribution center in Southaven,
Mississippi during the second quarter of 1995, which is ongoing, and a strike at
its Koehring facility in Waverly, Iowa in December 1995, which has been settled.
The strike at Southaven has had no appreciable effect on the conduct of business
or financial results of that operation.
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.
<PAGE>
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.
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.
Terex Trucks
Unit Rig ...............Tulsa, Oklahoma Manufacturing and office
325,000 sq. ft.
TEL.....................Motherwell, Scotland Manufacturing, warehouse and
office 714,000 sq. ft. (3)
Terex Cranes
Koehring & Mark.........Waverly, Iowa (4) Office, manufacturing and
warehouse
383,000 sq. ft.
PPM North America.......Conway, South Carolina (1) Office, manufacturing and
warehouse
257,040 sq. ft.
PPM Europe..............Montceau les Mines, France Office, manufacturing and
warehouse
419,764 sq. ft.
PPM Europe..............Crespellano, Italy Office, manufacturing and
warehouse
92,750 sq. ft.
PPM Europe..............Dortmund, Germany (1) Office and warehouse
129,180 sq. ft.
PPM Europe..............Rethel, France Office, manufacturing and
warehouse
215,300 sq. ft.
- ------------------------------
(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.
(4) Koehring also owns a 66,000 sq. ft. facility in Waterloo, Iowa which
is currently leased to others.
<PAGE>
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.
The properties listed above are suitable and adequate for the Company's use. The
Company has determined that certain of its properties exceed its requirements.
Such properties may be sold, leased or utilized in another manner and have been
excluded from the above list.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, including product
liability and workers' compensation liability matters, which have arisen in the
normal course of its operations and to which the Company is self-insured for up
to $5.0 million. Management believes that the final outcome of such matters will
not have a material adverse effect on the Company's consolidated financial
position. See Note L -- "Litigation and Contingencies" in the Notes to the
Consolidated Financial Statements.
For information concerning other contingencies and uncertainties, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following individuals are currently directors of the Company:
Name Age Positions and First Year
Offices with Company Elected Director
Ronald M. DeFeo 44 President, Chief Executive 1993
Officer, Chief Operating
Officer and Director
Marvin B. Rosenberg 55 Senior Vice President, 1992
General Counsel,
Secretary and Director
G. Chris Andersen 58 Director 1992
William H. Fike 60 Director 1995
Bruce I. Raben 42 Director 1992
David A. Sachs 37 Director 1992
Adam E. Wolf 82 Director 1983
Mr. DeFeo became a director of the Company in 1993 and was appointed President
and Chief Operating Officer of the Company on October 4, 1993 and Chief
Executive Officer of the Company on March 24, 1995. Prior to joining Terex on
May 1, 1992 as President of the Company's Heavy Equipment Group, Mr. DeFeo was a
Senior Vice President of J.I. Case Company, the farm and construction equipment
division of Tenneco Inc., and also served as a Managing Director of Case
Construction Equipment throughout Europe. While at J.I. Case, Mr. DeFeo was also
a Vice President of North American Construction Equipment Sales and General
Manager of Retail Operations.
Mr. Rosenberg was appointed a director of the Company in 1992 and was appointed
a Senior Vice President of the Company effective January 1, 1994. He has served
as Secretary and General Counsel of the Company since 1987. Mr. Rosenberg is a
director of Fruehauf and served as Secretary of Fruehauf since it was organized
in March 1989 until August 1993. From 1987 until December 31, 1993, he was
employed as General Counsel of KCS, an entity that, until December 31, 1993,
provided administrative, financial, marketing, technical, real estate and legal
services to the Company and its subsidiaries.
Mr. Andersen was appointed a director of the Company in 1992 and served as a
director of Fruehauf from July 1991 until August 1993. Mr. Andersen was a Vice
Chairman of PaineWebber Incorporated ("PaineWebber") from March 1990 through
1995. Mr. Andersen is currently a partner of Andersen Weinroth & Co. L.P.,
serves as a consultant to PaineWebber Incorporated and also serves as a director
of AFGL International, Inc., Sunshine Mining Company and United Waste Systems,
Inc.
Mr. Fike was appointed a director of the Company in April 1995. Mr. Fike is the
Vice Chairman and Executive Vice President of Magna International, Inc., an
automotive parts manufacturer based in Ontario, Canada ("Magna"). Prior to
joining Magna in September 1994, Mr. Fike was employed by Ford Motor Company
from 1966 to 1994, where he served in various capacities, most recently as
President of Ford Europe. Mr. Fike serves as a director to Magna and AGCO
Corporation.
Mr. Raben was appointed a director of the Company in 1992. Mr. Raben is a
managing director of CIBC Wood Gundy. Prior to joining CIBC Wood Gundy in
February 1996, Mr. Raben was employed as an Executive Vice President of
Jefferies & Company, Inc. Mr. Raben is also a director of Optical Securities
Group and Equity Marketing.
Mr. Sachs was appointed a director of the Company in 1992 and served as a
director of Fruehauf from November 1992 to March 1993. Mr. Sachs is President of
Alpha Onyx Asset Management, LLC, an investment advisory firm, and is a
principal at Onyx Partners, Inc., a merchant banking firm. From 1990 to 1994,
Mr. Sachs was employed at TMT-FW, Inc., an affiliate of Taylor & Co., a private
investment firm based in Fort Worth, Texas.
Mr. Wolf became a director of the Company in 1983. Mr. Wolf has been principally
self-employed as an attorney throughout his career. He has previously served on
several boards of directors, including those of a telephone company, a bank and
a hospital.
The following table sets forth, as of May 15, 1996, the respective names and
ages of the Company's executive officers indicating all positions and offices
held by each such person. Each officer is elected by the Board to hold office
for one year or until his successor is duly elected and qualified.
Name Age Positions and Offices Held
Ronald M. DeFeo 44 President, Chief Executive Officer and
Chief Operating Officer
David J. Langevin 45 Executive Vice President
Marvin B. Rosenberg 55 Senior Vice President, General Counsel
and Secretary
Ralph T. Brandifino 51 Senior Vice President and
Chief Financial Officer
Brian J. Henry 37 Vice President - Finance, Treasurer and
Director of Investor Relations
Joseph F. Apuzzo 40 Vice President - Finance and Controller
Steven E. Hooper 43 Vice President, Human Resources
For information regarding Messrs. DeFeo and Rosenberg, refer to the table
listing directors above.
Mr. Langevin became Executive Vice President of the Company effective January 1,
1994 and was Acting Chief Financial Officer of the Company from March to
December, 1993. He was employed as a Vice President of KCS from 1988 until
December 31, 1993.
Mr. Brandifino was appointed to the position of Senior Vice President and Chief
Financial Officer on December 6, 1993. Mr. Brandifino was previously the Chief
Financial Officer at the Long Island Lighting Company from 1987 through 1993.
Mr. Henry was appointed Vice President - Finance and Treasurer of the Company on
July 11, 1995. Mr. Henry also serves as the Company's Director of Investor
Relations. Mr. Henry formerly held the position of the Company's Vice President
- - Corporate Development and Acquisitions and has been employed by the Company
since 1993. He was employed by KCS from 1990 to 1993.
Mr. Apuzzo was appointed Vice President - Finance and Controller of the Company
on May 15, 1996. Mr. Apuzzo previously held the position of Vice President,
Corporate Controller of the Company since joining the Company on October 9,
1995. Mr. Apuzzo was Vice President of Corporate Finance at D'Arcy Masius Benton
& Bowles, Inc. from September 1994 until October 1995 when he joined the
Company. Mr. Apuzzo was employed by Price Waterhouse LLP in various capacities
from 1983 until September 1994.
Mr. Hooper was appointed Vice President, Human Resources of the Company on
September 15, 1995, after serving as Director of Human Resources of the Company
since January 1994. He was previously a Human Resources Director at Allied
Signal Aerospace from October 1992 to December 1993. Prior to October 1992, Mr.
Hooper was with Tenneco Inc. for eight years in various senior level human
resources positions.
<PAGE>
Executive Compensation
<TABLE>
<CAPTION>
Summary Compensation Table
The Summary Compensation Table below shows the compensation for the
past three fiscal years of the Company's Chief Executive Officer and its four
highest paid executive officers with 1995 earned qualifying compensation in
excess of $100,000 (the "Named Executive Officers").
Long-Term
Annual Compensation Compensation
Other Restricted Securities All Other
Annual Stock Underlying Compen-
Name and Salary Bonus Compen- Awards Options/ sation
Principal Position Year ($) ($) sation ($) SARS (#) ($)
------------------ ---- ------- ------- -------- --------- --------- ------
($)
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 1995 $ 350,000 $ 250,000 $ --- $ 237,500(1) 40,000 $ 3,080(6)
President, Chief Executive 1994 350,000 225,000 --- 84,700(2) 30,800 3,080(6)
Officer and Chief Operating 1993 237,500 100,000 222,693(7) --- 10,000 3,148(6)
Officer (3)
Randolph W. Lenz 1995 384,750 --- --- --- --- ---
Chairman of the Board(4)(5) 1994 486,000 243,000 --- 118,250(2) 43,000 ---
1993 483,508 --- --- --- --- ---
David J. Langevin 1995 303,600 150,000 --- --- 10,000 3,080(6)
Executive Vice President(4)(8) 1994 303,600 150,000 --- 75,350(2) 27,400 ---
1993 --- --- --- --- --- ---
Marvin B. Rosenberg 1995 250,000 75,000 --- --- 5,000 ---
Senior Vice President, 1994 250,000 75,000 --- 62,150(2) 22,600 ---
Secretary and General 1993 --- --- --- --- --- ---
Counsel(4)(9)
Ralph T. Brandifino 1995 235,000 100,000 --- --- --- 3,080(6)
Senior Vice President, Chief 1994 235,000 100,000 --- 58,300(2) 21,200 ---
Financial Officer and 1993 16,913 --- --- --- --- ---
Treasurer(10)
Brian J. Henry 1995 165,000 33,000 --- --- 10,000 3,080(6)
Vice President and Treasurer (11) 1994 150,000 33,000 --- 13,750(2) 5,000 3,080(6)
1993 70,000 50,000 --- --- --- 1,500(6)
<FN>
- -----------------------------
(1) As part of Mr. DeFeo's 1995 long term incentive compensation, on
February 15, 1996, Mr. DeFeo was granted 5,000 shares of Restricted
Stock under the Company's 1994 Long Term Incentive Plan (the "1994
Plan") and conditionally granted 45,000 shares of Restricted Stock
under the Company's 1996 Long Term Incentive Plan (the "1996 Plan"),
subject to stockholder approval, which was obtained on May 15, 1996.
The value of the Restricted Stock granted to Mr. DeFeo set forth in the
table above for 1995 is based on the closing stock price of $5.00 per
share as of February 15, 1996, the date of grant. The shares of
Restricted Stock awarded to Mr. DeFeo for 1995 become vested to the
extent of one-fourth of the shares covered thereby on each of the first
four anniversaries of February 15, 1996; however, upon the earliest to
occur of a change in control of the Company and the death or disability
of Mr. DeFeo, any unvested portion of such Restricted Stock shall vest
immediately. Dividends, if any, are paid on Restricted Stock awards at
the same rate as paid to all stockholders.
(2) As part of their 1994 long term incentive compensation, on June 23,
1994 the Named Executive Officers were granted shares of Restricted
Stock under the Company's 1994 Plan. The value of the Restricted Stock
set forth in the table above is based on the closing stock price of
$5.50 per share on June 23, 1994, the date of grant. Dividends, if any,
are paid on Restricted Stock awards at the same rate as paid to all
stockholders. The number and market value, based on the closing stock
price of $4.75 of the Restricted Stock awards set forth in the table
above as of December 31, 1995 for Messrs. DeFeo, Lenz, Langevin,
Rosenberg, Brandifino and Henry are: Mr. DeFeo, 15,400 shares, $73,150;
Mr. Lenz, 21,500 shares, $102,125; Mr. Langevin, 13,700 shares,
$65,075; Mr. Rosenberg, 11,300 shares, $53,675; Mr. Brandifino, 10,600
shares, $50,350; and Mr. Henry, 2,500 shares, $11,875. The shares of
Restricted Stock covered by the Restricted Stock awards of each of the
Named Executive Officers become vested to the extent of one-fourth of
the shares of covered thereby on each of the first four anniversaries
of June 23, 1994; however, upon the earliest to occur of a change of
control of the Company and the death or disability of such Named
Executive Officer, any unvested portion of such Restricted Stock will
vest immediately.
(3) Mr. DeFeo became Chief Executive Officer on March 24, 1995.
(4) In conjunction with the termination of the Company's management
agreement with KCS, Mr. Lenz, together with Messrs. Langevin and
Rosenberg (who became employees of the Company on January 1, 1994),
received cash and certain securities of the Company in 1994. Such
payments are not included as part of Messrs. Lenz's, Langevin's and
Rosenberg's 1994 annual compensation.
(5) Mr. Lenz was Chief Executive Officer of the Company from 1993 through
March 24, 1995 when Mr. DeFeo was appointed CEO. Mr. Lenz retired as
Chairman of the Board and a Director of the Company as of August 28,
1995 (see "Retirement of Randolph W. Lenz" below). Mr. Lenz was paid
his salary through the date of his retirement.
(6) Company's matching contribution to defined contribution plan account.
(7) Includes relocation payments of $214,604.
(8) Mr. Langevin was acting Chief Financial Officer of the Company from
March 9, 1993 through December 5, 1993, but did not receive
compensation from the Company until he became Executive Vice President
of the Company effective January 1, 1994. Prior to 1994, Mr. Langevin
was employed as an executive officer of KCS and received compensation
from KCS.
(9) Although Mr. Rosenberg has acted as Secretary and General Counsel of
the Company since 1987, he did not receive compensation from the
Company until he was appointed Senior Vice President of the Company
effective January 1, 1994. Prior to 1994, Mr. Rosenberg was employed as
an executive officer of KCS and received compensation from KCS.
(10) Mr. Brandifino joined the Company on December 6, 1993.
(11) Mr. Henry joined the Company on July 1, 1993. Prior to July 1, 1993,
Mr. Henry was employed by KCS and received compensation from KCS.
</FN>
</TABLE>
Option Grants in 1995
In May 1986, the stockholders approved an incentive stock option plan covering
key management employees (the "1988 Incentive Plan"). As further amended by
action of the stockholders and the Board, 108,228 shares of Common Stock are
currently available for purchase pursuant to incentive stock options granted or
to be granted under the 1988 Incentive Plan, subject to adjustment in the event
of changes in the outstanding Common Stock by reason of certain corporate events
such as stock splits and mergers. The exercise price of the options equals or
exceeds the fair market value of the Common Stock at the time of the grant.
Options granted under the 1988 Incentive Plan vest ratably over three years from
the date of grant. During 1995, options for 28,000 shares were granted to Named
Executive Officers under the 1988 Incentive Plan.
The Board of Directors adopted the 1994 Plan on June 23, 1994, subject to
stockholder approval which was obtained on June 23, 1995. The 1994 Plan provides
for the grant of stock options (both incentive stock options and nonqualified
stock options), shares of stock (including restricted stock) and performance
awards. Subject to adjustment in the event of certain changes in the outstanding
Common Stock, 750,000 shares of Common Stock have been reserved for issuance
under the 1994 Plan. The exercise price of stock options generally will be no
less than the fair market value of the Common Stock at the time of grant unless
otherwise determined by a committee of two or more outside directors (the "Plan
Committee"). The options will vest as determined by the Plan Committee (but no
less than one year from the date of grant), provided that the options will vest
immediately in the event of a Change in Control (as defined in the 1994 Plan).
During 1995, options for 65,000 shares were granted to Named Executive Officers
under the 1994 Plan.
In December 1995, the Board of Directors approved, subject to shareholder
approval, the 1996 Plan. Shareholder approval of the 1996 plan was granted on
May 15, 1996. The 1996 Plan authorizes the granting of (i) options ("Stock
Option Awards") to purchase shares of Common Stock, including Restricted Stock,
(ii) shares of Common Stock, including Restricted Stock ("Stock Awards"), and
(iii) cash bonus awards based upon a participant's job performance ("Performance
Awards"). Subject to adjustment as described below under "Adjustments," the
aggregate number of shares of Common Stock (including Restricted Stock, if any)
optioned or granted under the 1996 Plan shall not exceed 300,000 shares. The
1996 Plan provides that a committee (the "Committee") of the Board of Directors
consisting of two or more members thereof who are non-employee directors, shall
administer the 1996 Plan and has provided the Committee with the flexibility to
respond to changes in the competitive and legal environments, thereby protecting
and enhancing the Company's current and future ability to attract and retain
directors and officers and other key employees and consultants. The 1996 Plan
also provides for automatic grants of Stock Option Awards to non-employee
directors.
<TABLE>
<CAPTION>
The table below summarizes options granted during 1995 to the Named Executive
Officers.
Potential Realizable
Number of % of Total Exercise Value at
Securities Options/SARs or Assumed Annual Rates
Underlying Granted to Base of Stock Price
Options/SARs Employees in Price Expiration Appreciation
Name Granted (#)(1) Fiscal Year ($/Sh) Date for Option Term (3)
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 40,000 12.2% $4.250 12/13/05 $106,912 $270,930
Randolph W. Lenz (2) -0- 0% -0- --- -0- -0-
David J. Langevin 10,000 3.0% 4.250 12/13/05 26,995 68,411
Marvin B. Rosenberg 5,000 1.5% 4.250 12/13/05 13,364 33,867
Ralph T. Brandifino -0- 0% -0- --- -0- -0-
Brian J. Henry 10,000 3.0% 4.875 07/10/05 30,659 77,695
<FN>
- -------------------
(1) Of the options listed above, 19,709, 4,927 and 2,464 for Messrs. DeFeo,
Langevin and Rosenberg, respectively, were granted under the 1994 Plan
and become vested to the extent of one-fourth of the shares of Common
Stock covered thereby on each of the first four anniversaries of
December 13, 1995, the date of grant; and 20,291, 5,173 and 2,536 for
Messrs. DeFeo, Langevin and Rosenberg, respectively, were granted under
the 1988 Plan and become vested to the extent of one-third of the
shares of Common Stock covered thereby on each of the first three
anniversaries of December 31, 1995, the date of grant. Mr. Henry's
option to purchase 10,000 shares of Common Stock was granted to him
under the 1994 Plan in connection with his promotion to Vice President
and Treasurer on July 10, 1995, and becomes vested to the extent of
one-fourth of the shares of Common Stock covered thereby on each of the
first four anniversaries of July 10, 1995, the date of grant.
(2) Mr. Lenz retired as Chairman on August 28, 1995. (See "Retirement of
Randolph W. Lenz" below.)
(3) The potential gains shown are net of the option exercise price and do
not include the effect of any taxes associated with exercise. The
amounts are for the assumed rates of appreciation only, do not
constitute projections of future stock price performance, and may not
necessarily be realized. Actual gains, if any, on stock option
exercises depend on the future performance of the Common Stock,
continued employment of the optionee through the term of the option,
and other factors.
</FN>
</TABLE>
<PAGE>
Aggregated Option Exercises in 1995 and Year-End Option Values
<TABLE>
<CAPTION>
The table below summarizes options exercised during 1995 and year-end option
values of the Named Executive Officers.
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
Fiscal Year-end at
Shares Value (#) Fiscal Year-end ($)(1)
Name Acquired on Realized
Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Ronald M. DeFeo - - 34,366/66,434 0/190,000
Randolph W. Lenz (2) - - 10,750/32,250 0/0
David J. Langevin - - 6,850/30,550 0/47,500
Marvin B. Rosenberg - - 5,650/21,950 0/23,750
Ralph T. Brandifino - - 5,300/15,900 0/0
Brian J. Henry - - 1,250/13,750 0/0
<FN>
- ------------------
(1) Based on the closing price of the Company's Common Stock on the New
York Stock Exchange ("NYSE") on December 31, 1995 of $4.75.
(2) Mr. Lenz retired as Chairman on August 28, 1995. (See "Retirement of
Randolph W. Lenz" below.)
</FN>
</TABLE>
Pension Plans
The Company maintains four defined benefit pension plans covering certain
domestic employees, including, as described below, certain officers of the
Company. Retirement benefits for the plans covering the salaried employees are
based primarily on years of service and employees' qualifying compensation
during the final years of employment.
Mr. DeFeo participates in the Terex Corporation Salaried Employees' Retirement
Plan (the "Retirement Plan"). Messrs. Brandifino, Langevin and Rosenberg do not
participate because participation in the Retirement Plan was frozen as of May 7,
1993, prior to their employment with the Company.
Participants of the Retirement Plan with five or more years of eligible service
are fully vested and entitled to annual pension benefits beginning at age 65.
Retirement benefits under the Retirement Plan are equal to the product of (i)
the participant's years of service (as defined in the Retirement Plan) and (ii)
1.02% of final average earnings (as defined in the Retirement Plan) plus 0.71%
of such compensation in excess of amounts shown on the applicable Social
Security Integration Table for participants born prior to 1938. For participants
born during 1938-1954, the formula is modified by replacing the 1.02% and 0.71%
figures with 1.08% and 0.65%, respectively. For participants born after 1954,
the formula is modified by replacing the 1.02% and 0.71% figures with 1.13% and
0.60%, respectively. Service in excess of 25 years is not recognized. There is
no offset for primary Social Security.
Participation in the Retirement Plan was frozen as of May 7, 1993, and no
participants, including Mr. DeFeo, will be credited with service following such
date. However, participants not currently fully vested, including Mr. DeFeo,
will be credited with service for purposes of determining vesting only. The
annual retirement benefits payable at normal retirement age under the Retirement
Plan will be $4,503 for Mr. DeFeo (assuming full vesting).
Compensation of Directors
The directors who are employees of the Company receive no additional
compensation by virtue of their being directors of the Company. Non-employee
directors receive an annual fee of $24,000. All directors of the Company are
reimbursed for travel, lodging and related expenses incurred in attending Board
and committee meetings.
In addition, in accordance with the 1996 Plan, outside directors shall, in lieu
of compensation payable under the 1994 Plan:
(i) be awarded on the date of appointment as an outside director, an
option to purchase 25,000 shares of Common Stock;
(ii)be awarded an option to purchase the number of shares of Common Stock
necessary to bring the total number of shares of Common Stock for which
the director has or had an option, granted by the Company during his
tenure as a director, to 25,000 shares, at a price of $4.25 per share;
(iii) in consideration of services to the Board during 1995 and each year
thereafter, as applicable, be awarded annually an option to purchase
7,500 shares of Common Stock five business days after the date on which
the Company files its Annual Report on Form 10-K with the Commission,
at the closing price of a share of Common Stock on the NYSE on such
date, except that the exercise price of options granted in
consideration of services rendered during 1995 shall be $4.25 per
share;
(iv)in consideration of services to the Board during 1995 and each year
thereafter, as applicable, (a) if such outside directors are serving as
a chairperson of a committee to the Board of Directors five business
days after the date on which the Company files its Annual Report on
Form 10-K with the Commission, be awarded an option to purchase 5,000
shares of Common Stock at $4.25 per share for the options granted in
consideration of services rendered during 1995 and at the closing price
of a share of Common Stock on the NYSE on the date of all other annual
awards, or (b) if such outside directors are serving as a member of a
committee (and not as a chairperson of such committee) of the Board of
Directors five business days after the date on which the Company files
its Annual Report on Form 10-K with the Commission, be awarded an
option to purchase 2,500 shares of Common Stock at $4.25 per share for
the options granted in consideration of services rendered during 1995
and at the closing price of Common Stock on the NYSE on the date of all
other annual awards; provided, however, that an individual outside
director shall not be awarded an option to purchase more than 7,500
shares of Common Stock per year for service as a committee chairperson
and/or member, regardless of the number of positions held.
The outside director options described above shall have a term of five years and
the exercise price of the options shall be equal to the fair market value of the
Common Stock on the date preceding the day the grant is authorized, unless
otherwise provided. The options shall vest immediately. On December 13, 1995,
pursuant to such provisions of the 1996 Plan, (i) G. Chris Andersen was
conditionally granted an option to purchase 30,000 shares of Common Stock; (ii)
William H. Fike was conditionally granted an option to purchase 25,000 shares of
Common Stock; (iii) Bruce I. Raben was conditionally granted an option to
purchase 30,000 shares of Common Stock; (iv) David A. Sachs was conditionally
granted an option to purchase 27,500 shares of Common Stock; and (v) Adam E.
Wolf was conditionally granted an option to purchase 17,500 shares of Common
Stock, in each case at an option price of $4.25 per share. In addition, on
December 13, 1995, pursuant to the provisions of the 1996 Plan; (i) G. Chris
Andersen was conditionally granted an option to purchase 15,000 shares of Common
Stock; (ii) William H. Fike was conditionally granted an option to purchase
12,500 shares of Common Stock; (iii) each of Bruce I. Raben and David A. Sachs
was conditionally granted an option to purchase 15,000 shares of Common Stock;
and (iv) Adam E. Wolf was conditionally granted an option to purchase 10,000
shares of Common Stock, in each case at an option price of $6.75 per share. At
the time of the Board of Directors' approval of the 1996 Plan and the initial
awards to outside directors, the Board of Directors noted the increased workload
of the outside directors during 1995 as a result of negotiations relating to Mr.
Lenz's retirement as well as the lack of a permanent Chairman since the date of
Mr. Lenz's retirement. See "Retirement of Randolph W. Lenz" below.
Retirement of Randolph W. Lenz
On August 28, 1995, the Company announced that its Chairman, Randolph W. Lenz,
had retired from his position with the Company and its Board of Directors. In
connection with his retirement, the Company (acting upon the recommendation of a
committee comprised of its independent Directors and represented by independent
counsel) and Mr. Lenz have entered into a retirement agreement providing certain
benefits to Mr. Lenz and the Company. The agreement provides, among other
things, for a five-year consulting engagement requiring Mr. Lenz to make himself
available to the Company to provide consulting services for certain portions of
his time. Mr Lenz, or his designee, will receive a fee for consulting services
which will include payments in an amount, and a rate, equal to his 1995 base
salary until December 31, 1996. The agreement also provides for the granting of
a five-year $1.8 million loan bearing interest at 6.56% per annum which is
subject to being forgiven in increments over the five-year term of the agreement
upon certain conditions and equity grants having a maximum potential of 200,000
shares of Common Stock conditioned upon the Company achieving certain financial
performance objectives in the future. In contemplation of the execution of this
retirement agreement, the Company advanced to Mr. Lenz the principal amount of
the forgivable loan. Mr. Lenz has also agreed not to compete with the Company,
to vote his Terex shares in the manner recommended by the Company's Board of
Directors, not to acquire any additional shares of the Common Stock, and, except
under certain circumstances, not to sell his shares of common stock.
The foregoing description is a summary of the terms of the retirement agreement
and does not purport to be complete and is qualified in its entirety by
reference to the Agreement dated as of November 2, 1995 between the Company and
Randolph W. Lenz, a copy of which is filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements
The Company has agreed with Ronald M. DeFeo that in the event of a change in
ownership of the Company which prevents him from continuing in his position as
President and Chief Executive Officer, the Company will provide for a
continuance of his income for a period of 24 months.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board recommending compensation for executive
officers, including the Named Executive Officers, during the Company's 1995
fiscal year consisted of G. Chris Andersen, William H. Fike and David A. Sachs.
There are no compensation Committee interlocks or insider participation with
respect to such individuals.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock by each person known by the Company to own
beneficially more than 5% of Common Stock, by each director, by each executive
officer of the Company named in "Management -- Executive Compensation," and by
all directors and executive officers as a group, as of May 15, 1996. Each person
named in the following table has sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by such person, except
as otherwise set forth in the notes to the table. Shares of Common Stock that
any person has a right to acquire within 60 days after May 15, 1996 pursuant to
an exercise of options, warrants or other rights or conversion of preferred
stock or otherwise are deemed to be outstanding for the purpose of computing the
percentage ownership of such person, but are not deemed to be outstanding for
computing the percentage ownership of any other person shown in the table.
Name and Address of Amount Percent
Beneficial Owner Beneficially of Class
Owned
Randolph W. Lenz (1) 4,425,701 (2) 41.76%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
G. Chris Andersen 79,900 (3) *
821 West Shore Drive
Kinnelon, NJ 07405
Ronald M. DeFeo 68,737 (4) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
William H. Fike 37,500 (5) *
Magna International, Inc.
26200 Lahser Road
Suite 300
Southfield, MI 48034
Bruce I. Raben 112,663 (6) 1.06%
CIBC Wood Gundy
1999 Avenue of the Stars, Suite 1910
Los Angeles, CA 90067
Marvin B. Rosenberg 119,950 (7) 1.13%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
David A. Sachs 75,300 (8) *
Onyx Partners
9595 Wilshire Boulevard, Suite 700
Beverly Hills, CA 90212
Adam E. Wolf 48,500 (9) *
875 East Donges Lane
Milwaukee, WI 53217
Joseph F. Apuzzo 91 *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Ralph T. Brandifino 17,455 (10) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Brian J. Henry 7,750 (11) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Steven E. Hooper 3,861 (12) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
David J. Langevin 138,950 (13) 1.31%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
All directors and executive officers
as a group (12 persons) 710,657 (14) 6.70%
- ------------------------------
* Amount owned does not exceed one percent (1%) of the class so owned.
(1) Mr. Lenz currently pledges, and intends to pledge in the future, shares
of the Common Stock owned by him as collateral for loans. If Mr. Lenz
does not pay such loans when due, the pledgee may have the right to
sell the shares of the Common Stock pledged to it in satisfaction of
Mr. Lenz's obligations. The sale of a significant amount of such
pledged shares could result in a change of control of the Company.
Pursuant to a retirement agreement between the Company and Mr. Lenz,
Mr. Lenz has agreed to vote his shares of the Company's Common Stock in
the manner recommended by the Company's Board of Directors.
(2) Includes (a) 3,727,787 shares of Common Stock directly owned by Mr.
Lenz, (b) 21,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days and held by Mr. Lenz, (c) 573,414
shares of Common Stock indirectly owned by Mr. Lenz through four
corporations that he indirectly owns and controls, (d) 38,800 shares of
Series B Cumulative Redeemable Convertible Preferred Stock (the "Series
B Preferred Stock") convertible into 87,300 shares of Common Stock and
(e) Series B Common Stock Purchase Warrants (the "Series B Warrants")
exercisable into 15,700 shares of Common Stock.
(3) Includes 55,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(4) Includes 42,066 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(5) Includes 37,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(6) Includes 10,000 shares owned by Mr. Raben's wife as to which Mr. Raben
does not have dispositive or voting power and disclaims beneficial
ownership. Also includes 55,000 shares of Common Stock issuable upon
the exercise of options held by Mr. Raben and which are exercisable
within 60 days.
(7) Includes 11,300 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(8) Includes 3,300 shares of Common Stock owned by Mr. Sach's wife. Mr.
Sachs disclaims the beneficial ownership of such shares. Also
includes 52,500 shares of Common Stock issuable upon the exercise of
options held by Mr. Sachs which are exercisable within 60 days.
(9) Includes 47,500 shares of Common Stock issuable upon the exercise of
options held by Mr. Wolf which are exercisable within 60 days. Also
includes 800 shares of Common Stock held in a testamentary trust for
which Mr. Wolf has shared voting power and shared investment power and
200 shares of Common Stock held by Mr. Wolf's wife for which he claims
beneficial ownership.
(10) Includes 10,600 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days
(11) Includes 2,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(12) Includes 2,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(13) Includes 13,700 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(14) Includes 327,666 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
CERTAIN TRANSACTIONS
On August 28, 1995, Randolph W. Lenz retired as Chairman of the Board and a
Director of the Company. Mr. Lenz remains the Company's principal stockholder.
As of March 31, 1996 he beneficially owned, directly and indirectly,
approximately 42% of the outstanding Common Stock of the Company. In connection
with his retirement, the Company entered into an agreement with Mr. Lenz which
provides certain benefits to Mr. Lenz and the Company. See "Management --
Retirement of Randolph W. Lenz." In addition to indebtedness pursuant to the
retirement agreement, an affiliate of Mr. Lenz is indebted to the Company in the
approximate amount of $33,450 representing shipping charges incurred by such
affiliate to the Company during 1994. The affiliate of Mr. Lenz has not paid
such charges as of May 31, 1996.
The Company, certain directors and executives of the Company, and KCS are named
parties in various legal proceedings. During 1995, the Company incurred $0.3
million of legal fees and expenses on behalf of the Company, directors and
executives of the Company, and KCS named in the lawsuits.
In 1995, the Company retained Jefferies, of which a director of the Company was
then an officer, in connection with the offering of the Old Notes and the
Acquisition of PPM which was completed in May 1995. Jefferies was paid $9.338
million as an underwriting discount and for services rendered. Jefferies has
previously rendered financial advisory and other services to the Company.
The Company intends 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 will be advised in advance of any such proposed
transaction or agreement and will utilize such procedures in evaluating their
terms and provisions as are appropriate in light of the Board's fiduciary duties
under Delaware law. In addition, the Company has an Audit Committee consisting
solely of outside directors. One of the responsibilities of the Audit Committee
is to review related party transactions.
<PAGE>
DESCRIPTION OF THE NOTES AND THE GUARANTEES
General
The Old Notes were, and the New Notes will be, issued pursuant to the Indenture.
The form and terms of the New Notes will be the same as the form and terms of
the Old Notes, except that the New Notes will be registered under the Securities
Act and, therefore, will not bear legends restricting the transfer thereof. The
terms of the New Notes will include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), as in effect on the date of the Indenture.
The following summary of certain provisions of the Indenture, the Collateral
Agreements (as defined below) and the Registration Rights Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, the Collateral Agreements and the Registration Rights Agreement,
including the definitions therein of certain terms used below. Copies of the
forms of Indenture, Collateral Agreements and Registration Rights Agreement have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part). The definitions of certain terms used in the following summary are set
forth below under "-- Certain Definitions."
Principal Maturity and Interest; Ranking of New Notes
The New Notes are limited in aggregate principal amount to $250 million and will
mature on May 15, 2002. Interest on the New Notes will be payable semi-annually
on May 15 and November 15 of each year, commencing on November 15, 1996, to
holders of record on the immediately preceding May 1 and November 1,
respectively. The Notes will bear interest at 13 1/4% per annum from the date of
original issue. Holders of New Notes will receive interest on November 15, 1996,
from the date of the initial issuance of the New Notes, plus an amount equal to
the accrued interest on the Old Notes exchanged therefor from the most recent
date to which interest has been paid to the date of exchange thereof. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The New Notes will be payable both as to principal and interest
at the office or agency of the Company or, at the option of the Company, payment
of interest may be made by check mailed to the holders of the New Notes at their
respective addresses set forth in the register of holders of Notes. Until
otherwise designated by the Company, the Company's office or agency will be the
office of the Trustee maintained for such purpose. If a payment date is a legal
holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a legal holiday at such place of payment, and no
interest shall accrue for the intervening period.
The New Notes will rank pari passu in right of payment with all existing and
future senior indebtedness (including the Old Notes) and senior to all
subordinated indebtedness of the Company. In addition, upon any distribution of
assets of the Company pursuant to any insolvency, bankruptcy, dissolution,
winding up, liquidation or reorganization, the payment of the principal of, and
the premium, if any, and interest on, the New Notes will rank pari passu in
right of payment with all existing and future senior indebtedness (including the
Old Notes). The Notes will rank pari passu in right of payment with all senior
borrowings. The New Notes will be issued in registered form, without coupons,
and in denominations of $1,000 and integral multiples thereof.
Redemption
The Notes are not redeemable at the Company's option prior to May 15, 2000.
Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable date
of redemption, if redeemed during the 12-month period beginning on May 15 of the
years indicated below:
Year Percentage
2000 103.79%
2001 101.89
2002 100.00
Notwithstanding the foregoing, prior to May 15, 2000, the Company may redeem up
to one-third of the original principal amount of the Notes, at a redemption
price of 111.36% of the principal amount of the Notes if the Notes are redeemed
prior to May 15, 1997, 109.46% of the principal amount of the Notes if the Notes
are redeemed after May 15, 1997 and prior to May 15, 1998, 107.57% of the
principal amount of the Notes if the Notes are redeemed after May 15, 1998 and
prior to May 15, 1999, and 105.68% of the principal amount the Notes are
redeemed after May 15, 1999, in each case plus accrued interest to the
applicable redemption date, with the net proceeds of a bona fide public offering
of common stock of the Company or any Restricted Subsidiary; provided, however,
that such redemption shall occur within 60 days of the date of the closing of
such public offering. The restrictions on optional redemptions set forth in the
Indenture will not limit the Company's right to make open market purchases of
the Notes from time to time, except that neither the Company nor any Restricted
Subsidiary may use the proceeds of a bona fide public offering made prior to May
15, 2000 to make open market purchases of the Notes.
If less than all of the Notes are to be redeemed at any time, selection of Notes
for redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee deems to be fair and appropriate, provided, however,
that Notes of $1,000 or less may not be redeemed in part. Notice of redemption
will be mailed by first-class mail at least 30 but not more than 60 days before
the redemption date to each holder of Notes to be redeemed at such holder's
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note will state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the date of redemption, interest
will cease to accrue on Notes or portions of them called for redemption.
The Notes will not be entitled to any mandatory redemption or sinking fund.
Guarantors
The repayment of the Old Notes is and repayment of the New Notes will be
unconditionally and irrevocably guaranteed by present and future Material
Subsidiaries of the Company that are Restricted Subsidiaries (other than TEL,
CMHC Germany, P.P.M., S.A. and any other present or future Restricted Subsidiary
organized under the laws of a foreign country), including Terex Cranes, PPM
Cranes, Koehring Cranes and CMHC. Two other Guarantors, CMH Acquisition and
International, are intermediary holding companies. See Note P -- "Consolidating
Financial Statements" in the Notes to the Consolidated Financial Statements. The
Indenture will provide that as long as any Notes remain outstanding, any future
domestic Material Subsidiary of the Company that is a Restricted Subsidiary
shall enter into a similar guarantee and the stock of such Subsidiary will be
pledged to secure the Notes.
The obligations of each Guarantor will be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee, result in the obligations of such Guarantor under
the Guarantee not constituting a fraudulent conveyance or fraudulent transfer
under federal or state law. See "Risk Factors -- Fraudulent Conveyance or
Transfer; Possible Invalidation or Subordination of Company Obligations."
Collateral
Subject to certain exceptions, the Notes and Guarantees will be secured by a
security interest in (i) substantially all of the assets of the Company and the
Guarantors, other than cash and cash equivalents (except that as to accounts
receivable and inventory, and proceeds thereof and certain related rights, such
security interest shall be subordinated to Liens securing obligations under any
Revolving Credit Facility to which any of them are obligors), (ii) property,
plant and equipment of the Company and certain of the Restricted Subsidiaries
organized outside of the U.S. and (iii) all of the Capital Stock of (and certain
intercompany notes from) all Subsidiaries of the Company owned by the Company or
any Restricted Subsidiary. In addition, the Notes will initially be secured by a
security interest in inventory of certain foreign Restricted Subsidiaries;
provided, however, that if any European subsidiary of the Company enters into a
Revolving Credit Facility, the Company is permitted to secure such facility with
accounts receivable and/or inventory of such subsidiary and the security
interest securing the Notes will be released to the extent required by the terms
of any such facility. All of the assets of the Company, the Guarantors and the
Restricted Subsidiaries described above are collectively referred to herein as
the "Collateral."
The Company, the Guarantors and the Restricted Subsidiaries have entered into
security agreements, mortgages, deeds of trust and certain other collateral
assignment agreements (collectively, the "Collateral Agreements") that provide
for the grant of a security interest in or pledge of the Collateral to the
Trustee, as collateral agent (in such capacity, the "Collateral Agent"), for the
benefit of the holders of the Notes. Such pledges and security interests will
secure the payment and performance when due of all of the Obligations of the
Company, the Guarantors and the Restricted Subsidiaries, under the Indenture,
the Notes, the Guarantees and the Collateral Agreements. The Trustee, on behalf
of the Noteholders, has entered into an intercreditor agreement with the Lenders
(as defined herein) under the Credit Facility relating to the parties'
respective rights to collateral and providing for certain other matters.
The Collateral Agreements grant certain blanket-type Liens to the Collateral
Agent against the personal property of the Company, the Guarantors and certain
of the Restricted Subsidiaries that are intended to secure the Obligations of
such persons under the Indenture, the Guarantees and the Notes. The Collateral
Agreements also grant a first priority Lien in all fee real property and certain
leasehold interests (the "Real Property Assets") owned or leased by the Company,
the Guarantors and certain of the Restricted Subsidiaries as of the date of the
Indenture. Such Liens shall be subordinate to (i) Purchase Money Liens permitted
under the covenant entitled "--Liens," (ii) Permitted Liens and (iii) Liens on
accounts receivable and inventory, and the proceeds thereof and certain related
rights securing obligations under the Credit Facility. With respect to leasehold
interests, the Collateral Agent's Liens will be limited to the extent such
leasehold interests may be encumbered pursuant to the terms of their respective
underlying leases, and by the terms of such leases. The Company and its
Restricted Subsidiaries will have the right to grant (and suffer to exist) Liens
to third parties to the extent provided in the covenant entitled "Liens" and
will have the right to acquire any such assets subject to such Liens (and suffer
to exist such Liens.) The Collateral Agent's Liens are intended to be, and shall
be, at all times automatically junior and subordinate in priority to certain of
such Liens. The Collateral Agreements also provide that the Collateral Agent
shall not have a lien on property, plant or equipment acquired by the Company,
any Guarantor or any Restricted Subsidiary with the proceeds of Purchase Money
Obligations permitted under the terms of the Indenture, which property, plant
and equipment is subject to Purchase Money Liens permitted under the terms of
the Indenture, if, and for so long as, the agreements governing the terms of
such Purchase Money Obligations and Purchase Money Liens prohibit junior liens
on the assets so acquired.
So long as no Event of Default (as defined in the Indenture) has occurred and is
continuing, and subject to certain terms and conditions in the Indenture and the
Collateral Agreements, the Company will be entitled to receive all cash
dividends, interest and other payments made upon or with respect to the Capital
Stock of any Subsidiary's collateral pledged by it, and to exercise any voting,
other consensual rights and other rights pertaining to such collateral pledged
by it. Upon the occurrence and during the continuance of an Event of Default
relating to payment of principal or interest on the Notes or if the Notes are
accelerated, all rights of the Company to exercise such voting, other consensual
rights or other rights will cease upon notice from the Collateral Agent, and all
such rights will become vested in the Collateral Agent, which to the extent
permitted by law, will have sole right to exercise such voting, other consensual
rights or other rights. Upon the occurrence and during continuance of any Event
of Default, all rights of the Company to receive all cash dividends, interest
and other payments made upon or with respect to the pledged collateral will,
upon notice from the Collateral Agent, cease and such cash dividends, interest
and other payments will be paid to the Collateral Agent. All funds distributed
under the Collateral Agreements and received by the Collateral Agent for the
benefit of the holders of the Notes will be retained and/or distributed by the
Collateral Agent in accordance with the provisions of the Indenture.
Under the terms of the Collateral Agreements, the Collateral Agent will
determine the circumstances and manner in which the Collateral will be disposed
of, including, but not limited to, the determination of whether to foreclose on
the Collateral following an Event of Default. Holders of the Notes may not
enforce the Collateral Agreements. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Notes may direct the
Collateral Agent in its exercise of any trust or power under the Collateral
Agreements. Upon the full and final payment and performance of all Obligations
of the Company under the Indenture and the Notes, the Collateral Agreements will
terminate and the pledged Collateral will be released. In addition, in the event
that the pledged Collateral is sold and the Net Proceeds are or will be applied
in accordance with the terms of the covenant described under "--Limitation on
Asset Sales," the Collateral Agent will release simultaneously with such sale
the Liens in favor of the Collateral Agent in the assets sold, provided,
however, that the Collateral Agent has received all documentation required by
the Trust Indenture Act therefor.
In the event of a default under the Notes, the proceeds from the sale of the
Collateral may not be sufficient to satisfy the Company's obligations under the
Notes in full. The amount to be received upon such a sale would be dependent
upon numerous factors including the condition, age and useful life of the
collateral at the time of such sale, the timing and the manner of the sale, and
whether the assets were being sold as part of an ongoing business. In addition,
the book value of the collateral should not be relied upon as a measure of
realizable value.
Repurchase Upon Change of Control
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase all the Notes then outstanding as described below (the
"Change of Control Offer") at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (the "Change of Control Payment"). Within 40 days following any
Change of Control, the Company must mail a notice to each holder stating, among
other things: (i) that the Change of Control Offer is being made pursuant to
this provision and that all Notes tendered will be accepted for payment, (ii)
the purchase price and the purchase date, which will be no earlier than 30 days
nor later than 40 days from the date such notice is mailed (the "Change of
Control Payment Date"), (iii) that any Note not tendered will continue to accrue
interest, (iv) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control Payment
Date, (v) that any holder electing to have Notes purchased pursuant to a Change
of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the paying agent with respect to the Notes (the "Paying Agent") at the address
specified in the notice prior to the close of business on the third business day
preceding the Change of Control Payment Date, (vi) that the holder will be
entitled to withdraw such election if the Paying Agent receives, not later than
the close of business on the second business day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the holder, the principal amount of Notes delivered for purchase,
and a statement that such holder is withdrawing his election to have such Notes
purchased, and (vii) that a holder whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes in connection with a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent lawful,
(i) accept for payment the Notes or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to
the Change of Control Payment in respect of all Notes or portions thereof so
tendered, and (iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an officer's certificate stating that the Notes or
portions thereof tendered to the Company are accepted for payment. The Paying
Agent will promptly mail to each holder of Notes so accepted payment in an
amount equal to the purchase price for such Notes, and the Trustee will
authenticate and mail to each holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any, provided, however, that
each such new Note will be in principal amount of $1,000 or an integral multiple
thereof. The Company will announce the result of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
There can be no assurance that sufficient funds will be available at the time of
any Change of Control Offer to make required repurchases.
"Change of Control" means (i) the sale, assignment, lease, transfer or
conveyance (in one transaction or a series of transactions) of all or
substantially all of the Company's assets to any Person or group (as such term
is used in Section 13(d)(3) of the Exchange Act), (ii) the liquidation or
dissolution of the Company or the adoption of a plan by the stockholders of the
Company relating to the dissolution or liquidation of the Company, (iii) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act), except for any Person or group owning in excess of 40% of the
voting power of the Voting Stock of the Company on the date of the Indenture, of
a direct or indirect majority in interest (more than 50%) of the voting power of
the Voting Stock of the Company by way of purchase, merger or consolidation or
otherwise, or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of the
Company (which includes any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of at least 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company.
Certain Covenants
Limitation on Restricted Payments. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly (i) declare or pay any
dividend or make any distribution on account of the Equity Interests of the
Company and its Subsidiaries (other than dividends or distributions payable in
Equity Interests of the Company or such Restricted Subsidiary (other than
Disqualified Stock) or dividends or distributions payable to the Company or any
Wholly Owned Subsidiary), (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interest of the Company or any Subsidiary or other
Affiliate of the Company (other than any such Equity Interest owned by the
Company or any Wholly Owned Subsidiary), (iii) voluntarily make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is expressly subordinated in right of payment to the
Notes prior to any scheduled principal payment, sinking fund payment or other
payment at the stated maturity thereof, or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
are collectively referred to as "Restricted Payments") unless, at the time of
such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or would
occur as a consequence thereof, and
(b) immediately after such Restricted Payment (the value of any such
payment, if other than cash, being determined in good faith by the
Board of Directors and evidenced by a resolution set forth in an
officers' certificate delivered to the Trustee) and after giving
effect thereto on a pro forma basis, the Company could incur at least
$1.00 of additional Indebtedness under the Interest Coverage Ratio
test set forth in the covenant described under "-- Limitation on
Incurrence of Indebtedness," and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (including Restricted
Payments permitted by clauses (i) and (ii) of the next following
paragraph and excluding Restricted Payments permitted by the other
clauses therein), is less than the sum of (x) 40% of the Consolidated
Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first quarter commencing immediately
after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, 100% of such
deficit), plus (y) 100% of the aggregate net cash proceeds received by
the Company from the issuance or sale, other than to a Subsidiary of
the Company, of Equity Interests of the Company (other than
Disqualified Stock) after the date of the Indenture and on or prior to
the time of such Restricted Payment, plus (z) 100% of the aggregate
net cash proceeds received by the Company from the issuance or sale,
other than to a Subsidiary of the Company, of any convertible or
exchangeable debt security of the Company that has been converted or
exchanged into Equity Interests of the Company (other than
Disqualified Stock) pursuant to the terms thereof after the date of
the Indenture and on or prior to the time of such Restricted Payment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would not have been prohibited by the provisions of the
Indenture, (ii) the redemption, purchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than Disqualified Stock), (iii) the
redemption, repurchase or payoff of any Indebtedness with proceeds of any
Refinancing Indebtedness (as defined below) permitted to be incurred pursuant to
the provision described under "--Limitation on Incurrence of Indebtedness," (iv)
the redemption, purchase, retirement or other payoff of the Series A Cumulative
Redeemable Convertible Preferred Stock, (v) Investments by the Company or any
Restricted Subsidiary, in an aggregate amount not to exceed $3 million, in a
Non-Restricted Subsidiary formed primarily for the purpose of financing
purchases and leases of inventory manufactured by the Company or any of its
Subsidiaries, and (vi) other Restricted Payments in an aggregate amount not to
exceed $8 million.
Not later than the date of making any Restricted Payment, the Company will
deliver to the Trustee an officers' certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements.
Limitation on Incurrence of Indebtedness. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guaranty or otherwise become directly or indirectly liable
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any preferred stock, provided,
however, that the Company may incur Indebtedness or issue shares of Disqualified
Stock if the Interest Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least equal to the ratio
set forth below opposite the period in which such incurrence or issuance occurs,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock has been issued, as the case may be, at the beginning of such
four-quarter period;
Period Ending Ratio
May 15, 1997......................................... 2.50:1
May 15, 1998 and thereafter.......................... 2.75:1
provided, however, that, in the case of Indebtedness, (i) the Weighted Average
Life to Maturity of such Indebtedness is greater than the remaining Weighted
Average Life to Maturity of the Notes by at least one year and (ii) such
Indebtedness has a final scheduled maturity that exceeds the final stated
maturity of the Notes by at least one year.
The foregoing limitations will not prohibit the incurrence of (a) Indebtedness
pursuant to the Revolving Credit Facility and repayment obligations in respect
of letters of credit, provided, however, that the aggregate principal amount of
Indebtedness so incurred on any date, together with all other Indebtedness
incurred pursuant to this clause (a) and outstanding on such date, shall not
exceed the sum of (i) 85% of Eligible Receivables (as defined in the Indenture),
plus (ii) 50% of Eligible Inventory (as defined in the Indenture), (b)
performance bonds, surety bonds, insurance obligations or bonds and other
similar bonds or obligations incurred in the ordinary course of business, (c)
Hedging Obligations incurred to fix the interest rate on any variable rate
Indebtedness otherwise permitted by the Indenture, (d) Indebtedness arising out
of sale and leaseback transactions, capital lease obligations or Purchase Money
Obligations (collectively, "Purchase Money Indebtedness") in an aggregate amount
not to exceed $6 million during any calendar year, (e) Indebtedness owed by the
Company to any Wholly Owned Subsidiary or Guarantor or by any Wholly Owned
Subsidiary or Guarantor to the Company or any other Wholly Owned Subsidiary or
Guarantor, (f) Guarantees incurred in the ordinary course of business of
Indebtedness incurred by any Person to purchase or lease inventory manufactured
or sold by the Company or any Restricted Subsidiary (including, without
limitation, Floor Plan Guarantees), provided, however, that (i) to the extent
commercially practicable, the Indebtedness so guaranteed is secured by a first
priority lien on such inventory in favor of the holder of such Indebtedness and
(ii) if the Company or such Restricted Subsidiary is required to make payment
with respect to such guaranty, the Company or such Restricted Subsidiary will
have the right to receive either (1) title to such inventory, (2) a valid
assignment of a perfected first priority security interest in such inventory or
(3) the net proceeds of any resale of such inventory, (g) Indebtedness
outstanding on the date of the Indenture, up to 80 million French Francs of PPM
Funded Debt (as defined in the Indenture) remaining outstanding following
consummation of the Acquisition and the PPM Subordinated Note (as defined in the
Indenture) and (h) Indebtedness issued in exchange for, or the proceeds of which
are contemporaneously used to extend, refinance, renew, replace, or refund
(collectively, "Refinance") Indebtedness referred to in clauses (d) or (g) above
and outstanding Indebtedness incurred pursuant to the debt incurrence tests set
forth in the immediately preceding paragraph (the "Refinancing Indebtedness"),
provided, however, that (1) the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of Indebtedness so Refinanced
(plus the amount of reasonable out-of-pocket fees and expenses incurred in
connection therewith), (2) the Refinancing Indebtedness has a Weighted Average
Life to Maturity that is either (x) equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (y) greater
than the Weighted Average Life to Maturity of the Notes, and (3) the Refinancing
Indebtedness ranks, in right of payment, no less favorable to the Notes as the
Indebtedness being Refinanced.
Limitation on Asset Sales. The Company will not, and will not permit any
Restricted Subsidiary to, make any Asset Sale unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets subject to such Asset Sale as
determined in good faith by the Board of Directors, (ii) at least 80% of the
consideration for such Asset Sale (other than consideration consisting of assets
that will be used in the business of the Company or its Subsidiaries) is in the
form of Permitted Proceeds, and (iii) within 12 months of such Asset Sale, the
Net Proceeds thereof are (a) invested in assets related to the business of the
Company or its Restricted Subsidiaries as conducted on the date of the
Indenture, (b) applied to repay Indebtedness under Purchase Money Obligations
incurred in connection with the asset so sold or (c) to the extent not used as
provided in clauses (a) or (b), applied to make an offer to purchase Notes as
described below (an "Excess Proceeds Offer"), provided, however, that if the
amount of Net Proceeds from any Asset Sale not invested pursuant to clause (a)
above is less than $5 million, the Company will not be required to repay
indebtedness pursuant to clause (b) or to make an offer pursuant to clause (c).
The amount of Net Proceeds not invested or applied as set forth in the preceding
clauses (a) and (b) constitutes "Excess Proceeds." If the Company elects, or
becomes obligated to make an Excess Proceeds Offer, the Company will offer to
purchase Notes having an aggregate principal amount equal to the Excess Proceeds
(the "Purchase Amount"), at a purchase price equal to 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the
purchase date. The Company must commence such Excess Proceeds Offer not later
than 60 days after the expiration of the 12-month period following the Asset
Sale that produced Excess Proceeds. If the aggregate purchase price for the
Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess
Proceeds, the Company and its Subsidiaries may use the portion of the Excess
Proceeds remaining after payment of such purchase price for general corporate
purposes.
The Excess Proceeds Offer will remain open for a period of 20 business days and
no longer, unless a longer period is required by law (the "Excess Proceeds Offer
Period"). Promptly after the termination of the Excess Proceeds Offer Period
(the "Excess Proceeds Payment Date"), the Company will purchase and mail or
deliver payment for the Purchase Amount for the Notes or portions thereof
tendered, pro rata or by such other method as may be required by law, or, if
less than the Purchase Amount has been tendered, all Notes tendered pursuant to
the Excess Proceeds Offer. The principal amount of Notes to be purchased
pursuant to an Excess Proceeds Offer may be reduced by the principal amount of
Notes acquired by the Company through purchase or redemption (other than
pursuant to a Change of Control Offer) subsequent to the date of the Asset Sale
and surrendered to the Trustee for cancellation. Any Excess Proceeds Offer will
be conducted in compliance with applicable regulations under the federal
securities law, including Exchange Act Rule 14e-1.
The Company's ability to purchase Notes in the event it is required to make an
Excess Proceeds Offer may be adversely affected by, among other things,
covenants of the Credit Facility. There can be no assurance that sufficient
funds will be available at the time of any Excess Proceeds Offer to make
required repurchases. The Company's failure to comply with the covenant
described above will be an Event of Default under the Indenture if such failure
continues for a specified period and the required notice is given by the Trustee
or the holders of not less than 25% in principal amount of the then outstanding
Notes.
The Company will not, and will not permit any of its Subsidiaries to, create or
suffer to exist or become effective any restriction that would impair the
ability of the Company to make an Excess Proceeds Offer upon an Asset Sale or,
if such Excess Proceeds Offer is made, to pay for the Notes tendered for
purchase.
Limitation on Liens. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, or on any income or
profits therefrom or assign or convey any right to receive income therefrom,
except (i) Liens on accounts receivable and inventory and the proceeds thereof
(and certain rights relating thereto) securing Indebtedness permitted to be
incurred pursuant to clause (a) under "--Limitation on Incurrence of
Indebtedness" (including the Revolving Credit Facility), (ii) Purchase Money
Liens securing Purchase Money Indebtedness incurred pursuant to clause (d) under
"--Limitation on Incurrence of Indebtedness," and (iii) Permitted Liens.
Limitation on Restrictions on Restricted Subsidiary Dividends. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary (a) to (i) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (A) on such Restricted Subsidiary's Capital Stock or (B)
with respect to any other interest or participation in, or measured by, such
Restricted Subsidiary's profits or (ii) pay any indebtedness owed to the Company
or any of its Restricted Subsidiaries, or (b) make loans or advances to the
Company or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reasons of (i) the Revolving Credit Facility that are not
materially more restrictive, taken as a whole, than those contained in the
Revolving Credit Facility existing on the date of the Indenture, (ii) the
Indenture, the Notes and the Collateral Agreements, (iii) applicable law, (iv)
any Acquired Debt, which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person, or the
property or assets of the person, so acquired, and (v) permitted Refinancing
Indebtedness, provided, however, that such restrictions contained in any
agreement governing such Refinancing Indebtedness are no more restrictive taken
as a whole than those contained in any agreements governing the Indebtedness
being refinanced.
Merger, Consolidation or Sale of Assets. The Company may not consolidate or
merge with or into (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to, any other person unless (i) the Company is the surviving person
or the person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition has been made is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia,
(ii) the person formed by or surviving any such consolidation or merger (if
other than the Company) or the person to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made assumes all the obligations
of the Company, pursuant to a supplemental indenture and Collateral Agreements
in a form reasonably satisfactory to the Trustee and the Collateral Agent, under
the Notes, the Indenture and the Collateral Agreements, (iii) immediately after
giving effect to such transaction, no Default or Event of Default exists, and
(iv) the Company, or any person formed by or surviving any such consolidation or
merger, or to which such sale, assignment, transfer, lease, conveyance or other
disposition has been made, (A) has Consolidated Net Worth (immediately after the
transaction but prior to any purchase accounting adjustments resulting from the
transaction) equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) is permitted, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, to incur at
least $1.00 of additional Indebtedness pursuant to the Interest Coverage Ratio
test set forth in the covenant described under "--Limitation on Incurrence of
Indebtedness."
Limitation on Transactions with Affiliates. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), except for (i)
Affiliate Transactions of aggregate value of up to $1 million conducted in good
faith that are on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
person, (ii) Affiliate Transactions of aggregate value of up to $10 million that
a majority of the disinterested members on the Board of Directors of the Company
determines to be fair to the Company or the relevant Restricted Subsidiary from
a financial point of view and (iii) Affiliate Transactions for which the Company
delivers to the Trustee an opinion as to the fairness to the Company or such
Restricted Subsidiary from a financial point of view issued by an investment
banking firm of national standing; provided, however, that the following will
not be deemed to be Affiliate Transactions: (i) employment agreements entered
into by the Company or any Restricted Subsidiary in the ordinary course of
business with the approval of the Company's Board of Directors, (ii)
transactions between or among the Company and/or its Wholly Owned Subsidiaries
or Guarantors, (iii) transactions permitted by the provisions of the Indenture
described above under "--Limitation on Restricted Payments", (iv) good faith
bona fide purchases and sales of inventory or services made in the ordinary
course of business consistent with past practice between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries and (v) reasonable
directors' fees for members of the Board of Directors of the Company.
Rule 144A Information Requirement. The Company has agreed to furnish to the
holders or beneficial holders of the Notes and prospective purchasers of Notes
designated by the holders of Transfer Restricted Securities, upon their request,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as the holders thereof have disposed of such
Notes pursuant to an effective registration statement.
Reports. Whether or not required by the rules and regulations of the Commission,
so long as any Notes are outstanding, the Company will furnish to the holders of
Notes all quarterly and annual financial information that would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Results of Operations and Financial Condition" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants. From and after the time the Company files a
registration statement with the Commission with respect to the Notes, the
Company will file such quarterly and annual information with the Commission.
Events of Default and Remedies
Each of the following constitutes an Event of Default under the Indenture: (i)
default for 30 days in the payment when due of interest on the Notes, (ii)
default in payment of principal (or premium, if any) on the Notes when due at
maturity, redemption, by acceleration or otherwise, (iii) default in the
performance or breach of the provisions of "--Merger, Consolidation or Sale of
Assets," "--Limitation on Restricted Payments," "--Limitation on Asset Sales,"
"--Limitation on Liens" or "--Repurchase Upon Change of Control," and certain
provisions of the Collateral Agreements, (iv) default in the performance or
breach of the provisions of "--Limitation on Incurrence of Indebtedness" which
the Company fails to cure within 30 days after the occurrence thereof, (v)
failure by the Company, any Guarantor or any Restricted Subsidiary for 30 days
after notice to comply with certain other agreements in the Indenture, the Notes
or the Collateral Agreements, (vi) default under (after giving effect to any
applicable grace periods or any extension of any maturity date) any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company, any
Guarantor or any Restricted Subsidiary (or the payment of which is guaranteed by
the Company, any Guarantor or any Restricted Subsidiary), whether such
Indebtedness or guarantee now exists or is created after the date of the
Indenture, if (a) either (1) such default results from the failure to pay
principal of or interest on such Indebtedness and (2) as a result of such
default the maturity of such Indebtedness has been accelerated, and (b) the
principal amount of such Indebtedness, together with the principal amount of any
other such Indebtedness with respect to which such a payment default (after the
expiration of any applicable grace period or any extension of the maturity date)
has occurred, or the maturity of which has been so accelerated, exceeds $4
million in the aggregate, (vii) failure by the Company, any Guarantor or any
Restricted Subsidiary to pay final judgments (other than any judgment as to
which a reputable insurance company has accepted full liability) aggregating in
excess of $1 million which judgments are not stayed within 60 days after their
entry, (viii) breach by the Company, any Guarantor or any Restricted Subsidiary
of any material representation or warranty set forth in the Collateral
Agreements, which breach is not cured by the Company or such Guarantor or
Restricted Subsidiary or waived within 30 days after notice to comply with such
breach of a material representation or warranty, (ix) repudiation by the Company
or any of the Guarantors or Restricted Subsidiaries of their obligations under
the Indenture, the Notes, the Collateral Agreements or the Guarantees or the
Company, any Guarantor or any Restricted Subsidiary takes any action that
causes, or asserts, or fails to take any action that it knows, or has been
notified by the Trustee, is necessary to prevent, the unenforceability of the
Indenture, the Notes, the Collateral Agreements or the Guarantees against the
Company or any of the Guarantors or Restricted Subsidiaries for any reason or is
necessary to maintain the priority and perfection of the Liens of the Collateral
Agreements, and (x) certain events of bankruptcy or insolvency with respect to
the Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the holders of
at least 25% in principal amount of the then outstanding Notes may declare by
written notice all the Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Trustee, may on behalf of the holders of
all of the Notes (i) waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes, and/or (ii)
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree if all existing Events of Default (except
nonpayment of principal or interest that has become due solely because the
acceleration) have been cured or waived.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company or
any Guarantor, as such, will have any liability for any obligations of the
Company under the Notes, the Indenture, the Collateral Agreements or the
Registration Rights Agreement or for any claim based on, in respect of, or by
reason of, such obligations of their creation. Each holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
Defeasance and Discharge of the Indenture and the Notes
The Indenture provides that the Company will be discharged from any and all
obligations in respect of the Notes, other than the obligation to duly and
punctually pay the principal of, and premium, if any, and interest on, the Notes
in accordance with the terms of the Notes and the Indenture upon irrevocable
deposit with the Trustee, in trust, of money and/or U.S. government obligations
that will provide money in an amount sufficient in the opinion of a nationally
recognized accounting firm to pay the principal of and premium, if any, and each
installment of interest, if any, on the due dates thereof on the Notes. Such
trust may only be established if, among other things, (i) the Company has
delivered to the Trustee an opinion of independent counsel to the effect that
the holders of the Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit and defeasance had not
occurred, (ii) no Event of Default or event that with the passing of time or the
giving of notice, or both, shall constitute an Event of Default shall have
occurred or be continuing, and (iii) certain of the customary conditions
precedent are satisfied.
The Company may satisfy and discharge its obligations under the Indenture to
holders of the Notes by delivering to the Trustee for cancellation all
outstanding Notes or by depositing with the Trustee or the Paying Agent, if
applicable, after the Notes have become due and payable, cash sufficient to pay
at the stated maturity all of the Notes and paying all other sums payable under
the Indenture by the Company.
Transfer and Exchange
A holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of any Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Indenture or the
Notes unless such consideration is offered to be paid or agreed to be paid to
all holders of the Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
<PAGE>
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraph, the Indenture and the Notes
may be amended or supplemented with the consent of the holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for Notes) and any
existing Default or Event of Default or compliance with any provision of the
Indenture, the Notes of the Collateral Agreements may be waived with the consent
of the holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes) (i) reduce
the principal amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of, or the premium on, or change
the fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes or alter the price at which repurchases of the Notes may
be made pursuant to an Excess Proceeds Offer or Change of Control Offer, (iii)
reduce the rate of or change the time for payment of interest on any Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest on the Notes, (v) make any Note payable in money other than
that stated in the Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of holders of Notes
to receive payments of principal of or interest on the Notes, (vii) waive a
redemption payment with respect to any Note, (viii) make any change in the
provisions of any of the Guarantees that adversely affects the rights of any
holder of Notes, (ix) adversely affect the contractual ranking of the Notes or
Guarantees, or (x) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of the holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to holders of the Notes or the Guarantor's
obligation under the Guarantee in the case of a merger or consolidation, to make
any change that would provide any additional rights or benefits to the holders
of the Notes or that does not adversely affect the legal rights under the
Indenture of any such holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that in case an Event of Default occurs (and
is not cured), the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any holder of
Notes, unless such holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture without
charge by writing to Terex Corporation, 500 Post Road East, Westport,
Connecticut 06880, Attention: Marvin B. Rosenberg, Senior Vice President and
General Counsel.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of any
other Person existing at the time such other Person merged with or into or
became a Subsidiary of such specified Person, other than Indebtedness incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. Notwithstanding the
foregoing to the contrary, neither Jefferies & Company, Inc. nor any of its
Affiliates will be deemed to be Affiliates of the Company.
"Asset Sale" means any sale, assignment, transfer, lease, conveyance, or other
disposition (including, without limitation, by way of merger or consolidation)
(collectively, a "transfer"), directly or indirectly, in one or a series of
related transactions other than in the ordinary course of business, of any
assets of the Company or its Restricted Subsidiaries (other than (i) to the
Company or a Restricted Subsidiary and (ii) sale and leaseback transactions that
are expressly permitted under the Indenture).
"Capital Lease Obligation" means, at the time any determination thereof is to be
made, the amount of the liability in respect of a capital lease that would at
such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, including, without
limitation, partnership interests and other indicia of ownership of a business
entity.
"Cash Equivalent" means (i) securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof), (ii) time deposits and certificates of deposit
and commercial paper issued by the parent corporation of any domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
and commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing within one
year after the date of acquisition and (iii) investments in money market funds
substantially all of whose assets comprise securities of the types described in
clauses (i) and (ii) above.
"Closing Date" means the date upon which the Notes are first issued.
"Consolidated EBITDA" means, with respect to any Person (the referent Person)
for any period, income (loss) from operations of such Person for such period,
determined in accordance with GAAP, plus (to the extent such amounts are
deducted in calculating such income (loss) from operations of such Person for
such period, and without duplication) amortization, depreciation and other
non-cash charges (including, without limitation, amortization of goodwill,
deferred financing fees and other intangibles but excluding (a) non-cash charges
incurred after the date of the Indenture that require an accrual of or a reserve
for cash charges for any future period, and (b) normally recurring accruals such
as reserves against accounts receivable); provided, however that (i) the income
from operations of any Person that is not a Wholly Owned Subsidiary or that is
accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends or distributions paid during such period to
the referent Person or a Wholly Owned Subsidiary of the referent Person, (ii)
the income from operations of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded, and (iii) the income from operations of any Subsidiary will not be
included to the extent that declarations of dividends or similar distributions
by that Subsidiary are not at the time permitted, directly or indirectly, by
operation of the terms of its organization documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its owners.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the consolidated interest expense of such Person for such period,
whether paid or accrued (including amortization of original issue discount,
noncash interest payment, and the interest component of Capital Lease
Obligations), to the extent such expense was deducted in computing Consolidated
Net Income of such Person for such period.
"Consolidated Net Income" means, with respect to any Person (the referent
Person) for any period, the aggregate of the Net Income of such Person and its
consolidated Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided, however that (i) the Net Income of any Person
that is not a Wholly Owned Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the amount of
dividends or distributions paid during such period to the referent Person or a
Wholly Owned Subsidiary of the referent Person, (ii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition will be excluded, and (iii) the Net Income of any
Subsidiary will not be included to the extent that declarations of dividends or
similar distributions by that Subsidiary are not at the time permitted, directly
or indirectly, by operation of the terms of its organization documents or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its owners.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholders' equity (exclusive of any Disqualified Stock) of such Person (less
Investments in Non-Restricted Subsidiaries) determined on a consolidated basis
in accordance with GAAP.
"Default" means any event that is, or after notice or the passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, (i) either by its terms or
the terms of any security into which it is convertible or for which it is
exchangeable or otherwise, is or upon the happening of an event or the passage
of time would be, required to be redeemed or repurchased (in whole or in part)
prior to the final stated maturity of the Notes or is redeemable (in whole or in
part) at the option of the holder thereof at any time prior to such final stated
maturity or (ii) is convertible into or exchangeable at the option of the issuer
thereof or any other Person for debt securities or Disqualified Stock. Accretion
in accordance with the terms of any Disqualified Stock outstanding on the Issue
Date shall not constitute the issuance of additional Disqualified Stock.
"Equity Interests" means Capital Stock or warrants, options or other rights to
acquire Capital Stock (but excluding any debt security that is convertible into,
or exchangeable for, Capital Stock).
"Floor Plan Guaranty" means the Guarantee by the Company or a Subsidiary of
Indebtedness incurred by a franchise dealer, or other purchaser or lessor, for
the purchase or lease of inventory manufactured or sold by the Company or a
Restricted Subsidiary, the proceeds of which Indebtedness is used solely to pay
the purchase price of inventory sold by the Company or a Restricted Subsidiary
to such franchise dealer and any related fees and expenses (including finance
fees); provided, that (i) to the extent commercially practicable, the
Indebtedness so guaranteed is secured by a perfected first priority lien on such
inventory in favor of the holder of such Indebtedness and (ii) if the Company or
such Restricted Subsidiary is required to make payment with respect to such
Guarantee, the Company or such Restricted Subsidiary will have the right to
receive either (a) title to such inventory, (b) a valid assignment of a first
priority perfected lien in such inventory or (c) the net proceeds of any resale
of such inventory.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as approved by a significant segment of the accounting profession, and in
the rules and regulations of the Commission, which are in effect on the date of
the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of such
Person under (i) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in interest rates.
"Indebtedness" of any Person means (without duplication) (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or services (other
than trade payables on customary terms incurred in the ordinary course of
business), (iv) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (v) all obligations of such Person as lessee under capitalized
leases, (vi) all obligations, contingent or otherwise, of such Person under
bankers' acceptance and letter of credit facilities, (vii) all obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any Disqualified Stock, (viii) all obligations of such Person in respect of
Hedging Obligations, (ix) all Indebtedness of others Guaranteed by such Person,
and (x) all Indebtedness of the type referred to in clauses (i) through (ix)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, provided, however, that the amount of such Indebtedness
shall (to the extent such Person has not assumed or become liable for the
payment of such Indebtedness) be the lesser of (x) the fair market value of such
property at the time of determination and (y) the amount of such Indebtedness.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date, provided, however, that,
in the case of each of clauses (i), (ii) and (iii) above, the amount of such
Indebtedness will be the amount that would appear as a liability on the balance
sheet of such Person prepared in accordance with GAAP.
"Interest Coverage Ratio" means, for any period, the ratio of (i) Consolidated
EBITDA of the Company for such period, over (ii) Consolidated Interest Expense
of the Company for such period. In calculating Interest Coverage Ratio for any
period, pro forma effect shall be given to: (a) the incurrence, assumption,
guarantee, repayment, repurchase, redemption or retirement by the Company or any
of its Subsidiaries of any Indebtedness (other than under the Revolving Credit
Facility) subsequent to the commencement of the period for which the Interest
Coverage Ratio is being calculated, as if the same had occurred at the beginning
of the applicable period; and (b) the occurrence of any Asset Sale during such
period by reducing Consolidated EBITDA for such period by an amount equal to the
Consolidated EBITDA (if positive) directly attributable to the assets sold and
by reducing Consolidated Interest Expense by an amount equal to the Consolidated
Interest Expense directly attributable to any Indebtedness secured by the assets
sold and assumed by third parties or repaid with the proceeds of such Asset
Sale, in each case as if the same had occurred at the beginning of the
applicable period. For purposes of making the computation referred to above,
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including all mergers and consolidations, subsequent to the
commencement of such period shall be calculated on a pro forma basis, assuming
that all such acquisitions, mergers and consolidations had occurred on the first
day of such period. Without limiting the foregoing, the financial information of
the Company with respect to any portion of such four fiscal quarters that falls
before the [Closing Date] shall be adjusted (1) to give pro forma effect to the
issuance of the Units and the application of the proceeds therefrom (including,
without limitation, consummation of the [Acquisition]) as if they had occurred
at the beginning of such four fiscal quarters and (2) to exclude expenses
incurred in connection with the Acquisition or the issuance of the [Units] to
the extent such expenses are included in computing Consolidated Net Income for
such period.
"Investments" means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the forms of loans, Guarantees,
advances or capital contributions (excluding (i) commission, travel and similar
advances to officers and employees of such Person made in the ordinary course of
business and (ii) bona fide accounts receivable arising from the sale of goods
or services in the ordinary course of business consistent with past practice),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Material Subsidiary" means any Person (a) that is a "Significant Subsidiary" of
the Company as defined in Rule 1-02 of Regulation S-X promulgated by the
Commission or (b) is otherwise material to the business of the Company.
"Net Assets" means, with respect to any Person, (i) the fair market value of the
assets of such Person and its consolidated Subsidiaries as determined on a
consolidated basis in good faith by the Board of Directors of such Person minus
(ii) the aggregate principal amount of the Indebtedness of such Person and its
Subsidiaries that would appear on the consolidated balance sheet of such Person
as of the date of determination.
"Net Income" means, with respect to any Person for any period, the net income
(loss) of such Person for such period, determined in accordance with GAAP,
excluding any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with any Asset Sales and
dispositions pursuant to sale and leaseback transactions, and excluding any
extraordinary gain (but not loss), together with any related provision for taxes
on such gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received in respect of any
Asset Sale, net of the direct out-of-pocket costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commission), other than any such costs payable to an Affiliate of the
Company, and any relocation expenses incurred as a result thereof, taxes paid or
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale, and any reserve for adjustment in respect of the
sale price of such asset or assets.
"Non-Restricted Subsidiary" means any Subsidiary of the Company formed or
acquired by the Company or by any Subsidiary of the Company after the date of
the Indenture that has been designated by the Company (by written notice to the
Trustee on or prior to the date of such formation or acquisition) as a
Non-Restricted Subsidiary and each Subsidiary of a Non-Restricted Subsidiary;
provided, however, that a Subsidiary may not be designated as a "Non-Restricted
Subsidiary" unless (i) such designation would not cause a Default or Event of
Default, (ii) neither such Subsidiary nor any of its Subsidiaries is a Guarantor
and (iii) the creditors of such Subsidiary have no direct or indirect recourse
(including, without limitation, recourse with respect to the payment of
principal or interest on Indebtedness of such Subsidiary) to the assets of the
Company or of a Restricted Subsidiary. For purposes of the foregoing, the
Company shall be deemed to make an Investment in each Subsidiary designated as a
"Non-Restricted Subsidiary" immediately following such designation in an amount
equal to the net Investment in such Subsidiary and its Subsidiaries immediately
prior to such designation.
"Obligations" means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other obligations and liabilities of the Company or
any of the Subsidiaries under the Indenture, the Notes or any of the Collateral
Agreements.
"Permitted Investments" means (a) Investments in the Company, (b) Investments in
Cash Equivalents, (c) Investments by the Company or any Restricted Subsidiary in
a Guarantor or any Wholly Owned Subsidiary or in a Person, if as a result of
such Investment (i) such Person becomes a Guarantor or a Wholly Owned Subsidiary
and the Capital Stock of such Person is pledged to secure the Obligations, or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company, a Guarantor or a Wholly Owned Subsidiary, (d) Guarantees by the
Company or any Restricted Subsidiary incurred in the ordinary course of business
of Indebtedness incurred for the purchase or lease of inventory manufactured or
sold by the Company or any Subsidiary, including, without limitation, Floor Plan
Guarantees, provided, however, that (a) to the extent commercially practicable,
the Indebtedness so guaranteed is secured by a perfected first priority lien on
such inventory in favor of the holder of such Indebtedness and (b) if the
Company or such Restricted Subsidiary is required to make payment with respect
to such guarantee, the Company or such Restricted Subsidiary will have the right
to receive either (i) title to such inventory, (ii) a valid assignment of a
perfected first priority security interest in such inventory, or (iii) the net
proceeds from the resale of such inventory, (e) Investments in shares of Capital
Stock of Fruehauf in satisfaction of outstanding indebtedness of Fruehauf to the
Company in the amount of up to $2 million, and (f) other Investments that do not
exceed in the aggregate $5 million at any time outstanding.
"Permitted Liens" means (i) Liens in favor of the Company and/or its Restricted
Subsidiaries other than with respect to intercompany Indebtedness, (ii) Liens on
property of a Person existing at the time such Person is acquired by, merged
into or consolidated with the Company or any Restricted Subsidiary, provided,
however, that such Liens were not created in contemplation of such acquisition
and do not extend to assets other than those subject to such Liens immediately
prior to such acquisition, (iii) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary, provided,
however, that such Liens were not created in contemplation of such acquisition
and do not extend to assets other than those subject to such Liens immediately
prior to such acquisition, (iv) Liens incurred in the ordinary course of
business in respect of Hedging Obligations, (v) Liens to secure Indebtedness for
borrowed money of a Subsidiary in favor of the Company or a Wholly Owned
Subsidiary, (vi) Liens (other than pursuant to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or environmental laws) to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary course of
business, (vii) Liens existing on the date of the Indenture, (viii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested or remedied in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided, however, that any
reserve or other appropriate provision as may be required in conformity with
GAAP has been made therefor, (ix) Liens arising by reason of any judgment,
decree or order of any court with respect to which the Company or any of its
Restricted Subsidiaries is then in good faith prosecuting an appeal or other
proceedings for review, the existence of which judgment, order or decree is not
an Event of Default under the Indenture, (x) encumbrances consisting of zoning
restrictions, survey exceptions, utility easements, licenses, rights of way,
easements of ingress or egress over property of the Company or any of its
Restricted Subsidiaries, rights or restrictions of record on the use of real
property, minor defects in title, landlord's and lessor's liens under leases on
property located on the premises rented, mechanics' liens, vendors' liens, and
similar encumbrances, rights or restrictions on personal or real property, in
each case not interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries, (xi) Liens
and priority claims incidental to the conduct of business or the ownership of
properties incurred in the ordinary course of business and not in connection
with the borrowing of money or the obtaining of advances or credit, including,
without limitation, liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, bids, and government contracts and leases and
subleases, and (xii) any extension, renewal, or replacement (or successive
extensions, renewals or replacements), in whole or in part, of Liens described
in clauses (i) through (xi) above.
"Permitted Proceeds" means (i) cash and/or (ii) promissory notes in an aggregate
principal amount of up to $5 million in connection with any single Asset Sale;
provided, however, that the obligations under any such promissory note are
secured by a first priority security interest in the assets sold.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof, or any other entity.
"Purchase Money Liens" means (i) Liens to secure or securing Purchase Money
Obligations permitted to be incurred under the Indenture and (ii) Liens to
secure Refinancing Indebtedness incurred solely to refinance Purchase Money
Obligations provided that such Refinancing Indebtedness is incurred no later
than 180 days after the satisfaction of such Purchase Money Obligations.
"Purchase Money Obligations" means Indebtedness representing, or incurred to
finance, the cost (i) of acquiring any assets and (ii) of construction or
build-out of manufacturing, distribution or administrative facilities (including
Purchase Money Obligations of any other Person at the time such other Person is
merged with or into or is otherwise acquired by the Company), provided, however,
that (a) the principal amount of such Indebtedness does not exceed 100% of such
cost, including construction charges, (b) any Lien securing such Indebtedness
does not extend to or cover any other asset or property other than the asset or
property being so acquired and (c) such Indebtedness is incurred, and any Liens
with respect thereto are granted, within 180 days of the acquisition of such
property or asset.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" means all Subsidiaries of the Company other than
Non-Restricted Subsidiaries.
"Revolving Credit Facility" means any working capital facility or facilities of
the Company or any Subsidiary providing for revolving credit borrowings or other
working capital facilities in an aggregate amount not to exceed the Indebtedness
permitted under clause (a) of the second paragraph under the heading
"Limitations on Incurrence of Indebtedness," including, without limitation, the
Credit Facility and any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith.
"Subsidiary" means, with respect to any Person, (i) any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of Voting Stock thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof and (ii) any partnership in which such Person or
any of its Subsidiaries is a general partner.
"Voting Stock" means, with respect to any Person, (i) one or more classes of the
Capital Stock of such Person having general voting power to elect at least a
majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time Capital Stock of any other class or
classes have or might have voting power by reason of the happening of any
contingency) and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years (rounded to the nearest one-twelfth) obtained by
dividing (i) the then outstanding principal amount of such Indebtedness into
(ii) the total of the product obtained by multiplying (x) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (y) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" means (i) a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries and (ii) Terex Cranes, PPM Cranes and
P.P.M., S.A., in each case so long as the Company or one or more Wholly Owned
Subsidiaries maintains a percentage ownership interest equal to or greater than
such ownership interest (on a fully diluted basis) on the Closing Date.
Book-Entry, Delivery and Form
Old Notes that were initially issued to qualified institutional buyers ("QIBs")
were issued in the form of one or more registered Global Notes (the "Global
Notes"), which were deposited with, or on behalf of, The Depositary Trust
Company (the "Depositary") and registered in its name or in the name of Cede &
Co., its nominee (the "Global Holder"). Old Notes that were (i) originally
issued to or transferred to institutional "accredited investors" (as such term
is defined in Rule 501(A)(1), (2), (3) or (7) under the Securities Act) who are
not QIBs or to any other persons who are not QIBs (the "Non-Global Purchasers")
or (ii) issued as described below under "Certificated Securities," were issued
in registered form (the "Certificated Securities"). Upon the transfer to a QIB
of Certificated Securities initially issued to a Non-Global Purchaser, such
Certificated Securities will, unless the applicable Global Notes have previously
been exchanged for Certificated Securities, be exchanged for an interest in the
Global Notes representing the principal amount of Notes being transferred. The
following are summaries of certain rules and operating procedures of the
Depository which affect the Global Notes.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depository's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository only through the Depository's
Participants or the Depository's Indirect Participants.
Pursuant to procedures established by the Depository (i) upon deposit of the
Global Notes, the Depository credited the accounts of Participants designated by
the Initial Purchasers with portions of the Global Notes and (ii) ownership of
the Notes was shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depository (with respect to the
interests of the Depository's Participants), the Depository's Participants and
the Depository's Indirect Participants. The laws of some states require that
certain persons take physical deliver in definitive form of securities that they
own. Consequently, the ability to transfer Notes will be limited to such extent.
So long as the Global Holder is the registered owner of any Notes, the Global
Holder will be considered the sole owner of such Notes under the Indenture.
Except as provided below, owners of beneficial interests in Global Notes will
not be entitled to have Notes represented by such Global Notes registered in
their names, will not receive or be entitled to receive physical delivery of
Certificated Securities, and will not be considered the owners or Holders
thereof under the Indenture, for any purpose. As a result, the ability of a
person having a beneficial interest in Notes represented by a Global Note to
pledge such interest to persons or entities that do not participate in the
Depository's system or to otherwise take actions in respect of such interest,
may be affected by the lack of a physical certificate evidencing such interest.
Accordingly, each QIB owning a beneficial interest in a Global Note must rely on
the procedures of the Depository and, if such QIB is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
QIB owns its interest, to exercise any rights of a holder under such Global Note
or the Indenture.
Neither of the Company nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of Notes
by the Depository, or for maintaining, supervising or reviewing any records of
the Depository relating to such Notes.
Payments in respect of the principal of, premium, if any, and interest on any
Notes registered in the name of a Global Holder on the applicable record date
will be payable by the Trustee to or at the direction of such Global Holder in
its capacity as the registered holder under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes (including principal, premium, if any, and interest), or to
immediately credit the accounts of the relevant Participants with such payment,
in amounts proportionate to their respective interests in the Global Notes in
principal amount of beneficial interests in the relevant security as shown on
the records of the Depository. Payments by the Depository's Participants and the
Depository's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depository's Participants or the Depository's Indirect
Participants.
Certificated Securities
If (i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a Depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the relevant Global
Holder of its Global Note, Certificated Securities in such form will be issued
to each person that such Global Holder and the Depository identify as the
beneficial owner of the related Notes. In addition, subject to certain
conditions, any person having a beneficial interest in the Global Note may, upon
request to the Trustee, exchange such beneficial interest for Notes in the form
of Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof) in full
registered form.
Neither the Company nor the Trustee will be liable for any delay by the related
Global Holder or the Depository in identifying the beneficial owners of the
related Notes and each such person may conclusively rely on, and will be
protected in relying on, instructions from such Global Holder or of the
Depository for all purposes (including with respect to the registration and
delivery, and the respective principal amounts of the Notes to be issued).
Same-Day Settlement and Payment
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Notes are
expected to be eligible to trade in the PORTAL Market and to trade in the
Depository's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the Notes will therefore be required by the
Depository to be settled in immediately available funds. No assurance can be
given as to the effect, if any, of such settlement arrangements on trading
activity in the Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the anticipated principal United States Federal
income tax consequences of the exchange of Old Notes for New Notes. The
discussion set forth below is based upon the Internal Revenue Code of 1986, as
amended, regulations and announcements promulgated thereunder and published
rulings and court decisions, all as in effect on the date hereof and without
giving effect to changes to the Federal tax laws, if any, enacted after the date
hereof. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements or conclusions set
forth below. This summary does not discuss all the Federal income tax
consequences that may be relevant to a particular holder or to certain holders
subject to special treatment under the Federal income tax laws (including
insurance companies, tax exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens of the
United States).
The exchange of Old Notes for New Notes should not be treated as a sale or
exchange of Old Notes for Federal income tax purposes. Consequently, Noteholders
who exchange Old Notes for New Notes will not recognize gain or loss upon
receipt of the New Notes. For purposes of computing original issue discount on
the New Notes, the original issue discount, if any, of the Old Notes will carry
over to the New Notes as if the New Notes were issued on the same issue date and
for the same issue price as the Old Notes. A Noteholder's tax basis in and
market discount, if any, on the New Notes will be the same as such noteholder's
tax basis in and market discount, if any, on the Old Notes exchanged therefor.
Noteholders will be considered to have held the New Notes from the time of their
original acquisition of the Old Notes.
There will be no Federal income tax consequences of the Exchange Offer to
nonexchanging noteholders.
This summary is based on the Company's understanding of the Federal Income Tax
laws, which in turn is in part based on discussions with the Company's
professional advisers. It is the Company's belief that all material federal
income tax consequences are addressed.
THE FOREGOING IS A SUMMARY OF THE PRINCIPAL INCOME TAX CONSEQUENCES TO A HOLDER
OF AN OLD NOTE. EACH HOLDER OF AN OLD NOTE IS URGED TO CONSULT ITS TAX ADVISOR
TO DETERMINE THE SPECIFIC FEDERAL INCOME TAX CONSEQUENCES OF ACCEPTING THE
EXCHANGE OFFER, AS WELL AS THE EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of [___] days after the
Expiration Date, it will use its best efforts to make this Prospectus, as
amended or supplemented from time to time, available to any broker-dealer for
use in connection with any such resale. In addition, until
______________________, 1996 (90 days after the Registration Statement is
declared effective), all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers and will indemnify the
Holders of the New Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the New Notes and the guarantees
thereof will be passed upon for the Company by Robinson Silverman Pearce
Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995 and
1994 and for each of the years in the three year period ended December 31, 1995
and the consolidated financial statements of PPM Cranes, Inc. as of December 31,
1995 and for the eight months ended December 31, 1995 included in this
Prospectus have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The combined financial statements of P.P.M. S.A. and Legris Industries, Inc. at
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of PPM Cranes, Inc. at December 31, 1994
and 1993, and for each of the three years in the period ended December 31, 1994,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein which is based in part on the report of Price
Waterhouse (Australia), independent accountants. The financial statements
referred to above are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
<PAGE>
TEREX CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Page
TEREX CORPORATION (REGISTRANT)
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995
AND 1994 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1995
Report of independent accountants........................................F - 3
Consolidated statement of operations ....................................F - 4
Consolidated balance sheet...............................................F - 5
Consolidated statement of changes in stockholders' deficit...............F - 6
Consolidated statement of cash flows.....................................F - 7
Notes to consolidated financial statements...............................F - 8
TEREX CORPORATION (REGISTRANT)
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1995
Unaudited condensed consolidated statement of operations ................F - 37
Unaudited condensed consolidated balance sheet...........................F - 38
Unaudited condensed consolidated statement of cash flows.................F - 39
Notes to unaudited condensed consolidated financial statements...........F - 40
PPM S.A. AND LEGRIS INDUSTRIES, INC.
(BUSINESS ACQUIRED FROM LEGRIS INDUSTRIES, S. A. BY TEREX CORPORATION)
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994
AND 1993 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1994
Report of independent auditors...........................................F - 45
Combined balance sheets..................................................F - 46
Combined statements of operations........................................F - 48
Combined statements of shareholders' equity..............................F - 49
Combined statements of cash flows........................................F - 50
Notes to combined financial statements...................................F - 51
PPM S.A. AND LEGRIS INDUSTRIES, INC.
(BUSINESS ACQUIRED FROM LEGRIS INDUSTRIES, S.A. BY TEREX CORPORATION)
UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS AS OF MAY 9, 1995 AND 1994
AND FOR THE PERIODS ENDED MAY 9, 1995 AND 1994
Unaudited condensed combined statement of operations.....................F - 62
Unaudited condensed combined balance sheets..............................F - 63
Unaudited condensed combined statement of cash flows.....................F - 65
Notes to unaudited condensed combined financial information..............F - 66
PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION OF TEREX CORPORATION AND SUBSIDIARIES
Pro forma financial information..........................................F - 67
Unaudited pro forma condensed consolidated
statement of operations for the
year ended December 31, 1995............................................F - 68
Notes to unaudited pro forma financial information.......................F - 69
<PAGE>
PPM CRANES, INC. (GUARANTOR)
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995
AND FOR THE EIGHT MONTHS ENDED DECEMBER 31, 1995
Report of independent accountants........................................F - 70
Consolidated balance sheet...............................................F - 71
Consolidated statement of operations ....................................F - 73
Consolidated statement of shareholders' deficit..........................F - 74
Consolidated statement of cash flows.....................................F - 75
Notes to consolidated financial statements...............................F - 76
PPM CRANES, INC. (GUARANTOR)
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31 1996
AND FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Unaudited condensed consolidated statement of operations ................F - 86
Unaudited condensed consolidated balance sheet...........................F - 87
Unaudited condensed consolidated statement of cash flows.................F - 88
Notes to unaudited condensed consolidated financial statements...........F - 89
PPM CRANES, INC. (GUARANTOR)
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994 AND 1993 AND FOR
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
Report of independent auditors...........................................F - 92
Consolidated statements of operations ...................................F - 93
Consolidated balance sheets..............................................F - 94
Consolidated statements of changes in shareholders' equity...............F - 95
Consolidated statements of cash flows....................................F - 96
Notes to consolidated financial statements...............................F - 97
Financial Statement Schedules
Terex Corporation and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves.............F - 110
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Terex Corporation
In our opinion, the Terex Corporation consolidated financial statements listed
in the accompanying index on page F-1 present fairly, in all material respects,
the financial position of Terex Corporation and its subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 22, 1996
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
Year Ended December 31,
1995 1994 1993
NET SALES $ 1,030.2 $ 786.8 $ 670.3
COST OF GOODS SOLD 915.0 695.9 615.5
Gross Profit 115.2 90.9 54.8
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES
Third parties 90.3 77.9 81.1
Related parties --- 2.2 2.9
Write-off of Mark goodwill --- --- 4.7
90.3 80.1 88.7
SEVERANCE AND EXIT CHARGES 3.5 7.4 ---
Income (loss) from operations 21.4 3.4 (33.9)
OTHER INCOME (EXPENSE)
Interest income 0.8 0.6 1.2
Interest expense (39.5) (30.5) (31.2)
Amortization of debt issuance costs (2.3) (2.3) (3.4)
Gain on sale of Fruehauf stock 1.0 26.0 3.0
Gain on sale of Drexel business --- 4.7 ---
Property impairment charge (3.0) --- ---
Gain on sale of property, plant
and equipment 0.2 0.3 2.6
Other income (expense) - net (6.3) (0.2) (3.2)
INCOME (LOSS) BEFORE
INCOME TAXES AND EXTRAORDINARY ITEMS (27.7) 2.0 (64.9)
PROVISION FOR INCOME TAXES --- (0.8) (0.1)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (27.7) 1.2 (65.0)
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT (7.5) (0.7) (1.5)
NET INCOME (LOSS) (35.2) 0.5 (66.5)
LESS PREFERRED STOCK ACCRETION (7.3) (6.0) (0.2)
INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (42.5)$ (5.5) $ (66.7)
PER COMMON AND COMMON EQUIVALENT SHARE:
Loss before extraordinary items $ (3.37)$ (0.46) $ (6.55)
Extraordinary loss on retirement of debt (0.72) (0.07) (0.15)
Net income (loss) $ (4.09)$ (0.53) $ (6.70)
AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING IN PER SHARE CALCULATION 10.4 10.3 10.0
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 7.8 $ 9.7
Cash securing letters of credit 7.7 6.7
Trade receivables (less allowance of
$9.8 in 1995 and $6.1 in 1994) 127.1 91.7
Customer deposit 19.1 ---
Net inventories 249.3 164.2
Other current assets 15.2 5.8
Total Current Assets 426.2 278.1
LONG-TERM ASSETS
Property, plant and equipment - net 101.3 86.2
Goodwill - net 65.8 5.3
Debt issuance costs - net 14.5 3.3
Other assets 19.1 28.7
TOTAL ASSETS $ 626.9 401.6
CURRENT LIABILITIES
Notes payable $ 1.9 $2.1
Current portion of long-term debt 7.2 25.8
Trade accounts payable 161.0 112.2
Accrued compensation and benefits 16.8 10.8
Accrued warranties and product liability 38.6 27.6
Accrued interest 4.7 9.0
Accrued income taxes 1.4 1.3
Customer deposit 19.1 ---
Other current liabilities 44.0 32.8
Total Current Liabilities 294.7 221.6
NON CURRENT LIABILITIES
Long-term debt, less current portion 328.4 163.0
Accrued warranties and product liability 33.1 31.8
Accrued pension 18.9 16.4
Other 16.6 7.2
MINORITY INTEREST, INCLUDING REDEEMABLE
PREFERRED STOCK OF A SUBSIDIARY
Liquidation preference $26.1, subject to adjustment 9.4 ---
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Liquidation preference $41.2, in 1995 and $36.6 in 1994 24.6 17.3
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Warrants to purchase common stock 17.2 17.6
Common Stock, $0.01 par value--
authorized 30.0 shares; issued and
outstanding 10.6 in 1995 and 10.3 in 1994 0.1 0.1
Additional paid-in capital 40.5 40.1
Accumulated deficit (150.9) (108.4)
Pension liability adjustment (2.7) (1.8)
Unrealized holding gain on equity securities 1.0 1.8
Cumulative translation adjustment (4.0) (5.1)
Total Stockholders' Deficit (98.8) (55.7)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 626.9 $ 401.6
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(in millions)
Additional Pension Unrealized Cumulative
Common Paid-in Accumulated Liability Holding Translation
Warrants Stock Capital Deficit Adjustment Gain Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992 .......... $ -- $ 0.1 $ 37.8 $ (36.2) $ (4.5) $ -- $ (6.2) $ (9.0)
Issuance of Warrants ........ 16.9 -- -- -- -- -- -- 16.9
Pension Contribution ........ -- -- 2.3 -- -- -- -- 2.3
Net loss .................... -- -- -- (66.5) -- -- -- (66.5)
Accretion of carrying
value of redeemable
preferred stock to
redemption value ........... -- -- -- (0.2) -- -- -- (0.2)
Pension liability
adjustment ................. -- -- -- -- 0.3 -- -- 0.3
Translation adjustment ...... -- -- -- -- -- -- (6.0) (6.0)
BALANCE AT
DECEMBER 31, 1993 .......... 16.9 0.1 40.1 (102.9) (4.2) -- (12.2) (62.2)
Issuance of Warrants ........ 0.7 -- -- -- -- -- -- 0.7
Net income .................. -- -- -- 0.5 -- -- -- 0.5
Accretion of carrying
value of redeemable
preferred stock to
redemption value ........... -- -- -- (6.0) -- -- -- (6.0)
Pension liability
adjustment ................. -- -- -- -- 2.4 -- -- 2.4
Unrealized holding gain on
equity securities .......... -- -- -- -- -- 1.8 -- 1.8
Translation adjustment ...... -- -- -- -- -- -- 7.1 7.1
BALANCE AT
DECEMBER 31, 1994 .......... 17.6 0.1 40.1 (108.4) (1.8) 1.8 (5.1) (55.7)
Conversion of Warrants ...... -- 0.4 -- -- -- -- -- --
Net loss .................... -- -- -- (35.2) -- -- -- --
Accretion of carrying
value of redeemable
preferred stock to
redemption value ........... -- -- -- (7.3) -- -- -- (7.3)
Pension liability
adjustment ................. -- -- -- -- (0.9) -- -- (0.9)
Unrealized holding gain on
equity securities .......... -- -- -- -- -- (0.8) -- (0.8)
Translation adjustment ...... -- -- -- -- -- -- 1.1 1.1
BALANCE AT
DECEMBER 31, 1995 ........... $ 17.2 $ 0.1 $ 40.5 $ (150.9) $ (2.7) $ 1.0 $ (4.0) $ (98.8)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Year Ended December 31,
1995 1994 1993
OPERATING ACTIVITIES
Net Income (Loss) ........................... $ (35.2) $ 0.5 $ (66.5)
Adjustments to reconcile net
income (loss) to cash used in
operating activities:
Depreciation ................................ 21.4 13.7 12.1
Amortization ................................ 6.3 3.4 10.3
Extraordinary loss on retirement of debt .... 7.5 0.7 1.5
Gain on sale of Fruehauf stock .............. (1.0) (26.0) (3.0)
Gain on sale of Drexel business ............. -- (4.7) --
Gain on sale of property, plant and equipment (0.2) (0.3) (2.6)
Property impairment charge .................. 3.0 -- --
Other ....................................... 0.3 (0.8) 0.1
Changes in operating
assets and liabilities (net of
effects of acquisitions):
Restricted cash ............................. (1.0) (0.4) 5.2
Trade receivables ........................... 6.9 (17.6) 1.7
Net inventories ............................. (10.6) 0.1 30.3
Trade accounts payable ...................... (3.8) 24.4 (5.2)
Accrued compensation and benefits ........... 5.5 3.3 (3.6)
Accrued warranties and product liability .... 2.4 0.3 (3.4)
Accrued interest ............................ (4.1) (1.7) (1.1)
Accrued income taxes ........................ (1.9) (0.1) (0.6)
Other, net .................................. (17.4) (4.1) (21.4)
Net cash used in operating activities ....... (21.9) (9.3) (46.2)
INVESTING ACTIVITIES
Acquisition of businesses,
net of cash acquired ....................... (92.4) -- --
Capital expenditures ........................ (10.5) (12.7) (11.5)
Proceeds from sale of excess assets ......... 1.1 3.3 11.3
Proceeds from sale of Fruehauf stock ........ 2.7 24.9 2.5
Proceeds from sale of Drexel business ....... -- 10.3 --
Proceeds from sale-leaseback
of Saarn property .......................... -- 10.0 --
Other ....................................... 0.2 1.0 1.1
Net cash provided by (used in)
investing activities ....................... (98.9) 36.8 3.4
FINANCING ACTIVITIES
Net borrowings under revolving line
of credit agreements ....................... 34.7 13.0 11.9
Principal repayments of long-term debt ...... (153.9) (41.5) (12.4)
Proceeds from issuance of
preferred stock and warrants ............... -- -- 27.2
Proceeds from issuance of long-term
debt, net of issuance costs ................ 239.8 -- --
Other ....................................... (0.5) 0.2 --
Net cash provided by (used in)
financing activities ....................... 120.1 (28.3) 26.7
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS .................. (1.2) 1.3 (0.4)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ........................... (1.9) 0.5 (16.5)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ........................ 9.7 9.2 25.7
CASH AND CASH EQUIVALENTS AT
END OF PERIOD .............................. $ 7.8 $ 9.7 $ 9.2
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(dollar amounts in millions, 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 entities 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.
Customer Deposits. The customer deposit asset and liability in 1995 represent a
deposit made by an Australian customer on a large order placed with Unit Rig.
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 32%
and 50% of consolidated inventories at December 31, 1995 and 1994, respectively,
are accounted for under the LIFO method.
Debt Issuance Costs. Debt issuance costs incurred in securing the Company's
financing arrangements are capitalized and amortized over the term of the
associated debt. 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 $14.5 and $3.3 at December 31, 1995 and 1994,
respectively. During 1995, 1994 and 1993, the Company amortized $2.3, $2.3 and
$3.4, respectively, of capitalized debt issuance costs; in addition, $7.5, $0.7
and $2.2 of such costs were charged to extraordinary loss on retirement of debt
in 1995, 1994 and 1993, respectively.
Intangible Assets. Intangible assets include purchased patents and trademarks.
Costs allocated to patents, trademarks and other specifically identifiable
assets arising from business combinations are amortized on a straight-line basis
over the respective estimated useful lives not exceeding seven years.
Goodwill. Goodwill, representing the difference between the total purchase price
and the fair value of assets (tangible and intangible) and liabilities at the
date of acquisition, is being amortized on a straight-line basis over between
fifteen and forty years. Accumulated amortization is $4.2 and $0.7 at December
31, 1995 and 1994, respectively. It is the Company's policy to periodically
evaluate the carrying value of goodwill, and to recognize impairments when the
estimated related future net operating cash flows is less than its carrying
value. The amount of any impairment then recognized would be calculated as the
difference between estimated future discounted cash flows and the carrying value
of the goodwill.
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. The Company's product liability accruals are
presented on a gross settlement basis. Product liability payments, including
expenses, are estimated to approximate $10.0 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' Deficit. Gains or losses resulting from foreign currency
transactions are included in Other income (expense) -- net.
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, 1995 the Company had
foreign exchange contracts, which were hedges of firm commitments, totaling
$21.8 whose fair value approximates its carrying value. These contracts related
primarily to the customer deposit discussed above. At December 31, 1994, the
Company had no material 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 were not
material at December 31, 1995 and 1994.
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 $11.2 in 1995, $10.5 in 1994 and $11.8
in 1993.
Income Taxes. The Company adopted SFAS No. 109, "Accounting for Income Taxes" on
January 1, 1993. SFAS No. 109 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.
Reclassifications. Certain amounts shown for 1993 and 1994 have been
reclassified to conform to the 1995 presentation.
<PAGE>
NOTE B -- ACQUISITIONS
PPM, Inc. - On May 9, 1995, the Company, through Terex Cranes, Inc., a Delaware
corporation which is a wholly owned subsidiary of the Company ("Terex Cranes"),
completed the acquisition (the "PPM Acquisition") of substantially all of the
shares of P.P.M. S.A., a societe anonyme ("PPM Europe"), from Potain S.A., a
societe anonyme, and all of the capital stock of Legris Industries, Inc., a
Delaware corporation which owns 92.4% of the capital stock of PPM Cranes, Inc.,
a Delaware corporation ("PPM North America;" and PPM North America together with
PPM Europe collectively referred to as "PPM") from Legris Industries S.A., a
societe anonyme ("Legris France"). PPM designs, manufactures and markets mobile
cranes and container stackers primarily in North America and Western Europe
under the brand names of PPM, P&H (trademark of Harnischfeger Corporation) and
BENDINI. Concurrently with the completion of the PPM Acquisition, the Company
contributed the assets (subject to liabilities) of its Koehring Cranes and
Excavators and Marklift division to Terex Cranes. The former division now
operates as Koehring Cranes, Inc., a wholly owned subsidiary of Terex Cranes
("Koehring"). Koehring manufactures mobile cranes under the LORAIN brand name
and aerial lift equipment under the MARKLIFT brand name. PPM and Koehring
comprise the Terex Cranes Segment.
The purchase price of PPM, including acquisition costs, was approximately
$104.5. Approximately $92.6 of the purchase price was paid in cash, including
the repayment of certain indebtedness of PPM required to be repaid in connection
with the acquisition. The remainder of the purchase price consisted of the
issuance of redeemable preferred stock of Terex Cranes having an aggregate
liquidation preference of 127 million French francs (approximately $26.1),
subject to adjustment. The purchase price is subject to adjustment calculated by
reference to the consolidated net asset value of PPM as determined by an audit
as of the date of closing. The preferred stock does not bear a dividend and,
accordingly, the Company has valued this stock at approximately $8.8 (discounted
at 15%). The Company has not yet reached agreement with the sellers about the
amount of purchase price adjustment but, based on work performed, the Company
believes that the amount of the preferred stock could ultimately be reduced.
The PPM Acquisition was accounted for as a purchase, with the purchase price
allocated to the assets acquired and liabilities assumed based upon their
respective estimated fair values at the date of acquisition. The excess of
purchase price over the net assets acquired is being amortized on a
straight-line basis over 15 years. The estimated fair values of assets and
liabilities acquired in the PPM Acquisition are summarized as follows:
Cash $ 1.0
Accounts receivable 33.8
Inventories 69.1
Other current assets 11.9
Property, plant and equipment 20.5
Other assets 0.3
Goodwill 68.0
Accounts payable and other current liabilities (86.6)
Other liabilities (13.5)
$ 104.5
<PAGE>
The operating results of PPM are included in the Company's consolidated results
of operations since May 9, 1995. The following pro forma summary presents the
consolidated results of operations as though the Company completed the PPM
Acquisition on January 1, 1994, after giving effect to certain adjustments,
including amortization of goodwill, interest expense and amortization of debt
issuance costs on the debt issued in the Refinancing:
Unaudited
Pro Forma
for the Year
Ended
December 31,
1995 1994
Net sales ................................. $ 1,095.1 $ 966.5
Income (loss) from operations ............. 4.9 (12.9)
Loss before extraordinary items ........... (53.0) (19.3)
Loss before extraordinary items, per share $ (5.89) $ (2.45)
The pro forma information is not necessarily indicative of what the actual
results of operations of the Company would have been for the periods indicated,
nor does it purport to represent the results of operations for future periods.
NOTE C -- SALE OF FRUEHAUF STOCK
In December 1993, the Company, which owned 26% of Fruehauf Trailer Corporation
("FTC" or "Fruehauf") before the sale, sold one million shares of FTC Common
Stock. The Company realized a gain of $3.0. In 1994, the Company sold 5.9
million shares of FTC stock for $24.9. In January 1995, the Company sold its
remaining shares of FTC for $1.0. In June 1995, the Company received 250
thousand shares of Fruehauf stock in settlement of certain obligations of
Fruehauf.
NOTE D -- INVENTORIES
Inventories consist of the following:
December 31,
1995 1994
Finished equipment ................................... $ 53.1 $ 26.8
Replacement parts .................................... 94.5 68.9
Work-in-process ...................................... 26.0 13.5
Raw materials and supplies ........................... 78.9 57.9
252.5 167.1
Less: Excess of FIFO inventory value over LIFO cost .. (3.2) (2.9)
Net inventories $ .................................... 249.3 $ 164.2
In 1994, 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 $2.1 in
1994.
<PAGE>
NOTE E -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
1995 1994
Property ........................... $ 11.0 $ 8.4
Plant .............................. 41.7 32.2
Equipment .......................... 101.2 83.4
153.9 124.0
Less: Accumulated depreciation ..... (52.6) (37.8)
Net property, plant and equipment... $ 101.3 $ 86.2
NOTE F -- LONG-TERM OBLIGATIONS
Long-term debt is summarized as follows:
December 31,
1995 1994
13.25% Senior Secured Notes due
May 15, 2002 ("Senior Secured Notes") .... $ 247.0 $ --
Credit Facility maturing May 9, 1998 ....... 66.8 --
13.0% Senior Secured Notes due
August 1, 1996 ("Old Senior Secured Notes") -- 127.2
13.5% Secured Senior Subordinated
Notes due July 1, 1997
("Subordinated Notes") .................... -- 24.5
Lending Facility maturing August 24, 1997 .. -- 24.1
Secured term note bearing interest at 9.0%
payable in equal semiannual installments
from August 1994 to February 1998 ......... -- 0.6
Note payable ............................... 4.5 --
Capital lease obligations .................. 14.9 12.4
Other ...................................... 2.4 --
Total long-term debt ..................... 335.6 188.8
Current portion of long-term debt ........ 7.2 25.8
Long-term debt, less current portion ..... $ 328.4 $ 163.0
The Senior Secured Notes
On May 9, 1995, the Company issued $250 of Senior Secured Notes due May 15,
2002. The Senior Secured Notes were issued in conjunction with the PPM
Acquisition and a refinancing of the Old Senior Secured Notes, and Subordinated
Notes. Except in the event of certain asset sales, there are no principal
repayment or sinking fund requirements prior to maturity. Interest on the Notes
is payable semi-annually on May 15 and November 15 of each year, commencing on
November 15, 1995, to holders of record on the immediately preceding May 1 and
November 1, respectively. The Notes bear interest at 13 3/4% per annum. Upon the
earlier of (i) the consummation of an exchange offer and (ii) the effectiveness
of a Shelf Registration Statement, the interest rate on the Notes will decrease
to 13 1/4% per annum. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Senior Secured Notes are senior obligations of the Company, pari passu in
right of payment with all existing and future senior indebtedness and senior to
all subordinated indebtedness. Repayment of the Senior Secured Notes are
guaranteed by certain domestic subsidiaries of the Company (the "Guarantors").
The Senior Secured Notes are secured by a first priority security interest on
substantially all of the assets of the Company and the Guarantors, other than
cash and cash equivalents, except that as to accounts receivable and inventory
and proceeds thereof, and certain related rights, such security shall be
subordinated to liens securing obligations outstanding under any working capital
or revolving credit facility secured by such accounts receivable and inventory,
including the Credit Facility. The Senior Secured Notes are also secured by a
lien on certain assets of the Company's foreign subsidiaries. The indenture for
the Senior Secured Notes places certain limits on the Company's ability to incur
additional indebtedness; permit the existence of liens; issue, pay dividends on
or redeem equity securities; sell assets; consolidate, merge or transfer assets
to another entity; and enter into transactions with affiliates.
In connection with the issuance of the Senior Secured Notes, the Company issued
one million stock appreciation rights ("1995 SARs") entitling the holders to
receive cash or Terex Corporation common stock, at the option of the Company, in
an amount equal to the average closing sale price of the common stock for 60
trading days prior to the date of exercise less $7.288 for each SAR.
The Credit Facility
The Company currently has a secured revolving credit facility (the "Credit
Facility") with certain institutional lenders (the "Lenders"). Under the terms
of such facility, the Company and Clark Material Handling Company ("CMHC"),
Koehring and PPM North America, each a subsidiary of the Company, (collectively,
the "Borrowers") will have availability, subject to the borrowing base
limitations set forth below, in an aggregate amount of up to $100. Subject to
the terms and conditions set forth in the Credit Facility, the Borrowers may
borrow (in the form of revolving loans and up to $15 in outstanding letters of
credit) an amount at any time outstanding initially equalling the sum of the
following: (i) 75% of the net amount of eligible receivables (as defined in the
Credit Facility) of the Company, Koehring and PPM North America, plus (ii) 70%
of the net amount of eligible receivables of CMHC, plus (iii) the lesser of (a)
45% of the value of eligible inventory (as defined in the Credit Facility) of
the Borrowers or (b) 80% of the appraised orderly liquidation value of eligible
inventory.
Each Borrower guarantees, on a joint and several basis, all of the obligations
of the other Borrowers under the Credit Facility, which obligations will
generally be secured by a first priority security interest in favor of the
Lenders in all of the receivables and inventory and certain related rights of
the Borrowers.
The outstanding principal amount of prime rate loans initially bears interest at
the rate of 1.75% per annum in excess of the prime rate and the outstanding
principal amount of Eurodollar rate loans initially bears interest at the rate
of 3.75% per annum in excess of the adjusted Eurodollar rate. The Company must
pay a fee of 0.25% per annum on the unused portion of the Credit Facility. The
Credit Facility contains covenants limiting the Borrowers' activities,
including, without limitation, limitations on the incurrence of indebtedness,
liens, asset sales, dividends and other payments, investments, mergers and
related party transactions.
The Credit Facility matures on May 9, 1998. The Lenders, at their option, may
extend the facility for one additional year. In the event that for any reason
the facility is terminated prior to the maturity date, the Borrowers must pay to
the Lenders a termination fee.
Old Senior Secured Notes and Subordinated Notes
The Old Senior Secured Notes and Subordinated Notes were retired on May 9, 1995
in conjunction with the PPM Acquisition and the issuance of the Senior Secured
Notes. The Company realized an extraordinary loss of $5.7 and $1.6 on the early
extinguishment of the Old Senior Secured Notes and the Subordinated Notes,
respectively. The Old Senior Secured Notes, were issued during July 1992 for a
total of $160.0 in conjunction with the CMH Acquisition and a refinancing of the
Company's bank debt. Proceeds from the issuance of the Old Senior Secured Notes
were used for the cash portion of the CMH Acquisition purchase price ($85.0),
for the settlement of all amounts outstanding under its previous credit facility
($58.0), and for working capital and transaction costs. Interest on the Senior
Secured Notes was due semiannually on February 1 and August 1.
The indenture for the Old Senior Secured Notes required that proceeds from the
sale of collateral be used to make an offer to repurchase, at par, an equivalent
amount of Old Senior Secured Notes. During 1994, as a result of sales of 5.4
million shares of Fruehauf common stock during 1994 and 1.0 million shares in
the last quarter of 1993, the Company repurchased $27.3 principal amount of the
Old Senior Secured Notes. The Company realized an extraordinary loss of $0.7 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 $5.0 principal
amount of Old Senior Secured Notes for approximately $4.5, 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 $0.5,
net of unamortized debt discount and debt issuance costs.
The Subordinated Notes were initially issued as unsecured subordinated notes for
a total amount of $50.0. Interest on the Subordinated Notes was due semiannually
on January 2 and July 1.
Lending Facility
The Lending Facility was terminated in May 1995 in conjunction with the PPM
Acquisition and entering into the Credit Facility. The Company realized an
extraordinary loss of $0.2 to write-off the unamortized debt issuance cost at
termination. 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 was secured by
substantially all the Company's domestic receivables and proceeds thereof.
Interest on Lending Facility borrowings was 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 provided for up to $30.0 of cash advances and guarantees through April
30, 1995, and $25.0 thereafter through the extended maturity date. The balance
outstanding under the Lending Facility at December 31, 1994 was $24.1.
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 $2.0 to write off the unamortized debt issuance costs.
TEL Facility
In 1995, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "TEL Facility") which
provides up to (pound)30.5 ($47.4) including up to (pound)10.0 ($15.5)
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 this and the prior
facility were $11.7 and $11.9 at December 31, 1995 and 1994, respectively.
In 1993, the Company's subsidiary, Terex Equipment Limited ("TEL") located in
Motherwell, Scotland, entered into a bank facility (the "Old TEL Facility")
which provides up to (pound)28.0 ($42.0) including up to (pound)13.0 ($19.5)
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 Old TEL Facility is
collateralized primarily by the related accounts receivable. The Old TEL
Facility requires no performance covenants. Proceeds from the Old TEL Facility
are primarily used for working capital purposes.
Note Payable
As part of the PPM Acquisition, the Company assumed the obligation for a note
payable to Harnischfeger Corporation. The note is non-interest bearing.
Schedule of Debt Maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1995
in the successive five-year period are summarized below. Amounts shown are
exclusive of minimum lease payments disclosed in Note G -- "Lease Commitments":
1996 $ 1.8
1997 0.7
1998 67.2
1999 0.4
2000 0.3
Thereafter 250.2
Total $ 320.6
<PAGE>
Based on quoted market values, the Company believes that the fair value of the
Senior Secured Notes was approximately $218.8 as of December 31, 1995. The
Company believes that, based on quoted market values, 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 $43.1, $32.2 and $31.8 of interest in 1995, 1994 and 1993,
respectively.
The weighted average interest rate on short term borrowings outstanding was
10.0% at December 31, 1995 and 10.2% at December 31, 1994.
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 $20.4 and $5.9 at December 31, 1995 and 1994,
respectively, net of accumulated amortization of $3.5 and $2.9 at December 31,
1995 and 1994, 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 $6.6 of which $2.4 is current at December 31, 1995.
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, 1995 are as
follows:
Capital Operating
Leases Leases
1996 $ 6.9 $ 6.6
1997 4.8 5.3
1998 2.9 2.1
1999 1.3 1.7
2000 0.5 1.2
Thereafter 0.2 1.1
Total minimum obligations 16.6 $ 18.0
Less amount representing interest 1.7
Present value of net minimum obligations 14.9
Less current portion 5.8
Long-term obligations $ 9.1
Most of the Company's operating leases provide the Company with the option to
renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases based upon the fair
rental values at the date of expiration of the initial lease. Total rental
expense under operating leases was $6.5, $7.4 and $6.3 in 1995, 1994, and 1993,
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
$11.0 and will lease the facility under the terms of a five year lease for a
total rental of $1.9 per year. The Company realized a gain of $4.0 which was
deferred and will be amortized as a reduction of rental expense over the lease
term ($0.8 per year).
NOTE H -- INCOME TAXES
The components of Income (Loss) Before Income Taxes and Extraordinary Items are
as follows:
Year ended December 31,
1995 1994 1993
United States $ (30.8) $ 12.4 $ (67.5)
Foreign 3.1 (10.4) 2.5
Income (loss) before income taxes
and extraordinary items $ (27.7) $ 2.0 $ (65.0)
The major components of the Company's provision for income taxes are summarized
below:
Year ended December 31,
1995 1994 1993
Current:
Federal $ --- $ --- $ ---
State --- 0.5 ---
Foreign 4.6 2.1 1.3
Utilization of foreign
net operating loss ("NOL")
carryforward (4.6) (1.8) (1.2)
Current income tax provision --- 0.8 0.1
Deferred:
Deferred federal income
tax benefit --- --- ---
Total provision for income taxes $ --- $ 0.8 $ 0.1
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, 1995 and 1994 are summarized below for major
balance sheet captions:
1995 1994
Net inventories $ (5.6) $ (7.1)
Fixed assets (3.0) (9.6)
Other (1.0) (0.5)
Total deferred tax liabilities (9.6) (17.2)
Receivables 1.7 1.4
Warranties and product liability 24.6 20.8
Investments --- 1.0
All other items 4.4 6.1
Benefit of net operating loss carryforward 136.9 126.5
Total deferred tax assets 167.6 155.8
Deferred tax assets valuation allowance (158.0) (138.6)
Net deferred tax liabilities $ --- $ ---
The valuation allowance for deferred tax assets as of January 1, 1994 was
$137.1. The net change in the total valuation allowance for the years ended
December 31, 1994 and 1995 were increases of $1.5 and $19.4, respectively.
<PAGE>
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,
1995 1994 1993
Statutory federal income tax rate .................. $ (9.7) $ 0.7 $ (22.7)
Recognition of previously unrecognized tax assets .. -- (4.3) --
NOL with no current benefit ........................ 9.5 -- 21.6
Foreign tax differential on
income/losses of foreign subsidiaries .............. (1.2) 3.7 (0.6)
Goodwill ........................................... 1.1 -- 1.8
State tax .......................................... -- 0.5 --
Other .............................................. 0.3 0.2 0.1
Total provision for income taxes ................... $ -- $ 0.8 $ 0.2
The Company has not provided for U.S. federal and foreign withholding taxes on
$19.0 of foreign subsidiaries' undistributed earnings as of December 31, 1995,
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 $3.4.
At December 31, 1995, the Company had domestic federal net operating loss
carryforwards of $297.7. Approximately $69.7 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
1996 $ 45.2
1997 8.0
1998 11.9
1999 ---
2000 4.6
2006 20.7
2007 35.7
2008 97.3
2009 34.2
2010 40.1
Total $ 297.7
The Company also has various state net operating loss and tax credit
carryforwards expiring at various dates through 2010 available to reduce future
state taxable income and income taxes. In addition, the Company's foreign
subsidiaries have approximately $62.5 of loss carryforwards, $36.1 in Germany,
$11.9 in U.K. and $14.5 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 $10.7 are
available without expiration, with the remaining $3.8 expiring in the years 1996
through 2001.
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 plus interest and penalties. If the
Company were required to pay a significant portion of the assessment, it could
have a material adverse impact on the Company and could exceed the Company's
resources. The Company has filed 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 the
resolution of significant legal and factual issues. If the Company's positions
prevail on the most significant issues, management believes that the amounts due
would not exceed amounts previously paid or provided; however, even under such
circumstances, it is possible that the Company's NOL's could be reduced to some
extent. 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
plus interest and penalties and the ultimate outcome cannot presently be
determined or estimated.
The Company made income tax payments of $0.0, $0.8 and $0.1 in 1995, 1994 and
1993, respectively.
NOTE I -- PREFERRED STOCK
The Company's certificate of incorporation was amended in October 1993 to
authorize 10.0 million shares of preferred stock, $.01 par value per share. As
of December 31, 1995, a total of 1.2 million shares of preferred stock are
issued and outstanding as described below.
Series A Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1995, the Company had 1.2 million 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 1.3 million
Common Stock Purchase Warrants (the "Series A Warrants," see Note J --
"Stockholders' Deficit"). 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 $39.2 at December 31, 1995.
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 $27.2. The Company
allocated $10.3 and $16.9 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 1995 and
1994 was $7.3 and $6.0, respectively.
Series B Cumulative Redeemable Convertible Preferred Stock
As of December 31, 1995, the Company had 38.8 thousand issued and outstanding
shares of Series B Cumulative Redeemable Convertible Preferred Stock (the
"Series B Preferred Stock"). These shares constitute the remaining balance
outstanding of the Series B Preferred Stock issued to certain individuals on
December 9, 1994 in consideration for the early termination of a contract
between the Company and KCS Industries, L.P., a Connecticut limited partnership
("KCS"), a related party (see Note M -- "Related Party Transactions"). 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 $2.0 at December 31, 1995.
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, as described below,
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 allocated $0.9 and $0.7 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.
NOTE J -- STOCKHOLDERS' DEFICIT
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 30.0 million. As of December 31, 1995, there were 10.6
million shares issued and outstanding. Of the 19.4 million unissued shares at
that date, 6.7 million shares were reserved for issuance for conversion of
Series A and B Preferred Stock (Note I) and the exercise of stock options and
Series A and B Warrants.
In December 1993, the Company issued 0.4 million shares of Common Stock as a
contribution to two of the Company's pension plans. The Company valued these
shares at $2.3, 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
1.3 million 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. As of December 31, 1995, upon the exercise or redemption of a
Warrant, the holder thereof was entitled to receive 2.35 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 issuance of the Series B Preferred
Stock (see Note I -- "Series B Preferred Stock"), the Company issued 107.0
thousand 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. At December 31, 1995,
approximately 16 thousand warrants remain unexercised.
Stock Options. The Company maintains a qualified incentive stock option ("ISO")
plan covering certain officers and key employees. The exercise price of the ISO
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
expire after ten years. At December 31, 1995, 4.8 thousand stock options were
available for grant under the plan.
The following table is a summary of stock options:
Number of Exercise Price per
Options Option
Outstanding at December 31, 1992 59,666 $ 6.40 to 14.80
Granted 23,750 7.13 to 10.50
Exercised (3,750) 10.2
Canceled or expired (3,750) 14.8
Outstanding at December 31, 1993 75,916 $ 6.40 to 14.80
Granted 10,000 6.63
Exercised ---
Canceled or expired (3,750) 14.8
Outstanding at December 31, 1994 82,166 $ 6.40 to 14.80
Granted 27,900 4.25
Exercised ---
Canceled or expired (6,666) 7.13 to 14.80
Outstanding at December 31, 1995 103,400 $ 4.25 to 14.80
Exercisable at December 31, 1995 62,168 $ 6.40 to 14.80
Long-Term Incentive Plans. In December 1995, the Board of Directors approved,
subject to shareholder approval, the 1996 Terex Corporation Long-Term Incentive
Plan (the "1996 Plan"). The 1996 Plan authorizes the granting of (i) options
("Stock Option Awards") to purchase shares of Common Stock, including Restricted
Stock, (ii) shares of Common Stock, including Restricted Stock ("Stock Awards"),
and (iii) cash bonus awards based upon a participant's job performance
("Performance Awards"). Subject to adjustment as described below under
"Adjustments," the aggregate number of shares of Common Stock (including
Restricted Stock, if any) optioned or granted under the 1996 Plan shall not
exceed 300 thousand shares. The 1996 Plan provides that a committee (the
"Committee") of the Board of Directors consisting of two or more members thereof
who are non-employee directors, shall administer the 1996 Plan and has provided
the Committee with the flexibility to respond to changes in the competitive and
legal environments, thereby protecting and enhancing the Company's current and
future ability to attract and retain directors and officers and other key
employees and consultants. The 1996 Plan also provides for automatic grants of
Stock Option Awards to non-employee directors. 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 was approved by Stockholders at the 1994 annual meeting. 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 thousand, subject to certain adjustments. In 1995,
options to purchase a total of 290.7 thousand shares of common stock at $4.25 to
$7.00 per share and a total of 50.0 thousand shares of restricted stock were
granted to employees. In June 1994, options to purchase a total of 308.8
thousand shares of common stock at $5.50 per share and a total of 129.4 thousand
shares of restricted common stock were granted to employees and outside
directors.
Stock Appreciation Rights. In connection with the July 1992 sale of the Old
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
658.4 thousand common stock appreciation rights ("1992 SARs"). As of December
31, 1995, there were 624.8 thousand 1992 SARs outstanding. Of the outstanding
1992 SARs, 552.0 thousand may be exercised at the option of the holder thereof
at any time through July 31, 1996, at which time they expire. The remaining 72.8
thousand SARs may be exercised through July 1, 1997, at which time they expire.
The 1992 SARs 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, 1995, there was no reserve requirement necessary
because the Company's Common Stock price was below $11.00 per share.
In connection with the May 1995 issuance of the Senior Secured Notes, the
Company issued 1.0 million stock appreciation rights (the "1995 SARs") entitling
the holders to receive cash or Common Stock, at the option of the Company, in an
amount equal to the average closing sale price of the common stock for 60
trading days prior to the date of exercise less $7.288 for each 1995 SAR. The
1995 SARs expire on May 15, 2002. At December 31, 1995 there was no reserve
requirement necessary because the Company's Common Stock price was below $7.288
per share.
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 1995, 1994 and 1993:
Year ended December 31,
1995 1994 1993
Service cost for benefits earned during period $ 0.1 $ 0.2 $ 0.4
Interest cost on projected benefit obligation 2.2 2.2 2.4
Actual (return) loss on plan assets (3.8) (0.4) (2.1)
Net amortization and deferral 2.0 (1.2) 0.9
Curtailment (gain) loss --- --- (0.3)
Net pension expense $ 0.5 $ 0.8 $ 1.3
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth the US plans' funded status and the amounts
recognized in the Company's financial statements at December 31:
1995 1994 1993
Overfunded Underfunded Overfunded Underfunded Overfunded Underfunded
Plans Plans Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $ 9.4 $ 20.9 $ 8.0 $ 19.0 $ 9.3 $ 22.5
Accumulated benefits $ 9.9 $ 20.9 $ 8.1 $ 19.1 $ 9.5 $ 22.7
Projected benefits $ 9.9 $ 20.9 $ 8.1 $ 19.1 $ 9.5 $ 22.7
Fair value of plan assets 10.2 16.5 9.2 14.7 9.7 14.7
Projected benefit obligation
(in excess of) less than
plan assets 0.4 (4.4) 1.1 (4.4) 0.2 (8.0)
Unrecognized net loss from past
experience different than
assumed 2.6 2.7 2.5 1.8 3.7 4.2
Unrecognized prior service cost 0.9 --- 0.5 --- 0.5 ---
Adjustment to recognize
minimum liability --- (2.7) --- (1.8) --- (4.2)
Pension asset (liability)
recognized in the balance
sheet $ 3.9 $ (4.4) $ 4.1 $ (4.4) $ 4.4 $ (8.0)
</TABLE>
The expected long-term rate of return on plan assets was 9% for the periods
presented. The discount rate assumption was 7.5% for 1995, 8.5% for 1994 and
7.0% for 1993. The assumption for the rate of compensation increase, if
applicable per plan provisions, was 5.5% for 1993 (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 $2.7 and $1.8 to recognize
a minimum pension liability at December 31, 1995 and 1994, respectively. This
liability is offset by a direct reduction of stockholders' deficit.
In December 1993, Terex contributed 350.0 thousand shares of Terex Common Stock
to the Master Trust for the benefit of two of the Terex plans, which were valued
by the Company at $2.3 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 $1.7 at December 31, 1995.
In addition, the Master Trust held 6.0 thousand 1992 SARs, valued at $0.10 per
right (total value of less than $0.1) at December 31, 1995 and 6.0 thousand
Terex SARs, valued at $1.00 per right (less than $0.1) at December 31, 1994.
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 $0.3, $0.3 and $0.2 for the years ended December 31, 1995, 1994
and 1993, respectively.
Certain of CMH's German employees are covered by noncontributory defined benefit
pension plans. 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.
<PAGE>
The components of consolidated pension expense for each of the reporting periods
covered by these financial statements is as follows:
Year Ended
December 31,
1995 1994 1993
Current service cost ........................... $ 0.1 $ 0.2 $ 0.2
Interest cost .................................. 0.9 0.9 0.9
Net amortization and deferrals ................. (0.9) (0.8) 0.1
Defined benefit pension expense .............. $ 0.1 $ 0.3 $ 1.2
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,
1995 1994
Accumulated benefit obligation,
including nonvested benefits
of $0.2 and $0.2 at December 31, 1995 and 1994 .. $ 12.8 $ 11.1
Projected benefit obligations .................... $ 12.8 $ 11.2
Unrecognized net gain/(loss) ..................... (0.9) 1.9
Unrecognized prior service cost .................. 0.4 --
Unrecognized transition asset (liability) ........ 0.6 (0.7)
Adjustment required to recognize minimum liability -- --
Accrued pension cost ............................. $ 12.9 $ 12.4
The discount rate of 7.5% was used in 1995 and 1994 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." In 1994
the Company changed certain assumptions used in the actuarial valuation of the
plans. These changes in assumptions reflected 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 $2.7. The gain in excess of 10% of the projected benefit obligation is
being amortized over 2 years.
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 Postemployment Benefits
The Company provides postemployment 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.
<PAGE>
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 $4.5. 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:
1995 1994
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees ................................................. $ 4.4 $ 4.6
Active participants ...................................... -- --
Total accumulated postretirement benefit obligation ...... 4.4 4.6
Unamortized transition obligation ........................ (3.4) (3.7)
Liability recognized in the balance sheet .............. $ 1.0 $ 0.9
Health care trend rates used in the actuarial assumptions range from 12.0% to
13.5%. These rates decrease to 6.5% over a period of 8 to 10 years. The effect
of a one percentage-point change in the health care cost trend rates would
change the accumulated postretirement benefit obligation approximately 7%. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 8.25% for the years ended December 31, 1995 and 1994,
respectively.
Net periodic postretirement benefit expense includes the following components
for 1995 and 1994:
Year Ended December 31,
1995 1994
Service cost $ --- $ ---
Interest cost 0.3 0.4
Net amortization 0.4 0.4
Total $ 0.7 $ 0.8
The Company's postretirement benefit obligations are not funded. Net periodic
postretirement benefit expense for the years ended December 31, 1995, 1994 and
1993 was approximately $0.6, $0.5 and $0.4 greater on the accrual basis than it
would have been on the cash basis.
NOTE L -- LITIGATION AND CONTINGENCIES
In December 1992, a Class Action complaint was filed against Fruehauf, the
Company, certain of Fruehauf's then officers and directors and certain of the
underwriters of the initial public offering of Fruehauf, in the United States
District Court for the Eastern District of Michigan, Southern Division,
alleging, among other things, violations of certain provisions of the federal
securities laws, and seeking unspecified compensatory and punitive damages. The
Company has settled this litigation, with court approval, and recorded a
provision of $0.3 million in the quarter ended March 31, 1995.
In the Company's lines of business, but primarily in the Material Handling
Segment, numerous suits have been filed alleging damages for accidents that have
arisen in the normal course of operations involving the Company's products. 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, 1995, 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 at its estimated net realizable value.
Any resultant losses are charged against related reserves. The guarantee under
such floor plans aggregated approximately $30.0 at December 31, 1995. The
Company has recorded reserves based on management's estimates of potential
losses arising from these guarantees. Historically, the Company has incurred
only minimal 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 in
the ordinary conduct of its business. Such guarantees approximated $3.8 at
December 31, 1995. Estimated losses, if any, 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 equipment 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
of approximately $200.0 at December 31, 1995 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 minimal losses
relating to these arrangements.
The Company's outstanding letters of credit totaled $7.7. 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.
The Company 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. In 1993, the Company recorded liabilities for these contingent
obligations representing management's estimate of the maximum potential losses
which the Company might incur.
NOTE M -- RELATED PARTY TRANSACTIONS
On August 28, 1995, the Company announced that its Chairman, Randolph W. Lenz,
had retired from his position with the Company and its Board of Directors. In
connection with his retirement, the Company (upon the recommendation of a
committee comprised of its independent Directors and represented by independent
counsel) and Mr. Lenz have executed a retirement agreement providing certain
benefits to Mr. Lenz and the Company. The agreement provides, among other
things, for a five-year consulting engagement requiring Mr. Lenz to make himself
available to the Company to provide consulting services for certain portions of
his time. Mr. Lenz, or his designee, will receive a fee for consulting services
which will include payments in an amount, and a rate, equal to his 1995 base
salary until December 31, 1996. The agreement also provides for the granting of
a five-year $1.8 million loan bearing interest at 6.56% per annum which is
subject to being forgiven in increments over the five-year term of the agreement
upon certain conditions and equity grants having a maximum potential of 200.0
thousand shares of Terex common stock conditioned upon the Company achieving
certain financial performance objectives in the future. In contemplation of the
execution of this retirement agreement, the Company advanced to Mr. Lenz the
principal amount of the forgivable loan. Mr. Lenz has also agreed not to compete
with the Company, to vote his Terex shares in the manner recommended by the
Company's Board of Directors, not to acquire any additional shares of the
Company's common stock, and, except under certain circumstances, not to sell his
shares of common stock. In addition to indebtedness pursuant to the retirement
agreement, an affiliate of Mr. Lenz is indebted to the Company in the
approximate amount of $33.45 thousand representing shipping charges incurred by
the Company for such affiliate during 1994. The affiliate of Mr. Lenz has not
paid such charges to date.
Under a contract dated July 1, 1987, as amended, KCS Industries, L.P., a
Connecticut limited partnership ("KCS"), principally owned by Mr. Lenz provided
administrative, financial, marketing, technical, real estate and legal services
to the Company and its subsidiaries. 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. During 1993 the Company made payments to KCS
of $2.9.
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. Certain
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 89.8 thousand shares of the Company's Series B Cumulative Redeemable
Convertible Preferred Stock (valued at $0.9) and 106.95 thousand Series B
Warrants (valued at $0.7), 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 38.8 thousand shares
of preferred stock and warrants exercisable for 15.7 thousand shares of Terex
Common Stock and other KCS employees each received 25.5 thousand shares of
preferred stock and warrants exercisable for 45.6 thousand shares of Terex
Common Stock. The employees converted their shares and warrants to Common Stock
in 1995. In addition, Mr. Lenz received cash payments of approximately $0.5.
The Company, certain directors and executives of the Company, and KCS have been
named parties in various legal proceedings. During 1995, 1994 and 1993, the
Company incurred $0.3, $0.3 and $0.4 of legal fees and expenses on behalf of the
Company, directors and executives of the Company, and KCS named in the lawsuits.
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 1992 SARs, and the establishment of the
Bank Lending Agreement. A director of the Company was at the time 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 Old Senior Secured Notes and 1992 SARs. Jefferies was paid fees of $6.5
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 $2.5 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 250.0
thousand Series A Warrants and 180.0 thousand shares of Series A Preferred Stock
from the Company in connection with the Company's private placement on December
20, 1993.
In 1995, the Company retained Jefferies & Company, Inc., of which a director of
the Company was then Executive Vice President, in connection with the offering
of the Company's $250 million Senior Secured Notes and acquisition of PPM which
was completed in May 1995. Jefferies & Company, Inc. was paid $9.2 as an
underwriting discount and for services rendered.
A director of the Company was affiliated with the Airlie Group L.P. ("Airlie"),
a limited partnership which owned approximately 9% of the Company's Common Stock
(including Common Stock issuable upon conversion of Series A Preferred Stock)
and 40 thousand Warrants. Until May 1994, this director 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 the director was affiliated with
Airlie, Airlie received all director fees to which the director was entitled by
reason of his service as a director of the Company. On December 20, 1993, Airlie
purchased 40 thousand Warrants and 40 thousand shares of Series A Preferred
Stock from the Company as part of the Company's private placement.
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.
<PAGE>
NOTE N-- BUSINESS SEGMENT INFORMATION
The Company operates in three industry segments: Material Handling, Terex Trucks
and Terex Cranes.
The Material Handling Segment designs, manufactures and markets a complete line
of internal combustion ("IC") and electric lift trucks, electric walkies,
automated pallet trucks and related components and 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 CMH, which was acquired by the Company on July 31, 1992 from
Clark Equipment Company.
Terex Trucks designs, manufactures and markets heavy-duty, off-highway
earthmoving and construction 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. Terex Trucks
consists of two operating businesses: (i) the Terex Business, which manufactures
off-highway rigid and articulated haulers, scrapers and wheel loaders and (ii)
Unit Rig, which manufactures electric rear and bottom dump haulers, as well as
mechanical drive haulers and wheel loaders principally sold to the mining
industry.
Terex Cranes designs, manufactures and markets mobile cranes, aerial platforms,
container stackers and scrap handlers and related components and replacement
parts. These products are used primarily for construction, repair and
maintenance of infrastructure, buildings and manufacturing facilities, for
material handling applications in the distribution and transportation industries
as well as in the scrap, refuse and lumber industries. Terex Cranes consists of
three operating businesses: (i) Koehring, which manufactures mobile cranes,
aerial lift platforms and scrap handlers, (ii) PPM North America, which
manufactures mobile cranes and container stackers under the brand name P&H (a
trademark of Harnischfeger) primarily in North America and (iii) PPM Europe,
which manufactures mobile cranes and container stackers primarily in Europe.
<PAGE>
Industry segment information is presented below:
1995 1994 1993
Sales
Material Handling ....................... $ 528.8 $ 472.7 $ 395.6
Terex Trucks ............................ 250.3 226.8 203.8
Terex Cranes ............................ 252.3 90.4 71.4
Eliminations ............................ (1.2) (3.1) (0.5)
Total ................................ $ 1,030.2 $ 786.8 $ 670.3
Income (Loss) from Operations
Material Handling ....................... $ 3.0 $ (13.9) $ (28.6)
Terex Trucks ............................ 13.0 11.1 11.0
Terex Cranes ............................ 7.2 7.9 (12.8)
General/Corporate ....................... (1.8) (1.7) (3.5)
Total ................................... $ 21.4 $ 3.4 $ (33.9)
Depreciation and Amortization
Material Handling ....................... $ 14.8 $ 11.0 $ 9.7
Terex Trucks ............................ 2.3 2.2 7.2
Terex Cranes ............................ 7.6 1.0 1.5
General/Corporate ....................... 3.0 2.9 4.0
Total .................................. $ 27.7 $ 17.1 $ 22.4
Capital Expenditures
Material Handling ....................... $ 5.3 $ 7.8 $ 8.9
Terex Trucks ............................ 2.7 4.2 2.1
Terex Cranes ............................ 2.4 0.4 0.5
General/Corporate ....................... 0.1 0.3 --
Total .................................. $ 10.5 $ 12.7 $ 11.5
Identifiable Assets
Material Handling ....................... $ 191.0 $ 195.0 $ 205.6
Terex Trucks ............................ 169.4 147.4 130.4
Terex Cranes ............................ 239.9 40.3 37.8
General/Corporate ....................... 26.6 18.9 16.9
Total .................................. $ 626.9 $ 401.6 $ 390.7
<PAGE>
Geographic segment information is presented below:
1995 1994 1993
Sales
North America ......................... $ 677.9 $ 557.1 $ 466.9
Europe ................................ 385.4 240.7 211.7
All other ............................. 13.0 34.0 19.4
Eliminations .......................... (46.1) (45.0) (27.7)
Total ................................. $ 1,030.2 $ 786.8 $ 670.3
Income (Loss) from Operations
North America ......................... $ 12.2 $ 6.3 $ (36.7)
Europe ................................ 17.4 (4.5) (0.7)
All other ............................. (4.6) 0.4 2.3
Eliminations .......................... (3.6) 1.2 1.2
Total ............................... $ 21.4 $ 3.4 $ (33.9)
Identifiable Assets
North America ......................... $ 275.0 $ 250.6 $ 241.6
Europe ................................ 294.4 167.5 150.0
All other ............................. 30.1 8.8 10.8
Eliminations .......................... 27.4 (25.3) (11.7)
Total ............................... $ 626.9 $ 401.6 $ 390.7
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 Company is not dependent upon any single customer.
Export sales from U.S. operations were as follows:
Year Ended December 31,
1995 1994 1993
North and South America .................... $ 57.4 $ 34.9 $ 28.8
Europe, Africa and Middle East ............. 26.2 15.1 20.7
Asia and Australia ......................... 38.5 39.6 32.8
$ 122.1 $ 89.6 $ 82.3
NOTE O -- LIQUIDITY, FINANCING AND SEVERANCE ACTIONS
The Company's businesses are working 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 debt
and monthly interest payments on its credit facility. Debt reduction and an
improved capital structure are major focal points for the Company. In this
regard, the Company reviews on a regular basis its alternatives to improve its
capital structure and to reduce debt through debt refinancings, issuance of
equity, asset sales, the sales of business units or any combination thereof.
Net cash of $21.9 was used in operating activities during the year ended
December 31, 1995. Net cash used by investing activities was $98.9 during the
year ended December 31, 1995 principally due to the PPM Acquisition as described
below. Net cash provided by financing activities during the year ended December
31, 1995 was $120.1, primarily from the Refinancing discussed below. Cash and
cash equivalents totaled $7.8 at December 31, 1995.
The Company announced personnel reductions totaling approximately 134 employees
in the Material Handling Segment's North American operations during the second
quarter of 1995 as a continuation of the Company's programs to increase
manufacturing efficiency, reduce costs and improve liquidity. The Company
recorded a combined charge of $3.5 in the second quarter of 1995 for severance
costs associated with these actions and additional costs associated with the
closing of certain administrative and warehouse facilities.
As discussed below, the Company has refinanced its senior and subordinated debt,
established new credit facilities and borrowed additional funds to complete the
PPM Acquisition which will impact future operating results, sources of liquidity
and debt service requirements.
On May 9, 1995, the Company completed the Refinancing and the PPM Acquisition.
The Refinancing included the private placement to institutional investors of
$250 of the Senior Secured Notes, repayment of the Company's Old Senior Secured
Notes and Senior Subordinated Notes, totaling approximately $152.6 principal
amount, and entry into the Credit Facility to replace the Company's existing
Lending Facility in the U.S. Until such time as the Company completes an
exchange of the Senior Secured Notes for an equivalent issue of registered
notes, or a shelf registration statement for the Senior Secured Notes is
effective, the interest rate on the Senior Secured Notes will be 13.75%. The
Indenture for the Senior Secured Notes places certain limits on the Company's
ability to incur additional indebtedness; permit the existence of liens; issue,
pay dividends on or redeem equity securities; utilize the proceeds of assets
sales; consolidate, merge or transfer assets to another entity; and enter into
transactions with affiliates. In connection with the issuance of the Senior
Secured Notes, the Company issued 1.0 million stock appreciation rights ("SARs")
entitling the holders to receive cash or Common Stock, at the option of the
Company, in an amount equal to the average closing sale price of the common
stock for 60 trading days prior to the date of exercise less $7.288 for each
SAR.
Approximately $92.6 of the proceeds of the Senior Secured Notes was used for the
PPM Acquisition, including the repayment of certain indebtedness of PPM required
to be repaid in connection with the acquisition. In addition, the Company
estimates that the acquisition costs incurred will total approximately $5.0. The
remainder of the purchase price consisted of the issuance of redeemable
preferred stock of Terex Cranes having an aggregate liquidation preference of
127 French francs (approximately $26.1), subject to adjustment. The purchase
price is subject to adjustment calculated by reference to the consolidated net
asset value of PPM as determined by an audit as of the date of closing. The
preferred stock does not bear a dividend and, accordingly, the Company has
valued this stock at approximately $8.8 (discounted at 15%). The Company has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, the Company believes that the amount of
the preferred stock could ultimately be reduced.
The Company's Credit Facility provides the Company with the ability to borrow
(in the form of revolving loans and up to $15 in outstanding letters of credit)
up to $100. The Credit Facility is secured by substantially all of the Company's
domestic receivables and inventory (including PPM). The amount of borrowings is
limited to the sum of the following: (i) 75% of the net amount of eligible
receivables, as defined, of the Company's U.S. businesses other than CMHC, plus
(ii) 70% of the net amount of CMHC eligible receivables, plus (iii) the lesser
of 45% of the value of eligible inventory, as defined, or 80% of the appraised
orderly liquidation value of eligible inventory less (iv) any availability
reserves established by the lenders. The Credit Facility expires May 9, 1998
unless extended by the lenders for one additional year. At the option of the
Company, revolving loans may be in the form of prime rate loans initially
bearing interest at the rate of 1.75% per annum in excess of the prime rate and
Eurodollar rate loans initially bearing interest at the rate of 3.75% per annum
in excess of the adjusted Eurodollar rate.
The Company made an interest payment of $17.7 on November 15, 1995 on the Senior
Secured Notes. The Company's debt service obligations for 1996 include
approximately $17.1 on May 15 and November 15, 1996 on the Senior Secured Notes
and approximately $0.6 monthly on the Credit Facility. Management believes that,
absent significant unanticipated declines in operating performance, cash
generated from operations and the Refinancing provide the Company with adequate
liquidity to meet the Company's operating and debt service requirements. The
balance outstanding under the Credit Facility as of December 31, 1995 was $66.8,
and the additional amount the Company could have borrowed was $8.8 as of that
date. As of March 20, 1996, the amount available to the Company under the Credit
Facility was approximately $13.0. TEL entered into a new bank working capital
facility in 1995, and PPM Europe is in negotiations to secure a working capital
facility in 1996. Management intends to seek additional working capital
financing facilities for the Company's international operations to provide
additional liquidity worldwide.
NOTE P -- CONSOLIDATING FINANCIAL STATEMENTS
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing") and, through Terex Cranes, Inc. ("Terex
Cranes"), a wholly-owned subsidiary, completed the acquisition of substantially
all of the outstanding stock of PPM. S.A. and Legris Industries, Inc. See Note B
for information related to the acquisition.
Clark Material Handling Company, Terex Cranes, Inc., Koehring Cranes, Inc., CMH
Acquisition Corp., CMH Acquisition International Corp. (the "Wholly-owned
Guarantors"), and PPM Cranes, Inc. (collectively, the "Guarantors"), all
subsidiaries of Terex, provide a full, unconditional, joint and several
guarantee of the obligations under the Senior Secured Notes and will provide the
same guarantee for the obligations of any registered notes exchanged for the
Senior Secured Notes.
With the exception of PPM Cranes, Inc. and Clark Material Handling Company, each
of the Guarantors is a corporation organized and existing under the laws of the
state of Delaware and is a wholly-owned subsidiary of the Company. PPM Cranes,
Inc. is a corporation organized and existing under the laws of the state of
Delaware and is 92.4% owned by Terex. Clark Material Handling Company is a
corporation organized and existing under the laws of the Commonwealth of
Kentucky and is wholly-owned by Terex.
The following summarized condensed consolidating financial information for the
Company segregates the financial information of Terex Corporation, the
Wholly-owned Guarantors, PPM Cranes, Inc. and the Non-guarantor Subsidiaries.
Terex Corporation consists of parent company operations. Subsidiaries of the
parent company are reported on the equity basis.
Wholly-owned Guarantors combine the operations of the Wholly-owned Guarantor
Subsidiaries (Clark Material Handling Company, Terex Cranes, Inc., Koehring
Cranes, Inc., CMH Acquisition Corp. and CMH Acquisition International Corp.).
Non-guarantor subsidiaries of Wholly-owned Guarantors are reported on the equity
basis.
PPM Cranes, Inc. presents the operations of PPM Cranes, Inc. and its
subsidiaries (PPM Pty Ltd and PPM Far East Ltd) reported on an equity basis.
Non-Guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the Senior
Secured Notes. These subsidiaries include Terex Equipment Limited, Unit Rig
Australia (Pty) Ltd., Unit Rig South Africa (Pty) Ltd., Unit Rig (Canada) Ltd.,
Clark Material Handling GmbH, Clark Forklift Korea, PPM S.A., Bendini S.P.A.,
Brimont Agraire, PPM Kranes, Baulift, PPM Pty Ltd., and PPM Far East Ltd.
Debt and Goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............. $ 3.1 $ 3.2 $ 0.3 $ 1.2 $ -- $ 7.8
Cash securing letters of credit ........ 2.1 0.2 -- 5.4 -- 7.7
Trade receivables - net ................ 19.6 28.6 10.7 68.2 -- 127.1
Intercompany receivables ............... 0.3 2.6 1.5 26.3 (30.7) --
Customer deposit ....................... -- -- -- 19.1 -- 19.1
Inventories - net ...................... 46.1 71.2 23.5 108.8 (0.3) 249.3
Other current assets ................... 1.1 0.2 0.2 13.7 -- 15.2
Total current assets ................... 72.3 106.0 36.2 242.7 (31.0) 426.2
Property, plant & equipment - net ...... 11.1 24.5 3.6 62.1 -- 101.3
Investment in and advances to (from)
subsidiaries .......................... 30.8 (97.2) (0.5) (125.1) 192.0 --
Goodwill - net ......................... -- 4.3 29.4 32.1 -- 65.8
Debt issuance costs and intangible
assets - net .......................... 3.3 2.8 2.8 5.6 -- 14.5
Other assets ........................... 3.7 5.6 -- 9.8 -- 19.1
TOTAL ASSETS ........................... $ 121.2 $ 46.0 $ 71.5 $ 227.2 $ 161.0 $ 626.9
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt ...................... $ -- $ -- $ 0.9 $ 8.2 $ -- $ 9.1
Trade accounts payable ................. 14.5 50.2 5.4 90.9 -- 161.0
Intercompany payables .................. 12.3 10.4 3.9 4.1 (30.7) --
Customer deposit ....................... -- -- -- 19.1 -- 19.1
Accruals and other current liabilities . 25.9 30.3 12.0 37.3 -- 105.5
Total current liabilities .............. 52.7 90.9 22.2 159.6 (30.7) 294.7
Long-term debt less current portion .... 127.9 48.0 51.5 101.0 -- 328.4
Other long-term liabilities ............ 12.5 33.9 1.0 21.2 -- 68.6
Minority interest and redeemable
preferred stock ....................... -- 9.4 -- -- -- 9.4
Redeemable convertible preferred stock . 24.6 -- -- -- -- 24.6
Stockholders' deficit .................. (96.5) (136.2) (3.2) (54.6) 191.7 (98.8)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT ............................. $ 121.2 $ 46.0 $ 71.5 $ 227.2 $ 161.0 $ 626.9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET SALES .............................. $ 146.7 $ 484.8 $ 54.5 $ 401.2 $ (57.0) $ 1,030.2
Cost of goods sold ..................... 129.4 436.0 48.1 358.2 (56.7) 915.0
GROSS PROFIT ........................... 17.3 48.8 6.4 43.0 (0.3) 115.2
Engineering, selling & administrative
expenses .............................. 15.5 36.6 4.2 34.0 -- 90.3
Severance charges ...................... -- 3.5 -- -- -- 3.5
INCOME (LOSS) FROM OPERATIONS .......... 1.8 8.7 2.2 9.0 (0.3) 21.4
Interest income ........................ 0.8 -- -- -- -- 0.8
Interest expense ....................... (5.0) (12.5) (4.7) (17.3) -- (39.5)
Income (loss) from equity investees .... (24.0) (21.3) (0.5) -- 45.8 --
Other income (expense) - net ........... (4.8) (0.2) (0.2) (5.2) -- (10.4)
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS .................... (31.2) (25.3) (3.2) (13.5) 45.5 (27.7)
Provision for income taxes ............. -- -- -- -- -- --
Income (loss) before extraordinary
items ................................. (31.2) (25.3) (3.2) (13.5) 45.5 (27.7)
Extraordinary loss on retirement of
debt .................................. (3.7) (2.3) -- (1.5) -- (7.5)
NET INCOME (LOSS) ...................... (34.9) (27.6) (3.2) (15.0) 45.5 (35.2)
Less preferred stock accretion ......... (7.3) -- -- -- -- (7.3)
INCOME (LOSS) APPLICABLE TO COMMON
STOCK ................................. $ (42.2) $ (27.6) $ (3.2) $ (15.0) $ 45.5 $ (42.5)
</TABLE>
<TABLE>
<CAPTION>
TEREX COPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES .................. $ 61.1 $ 5.7 $ (46.7) $ (42.0) -- $ (21.9)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business, net of cash
acquired .............................. (92.4) -- -- -- -- (92.4)
Capital expenditures ................... (2.0) (3.0) (0.2) (5.3) -- (10.5)
Proceeds from sale of property, plant
and equipment ......................... 0.1 0.5 0.1 0.4 -- 1.1
Proceeds from sale of Fruehauf stock ... 2.7 -- -- -- -- 2.7
Other - net ............................ 0.1 -- -- 0.1 -- 0.2
Net cash used in investing activities .. (91.5) (2.5) (0.1) (4.8) -- (98.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements ... 34.7 -- -- -- -- 34.7
Principal repayments of long-term debt . (49.2) (48.5) -- (56.2) -- (153.9)
Proceeds from issuance of long-term
debt, net of issuance costs ........... 44.3 48.5 47.1 99.9 -- 239.8
Other .................................. -- -- -- (0.5) -- (0.5)
Net cash provided by financing
activities ............................ 29.8 -- 47.1 43.2 -- 120.1
Effect of exchange rates on cash and
cash equivalents ...................... -- -- -- (1.2) -- (1.2)
Net increase (decrease) in cash and
cash equivalents ...................... (0.6) 3.2 0.3 (4.8) -- (1.9)
Cash and cash equivalents, beginning
of period ............................. 3.7 -- -- 6.0 -- 9.7
Cash and cash equivalents, end of
period ................................ $ 3.1 $ 3.2 $ 0.3 $ 1.2 -- $ 7.8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1994
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents .............. $ 3.7 $ -- $ -- $ 6.0 $ -- $ 9.7
Cash securing letters of credit ........ 2.3 -- -- 4.4 -- 6.7
Trade receivables - net ................ 26.3 36.6 -- 28.8 -- 91.7
Intercompany receivables ............... 3.0 2.0 -- 28.2 (33.2) --
Inventories - net ...................... 45.9 73.0 -- 45.6 (0.3) 164.2
Other current assets ................... 2.3 0.4 -- 3.1 -- 5.8
Total current assets ................... 83.5 112.0 -- 116.1 (33.5) 278.1
Property, plant & equipment - net ...... 9.8 29.6 -- 46.8 -- 86.2
Investment in and advances to (from)
subsidiaries .......................... 9.2 (84.0) -- (58.6) 133.4 --
Goodwill - net ......................... -- 5.3 -- -- -- 5.3
Debt issuance costs and intangible
assets - net .......................... 1.4 0.9 -- 1.0 -- 3.3
Other assets ........................... 7.9 5.7 -- 15.1 -- 28.7
TOTAL ASSETS ........................... $ 111.8 $ 69.5 $ -- $ 120.4 $ 99.9 $ 401.6
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt ....................... $ 23.2 $ 0.1 $ -- $ 4.6 $ -- $ 27.9
Trade accounts payable ................. 17.0 55.5 -- 39.7 -- 112.2
Intercompany payables .................. 11.5 16.7 -- 5.0 (33.2) --
Accruals and other current liabilities . 36.5 27.6 -- 17.4 -- 81.5
Total current liabilities .............. 88.2 99.9 -- 66.7 (33.2) 221.6
Long-term debt less current portion .... 49.5 48.6 -- 64.9 -- 163.0
Other long-term liabilities ............ 7.4 32.6 -- 15.4 -- 55.4
Redeemable convertible preferred stock . 17.3 -- -- -- -- 17.3
Stockholders' deficit .................. (50.6) (111.6) -- (26.6) 133.1 (55.7)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT ............................. $ 111.8 $ 69.5 $ -- $ 120.4 $ 99.9 $ 401.6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET SALES ........................... $ 139.7 $ 438.0 $ -- $ 281.8 $ (72.7) $ 786.8
Cost of goods sold .................. 120.2 387.2 -- 260.9 (72.4) 695.9
GROSS PROFIT ........................ 19.5 50.8 -- 20.9 (0.3) 90.9
Engineering, selling & administrative
expenses ........................... 15.1 41.8 -- 23.2 -- 80.1
Severance charges ................... -- 4.5 -- 2.9 -- 7.4
INCOME (LOSS) FROM OPERATIONS ....... 4.4 4.5 -- (5.2) (0.3) 3.4
Interest income ..................... 0.1 -- -- 0.5 -- 0.6
Interest expense .................... (3.7) (12.7) -- (14.1) -- (30.5)
Income (loss) from equity investees . (23.9) (17.9) -- -- 41.8 --
Other income (expense) - net ........ 24.2 4.5 -- (0.2) -- 28.5
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS ................ 1.1 (21.6) -- (19.0) 41.5 2.0
Provision for income taxes .......... -- (0.5) -- (0.3) -- (0.8)
Income (loss) before extraordinary
items .............................. 1.1 (22.1) -- (19.3) 41.5 1.2
Extraordinary loss on retirement of
debt ............................... (0.3) (0.2) -- (0.2) -- (0.7)
NET INCOME (LOSS) ................... 0.8 (22.3) -- (19.5) 41.5 0.5
Less preferred stock accretion ...... (6.0) -- -- -- -- (6.0)
INCOME (LOSS) APPLICABLE TO COMMON
STOCK .............................. $ (5.2) $ (22.3) $ -- $ (19.5) $ 41.5 $ (5.5)
</TABLE>
<TABLE>
<CAPTION>
TEREX COPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ................. $ (5.6) $ (1.5) $ -- $ (2.2) $ -- $ (9.3)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................. (3.9) (5.5) -- (3.3) -- (12.7)
Proceeds from sale of property, plant
and equipment ....................... -- 3.0 -- 0.3 -- 3.3
Proceeds from sale of Fruehauf stock . 24.9 -- -- -- -- 24.9
Proceeds from sale of Drexel business -- 10.3 -- -- -- 10.3
Proceeds from sale-leaseback of
Saarn property ...................... -- -- -- 10.0 -- 10.0
Other - net .......................... 1.0 -- -- -- -- 1.0
Net cash provided by (used in)
investing activities ................ 22.0 7.8 -- 7.0 -- 36.8
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements . 13.0 -- -- -- -- 13.0
Principal repayments of long-term debt (27.0) (6.5) -- (8.0) -- (41.5)
Other ................................ 0.2 -- -- -- -- 0.2
Net cash provided by financing
activities .......................... (13.8) (6.5) -- (8.0) -- (28.3)
Effect of exchange rates on cash and
cash equivalents ..................... -- -- -- 1.3 -- 1.3
Net increase (decrease) in cash and
cash equivalents ..................... 2.6 (0.2) -- (1.9) -- 0.5
Cash and cash equivalents, beginning
of period ........................... 1.1 0.2 -- 7.9 -- 9.2
Cash and cash equivalents, end of
period .............................. $ 3.7 $ -- $ -- $ 6.0 $ -- $ 9.7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET SALES ........................... $ 120.0 $ 370.4 $ -- $ 236.6 $ (56.7) $ 670.3
Cost of goods sold .................. 101.1 356.7 -- 214.4 (56.7) 615.5
GROSS PROFIT ........................ 18.9 13.7 -- 22.2 -- 54.8
Engineering, selling & administrative
expenses ........................... 16.6 51.2 -- 20.9 -- 88.7
Severance charges ................... -- -- -- -- -- --
INCOME (LOSS) FROM OPERATIONS ....... 2.3 (37.5) -- 1.3 -- (33.9)
Interest income ..................... 0.5 -- -- 0.7 -- 1.2
Interest expense .................... (3.7) (14.0) -- (13.5) -- (31.2)
Income (loss) from equity investees . (63.1) (9.5) -- -- 72.6 --
Other income (expense) - net ........ (1.8) (0.6) -- 1.4 -- (1.0)
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS ................ (65.8) (61.6) -- (10.1) 72.6 (64.9)
Provision for income taxes .......... 0.1 -- -- -- -- 0.1
Income (loss) before extraordinary
items .............................. (65.9) (61.6) -- (10.1) 72.6 (65.0)
Extraordinary loss on retirement of
debt ............................... (0.6) (0.4) -- (0.5) -- (1.5)
NET INCOME (LOSS) ................... (66.5) (62.0) -- (10.6) 72.6 (66.5)
Less preferred stock accretion ...... (0.2) -- -- -- -- (0.2)
INCOME (LOSS) APPLICABLE TO COMMON
STOCK .............................. $ (66.7) $ (62.0) $ -- $ (10.6) $ 72.6 $ (66.7)
</TABLE>
<TABLE>
<CAPTION>
TEREX COPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ................ $ (31.6) $ 6.2 $ -- $ (20.8) $ -- $ (46.2)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................. (1.3) (6.8) -- (3.4) -- (11.5)
Proceeds from sale of property, plant
and equipment ....................... 1.3 -- -- 10.0 -- 11.3
Proceeds from sale of Fruehauf stock . 2.5 -- -- -- -- 2.5
Other - net .......................... -- -- -- 1.1 -- 1.1
Net cash used in investing activities 2.5 (6.8) -- 7.7 -- 3.4
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements . 11.9 -- -- -- -- 11.9
Principal repayments of long-term debt (9.7) (1.2) -- (1.5) -- (12.4)
Issuance of preferred stock and
warrants ............................ 27.2 -- -- -- -- 27.2
Net cash provided by financing
activities .......................... 29.4 (1.2) -- (1.5) -- 26.7
Effect of exchange rates on cash and
cash equivalents .................... -- -- -- (0.4) -- (0.4)
Net increase (decrease) in cash and
cash equivalents .................... 0.3 (1.8) -- (15.0) -- (16.5)
Cash and cash equivalents, beginning
of period ........................... 0.8 2.0 -- 22.9 -- 25.7
Cash and cash equivalents, end of
period .............................. $ 1.1 $ 0.2 $ -- $ 7.9 $ -- $ 9.2
</TABLE>
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
For the Three Months
Ended March 31,
1996 1995
Net sales ........................................ $ 282.0 $ 214.2
Cost of goods sold ............................... 247.3 191.1
Gross profit ..................................... 34.7 23.1
Engineering, selling and
administrative expenses ......................... 23.9 17.1
Income from operations ........................... 10.8 6.0
Other income (expense):
Interest income .................................. 0.1 0.3
Interest expense ................................. (11.5) (7.0)
Gain on sale of Fruehauf stock ................... -- 1.0
Gain on sale of property, plant and equipment .... 2.4 0.1
Amortization of debt issuance costs .............. (0.6) (0.5)
Other income (expense) - net ..................... (0.7) (1.7)
Income (loss) before income taxes ................ 0.5 (1.8)
Provision for income taxes ....................... -- (0.1)
NET INCOME (LOSS) ................................ 0.5 (1.9)
Less preferred stock accretion ................... (1.9) (1.7)
Income (loss) applicable to common stock ....... $ (1.4) $ (3.6)
PER COMMON AND COMMON EQUIVALENT SHARE:
Net income (loss) ................................ $ (0.13) $ (0.35)
Weighted average common and common
equivalent shares outstanding (See Exhibit 11.1) . 10.6 10.3
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
March 31, December 31,
1996 1995
ASSETS
Current assets
Cash and cash equivalents ..............................$ 12.7 $ 7.8
Cash securing letters of credit ........................ 7.2 7.7
Trade receivables (less allowance of
$9.9 at March 31, 1996 and
$9.8 at December 31, 1995) ............................ 143.9 127.1
Customer deposit ....................................... 11.0 19.1
Net inventories ........................................ 243.3 249.3
Other current assets ................................... 17.1 15.2
Total current assets ................................... 435.2 426.2
Long-term assets
Property, plant and equipment - net .................... 95.3 101.3
Goodwill - net ......................................... 64.5 65.8
Other assets ........................................... 32.6 33.6
Total assets ...........................................$ 627.6 $ 626.9
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Notes payable ..........................................$ 7.5 $ 1.9
Current portion of long-term debt
and capital lease obligation .......................... 7.3 7.2
Trade accounts payable ................................. 162.2 161.0
Accrued compensation and benefits ...................... 18.0 16.8
Accrued warranties and product liability ............... 38.2 38.6
Accrued interest ....................................... 13.2 4.7
Accrued income taxes ................................... 0.5 1.4
Customer deposit ....................................... 11.0 19.1
Other current liabilities .............................. 38.8 44.0
Total current liabilities .............................. 296.7 294.7
Long-term liabilities
Long-term debt and capital lease
obligations less current portion ...................... 326.5 328.4
Accrued warranties and product
liability - long-term ................................. 34.2 33.1
Accrued pension ........................................ 18.9 18.9
Other long-term liabilities ............................ 16.3 16.6
Minority interest, including redeemable preferred
stock of a subsidiary (liquidation
preference $25.2, subject to adjustment) .............. 9.4 9.4
Redeemable convertible preferred stock
(liquidation preference $41.7 at March 31, 1996 and
$41.2 at December 31, 1995) ........................... 25.8 24.6
Commitments and contingencies
Stockholders' deficit
Warrants to purchase common stock ...................... 16.5 17.2
Common stock, $.01 par value -
authorized 30.0 shares;
issued and outstanding 10.6 at March 31, 1996
and 10.6 at December 31, 1995 ......................... 0.1 0.1
Additional paid-in capital ............................. 41.9 40.5
Accumulated deficit .................................... (152.3) (150.9)
Pension liability adjustment ........................... (2.7) (2.7)
Unrealized holding gain on equity securities ........... 0.2 1.0
Cumulative translation adjustment ...................... (3.9) (4.0)
Total stockholders' deficit............................. (100.2) (98.8)
Total liabilities and stockholders' deficit ............$ 627.6 $ 626.9
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the
Three Months
Ended March 31,
1996 1995
OPERATING ACTIVITIES
Net income (loss) ................................... $ 0.5 $ (1.9)
Adjustments to reconcile net income
(loss) to cash used in operating
activities:
Depreciation ........................................ 5.1 3.9
Amortization ........................................ 2.0 0.8
Gain on sale of property, plant and equipment........ (2.4) (0.1)
Gain on sale of Fruehauf stock ...................... -- (1.0)
Other ............................................... -- 0.3
Changes in operating assets and
liabilities:
Restricted cash ..................................... 0.5 2.5
Trade receivables ................................... (16.8) 7.5
Net inventories ..................................... 6.0 (16.3)
Trade accounts payable .............................. 1.2 12.8
Accrued interest .................................... 8.5 (4.9)
Other, net .......................................... (7.4) (4.1)
Net cash used in operating activities ............... (2.8) (0.5)
INVESTING ACTIVITIES
Capital expenditures ................................ (1.7) (1.9)
Proceeds from sale of property, plant and equipment . 3.3 0.5
Proceeds from sale of Fruehauf stock ................ -- 2.7
Other ............................................... -- (0.1)
Net cash provided by investing activities ........... 1.6 1.2
FINANCING ACTIVITIES
Net incremental borrowings under
revolving line of credit agreements ................ 5.2 0.5
Other ............................................... -- (0.6)
Net cash provided by (used in) financing activities . 5.2 (0.1)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS ....................... 0.9 1.4
NET INCREASE IN CASH AND CASH EQUIVALENTS ........... 4.9 2.0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .... 7.8 9.7
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......... $ 12.7 $ 11.7
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unless otherwise denoted)
March 31, 1996
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. The accompanying condensed consolidated financial
statements of Terex Corporation and subsidiaries as of March 31, 1996 and for
the three months ended March 31, 1996 and 1995 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles to be included in full year financial statements.
The accompanying condensed consolidated balance sheet as of December 31, 1995,
has been derived from the audited consolidated balance sheet as of that date.
The condensed 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."
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a normal
recurring nature. Certain 1995 amounts have been reclassified to conform with
the 1996 presentation. Operating results for the three months ended March 31,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
NOTE B -- INVENTORIES
Net inventories consist of the following:
March 31, December 31,
1996 1995
Finished equipment ............................... $ 62.8 $ 53.1
Replacement parts ................................ 82.5 94.5
Work-in-process .................................. 19.5 26.0
Raw materials and supplies ....................... 81.7 78.9
246.5 252.5
Less: Excess of FIFO inventory value of LIFO cost (3.2) (3.2)
Net inventories ................................. $ 243.3 $ 249.3
<PAGE>
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following:
March 31, December 31,
1996 1995
Property, plant and equipment ... $ 149.7 $ 153.9
Less: Accumulated depreciation .. (54.4) (52.6)
Net property, plant and equipment $ 95.3 $ 101.3
NOTE D -- LITIGATION AND CONTINGENCIES
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
effect on the Company. When it is probable that a loss has been incurred and
possible to make reasonable estimates of the Company's liability with respect to
such matters, a provision is recorded for the amount of such estimate or for the
minimum amount of a range of estimates when it is not possible to estimate the
amount within the range that is most likely to occur.
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 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 plus interest and penalties. If
the Company were required to pay a significant portion of the assessment, it
could have a material adverse impact on the Company and could exceed the
Company's resources. The Company has filed 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 the resolution of significant legal and factual issues. If the
Company's positions prevail on the most significant issues, management believes
that the amounts due would not exceed amounts previously paid or provided;
however, even under such circumstances, it is possible that the Company's NOL's
could be reduced to some extent. 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 plus interest and penalties and the ultimate outcome
cannot presently be determined or estimated. If a change in control for tax
purposes were to occur, such a change in control could possibly result in a
significant reduction in the amount of NOL's available to the Company to offset
future taxable income.
<PAGE>
NOTE E -- CONSOLIDATING FINANCIAL STATEMENTS
On May 9, 1995, the Company completed the refinancing of substantially all of
its outstanding debt (the "Refinancing") and, through Terex Cranes, Inc. ("Terex
Cranes"), a wholly-owned subsidiary, completed the acquisition of substantially
all of the outstanding stock of PPM. S.A. and Legris Industries, Inc.
Clark Material Handling Company, Terex Cranes, Inc., Koehring Cranes, Inc., CMH
Acquisition Corp., CMH Acquisition International Corp. (the "Wholly-owned
Guarantors"), and PPM Cranes, Inc. (collectively, the "Guarantors"), all
subsidiaries of Terex, provide a full, unconditional, joint and several
guarantee of the obligations under the Senior Secured Notes and will provide the
same guarantee for the obligations of any registered notes exchanged for the
Senior Secured Notes.
With the exception of PPM Cranes, Inc. and Clark Material Handling Company, each
of the Guarantors is a corporation organized and existing under the laws of the
state of Delaware and is a wholly-owned subsidiary of the Company. PPM Cranes,
Inc. is a corporation organized and existing under the laws of the state of
Delaware and is 92.4% owned by Terex. Clark Material Handling Company is a
corporation organized and existing under the laws of the Commonwealth of
Kentucky and is wholly-owned by Terex.
The following summarized condensed consolidating financial information for the
Company segregates the financial information of Terex Corporation, the
Wholly-owned Guarantors, PPM Cranes, Inc. and the Non-guarantor Subsidiaries.
Terex Corporation consists of parent company operations. Subsidiaries of the
parent company are reported on the equity basis.
Wholly-owned Guarantors combine the operations of the Wholly-owned Guarantor
Subsidiaries (Clark Material Handling Company, Terex Cranes, Inc., Koehring
Cranes, Inc., CMH Acquisition Corp. and CMH Acquisition International Corp.).
Non-guarantor subsidiaries of Wholly-owned Guarantors are reported on the equity
basis.
PPM Cranes, Inc. presents the operations of PPM Cranes, Inc. and its
subsidiaries (PPM Pty Ltd and PPM Far East Ltd) reported on an equity basis.
Non-Guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the Senior
Secured Notes. These subsidiaries include Terex Equipment Limited, Unit Rig
Australia (Pty) Ltd., Unit Rig South Africa (Pty) Ltd., Unit Rig (Canada) Ltd.,
Clark Material Handling GmbH, Clark Forklift Korea, PPM S.A., Bendini S.P.A.,
Brimont Agraire, PPM Kranes, Baulift, PPM Pty Ltd., and PPM Far East Ltd.
Debt and Goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1996
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............ $ 5.1 $ 0.1 $ 0.1 $ 7.4 $ -- $ 12.7
Cash securing letters of credit ...... 2.1 -- -- 5.1 -- 7.2
Trade receivables - net .............. 18.2 36.7 17.3 71.7 -- 143.9
Intercompany receivables ............. 0.3 5.8 1.2 40.6 (47.9) --
Customer deposit ..................... -- -- -- 11.0 -- 11.0
Inventories - net .................... 54.2 67.0 24.7 98.8 (1.4) 243.3
Other current assets ................. 1.3 0.2 0.2 15.4 -- 17.1
Total current assets ................. 81.2 109.8 43.5 250.0 (49.3) 435.2
Property, plant & equipment - net .... 8.6 23.4 3.4 59.9 -- 95.3
Investment in and advances to (from)
subsidiaries......................... 36.1 (76.5) (3.0) (114.0) 157.4 --
Goodwill - net ....................... -- 4.1 28.9 31.5 -- 64.5
Other assets ......................... 8.1 5.2 2.6 16.7 -- 32.6
TOTAL ASSETS ......................... $ 134.0 $ 66.0 $ 75.4 $ 244.1 $ 108.1 $ 627.6
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable and current portion,
long-term debt ...................... $ -- $ -- $ 0.9 $ 13.9 $ -- $ 14.8
Trade accounts payable ............... 14.8 51.0 7.8 88.6 -- 162.2
Intercompany payables ................ 19.7 11.2 6.8 10.2 (47.9) --
Customer deposit ..................... -- -- -- 11.0 -- 11.0
Accruals and other current liabilities 39.2 26.2 10.9 32.4 -- 108.7
Total current liabilities ............ 73.7 88.4 26.4 156.1 (47.9) 296.7
Long-term debt less current portion .. 117.9 48.0 51.5 109.1 -- 326.5
Other long-term liabilities .......... 13.1 35.0 0.6 20.7 -- 69.4
Minority interest and redeemable
preferred stock ..................... -- 9.4 -- -- -- 9.4
Redeemable convertible preferred stock 25.8 -- -- -- -- 25.8
Stockholders' deficit ................ (96.5) (114.8) (3.1) (41.8) 156.0 (100.2)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT ............................. $ 134.0 $ 66.0 $ 75.4 $ 244.1 $ 108.1 $ 627.6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET SALES ........................... $ 36.8 $ 110.9 $ 23.5 $ 133.2 $ (22.5) $ 282.0
Cost of goods sold .................. 32.8 97.6 20.3 117.6 (21.1) 247.3
GROSS PROFIT ........................ 4.0 13.3 3.2 15.6 (1.4) 34.7
Engineering, selling & administrative
expenses ........................... 3.5 8.0 1.8 10.6 -- 23.9
INCOME (LOSS) FROM OPERATIONS ....... 0.5 5.3 1.4 5.0 (1.4) 10.8
Interest income ..................... 0.1 -- -- -- -- 0.1
Interest expense .................... (4.7) (1.7) (1.6) (3.5) -- (11.5)
Income (loss) from equity investees . 6.2 (1.7) -- -- (4.5) --
Other income (expense) - net ........ (0.2) 0.1 (0.1) 1.3 -- 1.1
INCOME (LOSS) BEFORE INCOME TAXES ... 1.9 2.0 (0.3) 2.8 (5.9) 0.5
Provision for income taxes .......... -- -- -- -- -- --
NET INCOME (LOSS) ................... (1.9) 2.0 (0.3) 2.8 (5.9) 0.5
Less preferred stock accretion ...... (1.9) -- -- -- -- (1.9)
INCOME (LOSS) APPLICABLE TO COMMON
STOCK .............................. $ -- $ 2.0 $ (0.3) $ 2.8 $ (5.9) $ (1.4)
</TABLE>
<TABLE>
<CAPTION>
TEREX COPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996
(in millions)
Inter-
Wholly- Non- company
Terex owned PPM guarantor Elimi-
Corporation Guarantors Cranes, Subsidi- nations Consolidated
Inc. aries
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ............... $ 3.1 $ (2.2) $ (0.1) $ (3.6) $ -- $ (2.8)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................ (0.1) (0.9) -- (0.7) -- (1.7)
Proceeds from sale of property, plant
and equipment ...................... -- -- -- 3.3 -- 3.3
Net cash used in investing activities (0.1) (0.9) -- (2.6) -- 1.6
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
revolving line of credit agreements. (1.0) -- -- 6.2 -- 5.2
Net cash provided by financing
activities ......................... (1.0) -- -- 6.2 -- 5.2
Effect of exchange rates on cash and
cash equivalents ................... -- -- (0.1) 1.0 -- 0.9
Net increase (decrease) in cash and
cash equivalents ................... 2.0 (3.1) (0.2) 6.2 -- 4.9
Cash and cash equivalents, beginning
of period .......................... 3.1 3.2 0.3 1.2 -- 7.8
Cash and cash equivalents, end of
period ............................. $ 5.1 $ 0.1 $ 0.1 $ 7.4 $ -- $ 12.7
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
PPM S.A. and Legris Industries, Inc.
We have audited the accompanying combined balance sheets of PPM S.A. and Legris
Industries, Inc. as of December 31, 1994 and 1993, and the related combined
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the combined financial position of PPM
S.A. and Legris Industries, Inc. at December 31, 1994 and 1993, and the combined
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.
ERNST & YOUNG LLP
Greenville, South Carolina
August 22, 1995
<PAGE>
PPM S.A. and Legris Industries, Inc.
Combined Balance Sheets
December 31
1994 1993
------------- -------------
(In thousands except
share amounts)
Assets
Current assets:
Cash and cash equivalents...............$ 3,586 $ 2,152
Trade accounts receivable,
less allowances of
$2,861 and $2,181 in 1994 and
1993, respectively..................... 35,173 25,868
Due from affiliates..................... 1,705 1,869
Refundable taxes........................ 5,946 5,257
Inventories............................. 70,020 63,498
Prepaid expenses........................ 5,525 4,758
Other current assets.................... 32 81
------------- -------------
Total current assets..................... 121,987 103,483
Property, plant, and equipment, net...... 20,922 23,002
Intangible assets:
Cost in excess of net assets
acquired, less accumulated
amortization of $8,567 and
$6,871 in 1994 and 1993,
respectively........................... 34,951 36,540
Other identified intangible
assets, less accumulated
amortization of $871 and
$597 in 1994 and 1993,
respectively........................... 462 715
------------- -------------
35,413 37,255
------------- -------------
Total assets.............................$ 178,322 $ 163,740
============= =============
<PAGE>
PPM S.A. and Legris Industries, Inc.
Combined Balance Sheets
(continued)
December 31
1994 1993
------------- -------------
(In thousands except
share amounts)
Liabilities and shareholders'
equity Current liabilities:
Trade accounts payable.................... $ 43,963 $ 35,052
Due to affiliates......................... 6,200 3,027
Product liability reserve................. 4,850 4,432
Product warranty reserve.................. 1,526 753
Accrued expenses.......................... 15,215 16,352
Current portion of long-term debt and othe
short-term borrowings................... 72,689 37,044
Current portion of obligations
under capital leases..................... 925 731
------------- -------------
Total current liabilities................... 145,368 97,391
Long-term debt, less current portion........ 5,851 28,331
Obligations under capital leases,
less current portion....................... 2,896 3,308
Minority interest in subsidiaries........... 1,944 2,591
Shareholders' equity:
Common stock of Legris
Industries, Inc., $100 par value --
authorized, issued and outstanding
200 shares................................ --- ---
Common stock of PPM S.A.,
100 French Francs ($19)
par value -- authorized, issued and
outstanding 1,265,544 shares.............. --- ---
Paid-in capital............................ 90,491 81,209
Accumulated deficit........................ (65,079) (46,043)
Foreign currency translation adjustments... (3,149) (3,047)
------------- -------------
Total shareholders' equity.................. 22,263 32,119
------------- -------------
Total liabilities and shareholders' equity.. $ 178,322 $ 163,740
============= =============
See accompanying notes.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Combined Statements of Operations
Year Ended December 31
1994 1993 1992
----------- ----------- -----------
(In thousands)
Net Sales............................ $ 179,695 $ 191,236 $ 236,088
Cost of products sold................ (155,129) (175,072) (197,243)
Selling, general and
administrative expenses............. (35,673) (38,861) (49,862)
Amortization of intangible assets.... (1,970) (1,807) (2,074)
----------- ----------- -----------
Loss from operations................. (13,077) (24,504) (13,091)
Other income (expense):
Interest income................. 48 11 30
Interest expense................ (6,668) (8,293) (6,421)
Insurance proceeds.............. --- 6,177 1,122
----------- ----------- -----------
(6,620) (2,105) (5,269)
----------- ----------- -----------
Loss before income taxes
and minority interest............... (19,697) (26,609) (18,360)
Income tax (benefit) provision....... (14) 30 917
----------- ----------- -----------
Loss before minority interest........ (19,683) (26,639) (19,277)
Minority interest in loss
of consolidated subsidiaries........ 647 946 424
----------- ----------- -----------
Net loss............................. $ (19,036) $ (25,693) $ (18,853)
=========== =========== ===========
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
PPM S.A. and Legris Industries, Inc.
Combined Statements of Shareholders' Equity
Foreign
Currency
Common Stock Paid-In Accumulated Translation
Shares Amount Capital Deficit Adjustments Total
----------- ----------- ----------- ----------- ----------- -----------
(In thousands except share amounts)
Balance at
<S> <C> <C> <C> <C> <C> <C>
December 31, 1991 1,265,744 $ --- $ 71,242 $ (1,497) $ (62) $ 69,683
Capital contribution --- --- 3,500 --- --- 3,500
Conversion of debt
to paid-in capital --- --- 6,467 --- --- 6,467
Net loss......... --- --- --- (18,853) --- (18,853)
Translation
adjustment.... --- --- --- --- (2,443) (2,443)
----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1992 1,265,744 --- 81,209 (20,350) (2,505) 58,354
Net loss......... --- --- --- (25,693) --- (25,693)
Translation
adjustment.... --- --- --- --- (542) (542)
----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31,1993. 1,265,744 --- 81,209 (46,043) (3,047) 32,119
Conversion of debt
to paid-in capital --- --- 9,282 --- --- 9,282
Net loss......... --- --- --- (19,036) --- (19,036)
Translation
adjustment.... --- --- --- --- (102) (102)
----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1994 1,265,744 $ --- $ 90,491 $ (65,079) $ (3,149) $ 22,263
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Combined Statements of Cash Flows
Year Ended December 31
1994 1993 1992
----------- ----------- -----------
(In thousands)
Operating activities
Net loss.............................. $ (19,036) $ (25,693) $ (18,853)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and amortization....... 6,088 5,661 6,013
Changes in operating
assets and liabilities:
Accounts receivable............... (9,305) 11,824 13,992
Inventories....................... (6,522) 20,562 513
Prepaid expenses and other........ (1,407) 3,450 3,328
Accounts payable.................. 8,911 (14,911) (20,660)
Net amounts due to affiliates..... 3,009 (3,275) (6,257)
Product liability reserve......... 418 493 (3,123)
Accrued expenses and
product warranty reserve......... (364) (2,654) (208)
----------- ----------- -----------
Net cash used in operating activities. (18,208) (4,543) (25,255)
Investing activities
Purchases of property, plant
and equipment........................ (718) (1,683) (5,398)
(Increase) decrease in other
intangible assets.................... (128) 86 (247)
----------- ----------- -----------
Net cash used in investing activities. (846) (1,597) (5,645)
Financing activities
Proceeds from revolving
credit with banks and from
notes payable to an
affiliated company................... 27,141 51,280 28,573
Principal payments on revolving
credit with banks and on
notes payable to an
affiliated company................... (5,688) (43,239) (2,967)
Proceeds on other long-term debt...... 347 76 749
Principal payments on
other long-term debt................. --- (3,351) ---
Payments on capital leases............ (218) (160) ---
Capital contribution.................. --- --- 3,500
----------- ----------- -----------
Net cash provided by
financing activities................. 21,582 4,606 29,855
Effect of exchange rate
changes on cash...................... (1,094) 942 (461)
----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents............ 1,434 (592) (1,506)
Cash and cash equivalents
at beginning of period............... 2,152 2,744 4,250
----------- ----------- -----------
Cash and cash equivalents at
end of period........................ $ 3,586 $ 2,152 $ 2,744
=========== =========== ===========
Supplemental disclosure of
cash flow information
Cash paid for interest................ $ 6,763 $ 9,811 $ 7,667
=========== =========== ===========
Cash paid for income taxes............ $ 74 $ 948 $ 2,015
=========== =========== ===========
See accompanying notes.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements
December 31, 1994
(In thousands)
1. Basis of Presentation and Description of Business
Basis of Presentation
As more fully described in Note 13, Terex Corporation ("Terex"), through its
wholly owned subsidiary Terex Cranes, Inc. ("Terex Cranes"), completed the
acquisition of substantially all of the common stock of PPM S.A. ("PPM Europe")
and Legris Industries, Inc. ("PPM North America") on May 9, 1995. PPM North
America together with PPM Europe collectively are referred to as "PPM" or "the
Company". Prior to the acquisition, Legris Industries, Inc. was a wholly owned
subsidiary of Groupe Legris Industries S.A., a French corporation, and PPM S.A.
was owned 99.13% by Potain S.A., a majority owned subsidiary of Groupe Legris
Industries S.A. ("Groupe Legris").
The accompanying combined financial statements were prepared on the basis of
generally accepted accounting principles and include the combined financial
position, results of operations and cash flows of the businesses of PPM as
follows below (subsidiaries are 100% owned except as indicated). All significant
intercompany balances have been eliminated.
PPM S.A.
Brimont Agraire S.A.
Bendini SpA
PPM Krane GmbH
Baulift Baumaschiunen and Krane Handels GmbH
Legris Industries, Inc.
Potain Tower Cranes, Inc. (inactive)
PPM Cranes, Inc. (92.4%)
PPM of Australia Pty. Ltd. (92.4%)
PPM Far East Pte. Ltd. (92.4%)
Description of Business
PPM designs, manufactures and markets mobile cranes and container stackers
primarily in North America and Western Europe under the brand names of PPM, P&H
(trademark of Harnischfeger Corporation) and BENDINI.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand and overnight investments. Included in cash and cash equivalents is $512
at December 31, 1994 invested under repurchase agreements collateralized by U.
S. Treasury Notes. Securities pledged as collateral for repurchase agreements
are held by the Company's custodian bank until maturity of the repurchase
agreements. Provisions of the agreements ensure that the market value of this
collateral is sufficient in the event of default; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
2. Summary of Significant Accounting Policies (continued)
Accounts Receivable
The Company provides credit in the normal course of business and performs
ongoing credit evaluation on certain of its customers' financial condition, but
generally does not require collateral to support such receivable. Accounts
receivable potentially exposes the Company to concentration of credit risk,
because the Company's customers operate primarily in the construction industry.
The Company also establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends and
other information.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for inventories held in the United States, by
the first-in, first-out (FIFO) method for inventories of PPM of Australia Pty.
Ltd and PPM Far East Pte. Ltd., and by the weighted average method for
inventories of PPM S.A.
Property, Plant and Equipment
Additions and major replacements or improvements to property, plant and
equipment are recorded at cost. Maintenance, repairs and minor replacements are
charged to expense when incurred. Assets of PPM are depreciated using the
straight-line method over their estimated useful lives.
Intangible Assets
The excess of cost over fair value of net assets of businesses acquired
("goodwill") is amortized on the straight-line method over a period of twenty
years for Legris Industries, Inc. and fifteen years for PPM S.A. Other
identified intangibles are primarily patents and organizational costs which are
amortized over five years. The lives established for these assets are a
composite of many factors; accordingly, the Company evaluates the continued
appropriateness of these lives based upon the latest available economic factors
and circumstances.
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will not
be recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value of
the goodwill is reduced by the estimated shortfall of cash flows.
Product Warranty
PPM warrants that each finished machine is merchantable and free of defects in
workmanship and material for a period of up to one year or a specified period of
use. Warranty reserves have been established for estimated normal warranty costs
and for specific problems known to exist on products in use.
Product Liability
Reserves for product liability have been established based upon historical loss
experience for the estimated liability on incidents which have occurred but have
not yet been reported and for the estimated liability for reported incidents.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
2. Summary of Significant Accounting Policies (continued)
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). Under FAS 109, the deferred tax liabilities and assets are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes. A valuation
allowance is recognized if it is more likely than not that some portion or all
of a deferred tax asset will not be ultimately realized.
Revenue Recognition
Sales are recorded upon shipment or designation of specific goods for later
shipment at customers' request with related risk of ownership passing to such
customers.
Research and Development Costs
Company sponsored research and development costs related to both present and
future products are expensed currently. Total expenditures for research and
development for 1994, 1993 and 1992 were $2,669, $3,751 and $3,440,
respectively.
Translation of Foreign Currencies
The local currencies of the Company's foreign operations have been determined to
be the functional currencies in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation". Transactions in
foreign currencies are translated into United States dollars at average rates of
exchange prevailing during the period. Assets and liabilities denominated in
foreign currencies are translated at the year end exchange rates and resulting
translation adjustments are included as a separate component of shareholders'
equity. Gains and losses on foreign currency transactions are recognized in
earnings.
Shareholders' Equity
No amounts were paid as consideration for the issuance of common stock of PPM
S.A. and Legris Industries, Inc. Accordingly, no amounts have been assigned to
common stock in the financial statements.
3. Inventories
Inventories at December 31, 1994 and 1993 consist of the following:
1994 1993
---------- ---------
Raw materials and parts............$ 41,018 $ 37,767
Work in process.................... 15,139 11,275
Finished goods and subassemblies .. 13,091 14,103
Consigned inventory................ 772 353
---------- ---------
$ 70,020 $ 63,498
========== =========
At December 31, 1994 and 1993, approximately $26,308 and $24,618 of inventories
were valued using the LIFO method. These amounts are approximately equivalent to
the corresponding FIFO values at December 31, 1994 and 1993.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
1994 1993
---------- ---------
Land and improvements............... $ 2,080 $ 2,242
Buildings........................... 21,273 20,181
Machinery and equipment............. 31,504 29,083
---------- ---------
54,857 51,506
Less accumulated depreciation....... (33,935) (28,504)
---------- ---------
$ 20,922 $ 23,002
========== =========
Depreciation expense for 1994, 1993 and 1992 was $4,118, $3,854 and $3,939,
respectively.
5. Debt
Debt at December 31, 1994 and 1993 consists of the following:
1994 1993
---------- ---------
Non-interest bearing promissory note
payable to Harnischfeger Corporation with
annual payments of $1,000 through
April 10, 1996, annual payments of $750
beginning April 10, 1997 through
April 10, 2001 and quarterly payments of
$125 beginning April 10, 2001 through
maturity on April 10, 2011..................... $ 6,331 $ 6,776
Letter of credit with Credit Lyonnais
bearing interest at U.S. Prime
(8.5% at December 31, 1994) payable on demand.... 4,700 7,100
Indebtedness to Groupe Legris bearing
interest at 9% annually maturing May 31,
1996 with no scheduled principal payments
prior to that date............................. 686 686
Indebtedness to Groupe Legris bearing
interest at the Eurodollar rate plus .5%
(6.875% at December 31, 1994)
payable on demand............................. 11,500 ---
Indebtedness to Groupe Legris bearing
interest at the Eurodollar rate plus .5%
(6.875% at December 31, 1994) maturing
December 31, 1996 with no scheduled
principal payments prior to that date......... 6,000 6,000
Indebtedness to Groupe Legris bearing
interest at the Eurodollar rate plus .5%
(6.875% at December 31, 1994) maturing
April 10, 1996 with no scheduled
principal payments prior to that date......... $ 3,000 $ 3,000
Bank debt bearing interest at 10.75%.......... --- 179
Notespayable to Credit National bearing
interest at rates ranging from 8% to
15.5% with maturities ranging from
10 to 15 years................................. 815 1,154
Note payable to Credit CECA
over 5 years at 9.32%.......................... 2,170 1,968
Notes payable to Solirem bearing
interest at 8.5% and
10.24%, payable over 6 years................... 557 843
Note payable to Ministero
del'Industria over 10 years at 8.37%........... 366 373
Note payable to Credito Romagnolo
over 8 years at 10.93%......................... 295 292
Lines of credit due on demand
with various banks, bearing
interest at rates ranging from 5.8% to 7.4%.... 37,857 33,753
Other........................................... 4,263 3,251
---------- ---------
78,540 65,375
Less current portion............................ 72,689 37,044
---------- ---------
$ 5,851 $ 28,331
========== =========
Other than the note payable to Harnischfeger Corporation, all debt obligations
were satisfied in connection with the acquisition by Terex in May of 1995 (see
Note 13). Accordingly, all debt obligations other than the long-term portion of
the note payable to Harnischfeger Corporation have been classified as current.
The maturities of the note payable to the Harnischfeger Corporation for the five
years following December 31, 1994 and thereafter are as follows:
Year Payments
-------- -----------
1995 $ 480
1996 520
1997 312
1998 338
1999 366
Thereafter 4,315
----------
$ 6,331
==========
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
6. Employee Benefit Plan
Domestically, PPM Cranes, Inc. has a defined contribution plan covering its U.S.
employees. Under this plan, the Company matches a portion of an employee's
contribution to the plan. PPM Europe also maintains government required fully
funded retirement plans for its employees in France and Italy. For purposes of
these financial statements, all domestic and PPM Europe employees are considered
to have participated in a multi-employer pension plan as defined in Statement of
Financial Accounting Standards No. 87 "Employer's Accounting for Pensions". For
multi-employer plans, employers are required to recognize as net pension expense
total contributions for the period. With respect to these plans, PPM recorded a
net pension expense of $289 for 1994, $118 for 1993 and $82 for 1992.
7. Income Taxes
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The adoption had no impact on the financial statements of the Company.
(Loss) income before income taxes and minority interest consisted of the
following:
1994 1993 1992
--------- --------- ---------
Domestic................... $ (7,346) $ (11,179) $ (4,269)
Foreign.................... (12,351) (15,430) (14,091)
--------- --------- ---------
$ (19,697) $ (26,609) $ (18,360)
========= ========= =========
Significant components of the provision for income taxes are as follows:
1994 1993 1992
--------- --------- ---------
Current
Federal........... $ --- $ (5) $ 147
Foreign........... 5 72 836
--------- --------- ---------
5 67 983
Deferred:
Federal........... --- --- ---
Foreign........... (19) (37) (66)
--------- --------- ---------
$ (14) $ 30 $ 917
========= ========= =========
PPM has not provided U.S. and foreign income taxes on foreign undistributed
earnings which are being retained indefinitely for reinvestment. The
distribution of these earnings would result in additional foreign withholding
taxes and additional U.S. Federal income taxes to the extent they are not offset
by foreign tax credits, but it is not practicable to estimate the total tax
liability that would be incurred upon such a distribution.
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
7. Income Taxes (continued)
The income tax (benefit) provision at the effective tax rate differed from the
benefit at the statutory rate as follows:
1994 1993 1992
--------- --------- ---------
Computed tax (benefit) at expected
statutory rate................. $ (6,697) $ (9,047) $ (4,074)
State taxes......................... (315) (480) (183)
Valuation allowance................. 4,695 8,823 4,431
Nondeductible goodwill.............. 837 837 837
Adjustment of prior years' accruals. 1,548 --- ---
Foreign tax rate differential....... (82) (103) (94)
--------- --------- ---------
Income tax (benefit) provision...... $ (14) $ 30 $ 917
========= ========= =========
At December 31, 1994, PPM North America has net operating loss carryforwards for
Federal income tax purposes of approximately $50,550 available to offset future
taxable income, expiring from 1997 to 2008 if not used. PPM Europe has loss
carryforwards of approximately $21,665 at December 31, 1994, including
approximately $11,023 of carryforwards which have no fixed expiration date. The
remaining carryforwards will expire beginning in 1995.
The differences between the loss carryforwards for financial reporting and
income tax purposes result principally from differences between the income tax
basis and the financial reporting basis allocated to the net assets acquired and
differences in the methods of depreciating property, plant, and equipment. For
financial reporting purposes, a valuation allowance equal to the entire benefit
of the cumulative temporary differences and net operating loss carryforwards has
been recognized to offset the net deferred tax assets. For substantially all of
the valuation allowance for deferred tax assets, subsequently recognized tax
benefits will be allocated to reduce goodwill resulting from the acquisition of
PPM by Terex. Components of the Company's deferred taxes are as follows:
1994 1993
---------- ---------
Total deferred tax liabilities...... $ (3,030) $ (1,113)
Total deferred tax assets,
principally net operating
loss carryforwards................. 43,454 36,179
Total valuation allowance........... (40,424) (35,066)
---------- ---------
Net deferred taxes.................. $ --- $ ---
========== =========
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
8. Fair Value of Financial Instruments
The Company has estimated the fair value amounts of financial instruments as
required by Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", using available market information
and appropriate valuation methodologies. The carrying amount of cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
long-term debt are reasonable estimates of their fair value at December 31,
1994. However, considerable judgment is required in interpreting market data to
develop the carrying amounts of fair value. Accordingly, the carrying amounts
presented herein are not necessarily indicative of the amounts that the Company
would realize in a current market exchange.
9. Leases
PPM has various lease agreements, primarily related to office space, production
facilities, and office equipment, which are accounted for as operating leases.
Certain leases have renewal options and provisions requiring PPM to pay
maintenance, property taxes and insurance. Rent expense for 1994, 1993 and 1992
was $2,977, $2,433 and $3,401, respectively.
PPM Europe also leases buildings and machinery and equipment under capital
leases with terms of 1 to 10 years. Capitalized lease obligations are calculated
using interest rates appropriate at the inception of the lease. Amortization of
assets under capital leases is included with depreciation expense. Property,
plant and equipment includes the following amounts for leases that have been
capitalized:
1994 1993
---------- ---------
Buildings............................. $ 1,810 $ 1,642
Machinery and equipment............... 5,124 3,700
---------- ---------
6,934 5,342
Less accumulated depreciation......... (3,030) (1,603)
---------- ---------
Property, plant and equipment, net.... $ 3,904 $ 3,739
========== =========
Future minimum rental payments, by year and in the aggregate, under capital
leases and noncancellable operating leases as of December 31, 1994 are as
follows:
Capital Operating
Year Leases Leases
--------- ---------- ---------
1995.....................................$ 1,365 $ 1,796
1996..................................... 1,297 1,242
1997..................................... 1,248 890
1998..................................... 664 788
1999..................................... 380 505
2000 and thereafter...................... 2,847 272
---------- ---------
Total minimum lease payments.............$ 7,801 $ 5,493
=========
Amount representing interest............. (3,980)
----------
Present value of minimum lease payments..$ 3,821
==========
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
10. Commitments and Contingencies
PPM is involved in product liability and other lawsuits incident to the
operation of its business. Insurance coverages are maintained for claims and
lawsuits of this nature. At December 31, 1994 and 1993, the Company had a
reserve of $4,850 and $4,432 related to product liability matters, including
$200 at December 31, 1994 related to unasserted claims. Actual costs to be
incurred in the future may vary from the estimates, given the inherent
uncertainties in evaluating the outcome of claims and lawsuits of this nature.
Although it is difficult to estimate the liability of the Company related to
these matters, it is management's opinion that none of these lawsuits will have
a materially adverse effect on the Company's combined financial position.
PPM North America is a defendant in a lawsuit initiated by the bankruptcy
trustee for Century II GmbH, a former subsidiary of the Company, related to an
increase in capital. The amount of the claim is for $6,000. Groupe Legris has
indemnified the Company against all losses related to this claim.
PPM is contingently liable up to $1,027 with respect to financing arrangements
and performance guarantees entered into with banks and between certain banks and
certain dealers or customers of PPM.
11. Segment and Geographic Information
The Company operates in one business segment, designing, manufacturing and
marketing mobile cranes and container stackers primarily in North America and
Western Europe. Geographic data for the Company's operations are presented in
the following table. Intercompany sales and expenses are eliminated in
determining results for each operation.
1994 1993 1992
--------- --------- ---------
Net sales to
unaffiliated customers:
North America.......... $ 72,409 $ 71,984 $ 65,459
Europe................. 92,175 112,673 155,587
--------- --------- ---------
164,584 184,657 221,046
Sales to affiliates......... 15,111 6,579 15,042
--------- --------- ---------
$ 179,695 $ 191,236 $ 236,088
========= ========= =========
(Loss) from operations:
North America.......... $ (5,466) $ (9,729) $ (3,130)
Europe................. (7,611) (14,775) (9,961)
--------- --------- ---------
....................... $ (13,077) $ (24,504) $ (13,091)
========= ========= =========
Identifiable assets:
North America.......... $ 80,179 $ 74,710 $ 87,900
Europe................. 98,143 89,030 122,683
--------- --------- ---------
$ 178,322 $ 163,740 $ 210,583
========= ========= =========
<PAGE>
PPM S.A. and Legris Industries, Inc.
Notes to Combined Financial Statements (continued)
(In thousands)
12. Related Party Transactions
PPM had transactions with Groupe Legris and certain of its subsidiaries as
follows:
1994 1993 1992
--------- --------- ---------
Product sales and service revenues. $ 15,111 $ 6,579 $ 15,042
Purchases of inventory............. 23,613 17,860 13,515
Interest expense................... 3,230 2,529 3,038
Other charges...................... 4,493 2,772 4,333
13. Subsequent Events -- Acquisition by Terex and Financing Arrangements
(unaudited)
On May 9, 1995, Terex, through its wholly-owned subsidiary Terex Cranes,
completed the acquisition of 99.18% of the shares of PPM S.A., a societe anonyme
("PPM Europe"), from Potain S.A., a societe anonyme, and 100% of the capital
stock of Legris Industries, Inc., a Delaware corporation which owns 92.4% of the
capital stock of PPM Cranes, Inc., a Delaware corporation ("PPM North America")
from Legris Industries S.A., a societe anonyme ("Legris France"). PPM North
America together with PPM Europe collectively are referred to as "PPM". PPM
designs, manufactures and markets mobile cranes and container stackers primarily
in North America and Western Europe under the brand names of PPM, P&H (trademark
of Harnischfeger Corporation) and BENDINI.
The purchase price, together with amounts needed to repay indebtedness of PPM
required to be repaid in connection with the Acquisition, consisted of (i)
approximately $92.6 million in cash and (ii) shares of Series A Redeemable
Exchangeable Preferred Stock of Terex Cranes having an aggregate liquidation
preference of approximately $25.9 million, subject to adjustment (the "Seller
Preferred Stock"). The Seller Preferred Stock bears no dividend and is
mandatorily redeemable in seven years and three months from the date of
issuance. The Seller Preferred Stock may be redeemed at any time for cash (to
the extent permitted pursuant to the provisions of the Indenture for Terex's 13
1/4% Senior Secured Notes due 2002) or, under certain circumstances for shares
of common stock, par value $.01 per share (the "Cranes 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. Terex Cranes has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, Terex Cranes believes that the amount
of the Seller Preferred Stock could ultimately be reduced. In addition, the
liquidation preference and the redemption price of the Seller Preferred Stock
may be adjusted based upon the unit shipments of the mobile crane industry in
Western Europe during the second and third years following the consummation of
the Acquisition.
The funds for the cash portion of the purchase price and the repayment of debt
of the acquired businesses were obtained from the private placement on May 9,
1995 to institutional investors of units consisting of Terex's 13 1/4% Senior
Secured Notes due 2002 and common stock appreciation rights. The Senior Secured
Notes are secured by substantially all of the assets of Terex and its domestic
subsidiaries, including PPM North America, subject to security interests granted
under the Credit Facility as described below, and by liens on certain assets of
certain of Terex's foreign subsidiaries, including PPM Europe.
Simultaneously with the acquisition, Terex, PPM North America and certain other
domestic subsidiaries of Terex entered into a Credit Facility which provides
that the companies will be able to borrow (in the form of revolving loans and up
to $15 million in outstanding letters of credit) up to $100 million, subject to
borrowing base limitations. The Credit Facility is secured by substantially all
of the companies domestic receivables and inventory (including PPM North
America). The amount of borrowings is limited to the sum of the following: (i)
75% of the net amount of eligible receivables, as defined, of Terex's U.S.
businesses other than Clark Material Handling Company ("CMHC") plus (ii) 70% of
the net amount of CMHC eligible receivables, plus (iii) the lesser of 45% of the
value of eligible inventory, as defined, or 80% of the appraised orderly
liquidation value of eligible inventory, less (iv) any availability reserves
established by the lenders. The Credit Facility expires May 9, 1998 unless
extended by the lenders for one additional year. At the option of Terex,
revolving loans may be in the form of prime rate loans bearing interest at the
rate of l.75% per annum in excess of the prime rate and Eurodollar rate loans
bearing interest at the rate of 3.75% per annum in excess of the adjusted
Eurodollar rate.
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
STATEMENT OF OPERATIONS
(in millions)
January 1
through
May 9,
1995 1994
NET SALES ............................................ $ 64.9 $ 46.9
COST OF GOODS SOLD ................................... 66.6 40.1
Gross Profit ......................................... (1.7) 6.8
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES...... 14.1 10.7
Income (loss) from operations ........................ (15.8) (3.9)
OTHER INCOME (EXPENSE):
Interest expense ..................................... (2.3) (2.2)
Other income (expense) - net ......................... (2.3) --
Loss before income taxes and minority interest ....... (20.4) (6.1)
PROVISION FOR INCOME TAXES ........................... -- --
Loss before minority interest ........................ (20.4) (6.1)
Minority interest in loss of consolidated subsidiaries -- 0.2
NET LOSS ........................................... $ (20.4) $ (5.9)
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
BALANCE SHEETS
(in millions except share amounts)
May 9,
1995 1994
Assets:
Current assets:
Cash and cash equivalents .......................... $ 1.4 $ 3.8
Trade accounts receivable, less allowances of $3.1
and $2.3 in 1995 and 1994, respectively ........... 33.8 26.8
Due from affiliates................................. 1.6 1.8
Refundable taxes.................................... 6.1 5.5
Inventories, net.................................... 69.1 68.6
Other current assets................................ 12.1 13.0
Total current assets................................ 124.1 119.5
Property, plant and equipment, net.................. 20.3 22.3
Intangible assets:
Cost in excess of net assets acquired, less
accumulated amortization of $9.1 and $7.4 in
1995 and 1994, respectively ....................... 34.4 36.0
Other identified intangible assets, less accumulated
amortization of $1.0 and $0.7 in 1995 and 1994,
respectively ...................................... 0.4 0.6
34.8 36.6
Total assets ...................................... $ 179.2 $ 178.4
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
BALANCE SHEETS
(in millions except share amounts)
(continued)
May 9,
1995 1994
Liabilities and shareholders' equity
Current liabilities:
Trade accounts payable ............................ $ 41.7 $ 34.1
Due to affiliates ................................. 7.8
27.3
Product liability reserve ......................... 4.5
5.9
Product warranty reserve .......................... 1.4
2.4
Accrued expenses................................... 15.2 16.1
Current portion of long-term debt
and other short-term borrowings .................. 72.7 50.9
Other current liabilities ......................... 0.7
1.0
Total current liabilities.......................... 166.2 115.5
Long-term debt, less current portion............... 5.9 28.3
Other liabilities and obligations
under capital leases, less
current portion .................................. 3.4 6.0
Minority interest in subsidiaries ................. 1.9 2.4
Total liabilities ................................. 177.4 152.2
Shareholders' equity:
Common stock of Legris Industries, Inc.,
$100 par value -- authorized, issued
and outstanding 200 shares ....................... -- --
Common stock of PPM S.A., 100 French Francs
($19) par value -- authorized, issued
and outstanding 1,265,544 shares ................. -- --
Paid-in capital.................................... 90.5 81.2
Accumulated deficit................................ (85.5) (51.9)
Foreign currency translation adjustments........... (3.2) (3.1)
Total shareholders' equity......................... 1.8 26.2
Total liabilities and shareholders' equity ........ $ 179.2 $ 178.4
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
UNAUDITED CONDENSED COMBINED
STATEMENT OF CASH FLOWS
(in millions except share amounts)
January 1 through May 9,
1995 1994
Net cash provided by operating activities .............. $ (1.9) $ (12.0)
Investing activities
Purchases of property, plant and equipment ............. 0.3 0.2
Financing activities
Proceeds from revolving credit with banks and from notes
payable to an affiliated company, net .................. -- 13.9
Payments on capital leases ............................. (0.1) (0.1)
Net cash provided by financing activities .............. (0.1) 13.8
Effect of exchange rate changes on cash ................ (0.5) (0.4)
Net increase (decrease) in cash and cash equivalents ... (2.2) 1.6
Cash at beginning of period ............................ 3.6 2.2
Cash at end of period .................................. $ 1.4 $ 3.8
Supplemental disclosure of cash flow information
Cash paid for interest ................................. $ 2.3 $ 2.3
Cash paid for income taxes ............................. $ -- $ --
<PAGE>
PPM S.A. AND LEGRIS INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED COMBINED
FINANCIAL INFORMATION
Basis of Presentation
The accompanying unaudited condensed combined financial information of PPM S.A.
and Legris Industries, Inc. (collectively, "PPM") include the combined financial
position, results of operations and cash flows of the businesses of PPM as
follows below (subsidiaries are 100% owned except as indicated). All significant
intercompany balances have been eliminated.
PPM S.A.:
-- Brimont Agraire S.A.
-- Bendini SpA
-- PPM Krane GmbH
-- Baulift Baumaschinen and Krane Handels GmbH
Legris Industries, Inc.
-- Potain Tower Cranes, Inc. (inactive)
-- PPM Cranes, Inc. (92.4%)
-- PPM of Australia Pty. Ltd. (92.4%)
-- PPM Far East Pte. Ltd. (92.4%)
<PAGE>
TEREX CORPORATION
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
of the Company gives effect to the PPM Acquisition and the Refinancing as
described elsewhere in this Prospectus. The pro forma information is based on
the historical statements of operations of the Company for the year ended
December 31, 1995, giving effect to the PPM Acquisition and related financing
transactions and adjustments as reflected in the accompanying notes.
On May 9, 1995, the Company completed the PPM Acquisition. The purchase price,
together with amounts needed to repay indebtedness of PPM required to be repaid
in connection with the PPM Acquisition, consisted of (i) approximately $92.6
million in cash and (ii) shares of Series A Redeemable Exchangeable Preferred
Stock of Terex Cranes having an aggregate liquidation preference of
approximately $26.1 million, subject to adjustment calculated by reference to
the consolidated net asset value of PPM on the closing date of the PPM
Acquisition. A private placement of $250 million of the Company's 13.25% Senior
Secured Notes due 2002 provided the financing for the cash portion of the
purchase price. Proceeds of the Senior Secured Notes and of a new domestic
Credit Facility also provided funds for the refinancing of certain existing
Company debt (the "Refinancing"), for transaction and acquisition costs and for
working capital purposes.
The acquisition was accounted for using the purchase method, with the purchase
price of the PPM Acquisition allocated to the assets acquired and liabilities
assumed based upon their respective estimated fair values at the date of
acquisition. The pro forma consolidated financial information reflects the
Company's initial estimates of the purchase price allocation.
The unaudited pro forma consolidated financial information is not necessarily
indicative of what the actual results of operations of the Company would have
been for the period indicated, nor does it purport to represent the results of
operations for future periods.
<PAGE>
<TABLE>
<CAPTION>
TEREX CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(in millions except per share amounts)
Terex
Corporation Pro Forma Pro Forma
and Business Acquisition Refinancing
Subsidiaries Acquired Adjustments Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
NET SALES............................. $ 1,030.2 $ 64.9 $ 0.0 $ 0.0 $ 1,095.1
COST OF GOODS SOLD.................... 922.0 66.6 0.7 (2a) 0.0 989.3
---------- -------- ----------- ---------- ---------
Gross Profit..................... 108.2 (1.7) (0.7) 0.0 105.8
ENGINEERING, SELLING AND
ADMINISTRATIVE EXPENSES.......... 83.3 14.1 0.0 0.0 97.4
SEVERANCE AND EXIT
CHARGES.......................... 3.5 0.0 0.0 0.0 3.5
---------- -------- ----------- ---------- ---------
Income (loss) from operations.... 21.4 (15.8) (0.7) 0.0 4.9
OTHER INCOME (EXPENSE):
Interest income.................. 0.8 0.0 0.0 0.0 0.8
Interest expense................. (39.5) (2.3) 1.8 (2b) (5.7) (2d) (45.7)
Amortization of debt issuance costs (2.3) 0.0 0.0 (0.2) (2d) (2.5)
Gain on sale of Fruehauf stock... 1.0 0.0 0.0 0.0 1.0
Other income (expense) - net..... (9.1) (2.4) 0.0 0.0 (11.5)
---------- -------- ----------- ---------- ---------
Loss before extraordinary items
and income taxes............. (27.7) (20.5) 1.1 (5.9) (53.0)
PROVISION FOR INCOME TAXES............ 0.0 0.0 0.0 0.0 0.0
---------- -------- ----------- ---------- ---------
Loss before
extraordinary items.......... (27.7) (20.5) 1.1 (5.9) (53.0)
LESS PREFERRED STOCK
ACCRETION........................ (7.3) 0.0 (0.8) (2c) 0.0 (8.1)
---------- -------- ----------- ---------- ---------
LOSS BEFORE EXTRAORDINARY
ITEMS APPLICABLE TO
COMMON STOCK..................... $ (35.0) $ (20.5) $ 0.3 $ (5.9) $ (61.1)
========== ======== =========== ========== =========
PER SHARE............................. $ (3.37) $ (5.89)
========== =========
AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING IN
PER SHARE CALCULATION 10.4 10.4
========== =========
</TABLE>
<PAGE>
TEREX CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1) The unaudited pro forma condensed consolidated financial information is
presented for the years ended December 31, 1994 and 1995. The pro forma
statements of operations reflect the consolidated operations of the Company
combined with those of the acquired business assuming the PPM Acquisition and
the Refinancing were consummated on January 1, 1994.
2) The pro forma statement of operations adjustments are summarized as follows:
a) Pro forma acquisition adjustments to "Cost of goods sold" represent
the elimination of goodwill amortization of the business acquired and
the amortization of goodwill resulting from the PPM Acquisition over 15
years.
b) Pro forma acquisition adjustments to "Interest expense" represent
the elimination of interest expense relating to debt repaid in
connection with the PPM Acquisition or forgiven by the seller.
c) Pro forma acquisition adjustments to "Preferred stock accretion"
represent accretion on Terex Cranes redeemable preferred stock issued
in the PPM Acquisition, assuming issuance as of January 1, 1994.
d) The Refinancing provided the funds to finance the PPM Acquisition,
as well as funds to refinance certain existing Company debt and pay
refinancing and acquisition costs. The new Senior Secured Notes bear
interest at 13.25% and are due May 15, 2002. The Credit Facility loans
bear interest at 1.75% in excess of the prime rate or at 3.75% in
excess of the adjusted eurodollar rate, at the Company's option
(interest rate of 11%, including fees, assumed for pro forma
presentation); the Credit Facility expires May 9, 1998. The pro forma
adjustments to "Interest expense" and "Amortization of debt issuance
costs" represent the incremental effects of the Refinancing:
- The Company's old 13% senior secured notes and 13.5% senior
subordinated notes are assumed to be repaid as of January 1, 1994,
and the interest expense and related amortization of discount and
issuance costs is eliminated. - The 13.25% new Senior Secured
Notes are assumed to be issued and registered as of January 1,
1994 and interest expense and related amortization of discount and
issuance costs is included. - The incremental amount borrowed
under the Credit Facility at the time of the Refinancing is
assumed to be outstanding from January 1, 1994 and interest is
included thereon.
3) A pro forma condensed balance sheet is not presented herein because the PPM
Acquisition is reflected in the Company's Consolidated Balance Sheet as of
December 31, 1995. The estimated fair values of assets and liabilities acquired
in the PPM Acquisition are summarized as follows (in millions):
Cash $ 1.0
Accounts receivable 33.8
Inventories 69.1
Other current assets 11.9
Property, plant and equipment 20.5
Other assets 0.3
Goodwill 68.0
Accounts payable and other current liabilities (86.6)
Other liabilities (13.5)
----------
$ 104.5
==========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of PPM Cranes, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and shareholders' deficit and of cash
flows present fairly, in all material respects, the financial position of PPM
Cranes, Inc. and its subsidiaries at December 31, 1995, and the results of their
operations and their cash flows for the eight-month period then ended in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Stamford, Connecticut
March 22, 1996
<PAGE>
PPM Cranes, Inc.
Consolidated Balance Sheet
(in millions, except share amounts)
December 31,
1995
Assets
Current assets:
Cash ....................................................... $ 0.5
Trade accounts receivable, less allowance of $0.5 .......... 11.9
Net inventories ............................................ 25.0
Due from affiliates ........................................ 1.0
Prepaid expenses and other current assets .................. 0.6
Total current assets ....................................... 39.0
Property, plant and equipment, net ......................... 3.9
Intangible assets:
Goodwill, less accumulated amortization of $1.4 ............ 30.9
Other identified intangible assets,
less accumulated amortization of $0.3 .................... 2.8
Total assets ............................................. $ 76.6
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM Cranes, Inc.
Consolidated Balance Sheet
(in millions, except share amounts)
(continued)
December 31,
1995
Liabilities and shareholders' deficit Current liabilities:
Trade accounts payable ..................................... $ 5.5
Accrued product liability .................................. 6.3
Accrued product warranty ................................... 1.9
Accrued expenses ........................................... 4.1
Due to affiliates .......................................... 3.9
Due to Terex Corporation ................................... 2.1
Current portion of long-term debt .......................... 0.9
Total current liabilities .................................. 24.7
Non-current liabilities:
Long-term debt, less current portion ....................... 54.0
Other non-current liabilities .............................. 1.0
Total non-current liabilities .............................. 55.0
Commitments and contingencies (Note 8)
Shareholders' deficit:
Common stock, Class A, $.01 par value -- authorized
8,000 shares;
issued and outstanding 5,000 shares ........................ --
Common stock, Class B, $.01 par value -- authorized
2,000 shares;
issued and outstanding 413 shares .......................... --
Accumulated deficit ........................................ (3.2)
Foreign currency translation adjustments ................... 0.1
Total shareholders' deficit ................................ (3.1)
Total liabilities and shareholders' deficit ................ $ 76.6
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM Cranes, Inc.
Consolidated Statement of Operations
(in millions)
Eight Months Ended
December 31,
1995
Net sales .............................................. $ 57.1
Cost of products sold .................................. 49.4
Gross profit ........................................... 7.7
Engineering, selling and administrative expenses ....... 5.8
Income from operations ................................. 1.9
Interest expense ....................................... 4.8
Amortization of debt issuance costs .................... 0.3
Loss before income taxes ............................... (3.2)
Provision for income taxes ............................. 0.0
Net loss ............................................... $ (3.2)
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM Cranes, Inc.
Consolidated Statement of Shareholders' Deficit
(in millions)
Foreign
Currency
Common Accumulated Translation
Stock Deficit Adjustments Total
Balance at May 9, 1995 ......... $ -- $ -- $ -- $ --
Net loss ....................... -- (3.2) -- (3.2)
Translation adjustment ......... -- -- 0.1 0.1
Balance at December 31, 1995 ... $ -- $ (3.2) $ 0.1 $ (3.1)
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM Cranes, Inc.
Consolidated Statement of Cash Flows
(in millions)
Eight Months Ended
December 31, 1995
Operating activities
Net loss ....................................... $ (3.2)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization .................. 2.1
Changes in operating assets and liabilities:
Accounts receivable ............................ (3.3)
Net inventories ................................ 2.7
Prepaid expenses and other current assets ...... 0.4
Accounts payable ............................... (1.2)
Net amounts due to affiliates .................. 3.2
Accrued product liability ...................... (1.6)
Accrued warranty ............................... 0.6
Accrued expenses ............................... 0.3
Other (net) .................................... 0.3
Net cash provided by operating activities ...... 0.3
Investing activities
Purchases of property, plant and equipment ..... (0.2)
Financing activities
Effect of exchange rate changes on cash ........ 0.1
Net increase in cash and cash equivalents ...... 0.2
Cash at beginning of period .................... 0.3
Cash at end of period .......................... $ 0.5
Supplemental disclosure of cash flow information
Cash paid for interest ......................... $ --
Cash paid for income taxes ..................... $ --
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM Cranes, Inc.
Notes to Consolidated Financial Statements
December 31, 1995
(In millions of dollars)
1. Description of the Business and Basis of Presentation
PPM Cranes, Inc. (the "Company" or "PPM") is engaged in the design, manufacture,
marketing and worldwide distribution and support of construction equipment,
primarily hydraulic and lattice boom cranes and related spare parts.
On May 9, 1995 (the "date of acquisition"), Terex Corporation, through its
wholly-owned subsidiary Terex Cranes, Inc., completed the acquisition of all of
the capital stock of Legris Industries, Inc., a Delaware Corporation which owns
92.4% of the capital stock of PPM Cranes, Inc. Terex Corporation and Terex
Cranes, Inc., are both Delaware corporations.
The financial statements reflect Terex Corporation's basis in the assets and
liabilities of the Company which was accounted for as a purchase transaction. As
a result, the debt and goodwill associated with the acquisition have been
"pushed down" to the Company's financial statements.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries; PPM of Australia Pty. Ltd., and PPM Far East
Private Ltd., a Singapore company. All material intercompany transactions and
profits have been eliminated. During 1995, management closed the operations in
PPM Far East Private Ltd.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for domestic inventories and by the first-in,
first-out (FIFO) method for inventories of foreign subsidiaries. Approximately
94% of consolidated inventories at December 31, 1995 are accounted for under the
LIFO method.
Property, Plant and Equipment
Additions and major replacements or improvements to property, plant and
equipment are recorded at cost. Maintenance, repairs and minor replacements are
charged to expense when incurred. Assets of the Company are depreciated using
the straight-line method over their estimated useful lives, which range from
three to twenty years.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Excess of Cost Over Net Assets
Goodwill, representing the difference between the total purchase price and the
fair value of assets (tangible and intangible) and liabilities at the date of
acquisition, is amortized on a straight-line basis over fifteen years.
Accumulated amortization is $1.4 at December 31, 1995. It is the Company's
policy to periodically evaluate the carrying value of goodwill, and to recognize
impairments when the estimated related future net operating cash flows is less
than its carrying value. The amount of any impairment then recognized would be
calculated as the difference between estimated future discounted cash flows and
the carrying value of the goodwill.
Debt Issuance Costs
Debt issuance costs incurred by Terex Corporation in securing the financing
related to acquiring the Company have been capitalized and are reflected in the
financial statements. Capitalized debt issuance costs are amortized over the
term of the related debt.
Product Liability and Warranty
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 claims and for claims anticipated to
have been incurred which have not yet been reported. Prior to August 1, 1995,
the Company maintained product liability insurance; therefore, the product
liability accrual was equal to the estimated product liability less expected
recoveries under insurance policies. Product liability payments, including
expenses, are estimated to be approximately $2.0 per year.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
The Company is a part of a group that files a consolidated income tax return.
The method used to allocate income taxes to members of the group is one in which
current and deferred income taxes are calculated on a separate return basis as
if the Company had not been included in a consolidated income tax return with
its parent. The tax benefit associated with the acquisition debt has been taken
into account in the Company's tax provision.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
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.
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' Deficit. Gains or
losses resulting from foreign currency transactions were not material in 1995.
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, 1995 the Company had no material
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 were not material at December 31,
1995.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
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
$0.1 in 1995.
3. Inventories
Inventories at December 31, 1995 consist of the following:
1995
Raw materials and supplies $ 9.4
Work in process .......... 2.5
Replacement parts ........ 8.6
Finished goods equipment . 4.5
$ 25.0
At December 31, 1995 approximately 94% of inventories were valued using the LIFO
method. The LIFO value is approximately equivalent to the corresponding FIFO
value at December 31, 1995.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1995 consists of the following:
1995
Property .................... $ 0.1
Plant ....................... 1.6
Machinery and equipment ..... 2.6
4.3
Less accumulated depreciation 0.4
$ 3.9
Depreciation expense for 1995 was $0.4.
<PAGE>
5. Long Term Debt
Long-term debt is summarized as follows:
13.25% Senior Secured Notes due May 15, 2002 $ 49.4
Note payable ................................ 5.5
Total long-term debt ........................ 54.9
Current portion long-term debt .............. 0.9
Long-term debt less current portion ......... $ 54.0
The Senior Secured Notes
On May 9, 1995, Terex Corporation issued $250 of Senior Secured Notes due May
15, 2002. The Senior Secured Notes were issued in conjunction with Terex
Corporation's acquisition of substantially all of the capital stock of PPM
Cranes, Inc. and P.P.M. S.A. and the refinancing of Terex Corporation's debt. Of
the total amount $50 relates to the acquisition of substantially all of the
capital stock of PPM Cranes, Inc. and has been included in the Company's balance
sheet. Except in the event of certain asset sales, there are no principal
repayment or sinking fund requirements prior to maturity. The notes bear
interest at 13 3/4% per annum. Upon the earlier of (i) the consummation of an
exchange offer or (ii) the effectiveness of a Shelf Registration Statement, the
interest rate on the notes will decrease to 13 1/4% per annum.
Interest is computed on the basis of a 360-day year comprised of twelve 30-day
months.
Repayments of the Senior Secured Notes are guaranteed by certain domestic
subsidiaries of Terex Corporation (the "Guarantors"), including PPM Cranes, Inc.
The Senior Secured Notes are secured by a first priority security interest on
substantially all of the assets of Terex Corporation and the Guarantors, other
than cash and cash equivalents, except that as to accounts receivable and
inventory and proceeds thereof, and certain related rights, such security shall
be subordinated to liens securing obligations outstanding under any working
capital or revolving credit facility secured by such accounts receivable and
inventory. The indenture for the Senior Secured Notes places certain limits on
Terex Corporation's ability to incur additional indebtedness; permit the
existence of liens; issue, pay dividends on or redeem equity securities; sell
assets; consolidate, merge or transfer assets to another entity; and enter into
transactions with affiliates.
<PAGE>
5. Debt (continued)
Note payable - Harnischfeger Corporation
The note payable to Harnischfeger Corporation is not interest bearing and is
payable as follows:
1996 $ 1.0
1997 0.8
1998 0.8
1999 0.8
2000 0.8
Thereafter 5.7
9.9
Imputed Interest (4.4)
$ 5.5
Schedule of debt maturities
Scheduled annual maturities of long-term debt outstanding at December 31, 1995
in the successive five-year period are summarized as follows:
Pushed
Harnischfeger Down
Debt Debt Total
1996 $ 1.0 $ 0.0 $ 1.0
1997 0.8 0.0 0.8
1998 0.8 0.0 0.8
1999 0.8 0.0 0.8
2000 0.8 0.0 0.8
Thereafter 5.7 49.4 55.1
9.9 49.4 59.3
Imputed Interest (4.4) 0.0 (4.4)
$ 5.5 $ 49.4 $ 54.9
<PAGE>
6. Employee Benefit Plan
The Company participates in a defined contribution plan which is sponsored by
Terex Corporation. The plan covers U.S. employees. Under the plan, the Company
matches a portion of an employee's contribution to the plan. The related expense
to the Company was $0.1 for 1995.
7. Income Taxes
The components of income (loss) before income taxes consisted of the following:
1995
Domestic .............. $ (3.6)
Foreign ............... 0.4
$ (3.2)
The Company has no provision for federal, foreign and state income taxes
(benefit).
The Company has not provided deferred taxes on $1.0 of cumulative undistributed
earnings of foreign subsidiaries as of December 31, 1995 as these earnings will
be either permanently re-invested or remitted substantially free of additional
income tax.
Deferred tax assets and liabilities result from differences in the basis of
assets and liabilities for tax and financial statements purposes. In accordance
with SFAS No. 109, "Accounting for income taxes," a valuation allowance fully
offsetting the net deferred tax asset, has been recognized. The tax effects of
the basis differences and Net Operating Loss ("NOL") carryforward as of December
31, 1995 are summarized below:
1995
Total deferred tax liabilities ....... $ (0.2)
Inventory ............................ 2.4
Product liability .................... 2.2
Other ................................ 0.9
NOL carryforwards .................... 18.1
Total deferred tax assets ............ 23.6
Deferred tax asset valuation allowance (23.4)
Net deferred taxes ................. $ 0.0
<PAGE>
7. Income Taxes (continued)
The valuation allowance for deferred tax assets at acquisition date, May 9,
1995, was $22.7. Any future reduction of this valuation allowance attributable
to the pre-acquisition period will reduce goodwill. The net change in the
valuation allowance for the current year was an increase of $0.7.
At December 31, 1995, the Company has loss carryforwards for federal income tax
purposes of approximately $51.7 available to offset future taxable income. The
expiration of the Company's loss carryforwards are as follows:
Year Expiring Amount
2004 $ 21.9
2005 0.8
2006 5.8
2007 16.3
2008 5.8
2009 0.0
2010 1.1
Total $ 51.7
The utilization of approximately $50.7 of loss carryforwards is limited
annually, as a result of an "ownership change" (as defined by Section 382 of the
Internal Revenue code), which occurred in 1995. Further, the use of these
pre-acquisition losses is limited to future taxable income of PPM Cranes.
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. The reasons for the difference are
summarized below:
Statutory federal income tax rate ............... $ (1.1)
Utilization of foreign NOLs ..................... (0.1)
Goodwill ........................................ 0.5
NOL and basis differences with no current benefit 0.7
Total provision for income taxes ................ $ 0.0
There were no income taxes paid during 1995.
<PAGE>
8. Commitments and Contingencies
The Company has various lease agreements, primarily related to office space,
production facilities, and office equipment, which are accounted for as
operating leases. Certain leases have renewal options and provisions requiring
the Company to pay maintenance, property taxes and insurance. Rent expense for
1995 was $0.6.
Future minimum payments under noncancelable operating leases at December 31,
1995 are as follows:
1996 $ 0.8
1997 0.7
1998 0.6
1999 0.4
Thereafter 0.0
$ 2.5
The Company is involved in product liability and other lawsuits incident to the
operation of its business. Insurance with third parties is maintained for
certain of these items. It is management's opinion that none of these lawsuits
will have a materially adverse effect on the Company's financial position.
<PAGE>
9. Foreign Operations
Summarized financial data relating to the foreign subsidiaries included in the
accompanying consolidated financial statements at December 31, 1995 are as
follows:
Assets ............... $ 4.8
Liabilities .......... $ 2.5
Net loss ............. $ 0.5
Assets and liabilities of the Company's foreign subsidiaries are translated into
United States dollars at year-end exchange rates. Adjustments resulting from the
translation of financial statements of the foreign subsidiaries and translation
gains or losses related to long-term intercompany investments are included in
the foreign currency translation adjustments account in shareholders' deficit.
10. Related Party Transactions
During the eight months ended December 31, 1995 the Company had transactions
with various unconsolidated affiliates as follows:
Product sales and service revenues $ 1.2
Management fee expense ........... $ 0.7
Interest expense ................. $ 4.8
Included in management fee expense are expenses paid by Terex Corporation on
behalf of the Company (e.g. Legal, Treasury and Tax Expense).
<PAGE>
PPM CRANES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
For the Three
Months Ended
March 31, 1996
Net sales ...................................... $ 25.0
Cost of goods sold ............................. 21.3
Gross profit ................................... 3.7
Engineering, selling and administrative expenses 2.2
Income from operations ......................... 1.5
Other income (expense):
Interest expense ............................... (1.8)
Amortization of debt issuance costs ............ (0.1)
Loss before income taxes ....................... (0.4)
Provision for income taxes ..................... --
NET LOSS ...................................... $ (0.4)
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM CRANES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except share amounts)
March 31, 1996
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 0.2
Trade accounts receivables
(less allowance of $0.5).......................... 17.4
Net inventories.................................... 25.8
Due from affiliates ............................... 1.2
Prepaid expenses and other current assets ......... 0.2
Total current assets .............................. 44.8
Property, plant and equipment - net ............... 3.8
Goodwill - net..................................... 30.4
Other identified intangible assets - net .......... 2.7
Total assets ...................................... $ 81.7
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable ............................ $ 7.8
Accrued product liability and product warranty .... 8.5
Accrued expenses .................................. 4.0
Due to affiliates ................................. 6.8
Due to Terex Corporation .......................... 3.1
Current portion of long-term debt ................. 0.9
Total current liabilities ......................... 31.1
Non-current liabilities:
Long-term debt, less current portion .............. 54.1
Other non-current liabilities ..................... 0.1
Total non-current liabilities ..................... 54.2
Commitments and contingencies
Shareholders' deficit
Common stock, Class A, $.01 par value
- authorized 8,000 shares;
issued and outstanding 5,000 shares............... --
Common stock, Class B, $.01 par value
- authorized 2,000 shares;
issued and outstanding 413 shares ................ --
Accumulated deficit................................ (3.6)
Foreign currency translation adjustment ........... --
Total shareholders' deficit ....................... (3.6)
Total liabilities and shareholders' deficit ....... $ 81.7
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM CRANES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the
Three
Months
Ended
March 31,
1996
OPERATING ACTIVITIES
Net loss ...................................................... $ (0.4)
Adjustments to reconcile net income (loss)
to cash used in operating activities:
Depreciation and amortization.................................. 0.7
Changes in operating assets
and liabilities:
Trade accounts receivable ..................................... (5.5)
Net inventories ............................................... (0.8)
Prepaid expenses and other current assets ..................... 0.4
Trade accounts payable ........................................ 2.3
Net amounts due to affiliates ................................. 3.7
Accrued product liability and product warranty ................ 0.3
Accrued expenses .............................................. (0.1)
Other, net .................................................... (0.8)
Net cash used in operating activities ......................... (0.2)
INVESTING ACTIVITIES
Net cash provided by investing activities...................... --
FINANCING ACTIVITIES
Net cash provided by financing activities...................... --
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS .. (0.1)
NET DECREASE IN CASH AND CASH EQUIVALENTS ..................... (0.3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............. 0.5
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................... $ 0.2
The accompanying notes are an integral part of these financial statements.
<PAGE>
PPM Cranes, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 1996
(In millions unless otherwise denoted)
1. Description of the Business and Basis of Presentation
PPM Cranes, Inc. (the "Company" or "PPM") is engaged in the design, manufacture,
marketing and worldwide distribution and support of construction equipment,
primarily hydraulic and lattice boom cranes and related spare parts.
On May 9, 1995 (the "date of acquisition"), Terex Corporation, through its
wholly-owned subsidiary Terex Cranes, Inc., completed the acquisition of all of
the capital stock of Legris Industries, Inc., a Delaware Corporation which owns
92.4% of the capital stock of PPM Cranes, Inc. Terex Corporation and Terex
Cranes, Inc., are both Delaware corporations.
The condensed consolidated financial statements reflect Terex Corporation's
basis in the assets and liabilities of the Company which was accounted for as a
purchase transaction. As a result, the debt and goodwill associated with the
acquisition have been "pushed down" to the Company's financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a
recurring nature. Operating results for the three months ended March 31, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries; PPM of Australia Pty. Ltd., and PPM Far East
Private Ltd., a Singapore company. All material intercompany transactions and
profits have been eliminated. During 1995, management closed the operations in
PPM Far East Private Ltd.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for domestic inventories and by the first-in,
first-out (FIFO) method for inventories of foreign subsidiaries.
Property, Plant and Equipment
Additions and major replacements or improvements to property, plant and
equipment are recorded at cost. Maintenance, repairs and minor replacements are
charged to expense when incurred. Assets of the Company are depreciated using
the straight-line method over their estimated useful lives, which range from
three to twenty years.
Excess of Cost Over Net Assets
Goodwill, representing the difference between the total purchase price and the
fair value of assets (tangible and intangible) and liabilities at the date of
acquisition, is amortized on a straight-line basis over fifteen years. It is the
Company's policy to periodically evaluate the carrying value of goodwill, and to
recognize impairments when the estimated related future net operating cash flows
is less than its carrying value. The amount of any impairment then recognized
would be calculated as the difference between estimated future discounted cash
flows and the carrying value of the goodwill.
Debt Issuance Costs
Debt issuance costs incurred by Terex Corporation in securing the financing
related to acquiring the Company have been capitalized and are reflected in the
financial statements. Capitalized debt issuance costs are amortized over the
term of the related debt.
<PAGE>
Product Liability and Warranty
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 claims and for claims anticipated to
have been incurred which have not yet been reported. Prior to August 1, 1995,
the Company maintained product liability insurance; therefore, the product
liability accrual was equal to the estimated product liability less expected
recoveries under insurance policies.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
The Company is a part of a group that files a consolidated income tax return.
The method used to allocate income taxes to members of the group is one in which
current and deferred income taxes are calculated on a separate return basis as
if the Company had not been included in a consolidated income tax return with
its parent. The tax benefit associated with the acquisition debt has been taken
into account in the Company's tax provision.
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.
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 Shareholders' Deficit.
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.
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.
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.
<PAGE>
3. Inventories
Inventories at March 31, 1996 consist of the following:
Raw materials and supplies $ 10.8
Work in process .......... 0.5
Replacement parts ........ 8.7
Finished goods equipment . 5.8
$ 25.8
The LIFO value is approximately equivalent to the corresponding FIFO value at
March 31, 1996.
4. Property, Plant and Equipment
Net property, plant and equipment at March 31, 1996 consists of the following:
Property, plant and equipment ..... $ 4.1
Less accumulated depreciation ..... (0.3)
Net property, plant and equipment.. $ 3.8
5. Contingencies
The Company is involved in product liability and other lawsuits incident to the
operation of its business. Insurance with third parties is maintained for
certain of these items. It is management's opinion that none of these lawsuits
will have a materially adverse effect on the Company's financial position.
<PAGE>
Financial Statements
PPM Cranes, Inc.
Three years ended December 31, 1994
with Report of Independent Auditors
PPM Cranes, Inc.
Consolidated Financial Statements
Three years ended December 31, 1994
Contents
Report of Independent Auditors 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Report of Independent Auditors
The Board of Directors and Shareholders
PPM Cranes, Inc.
We have audited the accompanying consolidated balance sheets of PPM Cranes, Inc.
as of December 31, 1994 and 1993, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1994. 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 did not audit the
financial statements of PPM of Australia Pty. Ltd., a wholly-owned subsidiary,
which statements reflect total assets of 3.5% and 3.0T as of December 31, 1994
and 1993, respectively, and total revenues of 5.3%, 4.2% and 5.5% for each of
the three years in the period ended December 31, 1994. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for PPM of Australia Pty. Ltd.
is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of PPM Cranes, Inc. at December 31, 1994 and
1993, and the consolidated 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.
Greenville, South Carolina
August 22, 1995
PPM Cranes, Inc.
Consolidated Balance Sheets
December 31
1994 1993
(In thousands of dollars
except share amounts)
Assets
Current Assets:
Cash and cash equivalents ............... $ 2,124 $ 850
Trade accounts receivable, less
allowance of $268 and $429 in
1994 and 1993, respectively ............ 10,293 5,827
Due from affiliates ..................... 185 633
Inventories ............................. 27,523 25,446
Prepaid expenses and other current assets 897 911
------- -------
Total current assets ..................... 41,022 33,667
Property, plant, and equipment, net ...... 4,550 4,606
Intangible assets:
Cost in excess of net assets acquired,
less accumulated amortization of
$8,739 and $6,592 in 1994 and 1993,
respectively ........................... 36,852 38,999
Other identified intangible assets,
less accumulated amortization of $731
and $502 in 1994 and 1993, respectively 413 642
------- -------
37,265 39,641
------- -------
Total assets ............................. $82,837 $77,914
======= =======
December 31
1994 1993
(In thousands of dollars
except share amounts)
Liabilities and shareholders' equity
Current liabilities:
Trade accounts payable ................. $ 5,518 $ 5,655
Due to affiliates ...................... 4,526 2,373
Product liability reserve .............. 4,850 4,432
Product warranty reserve ............... 616 299
Accrued interest ....................... 1,610 1,157
Accrued expenses ....................... 1,884 1,208
Bank overdraft ......................... 350 113
Current portion of long-term debt ...... 32,155 150
-------- --------
Total current liabilities ............... 51,509 15,387
Long-term debt, less current portion .... 5,851 28,927
Shareholders' equity:
Common stock, Class A, $.01 par value
-- authorized 8,000 shares;
issued and outstanding 5,000 shares ... -- --
Common stock, Class B, $.01 par value
-- authorized 2,000 shares;
issued and outstanding 413 shares ..... -- --
Additional paid-in capital ............. 52,782 52,782
Accumulated deficit .................... (27,274) (18,791)
Foreign currency translation adjustments (31) (391)
-------- --------
Total shareholders' equity .............. 25,477 33,600
-------- --------
Total liability and shareholders' equity $ 82,837 $ 77,914
======== ========
See accompanying notes
PPM Cranes, Inc.
Consolidated Statements of Operations
Year Ended December 31
1994 1993 1992
(In thousands of dollars)
Net sales ....................... $ 74,814 $ 74,125 $ 69,797
Cost of products sold ........... 65,470 68,581 58,584
Selling, general, and
administrative expenses ........ 12,990 13,545 12,319
Amortization of intangible assets 2,376 2,397 2,550
-------- -------- --------
Loss from operations ............ (6,022) (10,398) (3,656)
Other (income) expense:
Interest expense ............... 2,509 2,021 1,777
Interest income ................ (48) (12) (28)
-------- -------- --------
Loss before income taxes ........ (8,483) (12,407) (5,405)
Income tax (benefit) provision .. -- (5) 147
-------- -------- --------
Net loss ........................ $ (8,483) $(12,402) $ (5,552)
======== ======== ========
See accompanying notes
<TABLE>
<CAPTION>
PPM Cranes, Inc.
Consolidated Statements of Shareholders' Equity
Foreign
Additional Accumu- Currency
Common Stock Paid-in lated Translation
Shares Amount Capital Deficit Adjustments Total
(In thousands of dollars, except share amounts)
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1991 5,000 $-- $ 49,282 $ (837) $ (62) $ 48,383
Issuance of
common stock
-- Class B .... 413 -- 3,500 -- -- 3,500
Net loss ....... -- -- -- (5,552) -- (5,552)
Translation
adjustment for
period ........ -- -- -- -- (295) (295)
-------- ----- -------- -------- -------- --------
Balance at
December 31, 1992 5,413 -- 52,782 (6,389) (357) 46,036
Net loss ....... -- -- -- (12,402) -- (12,402)
Translation
adjustment .... -- -- -- -- (34) (34)
-------- ----- -------- -------- -------- --------
Balance at
December 31, 1993 5,413 -- 52,782 (18,791) (391) 33,600
Net loss ....... -- -- -- (8,483) -- (8,483)
Translation
adjustment .... -- -- -- -- 360 360
-------- ----- -------- -------- -------- --------
Balance at
December 31, 1994 5,413 $-- $ 52,782 $(27,274) $ (31) $ 25,477
======== ===== ======== ======== ======== ========
</TABLE>
PPM Cranes, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31
1994 1993 1992
(In thousands of dollars)
Operating activities
Net loss ................................... $ (8,483) $(12,402) $ (5,552)
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization ............ 3,144 3,211 3,225
Changes in operating assets and
liabilities:
Accounts receivable ..................... (4,466) 927 4,415
Inventories ............................. (2,077) 7,455 (2,139)
Prepaid expenses and other .............. 14 (135) (567)
Accounts payable ........................ (137) (174) (1,070)
Net amounts due to affiliates ........... 2,601 -- --
Product liability reserve ............... 418 493 (3,123)
Product warranty reserve ................ 317 (117) (433)
Accrued expenses ........................ 1,129 (471) (968)
-------- -------- --------
Net cash used in operating activities ...... (7,540) (1,213) (6,212)
Investing activities
Purchases of property, plant,
and equipment ............................. (712) (1,061) (1,271)
Increase in other intangible assets ........ -- -- --
-------- -------- --------
Net cash used in investing activities ...... (712) (1,061) (1,632)
Financing activities
Proceeds from revolving credit
with banks ................................ 237 35,028 8,999
Principal payments on revolving
credit with banks ......................... (179) (35,409) (8,631)
Proceeds from notes payable to
parent company ............................ 20,408 10,025 3,142
Principal payments on notes payable
to parent company ......................... (11,300) (6,925) --
Proceeds from sale of common stock ......... -- -- 3,500
-------- -------- --------
Net cash provided by financing
activities ................................ 9,166 2,719 7,010
Effect of exchange rate changes on cash .... 360 (34) (57)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents ...................... 1,274 411 (891)
Cash and cash equivalents at
beginning of period ....................... 850 439 1,330
-------- -------- --------
Cash and cash equivalents at
end of period ............................. $ 2,124 $ 850 $ 439
======== ======== ========
Supplemental disclosure of cash flow
information
Cash paid for interest ..................... $ 2,203 $ 2,024 $ 1,974
======== ======== ========
Cash paid for income taxes ................. $ -- $ 130 $ 100
======== ======== ========
See accompanying notes.
PPM Cranes, Inc.
Notes to Consolidated Financial Statements
December 31, 1994
(In thousands of dollars)
1. Basis of Presentation and Description of Business
Basis of Presentation
As more fully described in Note 13 (unaudited), Terex Corporation ("Terex"),
through its wholly owned subsidiary Terex Cranes, Inc. ("Terex Cranes"),
completed the acquisition of substantially all of the common stock of Legris
Industries, Inc. ("Legris"), a Delaware corporation on May 9,1995. Prior to the
acquisition, PPM Cranes, Inc. ("the Company"), a Delaware corporation, was owned
92.4% by Legris, which in turn was wholly owned by Legris Industries S.A., a
French corporation. The remaining 7.6% of the Company is owned by Harnischfeger
Corporation from whom the business was purchased in 199 1.
The Company has two classes of capital stock issued and outstanding - common
Class A and common Class B. These are equal in all respects except that Class B
(to be issued exclusively toHamischfeger Corporation) is entitled to elect one
director and Class A is entitled to elect the remaining directors.
The accompanying consolidated financial statements were prepared on the basis of
generally accepted accounting principles and include the consolidated financial
position, results of operations and cash flows of the Company and its wholly
owned subsidiaries, PPM of Australia Pty. Ltd. and PPM Far East Pte. Ltd. All
significant intercompany balances have been eliminated.
Description of Business
The Company operates in one business segment - the design, manufacture,
marketing and worldwide distribution and support of construction equipment,
primarily hydraulic and lattice boom cranes and related spare parts.
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand and overnight investments. Included in cash and cash equivalents is $512
at December 31, 1994 invested under repurchase agreements collateralized by U.
S. Treasury Notes. Securities pledged as collateral for repurchase agreements
are held by the Company's custodian bank until maturity of the repurchase
agreements. Provisions of the agreements ensure that the market value of this
collateral is sufficient in the event of default; however, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
2. Summary of Significant Accounting Policies
Accounts Receivable
The Company provides credit in the normal course of business and performs
ongoing credit evaluation on certain of its customers' financial condition, but
generally does not require collateral to support such receivable. Accounts
receivable potentially exposes the Company to concentration of credit risk,
because the Company's customers operate primarily in the construction industry.
The Company also establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends and
other information.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for domestic inventories and by the first-in,
first-out (FIFO) method for inventories of foreign subsidiaries.
Property, Plant and Equipment
Additions and major replacements or improvements to property, plant and
equipment are recorded at cost. Maintenance, repairs and minor replacements are
charged to expense when incurred. Assets of the Company are depreciated using
the straight-line method over their estimated useful lives.
Intangible Assets
The excess of cost over fair value of net assets of businesses acquired
("goodwill") is amortized on the straight-line method over a period of twenty
years. Other identified intangibles are primarily organizational costs which are
amortized over five years. The lives established for these assets are a
composite of many factors; accordingly, the Company evaluates the continued
appropriateness of these lives based upon the latest available economic factors
and circumstances.
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will not
be recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value of
the goodwill is reduced by the estimated shortfall of cash flows.
Product Warranty
The Company warrants that each finished machine is merchantable and free of
defects in workmanship and material for a period of up to one year or a
specified period of use. Warranty reserves have been established for estimated
normal warranty costs and for specific problems known to exist on products in
use.
Product Liability
Reserves for product liability have been established based upon historical loss
experience for the estimated liability on incidents which have occurred but have
not yet been reported and for the estimated liability for reported incidents.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). Under FAS 109, the deferred tax assets and liabilities are
determined based on temporary differences between the basis of certain assets
and liabilities for income tax and financial reporting purposes.
The Company is a part of a group that files a consolidated income tax return.
The method used to allocate income taxes to members of the group is one in which
current and deferred income taxes are allocated on a separate return basis as if
the Company had not been included in a consolidated income tax return with its
parent.
Revenue Recognition
Sales are recorded upon shipment or designation of specific goods for later
shipment at customers' request with related risk of ownership passing to such
customers.
Research and Development Costs
Company sponsored research and development costs related to both present and
future products are expensed currently. Total expenditures for research and
development for 1994, 1993 and 1992 were $1,576, $1,937 and $2,063,
respectively.
Translation of Foreign Currencies
The local currencies of the Company's foreign operations have been determined to
be the functional currencies in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation". Transactions in
foreign currencies are translated into United States dollars at average rates of
exchange prevailing during the period. Assets and liabilities denominated in
foreign currencies are translated at the year end exchange rates. Gains and
losses on foreign currency transactions are recognized in earnings. Adjustments
resulting from the translation of financial statements of the foreign
subsidiaries and translation gains or losses related to long-term intercompany
investments are included in the foreign currency translation adjustments account
in shareholders' equity.
Reclassifications
Certain reclassifications were made to the 1993 and 1992 financial statements to
conform to the 1994 presentation.
3. Inventories
Inventories at December 31, 1994 and 1993 consist of the following:
1994 1993
Raw materials and parts ........ $18,647 $17,906
Work in process ................ 5,876 3,994
Finished goods and subassemblies 2,228 3,193
Consigned inventory ............ 772 353
------- -------
$27,523 $25,446
======= =======
At December 31, 1994 and 1993, approximately $26,308 and $24,618 of inventories
were valued using the LIFO method. These amounts are approximately equivalent to
the corresponding FIFO values at December 31, 1994 and 1993.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and 1993 consists of the
following:
1994 1993
Land and improvements ....... $ 98 $ 98
Buildings ................... 2,318 2,191
Machinery and equipment ..... 5,116 4,531
------- -------
7,532 6,820
Less accumulated depreciation (2,982) (2,214)
------- -------
$ 4,550 $ 4,606
======= =======
Depreciation expense for 1994, 1993 and 1992 was $768, $814 and $675,
respectively.
5. Debt
At December 31, 1994 and 1993, PPM Far East Pte. Ltd. has a bank overdraft of
approximately $350 and $113, respectively. This overdraft is collateralized by a
building located in Singapore and a guarantee of PPM and bears interest based on
various bank benchmark rates.
Long-term debt at December 31, 1994 and 1993 consists of the following:
1994 1993
Notes payable to Legris $ 38,006 $ 28,898
Note payable to bank .. -- 179
-------- --------
38,006 29,077
Less current maturities (32,155) (150)
-------- --------
$ 5,851 $ 28,927
======== ========
Approximately $12,686 of the indebtedness to Legris bears interest at an annual
fixed rate of 9%. The remainder of this indebtedness bears interest at annual
rates based on various bank benchmark rates ranging from 6.875% to 8.5% at
December 31, 1994. At December 31, 1993, Legris represented to the Company that
this indebtedness should be classified as long-term. In connection with the
acquisition by Terex on May 9, 1995 (see Note 13), all debt obligations of
Legris and its subsidiaries, other than a note payable to Harnischfeger
Corporation, were satisfied. Accordingly, all debt obligations other than the
long-term portion of the note payable toHamischfeger Corporation have been
classified as current at December 31, 1994.
The maturities of the note payable to the Harnischfeger Corporation for the five
years following December 31, 1994 and thereafter are as follows:
Year Payments
1995 $ 480
1996 520
1997 312
1998 338
1999 366
Thereafter 4,315
$6,331
6. Employee Benefit Plan
The Company has a defined contribution plan covering its U. S. employees. Under
this plan, the Company matches a portion of an employee's contribution to the
plan. 'Me related expense to the Company was $119, $118 and $82 for 1994, 1993
and 1992, respectively.
7. Income Taxes
Effective January 1, 1992, the Company adopted the provisions of Statement of
FAS 109. There was no cumulative effect of this change in accounting for income
taxes on the consolidated financial statements.
(Loss) income before income taxes consisted of the following:
1994 1993 1992
Domestic ................. $ (8,703) $(11,980) $ (5,566)
Foreign .................. 220 (427) 161
-------- -------- --------
$ (8,483) $(12,407) $ (5,405)
======== ======== ========
Federal, foreign, and state income taxes (benefit) consisted of the following:
1994 1993 1992
Federal ...................... $-- $-- $--
Foreign ...................... -- (5) 147
State ........................ -- -- --
----- ----- -----
$-- $ (5) $ 147
===== ===== =====
The Company has not provided U.S. income taxes for undistributed earnings of
foreign subsidiaries which are considered to be retained indefinitely for
reinvestment. The distribution of these earnings would result in additional
foreign withholding taxes and additional U.S. Federal income taxes to the extent
they are not offset by foreign tax credits, but it is not practicable to
estimate the total tax liability that would be incurred upon such a
distribution.
The income tax (benefit) provision at the effective rate differed from the
benefit at the statutory rate as follows:
1994 1993 1992
Computed tax (benefit) at
expected statutory rate ................... $(2,884) $(4,218) $(1,838)
State taxes ................................ (364) (620) (270)
Change in state tax rate ................... 165 -- --
Increase in valuation allowance ............ 426 2,182 2,147
Nondeductible goodwill ..................... 837 852 --
Adjustment of prior years' estimated
deferred tax accruals ..................... 1,548 1,620 --
Foreign taxes .............................. -- (5) 147
Meals and entertainment .................... 20 12 13
Other ...................................... 252 172 (52)
------- ------- -------
Income tax (benefit) provision ............. $ -- $ (5) $ 147
======= ======= =======
At December 31, 1994, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $50,532 available to offset future
taxable income, which included net operating losses of approximately $2,000 that
existed at the date the business was acquired. The differences between the loss
carryforwards for financial reporting and income tax purposes result principally
from differences between the income tax basis and the financial reporting basis
allocated to the net assets acquired and differences in the methods of
depreciating property, plant, and equipment. For financial reporting purposes, a
valuation allowance equal to the entire benefit of the cumulative temporary
differences and net operating loss carryforwards has been recognized to offset
the net deferred tax assets. Components of the Company's deferred taxes at
December 31, 1994 and 1993 are as follows:
1994 1993
Total deferred tax liabilities ................. $ (2,253) $ (277)
Total deferred tax assets, principally
net operating loss carryforwards .............. 25,663 23,261
Total valuation allowance ...................... (23,410) (22,984)
-------- --------
Net deferred taxes ............................. $ -- $ --
======== ========
The expiration of the Company's net operating loss carryforwards are as follows:
Year Expiring Amount
2003 $493
2004 667
2005 22,421
2006 835
2007 5,837
2008 15,125
2009 5,154
-------
$50,532
=======
8. Commitments and Contingencies
The Company has various lease agreements, primarily related to office space,
production facilities, and office equipment, which are accounted for as
operating leases. Certain leases have renewal options and provisions requiring
the Company to pay maintenance, property taxes and insurance. Rent expense for
1994, 1993 and 1992 was $1,148, $1,079 and $656, respectively.
Future minimum payments under noncancelable operating leases at December 31,
1994 are as follows:
1995 $904
1996 620
1997 537
1998 508
1999 303
Thereafter 75
-------
2,947
=======
The Company is involved in product liability and other lawsuits incident to the
operation of its business. Insurance coverages and accruals are maintained for
claims and lawsuits of this nature. At December 31, 1994 and 1993, the Company
had a reserve of $4,850 and $4,432 related to product liability matters,
including $200 at December 31, 1994 related to unasserted claims. Actual costs
to be incurred in the future may vary from the estimates, given the inherent
uncertainties in evaluating the outcome of claims and lawsuits of this nature.
Although it is difficult to estimate the liability of the Company related to
these matters, it is management's opinion that none of these lawsuits will have
a materially adverse effect on the Company's financial position.
The Company is contingently liable up to $1,027 with respect to financing
arrangements and performance guarantees entered into with banks and between
certain banks and certain dealers or customers of the Company.
9. Foreign Operations
Summarized financial data relating to the foreign subsidiaries included in the
accompanying consolidated financial statements at December 31, 1994, 1993 and
1992 are as follows:
1994 1993 1992
Assets .............................. $ 4,832 $ 4,071 $ 4,879
Liabilities ............................ 1,584 830 1,010
Net income (loss) ...................... 220 (422) 14
10. Related Party Transactions
In addition to borrowings from Legris (see Note 5), the Company had transactions
with various unconsolidated affiliates as follows:
1994 1993 1992
Product sales and service revenues ...... $ 2,405 $ 2,141 $ 4,338
Purchases of inventory .................. 14,876 10,531 3,344
Management fee expense .................. 1,500 1,500 331
Interest expense ........................ 2,470 1,643 1,697
11. Subsequent Events - Acquisition by Terex and Financing Arrangements
(unaudited)
On May 9, 1995, Terex, through its wholly-owned subsidiary Terex Cranes,
completed the acquisition of 99.18% of the shares of PPM S.A., a societe
anonyme, from Potain S.A., a societe anonyme, and 100% of the capital stock of
Legris, which owns 92.4% of the capital stock of PPM Cranes, Inc., from Legris
Industries S.A., a societe anonyme. PPM Cranes, Inc. together with PPM S.A.
collectively are referred to as "PPM". PPM designs, manufactures and markets
mobile cranes and container stackers primarily in North America and Western
Europe under the brand names of PPM, P&H (trademark of Harnischfeger
Corporation) and BENDINI.
The purchase price, together with amounts needed to repay indebtedness of PPM
required to be repaid in connection with the Acquisition, consisted of (i)
approximately $92.6 million in cash and (ii) shares of Series A Redeemable
Exchangeable Preferred Stock of Terex Cranes having an aggregate liquidation
preference of approximately $25.9 million, subject to adjustment (the "Seller
Preferred Stock"). The Seller Preferred Stock bears no dividend and is
mandatorily redeemable in seven years and three months from the date of
issuance. The Seller Preferred Stock may be redeemed at any time for cash (to
the extent permitted pursuant to the provisions of the Indenture for Terex's 13
1/4% Senior Secured Notes due 2002) or, under certain circumstances for shares
of common stock, par value $.01 per share (the "Cranes 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. Terex Cranes has not
yet reached agreement with the sellers about the amount of purchase price
adjustment but, based on work performed, Terex Cranes believes that the amount
of the Seller Preferred Stock could ultimately be reduced. In addition, the
liquidation preference and the redemption price of the Seller Preferred Stock
may be adjusted based upon the unit shipments of the mobile crane industry in
Western Europe during the second and third years following the consummation of
the Acquisition.
The funds for the cash portion of the purchase price and the repayment of debt
of the acquired businesses were obtained from the private placement on May 9,
1995 to institutional investors of units consisting of Terex's 13 1/4% Senior
Secured Notes due 2002 and common stock appreciation rights. The Senior Secured
Notes are secured by substantially all of the assets of Terex and its domestic
subsidiaries, including PPM Cranes, Inc., subject to security interests granted
under the Credit Facility as described below and by liens on certain of Terex's
foreign subsidiaries, including PPM S.A.
Simultaneously with the acquisition, Terex, PPM Cranes, Inc. and certain other
domestic subsidiaries of Terex entered into a Credit Facility which provides
that the companies will be able to borrow (in the form of revolving loans and up
to $15 million in outstanding letters of credit) up to $100 million, subject to
borrowing base limitations and subject to participation commitments to be
obtained from additional lenders. The Credit Facility is secured by
substantially all of the companies domestic receivables and inventory (including
PPM Cranes, Inc.). The amount of borrowings is limited to the sum of the
following: (i) 75% of the net amount of eligible receivables, as defined, of
Terex's U.S. businesses other than Clark Material Handling Company ("CMHC") plus
(ii) 70% of the net amount of CMHC eligible receivables, plus (iii) the lesser
of 45% of the value of eligible inventory, as defined, or 80% of the appraised
orderly liquidation value of eligible inventory, less (iv) any availability
reserves established by the lenders. The Credit Facility expires May 9, 1998
unless extended by the lenders for one additional year. At the option of Terex,
revolving loans may be in the form of prime rate loans bearing interest at the
rate of 1.75% per annum in excess of the prime rate and Eurodollar rate loans
bearing interest at the rate of 3.75% per annum in excess of the adjusted
Eurodollar rate.
<TABLE>
<CAPTION>
TEREX CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Amounts in millions)
Additions
Balance Balance
Beginning Charges to End of
of Year Earnings Other Deductions(1) Year
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $ 6.1 $ 6.3 $-- $ (2.6) $ 9.8
Reserve for excess and obsolete inventory ................ 21.1 8.7 0.3(2) (9.5) 20.6
Totals ................................................... $ 27.2 $ 15.0 $ 0.3 $ (12.1) $ 30.4
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $ 7.5 $ 1.0 $-- $ (2.4) $ 6.1
Reserve for excess and obsolete inventory ................ 20.7 7.6 -- (7.2) 21.1
Totals ................................................... $ 28.2 $ 8.6 $-- $ (9.6) $ 27.2
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts ....................... $ 6.3 $ 1.7 $-- $ (0.5) $ 7.5
Reserve for excess and obsolete inventory ............. 22.4 7.5 -- (9.2) 20.7
Totals .................................................... $ 28.7 $ 9.2 $-- $ (9.7) $ 28.2
<FN>
(1) Utilization of established reserves, net of recoveries.
(2) Added with the acquisition of businesses.
</FN>
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") and Article IX of
the Company's By-laws provide for the indemnification of the Company's directors
and officers in a variety of circumstances, which may include liabilities under
the Securities Act.
Article IX of the Company's By-laws generally requires the Company to indemnify
its directors and officers against all liabilities (including judgments,
settlements, fines and penalties) and reasonable expenses incurred in connection
with the investigation, defense, settlement or appeal of any type of action,
whether instituted by a third party or a stockholder (either directly or
derivatively) and including specifically, but without limitation, actions
brought under the Securities Act and/or the Exchange Act; provided that no such
indemnification will be allowed if such director or officer was not successful
in defending against any such action and it is determined that the director or
officer engaged in misconduct which constitutes (i) a willful breach of his or
her "duty of loyalty" (as further defined therein) to the Company or its
stockholders; (ii) acts or omissions not in "good faith" (as further defined
therein) or which involve intentional misconduct or a knowing violation of law;
(iii) the payment of an illegal dividend or the authorization of an unlawful
stock repurchase in violation of Delaware law; or (iv) a transaction from which
the executive derived a material improper personal financial profit.
As permitted by Section 102(b)(7) of the DGCL, the Company's Certificate of
Incorporation, as amended, contains a provision which eliminates the personal
liability of a director to the Company and its stockholders for certain breaches
of his or her fiduciary duty of care as a director. This provision does not,
however, eliminate or limit the personal liability of a director (i) for any
breach of such director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under the Delaware statutory
provision making directors personally liable, under a negligence standard, for
unlawful dividends of unlawful stock repurchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision offers persons who serve on the Board of Directors of the Company
protection against awards of monetary damages resulting from negligent (except
as indicated above) and "grossly" negligent actions taken in the performance of
their duty of care, including grossly negligent business decisions made in
connection with takeover proposals for the Company. As a result of this
provision, the ability of the Company or a stockholder thereof to successfully
prosecute an action against a director for a breach of his duty of care has been
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The Securities and Exchange Commission (the "Commission") has
taken the position that the provision will have no effect on claims arising
under the Federal securities laws.
The Company maintains a directors' and officers' insurance policy which insures
the officers and directors of the Company from any claim arising out of an
alleged wrongful act by such persons in their respective capacities as officers
and directors of the Company.
Item 21. Exhibits and Financial Statement Schedules
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 (incorporated by reference to Exhibit 3.3 to the Form
10-K for the year ended December 31, 1994 of Terex Corporation, Commission
File No. 1-10702).
4.1 Indenture dated as of May 9, 1995 among the Company, the Guarantors
referred to therein and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.7 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
4.2 Form of 13-1/4% Senior Secured Notes Due 2002 of Terex Corporation
(incorporated by reference to Exhibit 4.6 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
4.3 Debt Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers (incorporated by reference to Exhibit 10.30 of
the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
4.4 Security and Pledge Agreement dated as of May 9, 1995 between the Company
and United States Trust Company of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.32 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
4.5 Subsidiary Security and Pledge Agreement dated as of May 9, 1995 between
certain subsidiaries of the Company and United States Trust Company of New
York, as Collateral Agent (incorporated by reference to Exhibit 10.33 of
the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
4.6 Form of Real Estate Mortgage, dated May 9, 1995, in favor of the Collateral
Agent, covering real estate owned by Terex Corporation or a subsidiary
thereof. *
4.7 Loan and Security Agreement dated as of May 9, 1995 among Terex
Corporation, Clark Material Handling Company, Koehring Cranes, Inc. and PPM
Cranes, Inc. and Congress Financial Corporation and Foothill Capital
Corporation, for itself and as agent (incorporated by reference to Exhibit
10.34 of the Amendment No. 1 to the Form S-1 Registration Statement of
Terex Corporation, Registration No. 33-52711).
4.8 Guarantee dated as of May 9, 1995 from Terex Corporation, Koehring Cranes,
Inc., PPM Cranes, Inc. and CMH Acquisition Corp. and Legris Industries,
Inc. (incorporated by reference to Exhibit 10.35 of the Amendment No. 1 to
the Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
4.9 Guarantee dated as of May 9, 1995 from Terex Corporation, Clark Material
Handling Company, PPM Cranes, Inc. and CMH Acquisition Corp. and Legris
Industries, Inc. (incorporated by reference to Exhibit 10.36 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
4.10 Guarantee dated as of May 9, 1995 from Terex Corporation, Clark Material
Handling Company, Koehring Cranes, Inc. and CMH Acquisition Corp. and
Legris Industries, Inc. (incorporated by reference to Exhibit 10.37 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
4.11 Guarantee dated as of May 9, 1995 from Clark Material Handling Company,
Koehring Cranes, Inc., PPM Cranes, Inc. and CMH Acquisition Corp. and
Legris Industries, Inc. (incorporated by reference to Exhibit 10.38 of the
Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
5.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP as to the
legality of the notes being registered.**
10.1 Terex Corporation Incentive Stock Option Plan, as amended (incorporated by
reference to Exhibit 4.1 to the Form S-8 Registration Statement of Terex
Corporation, Registration No. 33-21483).
10.2 1994 Terex Corporation Long Term Incentive Plan (incorporated by reference
to Exhibit 10.2 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.3 Terex Corporation Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10Registration 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).
10.11Series B Preferred Stock and Warrants Registration Rights Agreement
(incorporated by reference to Exhibit 10.27 to the Form 10-K for the year
ended December 31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.12Credit 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).
10.13Amended 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
(incorporated by reference to Exhibit 10.33 to the Form 10-K for the year
ended December 31, 1994 of Terex Corporation, Commission File No. 1-10702).
10.14Share Purchase Agreement, as amended, between Terex Cranes, Inc. and
Legris Industries, S.A. and Potain, S.A. (incorporated by reference to
Exhibit 10.1 to the From 8-K for May 9, 1995, Commission File No. 1-10702).
10.15Stockholders Agreement dated as of May 9, 1995 by and among Terex
Corporation, Legris Industries S.A., Potain S.A. and Terex Cranes, Inc.
(incorporated by reference to Exhibit 10.3 to the From 8-K for May 9, 1995,
Commission File No. 1-10702).
10.16Purchase Agreement, dated as of April 27, 1995, among Terex Corporation
(the "Company"), certain of its subsidiaries and Jefferies & Company, Inc.
("Jefferies") and Dillon, Read & Co. Inc. (together with Jefferies, the
"Purchasers") (incorporated by reference to Exhibit 10.28 of the Amendment
No. 1 to the Form S-1 Registration Statement of Terex Corporation,
Registration No. 33-52711).
10.17Common Stock Appreciation Rights Agreement dated as of May 9, 1995 between
the Company and United States Trust Company of New York, as Rights Agents
(incorporated by reference to Exhibit 10.29 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
10.18SAR Registration Rights Agreement dated as of May 9, 1995 among the
Company and the Purchasers (incorporated by reference to Exhibit 10.31 of
the Amendment No. 1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52711).
10.19Agreement dated as of November 2, 1995 between Terex Corporation, a
Delaware corporation, and Randolph W. Lenz (incorporated by reference to
Exhibit 10 to the Form 10-Q for the quarter ended September 30, 1995,
Commission File No. 1-10702).
10.20Warrant 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).
10.211996 Terex Corporation Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.40 of the Amendment No. 3 to the Form S-1 Registration
Statement of Terex Corporation Registration No. 33-52297).
11.1 Computation of per share earnings. *
12.1 Computation of ratio of earnings to fixed charges.*
21.1 Subsidiaries of Terex Corporation (incorporated by reference to Exhibit
21.1 of the Amendment No. 3 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. *
23.2 Independent Auditors' Consent of Ernst & Young LLP -- Greenville, South
Carolina. *
23.3 Independent Accountants' Consent of Price Waterhouse -- Melbourne,
Australia and the Independent Audit Report referred to therein.*
23.4 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP (included as
part of the Exhibit 5.1). **
24.1 Power of Attorney. *
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1. *
99.1 Form of Letter of Transmittal. *
99.2 Form of Notice of Guaranteed Delivery. *
- --------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
(b) Financial Statement Schedules:
Terex Corporation
Report of Price Waterhouse LLP (included as part of Exhibit 23.1)
Schedule II -- Valuation and Qualifying Accounts and Reserves
All other schedules are omitted as the required information is inapplicable or
the information is presented in the consolidated financial statements or related
notes.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such requests, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
TEREX CORPORATION
By: /s/ Ronald M.DeFeo *
Name: Ronald M. DeFeo
Title: President, Chief Executive Officer
and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Ronald M. DeFeo * President, Chief Executive Officer, June 12, 1996
Ronald M. DeFeo Chief Operating Officer and Director
(Principal Executive Officer)
/s/ David J. Langevin Executive Vice President June 12, 1996
David J. Langevin (Acting Principal Financial Officer)
/s/Joseph F. Apuzzo Vice President-Finance and Controller June 12, 1996
Joseph F. Apuzzo (Principal Accounting Officer)
/s/Marvin B. Rosenberg Senior Vice President, General Counsel, June 12, 1996
Marvin B. Rosenberg Secretary and Director
/s/G. Chris Andersen * Director June 12, 1996
G. Chris Andersen
/s/William H. Fike * Director June 12, 1996
William H. Fike
/s/Bruce I. Raben * Director June 12, 1996
Bruce I. Raben
/s/David A. Sachs * Director June 12, 1996
David A. Sachs
/s/Adam E. Wolf * Director June 12, 1996
Adam E. Wolf
* By /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
TEREX CRANES, INC.
By: /s/ Fil Filipov *
Name: Fil Filipov
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Fil Filipov * President June 12, 1996
Fil Filipov (Principal Executive Officer)
/s/David J. Langevin * Vice President, Treasurer June 12, 1996
David J. Langevin and Director
(Principal Financial
and Accounting Officer)
/s/ Marvin B. Rosenberg Vice President, Secretary June 12, 1996
Marvin B. Rosenberg and Director
/s/Ronald M. Defeo * Director June 12, 1996
Ronald M. Defeo
* By /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
PPM CRANES, INC.
By: /s/ Fil Filipov *
Name: Fil Filipov
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Fil Filipov * President June 12, 1996
Fil Filipov (Principal Executive Officer)
/s/David J. Langevin * Vice President, Treasurer June 12, 1996
David J. Langevin and Director
(Principal Financial
and Accounting Officer)
/s/Marvin B. Rosenberg Vice President, Secretary June 12, 1996
Marvin B. Rosenberg and Director
/s/Ronald M. DeFeo * Director June 12, 1996
Ronald M. DeFeo
Director
K. Thor Lundgren
* By /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
KOEHRING CRANES, INC.
By: /s/ Fil Filipov *
Name: Fil Filipov
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Fil Filipov * President June 12, 1996
Fil Filipov (Principal Executive Officer)
/s/David J. Langevin * Vice President, Treasurer and Director June 12, 1996
David J. Langevin (Principal Financial and
Accounting Officer)
/s/Marvin B. Rosenberg Vice President, Secretary and Director June 12, 1996
Marvin B. Rosenberg
/s/Ronald M. DeFeo * Director June 12, 1996
Ronald M. DeFeo
* By /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
CLARK MATERIAL HANDLING COMPANY
By: /s/ Martin Dorio *
Name: Martin Dorio
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Martin Dorio * President and Chief Executive Officer June 12, 1996
Martin Dorio (Principal Executive Officer)
/s/Joseph F. Lingg * Vice President Finance June 12, 1996
Joseph F. Lingg (Principal Financial and
Accounting Officer)
/s/Marvin B. Rosenberg Secretary and Director June 12, 1996
Marvin B. Rosenberg
* By /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
CMH ACQUISITION CORP.
By: /s/ Ronald M. DeFeo *
Name: Ronald M. DeFeo
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Ronald M. DeFeo * President June 12, 1996
Ronald M. DeFeo (Principal Executive, Financial and
Accounting Officer)
/s/Marvin B. Rosenberg Vice President, Secretary and Director June 12, 1996
Marvin B. Rosenberg
* By /s/ Marvin B. Rosenberg
Marvin B. Rosenberg
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Westport,
Connecticut, on June 12, 1996.
CMH ACQUISITION INTERNATIONAL CORP.
By: /s/ Ronald M. DeFeo *
Name: Ronald M. DeFeo
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/Ronald M. DeFeo * President
Ronald M. DeFeo (Principal Executive, Financial and June 12, 1996
Accounting Officer)
/s/Marvin B. Rosenberg Vice President, Secretary and Director June 12, 1996
Marvin B. Rosenberg
<PAGE>
<PAGE>
EXHIBIT 10.41
[South Carolina]
REAL ESTATE FEE & LEASEHOLD MORTGAGE, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
in the amount of
$250,000,000.00
FROM
PPM CRANES, INC., a Delaware corporation,
having an office at:
c/o Terex Corporation
500 Post Road East
Westport, Connecticut 06880
(the "Mortgagor")
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
as collateral agent,
having an office at:
114 West 47th Street
New York, New York 10036
(the "Mortgagee")
This instrument was prepared by and,
after recording, please return to:
Michael A. Woronoff, Esq.
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071
<PAGE>
REAL ESTATE FEE & LEASEHOLD MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT,
FINANCING STATEMENT AND FIXTURE FILING
THIS REAL ESTATE FEE & LEASEHOLD MORTGAGE, ASSIGNMENT OF RENTS, SECURITY
AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (hereafter, as amended,
modified, replaced, consolidated and extended, this "Mortgage") is made as of
the 9th day of May, 1995 from PPM CRANES, INC., a Delaware corporation (the
"Mortgagor"), a subsidiary of TEREX CORPORATION, a Delaware corporation
("Terex"), with a mailing address of 500 Post Road East, Westport, Connecticut
06880, to UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation (the
"Mortgagee"), as collateral agent, with a mailing address of 114 West 47th
Street, New York, New York 10036.
R E C I T A L S:
1. The Mortgagor is the owner of a fee simple interest in Tract I of and a
leasehold interest in Tract II of the Real Property (as hereinafter defined).
2. Pursuant to a certain Indenture (the "Indenture") dated as of even date
herewith between Terex and the Mortgagee as trustee thereunder (in such
capacity, the "Indenture Trustee") for the benefit of the Holders of the Notes
(as defined below), Terex has obtained financing in the amount of $250,000,000
(the "Loan") with a maturity date of May 15, 2002. All capitalized terms used
but not otherwise defined herein shall have the meaning ascribed to them in the
Indenture.
3. Mortgagor, as a subsidiary of Terex, will receive substantial benefits
from the Loan, and pursuant to Sections 10.7 and 10.8 of the Indenture, has
guaranteed the obligations of Terex under the Indenture and the Notes.
4. To secure Mortgagor's obligations under the Guaranty and the repayment
of the Notes and performance of all terms and conditions of the Indenture, the
Mortgagor has agreed to create a first mortgage lien on the Mortgaged Property
herein described, in favor of the Mortgagee.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and (A) in order to secure (i) payment of the
indebtedness under the Indenture, as the same may be amended, modified,
restated, substituted and extended by the terms hereof, aggregating $250,000,000
in principal amount (the various promissory notes and securities evidencing said
indebtedness and all supplements, substitutions, extensions and renewals thereof
are hereinafter referred to collectively as the "Notes"), (ii) payment of the
interest on such indebtedness according to the terms of the Indenture and the
Notes, (iii) payment of all other sums payable to the Mortgagee pursuant to the
terms of this Mortgage, and (iv) payment of all other sums owed by the Mortgagor
or Terex to the Mortgagee, the Indenture Trustee or the Holders in accordance
with the terms of the Indenture or pursuant to the Notes, the Security Documents
or the Guaranty (the payment obligations described in the foregoing clauses (i),
(ii), (iii) and (iv) are hereinafter referred to collectively as the
"Indebtedness"); and (B) in order to secure the performance of every obligation
contained in the Indenture, the Notes, this Mortgage, the Security Documents,
the Guaranty and all other instruments now or hereafter evidencing or securing
any portion of the Indebtedness (hereinafter referred to collectively as the
"Obligations"), the Mortgagor by these presents does hereby mortgage, warrant,
grant a security interest in, pledge, assign and transfer to the Mortgagee, and
each of its successors and assigns forever under and subject to the terms and
conditions hereof, all of the Mortgagor's estate, right, title and interest in
and to the following, whether now owned or held or hereafter acquired
(hereinafter collectively referred to as the "Mortgaged Property" or the
"Collateral"):
A. Mortgagor's fee and leasehold interest in that certain real property
(the "Real Property") more particularly described in Schedule A attached hereto
and made a part hereof by this reference; and
B. All of the buildings, structures and improvements (hereinafter,
collectively, together with all building equipment, the "Improvements") now or
hereafter located on the Real Property and all of its right, title and interest,
if any, in and to the streets and roads abutting the Real Property to the center
lines thereof, and strips and gores within or adjoining the Real Property, the
air space and right to use said air space above the Real Property, all rights of
ingress and egress by motor vehicles to parking facilities on or within the Real
Property, all easements now or hereafter affecting the Real Property or the
Improvements, all royalties and all rights appertaining to the use and enjoyment
of the Real Property or the Improvements, including, without limitation, alley,
drainage, crop, timber, agricultural, horticultural, mineral, water, oil and gas
rights; and
C. All fixtures (the "Fixtures"), and all appurtenances and additions
thereto and substitutions or replacements thereof, now or hereafter attached to
the Real Property and/or the Improvements. Without limiting the foregoing, to
the extent permitted under applicable law, this Mortgage shall be deemed to be a
"security agreement" under the Uniform Commercial Code of the State wherein the
Real Property and improvements are located (the "UCC"), and the Mortgagor hereby
grants to the Mortgagee a "security interest" (as defined in the UCC) in all of
its present and future Fixtures and the Mortgagee shall have, in addition to all
rights and remedies provided herein, and in any other agreements, commitments
and undertakings made by the Mortgagor to the Mortgagee, all of the rights and
remedies of a "secured party" under the UCC; and
D. To the extent the same does not constitute Fixtures, all equipment (as
such term is defined in Article 9 of the UCC) now owned or hereafter acquired
and owned by the Mortgagor, which is used at or in connection with the
Improvements or the Real Property and is located thereon or therein (including,
without limitation, all machinery, production equipment, furnishings, electronic
data- processing and other office equipment to the extent located on or in the
Mortgaged Property), together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and any and all extensions,
additions, improvements, betterments, renewals, substitutions and replacements
to, for or of any of the foregoing (collectively, the "Equipment"); and
E. All leases, lettings and licenses of the Real Property, the Improvements
and any other property or rights encumbered or conveyed hereby, or any part
thereof, now or hereafter entered into (each a "Lease," and collectively, the
"Leases") and all right, title and interest of the Mortgagor thereunder,
including, without limitation, cash and securities deposited thereunder, the
right to receive and collect the rents, issues and profits payable thereunder
and the right to enforce, whether by action at law or in equity or by other
means, all provisions, covenants and agreements thereof, including, without
limitation, the right (i) to enter upon and take possession of the Mortgaged
Premises (as hereinafter defined) for the purpose of collecting the said rents,
issues and profits, (ii) to dispossess by the usual summary proceedings (or any
other proceedings of the Mortgagee's selection) any tenant defaulting in the
payment thereof to the Mortgagee, (iii) to let the Mortgaged Premises, or any
part thereof, and (iv) subject to Mortgagor's license as hereinafter set forth,
to apply said rents, issues and profits, after payment of all necessary charges
and expenses, on account of the Indebtedness; and
F. Any and all permits, certificates, approvals and authorizations, however
characterized, related to the Real Property or the Improvements, issued or in
any way furnished, whether necessary or not for the operation and use of the
Real Property or the Improvements, including, without limitation, operating
licenses, franchise agreements, contracts, contract rights, public utility
deposits, building permits, certificates of occupancy, environmental
certificates, industrial permits and licenses and certificates of operation; and
G. All unearned premiums, accrued, accruing or to accrue under insurance
policies related to the Real Property or the Improvements now or hereafter
obtained by the Mortgagor and all proceeds of the conversion, voluntary or
involuntary, of the Real Property, the Improvements and/or any other property or
rights encumbered or conveyed hereby, or any part thereof, into cash or
liquidated claims, including, without limitation, proceeds of hazard and title
insurance and all awards and compensation heretofore and hereafter made to the
present and all subsequent owners of the Real Property, the Improvements and/or
any other property or rights encumbered or conveyed hereby by any governmental
or other lawful authority for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Real Property, the Improvements and/or any
other property or rights encumbered or conveyed hereby or any easement therein,
including, but not limited to, awards for any change of grade of streets; and
H. All extensions, improvements, betterments, renewals, substitutions and
replacements of and all additions and appurtenances to the Real Property, the
Improvements and/or any other property or rights encumbered or conveyed hereby,
hereafter acquired by or released to the Mortgagor or constructed, assembled or
placed by the Mortgagor on the Real Property, the Improvements and any other
property or rights encumbered or conveyed hereby, and all conversions of the
security constituted thereby which, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and in
each such case without any further mortgage, conveyance, assignment or other act
by the Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by the Mortgagor and
specifically described herein; and
I. All proceeds (as defined in the UCC) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims, including,
without limitation, proceeds of insurance and condemnation or other awards or
payments with respect thereto, including interest thereon.
TO HAVE AND TO HOLD the Mortgaged Property, with all powers of sale and
right of entry and possession (to the extent permitted by applicable law), with
all privileges and appurtenances to the same belonging, with the right of
possession thereof, unto the Mortgagee and its successors and assigns, forever,
and the Mortgagor hereby binds itself and its successors and assigns to warrant
and forever (but only until such time as the Indebtedness has been paid in full
and the Obligations have been fully satisfied) defend title to the Mortgaged
Property unto the Mortgagee and its successors and assigns against the claim or
claims of all parties claiming or to claim the same, or any part thereof;
FOR THE PURPOSE OF SECURING THE OBLIGATIONS.
PROVIDED, HOWEVER, that if the Mortgagor shall pay or cause to be paid
indefeasibly in full all of the Indebtedness and if the Mortgagor shall have
kept, performed, observed and satisfied all of the Obligations, then the
Mortgagee shall deliver to the persons legally entitled thereto all such
documents, in recordable form, as shall be necessary to release the Mortgaged
Property from the lien of this Mortgage and to release to the Mortgagor all
deposits held by or on behalf of the Mortgagee, but otherwise this Mortgage
shall remain in full force and effect.
AND the Mortgagor represents, warrants, covenants and agrees as follows:
ARTICLE I
Representations and Warranties of the Mortgagor
Section 1.1 Title to the Mortgaged Property. (i) The right, title and
interest of the Mortgagor constitutes a good, marketable and insurable (a) fee
simple estate in Tract I of the Mortgaged Property, and (b) leasehold estate in
Tract II of the Mortgaged Property, subject to no Liens, except for Liens
permitted pursuant to Section 4.12 of the Indenture (collectively, the
"Permitted Liens"). (ii) This Mortgage creates and constitutes a valid and
enforceable lien on the Mortgaged Property, and, to the extent any of the
Mortgaged Property shall consist of personalty (when taken together with any
fixture filings and financing statements delivered in connection herewith and
filed in accordance with the UCC), a perfected security interest in such
Mortgaged Property, subject only to the Permitted Liens. (iii) The Mortgagor has
full power and lawful authority to encumber the Mortgaged Property in the manner
and form set forth hereunder. (iv) The Mortgagor owns all Fixtures and Equipment
now or hereafter comprising part of the Mortgaged Property, subject only to the
matters set forth in this Section. (v) This Mortgage is and will remain a valid,
enforceable and continuing first priority Lien on the Mortgaged Property subject
only to the Permitted Liens. (vi) The Mortgagor will preserve such title as set
forth herein and in the Indenture, and will forever (but only until such time as
the Indebtedness has been paid in full and the Obligations have been fully
satisfied) warrant and defend the validity and priority of the lien hereof
against the claims of all persons and parties whatsoever.
Section 1.2 Mortgage Authorized. The execution and delivery of this
Mortgage, the Guaranty, the Indenture and each other document or instrument
executed or delivered by Mortgagor in connection with any of the foregoing or
the Notes have been duly authorized by all necessary corporate action of the
Mortgagor and there is no provision in the articles or certificate of
incorporation or bylaws of the Mortgagor requiring further consent for such
action by any other entity or person. The Mortgagor is duly organized, validly
existing and in good standing under the laws of the state of its formation, and
has (i) all necessary licenses, authorizations, registrations, permits and/or
approvals and (ii) full power and authority to own or lease its properties and
carry on its business as presently conducted, and the execution and delivery by
it of, and performance of the Obligations under this Mortgage, the Guaranty, the
Indenture and each other document or instrument executed or delivered by
Mortgagor in connection with any of the foregoing or the Notes will not result
in the Mortgagor being in default under any provision of its articles or
certificate of incorporation or bylaws or of any mortgage, lease, credit or
other agreement to which it is a party or which affects it or the Mortgaged
Property, or any part thereof.
Section 1.3 Operation of the Mortgaged Property. (i) The Mortgagor has all
certificates, licenses, authorizations, registrations, permits and/or approvals
and all required environmental permits necessary for the operation of the
Mortgaged Property or any part thereof, the lack of which would have a Material
Adverse Effect (as defined below), all of which as of the date hereof are in
full force and effect and are not, to the knowledge of the Mortgagor, subject to
any revocation, amendment, release, suspension, forfeiture or the like. (ii) The
Mortgaged Property is served by all easements and utility lines and connections
reasonably required or necessary for the current use thereof. (iii) The
Mortgaged Property has adequate access to public roadways. As used in this
Mortgage, "Material Adverse Effect" shall mean a material adverse effect, singly
or in the aggregate, on (i) the properties, business, prospects, operations,
earnings, assets, liabilities or condition (financial or otherwise) of Mortgagor
or Terex, taken as a whole, (ii) the ability of Mortgagor to perform its
obligations under this Mortgage, the Guaranty or the Indenture, (iii) the
perfection or priority of the Lien of this Mortgage, or (iv) the value or
utility of the Mortgaged Property, taken as a whole.
ARTICLE II
Covenants of the Mortgagor
Section 2.1 Payment of Indebtedness and Performance of Covenants. The
Mortgagor shall (a) duly and punctually pay or cause to be paid each payment of
the principal of and interest on the Indebtedness and any prepayments, late
charges, premiums and fees provided for in the Indenture and all other payment
Obligations secured by this Mortgage at the time and in the manner provided in
this Mortgage, the Guaranty, the Indenture and each other document or instrument
executed or delivered by Mortgagor in connection with any of the foregoing or
the Notes, and (b) duly and punctually perform and observe all of the terms,
provisions, conditions, covenants and agreements on the Mortgagor's part to be
performed or observed as provided in the Notes, this Mortgage, the Guaranty, the
Indenture and each other document or instrument executed or delivered by
Mortgagor in connection with any of the foregoing.
Section 2.2 Maintenance of the Mortgaged Property. (i) The Mortgagor shall
maintain the Mortgaged Property in a commercially reasonable manner for the
operation thereof and in accordance with the requirements of the Indenture, and
shall comply (and shall use commercially reasonable efforts to cause any tenants
to comply) with all federal, state and local laws, statutes, regulations,
ordinances, rules, codes, rulings, judgments, decrees, orders, injunctions and
other requirements of every government or public agency having or claiming
jurisdiction over the Mortgaged Property (and all permits, certificates,
consents, licenses, variances, orders, exemptions, approvals and authorizations
issued thereby) as the same relate to the Mortgaged Property and the use and
occupancy thereof and all covenants, conditions, restrictions, declarations and
easements that affect or are binding upon the Mortgaged Property (each, a
"Requirement"). The Mortgagor shall permit the Mortgagee to enter upon the
Mortgaged Property and inspect the same at all reasonable hours and with
reasonable prior notice. The Mortgagor shall not, without the prior written
consent of the Mortgagee, threaten, commit, permit or suffer to occur any
alterations or changes to the Mortgaged Property or any part thereof other than
alterations or changes that do not materially adversely affect the value or
utility of the Mortgaged Property; provided, however, that Fixtures owned by the
Mortgagor may be removed from the Improvements if such Fixtures are obsolete or
if the Mortgagor concurrently therewith replaces the same with items which do
not reduce the value or utility of the Mortgaged Property or the Improvements,
free of any lien, charge or claim superior to the lien and/or security interest
created thereby.
(i) Nothing in this Section 2.2 shall require the Mortgagor to comply
with any Requirement so long as (a) the failure so to do shall not
otherwise apart from the provisions of this Section 2.2 (i) be an Event of
Default under this Mortgage, (b) the failure so to do shall not result in
the voiding, rescission or invalidation of the certificate of occupancy or
any other material license, certificate, permit or registration in respect
of the Mortgaged Property essential to the conduct of the Mortgagor's
business at the Mortgaged Property, (c) the failure so to do shall not
prevent, hinder or materially interfere with the lawful use and occupancy
of the Mortgaged Property or any material portion thereof for the use and
occupancy which the Mortgagor reasonably determines is most advantageous to
its business, (d) the failure so to do shall not void or invalidate or make
unavailable any insurance required by this Mortgage to be maintained by the
Mortgagor in respect of the Mortgaged Property and (e) the Mortgagor in
good faith and at its own expense shall contest the Requirement or the
validity thereof by appropriate legal proceedings, which proceedings must
operate to prevent (l) the occurrence of any of the events described in the
preceding clauses (a) through (d) of this paragraph (ii) and (2) the
collection or other realization of any material sums due or payable as a
consequence of the Requirement, the sale of any lien arising in respect of
the Requirement, and/or the sale or forfeiture of the Mortgaged Property,
any part thereof or interest therein, or the sale of any lien connected
therewith; provided that during such contest the Mortgagor shall, at the
option of the Mortgagee, either establish adequate reserves in accordance
with generally accepted accounting principles or provide security
reasonably satisfactory to the Mortgagee (in amount and form) assuring the
discharge of the Mortgagor's obligations hereunder and of any interest,
charge, fine, penalty, fee or expense arising from or incurred as a result
of such contest, and, for purposes herein, the Mortgagee agrees that the
deposit of cash or an irrevocable letter of credit drawn on a bank
reasonably acceptable to Mortgagee shall be a satisfactory form of
security; and provided, further, that if at any time compliance with any
obligation imposed upon the Mortgagor by the Requirement shall become
necessary to prevent (l) the occurrence of any of the events described in
clauses (a) through (d) of this paragraph (ii) or (2) the delivery of a
deed conveying the Mortgaged Property or any portion thereof or interest
therein because of noncompliance, or the sale of a lien in connection
therewith, or (3) the imposition of any material penalty, fine, charge,
fee, cost or expense on the Mortgagee, then the Mortgagor shall comply with
the Requirement in sufficient time to prevent the occurrence of any such
events, the delivery of such deed or the sale of such lien, or the
imposition of such material penalty, fine, charge, fee, cost or expense on
the Mortgagee.
Section 2.3 Insurance; Coverage. (i) The Mortgagor shall keep the
Mortgaged Property insured against (a) loss and damage by fire, casualty
and such other hazards as may be reasonably specified by the Mortgagee,
including, without limitation, those hazards which are covered by the
standard extended coverage allrisk insurance policy, (b) damage by
vandalism and/or malicious mischief, (c) explosion insurance in respect of
any boilers or similar apparatus located on the Mortgaged Property and (d)
such other hazards as may be reasonably specified by the Mortgagee. Such
insurance shall be on forms and by companies reasonably satisfactory to the
Mortgagee. The amounts and coverage limits of each policy of insurance
required pursuant to this Section 2.3 shall be sufficient to prevent the
Mortgagor or the Mortgagee from becoming a coinsurer of any partial loss
under the applicable policies and otherwise satisfactory to the Mortgagee,
but in no event less than the actual replacement value of such Mortgaged
Property as determined by the Mortgagor in accordance with generally
accepted insurance practice and approved by the Mortgagee, or at the
Mortgagee's option, which shall be exercised not more frequently than
annually, as determined at the Mortgagor's expense by the insurer or an
expert appraiser approved by the Mortgagee. Notwithstanding anything to the
contrary contained herein, Mortgagor shall be permitted to maintain
selfinsurance for all insurance required to be maintained hereby, provided
that such selfinsurance is consistent with Mortgagor's prior practice and
has been heretofore adequately disclosed to Mortgagee.
(ii) The Mortgagor shall maintain in full force liability insurance
against claims of bodily injury, death or property damage occurring on, in
or about the Mortgaged Property, with policy limits and deductibles in such
amounts as from time to time would be maintained by a prudent operator of
property similar in use and configuration to the Mortgaged Property and
located in the locality where the Mortgaged Property is located (which
policy limits and deductibles shall be reasonably satisfactory to the
Mortgagee), which policies of insurance shall name the Mortgagee as an
additional insured. All insurance policies and endorsements required
pursuant to this Section 2.3 shall be fully paid for, nonassessable and
contain such provisions (including, without limitation, inflation guard or
replacement cost endorsements) and expiration dates and shall be in such
form and amounts and issued by such insurance companies with a rating of "A
VIII" or better as established by Best's Rating Guide (or an equivalent
rating with such other publication of a similar nature as shall be in
current use and as approved by the Mortgagee), or such other companies, as
shall be approved by the Mortgagee.
(iii) The Mortgagor shall additionally keep the Mortgaged Property
insured against loss by flood if the Mortgaged Property is located in an
area identified by the Secretary of Housing and Urban Development as an
area having special flood hazards and which has been so identified under
the Flood Insurance Act of 1968 and the Flood Disaster Protection Act of
1973, as the same may have been or may hereafter be amended or modified
(and any successor acts thereto) in amounts reasonably acceptable to the
Mortgagee, but in no event more than what is available under such laws.
(iv) In all events and without limitation on the foregoing, the
Mortgagor will deliver the policy or policies (or true copies or
certificates thereof) of all such insurance required under this Mortgage to
the Mortgagee, which policy or policies shall be endorsed to name the
Mortgagee as a mortgageeloss payee thereunder, with loss payable to the
Mortgagee without contribution or assessment under a New York Standard
Mortgagee clause or similar clause, and shall provide the Mortgagee with no
less than thirty (30) days' notice from the insurer prior to the
expiration, cancellation or termination (for any reason whatsoever) of any
such policy.
(v) Insurance required hereunder may be carried by the Mortgagor
pursuant to blanket policies, provided that all other requirements herein
set forth are satisfied and that the underlying policy in respect of the
Mortgaged Property is delivered to the Mortgagee as herein required. In the
event that the Mortgagor fails to keep the Mortgaged Property insured as
required hereunder, the Mortgagee may, but shall not be obligated to,
obtain insurance and pay the premiums therefor and the Mortgagor shall, on
demand, reimburse the Mortgagee for all sums, advances and expenses
incurred in connection therewith and such sums, advances and expenses shall
be deemed a part of the Indebtedness secured hereby and shall bear interest
at the Default Rate (as defined in Section 2.13 of this Mortgage) until
reimbursed.
Section 2.4 Insurance; Proceeds. The Mortgagor shall give the Mortgagee
prompt notice of any material loss covered by insurance and the Mortgagee shall
have the right to join the Mortgagor in adjusting any loss during the
continuance of an Event of Default. The proceeds of insurance paid on account of
any damage or destruction to the Mortgaged Property or any part thereof shall be
paid over to the Mortgagee to be applied as hereinafter provided.
Notwithstanding anything to the contrary contained herein or in any provision of
applicable law, the proceeds of insurance policies coming into the possession of
the Mortgagee shall not be deemed trust funds.
Section 2.5 Restoration of the Mortgaged Property. In the event of any
material damage or destruction of the Mortgaged Property, or any part thereof,
as a result of casualty, condemnation, taking or other cause, the Mortgagor
shall give prompt written notice thereof to the Mortgagee. In the event that the
Mortgagee, in accordance with Section 2.6 hereof, makes available to the
Mortgagor the insurance proceeds received by it, if any (or in the event of
condemnation or taking, the award, if any, arising out of such condemnation or
taking), the Mortgagor shall with reasonable promptness commence and diligently
continue to perform the repair, restoration and rebuilding of the Mortgaged
Property (hereinafter, the "Work") so as to restore the Mortgaged Property in
full compliance with all legal requirements and so that the Mortgaged Property
shall, to the extent reasonably practicable, be at least equal in value and
general utility as it was immediately prior to the damage or destruction. If the
Work to be done is materially structural (as reasonably determined by the
Mortgagee) or if the cost of the Work, as estimated by the Mortgagee, shall
exceed $___________________ (hereinafter, collectively, "Major Work"), the
Mortgagor shall, prior to the commencement of the Major Work, furnish to the
Mortgagee for its approval not to be unreasonably withheld or delayed: (i)
complete plans and specifications for the Major Work, with reasonably
satisfactory evidence of the approval thereof (a) by all governmental
authorities whose approval is required for any or all of the Major Work, (b) by
all parties to or having an interest in the leases, if any, of any portion of
the Mortgaged Property whose approval is required, and (c) by an architect or
reputable contractor or construction manager or engineer satisfactory to the
Mortgagee (hereinafter, the "Architect") and which shall be accompanied by the
Architect's signed estimate, bearing the Architect's seal, of the Architect's
good faith estimate of the entire cost of completing the Major Work; (ii)
certified or photostatic copies of all permits and approvals required by law in
connection with the commencement and/or the conduct of the Work; and (iii) such
other documents, instruments and certificates as Mortgagee may reasonably
request. The Mortgagor shall not be entitled to receive any of the insurance
proceeds until the Mortgagor shall have complied with the applicable
requirements referred to in this Section 2.5. After commencing any Major Work
the Mortgagor shall perform such Major Work diligently and in good faith in
accordance with the plans and specifications referred to in this Section 2.5.
Section 2.6 Restoration; Advances. Insurance proceeds received by the
Mortgagee (or, in the case of condemnation or taking, the award therefor) less
the cost, if any, to the Mortgagee of recovery of the same and of paying out
such proceeds (including reasonable attorneys' fees and expenses and
administrative costs), shall be applied by the Mortgagee to reduce the
Indebtedness; provided, however, that so long as no Event of Default hereunder
has occurred and is continuing, the Mortgagor shall have the right to cause
Mortgagee to apply such net insurance proceeds to the payment of the cost of the
Work in accordance with the terms of this Section 2.6. Notwithstanding anything
to the contrary contained herein, and so long as no Event of Default hereunder
has occurred and is continuing, Mortgagor shall have the right, upon written
notice to Mortgagee, to not perform the Work, in which event the net amount of
any insurance proceeds received by Mortgagor or Mortgagee (or, in the case of
condemnation or taking, the award therefor) shall be either (i) applied to repay
the Indebtedness, or (ii) invested in assets related to the business of the
Mortgagor, Terex or any of its other Restricted Subsidiaries. If Mortgagor
elects (to the extent such an election is permitted hereby) to perform or cause
the Work to be performed, and the Work is not Major Work, insurance proceeds
will be paid in a lump sum to the Mortgagor. If Mortgagor elects (to the extent
such an election is permitted hereby) to perform or cause the Work to be
performed, and the Work is Major Work, the proceeds shall be paid out from time
to time, but not more often than monthly, to the Mortgagor as said Major Work
progresses, but subject to the following conditions:
(i) an Architect shall be in charge of such Major Work;
(ii) each request for payment shall be made on at least seven (7)
days' prior written notice to the Mortgagee and shall be accompanied by (a)
a certificate of the chief financial officer or other authorized officer of
the Mortgagor specifying the party to whom (and for the account of which)
such payment is to be made, (b) copies of lien releases (in form and
substance customary and appropriate for the jurisdiction in which the
Mortgaged Property is located) from each party to whom payment is to be
made, and (c) a certificate of an Architect if an Architect is required
under Section 2.5 above, otherwise a certificate of the chief financial
officer or other authorized officer of the Mortgagor stating (x) that all
of the Work completed has been done substantially in compliance with the
approved plans and specifications, if any, required under said Section 2.5,
and in accordance with all provisions of law; (y) the sum requested is
justly required to reimburse the Mortgagor for payments by the Mortgagor
to, or is justly due to, the contractor, subcontractors, materialmen,
laborers, engineers, architects or other persons rendering services or
materials for the Work (giving a brief description of any such services and
materials), and that when added to all sums, if any, previously paid out by
the Mortgagee does not exceed the cost of the Work done to the date of such
certificate and (z) that the amount of such proceeds remaining in the hands
of the Mortgagee will be sufficient on completion of the Work to pay for
the same in full (giving in such reasonable detail as the Mortgagee may
require an estimate of the cost of such completion) or that, if the
proceeds are inadequate, that a sufficient reserve has been created in
accordance with generally accepted accounting principles to provide for the
payment of such deficiency;
(iii) each request for payment shall be accompanied by sworn
statements and partial or final waivers of liens, as may be appropriate, or
if unavailable, lien bonds, satisfactory to the Mortgagee covering that
part of the Work previously paid for, if any, and by a search prepared by a
title insurance company or a licensed abstractor reasonably satisfactory to
the Mortgagee or by other evidence satisfactory to the Mortgagee, that
there has not been filed with respect to the Mortgaged Property any
mechanic's lien or other lien or instrument for the retention of title in
respect of any part of the Work not discharged of record and that there
exist no encumbrances on or affecting the Mortgaged Property (or any part
thereof) other than Permitted Liens;
(iv) no Event of Default shall have occurred and be continuing; and
(v) the request for any payment after the Work has been completed
shall be accompanied by certified copies of all certificates, permits,
licenses, waivers and/or other documents required by law which are
customarily issued in the state and municipality in which the Mortgaged
Property is located (or pursuant to any agreement binding upon the
Mortgagor or affecting the Mortgaged Property or any part thereof) to
render occupancy or use of the Mortgaged Property legal.
Upon completion of any Work and payment in full therefor, and provided that
no Event of Default has occurred and is continuing, the Mortgagee shall deliver
any excess proceeds to the Mortgagor; provided, however, that nothing herein
contained shall prevent the Mortgagee from applying at any time the whole or any
part of such proceeds to the curing of any Event of Default.
Section 2.7 Restoration by the Mortgagee. Without limitation on the
foregoing, in the event the Mortgagee, in accordance with the provisions of
Section 2.6 hereof, is making available to the Mortgagor insurance proceeds (if
any) recovered by the Mortgagee, and if there is an Event of Default which is
continuing, then in addition to all other rights herein set forth and
notwithstanding anything to the contrary contained herein, the Mortgagee, or any
lawfully appointed receiver of the Mortgaged Property, may at its option after
giving the Mortgagor ten (10) days' written notice of such Event of Default,
perform or cause to be performed such repair, restoration and rebuilding, and
may take such other steps as it deems reasonably advisable to perform such
repair, restoration and rebuilding, and upon twentyfour (24) hours' prior
written notice to the Mortgagor, the Mortgagee may enter upon the Mortgaged
Property to the extent reasonably necessary or appropriate for any of the
foregoing purposes, and the Mortgagor hereby waives, for the Mortgagor and all
others holding under the Mortgagor, any claim against the Mortgagee and/or such
receiver arising out of anything done by the Mortgagee or such receiver pursuant
hereto, and the Mortgagee may, at its option, apply insurance proceeds, if any
(without the need by the Mortgagee to fulfill any other requirements of this
Mortgage), to reimburse the Mortgagee and/or such receiver for all amounts
expended or incurred by either of them in connection with the performance of
such Work, and any excess costs shall be paid by the Mortgagor to the Mortgagee
upon demand, and such payment of excess costs shall be deemed part of the
Indebtedness secured hereby and shall bear interest at the Default Rate until
paid.
Section 2.8 Intentionally Deleted.
Section 2.9 Taxes and Other Charges.
(i) The Mortgagor shall pay and discharge by the last day payable
without penalty or premium all taxes of every kind and nature, water rates,
sewer rents and assessments, levies, permits, inspection and license fees
and all other charges imposed upon or assessed against the Mortgaged
Property or any part thereof or upon the revenues, rents, issues, income
and profits of the Mortgaged Property or arising in respect of the
occupancy, use or possession thereof (excluding any taxes in the nature of
income taxes). To the extent any such items are payable in installments,
the Mortgagor may elect to pay any such item in installments, but each
payment shall be made before any penalty accrues. The Mortgagor shall
exhibit to the Mortgagee within a reasonable period of time after request
and after the same are required to be paid as specified herein, validated
receipts or other evidence reasonably satisfactory to the Mortgagee showing
the payment of such taxes, assessments, water rates, sewer rents, levies,
fees and/or other charges. Should the Mortgagor default in the payment of
any of the foregoing taxes, assessments, water rates, sewer rents, levies,
fees or other charges, the Mortgagee may, but shall not be obligated to,
pay the same or any part thereof and the Mortgagor shall reimburse the
Mortgagee for all amounts so paid and such amounts shall be deemed a part
of the Indebtedness secured hereby and shall bear interest at the Default
Rate until reimbursed.
(ii) Nothing in this Section 2.9 shall require the payment or
discharge of any obligation imposed upon the Mortgagor by subsection (i) of
this Section 2.9 so long as the Mortgagor shall in good faith and at its
own expense contest the same or the validity thereof by appropriate legal
proceedings which proceedings must operate to prevent the collection
thereof or other realization thereon, the sale of the lien thereof and the
sale or forfeiture of the Mortgaged Property or any part thereof, to
satisfy the same; provided that during such contest the Mortgagor shall, at
the option of the Mortgagee, establish reserves in accordance with
generally accepted accounting principles or deposit cash or an irrevocable
letter of credit drawn on a bank reasonably acceptable to the Mortgagee,
assuring the discharge of the Mortgagor's obligation hereunder and of any
additional interest charge, penalty or expense arising from or incurred as
a result of such contest; and provided, further, that if at any time
payment of any obligation imposed upon the Mortgagor by subsection (i) of
this Section 2.9 shall become necessary to prevent the delivery of a tax
deed or similar instrument conveying the Mortgaged Property or any portion
thereof or the sale of the tax lien therefor because of nonpayment, or the
imposition of any penalty, which is not reserved or secured against, or
cost on the Mortgagee not paid by the Mortgagor, then the Mortgagor shall
pay the same in sufficient time to prevent the delivery of such tax deed or
the sale of such lien, or the imposition of such penalty or cost on the
Mortgagee.
(iii) The Mortgagor shall pay when due all (a) premiums for fire,
hazard and other insurance required to be maintained by the Mortgagor on
the Mortgaged Property pursuant to the terms of Section 2.3 hereof, (b)
title insurance premiums, if any, relating to the insurance to be obtained
on the Mortgaged Property in connection with this Mortgage, and (c) any and
all other costs, expenses and charges expressly required to be paid
hereunder.
Section 2.10 Mechanics' and Other Liens.
(i) To the extent that the following are not Permitted Liens, within
sixty (60) days from the date of the filing of any such Lien, the Mortgagor
shall pay, bond or discharge of record, from time to time, forthwith, all
Liens on the Mortgaged Property or any part thereof, and, in general, the
Mortgagor forthwith shall do, at the cost of the Mortgagor and without
expense to the Mortgagee, everything necessary to fully preserve the first
priority Lien of this Mortgage. In the event that the Mortgagor fails in a
timely manner to make payment in full of, bond or discharge, any such
Liens, as required under the preceding sentence, the Mortgagee may, but
shall not be obligated to, make payment, bond, or discharge such Liens, in
order fully to preserve the Lien of this Mortgage and the collateral value
of the Mortgaged Property, and the Mortgagor shall reimburse the Mortgagee
for all sums so expended and such sums shall be deemed a part of the
Indebtedness secured hereby and shall bear interest at the Default Rate
until reimbursed.
(ii) Nothing in this Section 2.10 shall require the payment or
discharge of any obligation imposed upon the Mortgagor by subsection (i) of
this Section 2.10 so long as the Mortgagor shall bond or discharge any Lien
on the Mortgaged Property arising from such obligation or in good faith and
at its own expense contest the same or the validity thereof by appropriate
legal proceedings which proceedings must operate to prevent the collection
thereof or other realization thereon, the sale of the Lien thereof and the
sale or forfeiture of the Mortgaged Property or any part thereof, to
satisfy the same; provided that during such contest the Mortgagor shall, at
the option of the Mortgagee, either (at the option of the Mortgagor)
establish an adequate reserve in accordance with generally acceptable
accounting principles or provide security satisfactory to the Mortgagee,
assuring the discharge of the Mortgagor's obligation hereunder and of any
additional interest charge, penalty or expense arising from or incurred as
a result of such contest, which security can take the form of cash or an
irrevocable letter of credit drawn on a bank reasonably acceptable to the
Mortgagee; and provided, further, that if at any time payment of any
obligation imposed upon the Mortgagor by subsection (i) of this Section
2.10 shall become necessary (a) to prevent the sale or forfeiture of the
Mortgaged Property or any portion thereof because of nonpayment, or (b) to
protect the Lien of this Mortgage, then the Mortgagor shall pay the same in
sufficient time to prevent the sale or forfeiture of the Mortgaged Property
or to protect the Lien of this Mortgage, as the case may be.
Section 2.11 Condemnation Awards. The Mortgagor, immediately upon obtaining
knowledge in any manner of the institution of any proceedings for the
condemnation of the Mortgaged Property or any portion thereof which could have a
Material Adverse Effect, will notify the Mortgagee of such proceedings. The
Mortgagee may participate in any such proceedings, and the Mortgagor from time
to time will deliver to the Mortgagee all instruments requested by it to permit
such participation. The Mortgagor and the Mortgagee shall both act reasonably
and expeditiously in connection with such proceedings. All awards and
compensation payable to the Mortgagor as a result of any condemnation or other
taking or purchase in lieu thereof of the Mortgaged Property or any part thereof
are hereby assigned to and shall be paid to the Mortgagee, and shall be treated
in accordance with the provisions of Sections 2.5 and 2.6 hereof. The Mortgagor
hereby authorizes the Mortgagee to collect and receive such awards and
compensation, to give proper receipts and acceptances therefor and to apply the
same in accordance with the provisions of Sections 2.5 and 2.6 of this Mortgage.
The Mortgagor, upon request by the Mortgagee, shall make, execute and deliver
any and all instruments requested for the purpose of confirming the assignment
of the aforesaid awards and compensation to the Mortgagee free and clear of any
Liens, charges or encumbrances of any kind or nature whatsoever.
Notwithstanding anything to the contrary in this Section 2.11, the
Mortgagor shall continue to pay the Indebtedness and perform the Obligations at
the time and in the manner provided for in the Notes, the Security Documents and
the Indenture. If the Mortgaged Property or any portion thereof is sold, through
foreclosure or otherwise, prior to the receipt by the Mortgagee of such payment,
the Mortgagee shall have the right, whether or not a deficiency judgment shall
have been sought, recovered or denied, to receive said payment, or a portion
thereof sufficient to pay the Indebtedness, whichever is less. The Mortgagor
shall file and prosecute its claim or claims for any such payment in good faith
and with due diligence and cause the same to be collected and paid over to the
Mortgagee, in the name of the Mortgagor or otherwise, to collect and give
receipt for any such payment and to file and prosecute such claim or claims, and
although it is hereby expressly agreed that the same shall not be necessary in
any event, the Mortgagor shall, upon demand of the Mortgagee, make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such payment to the Mortgagee, free and clear of any
encumbrances of any kind or nature whatsoever.
Section 2.12 Costs of Defending and Upholding the Lien. If any action or
proceeding is commenced to which action or proceeding the Mortgagee is made a
party or in which it becomes necessary to defend or uphold the first priority
Lien of this Mortgage, the Mortgagor shall reimburse the Mortgagee for all
reasonable expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by the Mortgagee in any such action or proceeding and
such expenses shall be deemed a part of the Indebtedness secured hereby and
shall bear interest at the Default Rate until reimbursed. To the extent the
subject of the action is covered by title insurance, the Mortgagee may be
defended by the title insurance counsel reasonably satisfactory to it; if
otherwise covered by insurance, the Mortgagee may be defended by counsel for the
insurance company reasonably satisfactory to the Mortgagee. Notwithstanding the
foregoing, in an action not covered by insurance, the Mortgagor may defend with
counsel reasonably satisfactory to the Mortgagee.
Section 2.13 Additional Advances and Disbursements. The Mortgagor shall pay
by the last day payable without premium or penalty all payments and charges on
all liens, encumbrances, ground and other leases and security interests which
affect or may affect or attach or may attach to the Mortgaged Property, or any
part thereof, and in default thereof, the Mortgagee shall have the right, but
shall not be obligated, to pay upon notice to the Mortgagor, if practicable in
order fully to preserve the first priority Lien of this Mortgage and the
collateral value of the Mortgaged Property, such payments and charges and the
Mortgagor shall reimburse the Mortgagee for any amounts so paid. In addition,
upon the occurrence of any material default of the Mortgagor in the performance
of any other terms, covenants, conditions or obligations by it to be performed
hereunder or under any such Lien, encumbrance, lease or security interest and
after the expiration of all applicable notice and cure periods, if any, the
Mortgagee shall have the right, but shall not be obligated, to cure such default
in the name and on behalf of the Mortgagor. All sums advanced and reasonable
expenses incurred at any time by the Mortgagee pursuant to this Section 2.13 or
as otherwise provided under the terms and provisions of this Mortgage or under
applicable law shall bear interest from the date that such sum is advanced or
expenses incurred, to and including the date of reimbursement, computed at an
interest rate per annum (the "Default Rate") at all times equal to the highest
default rate provided in the Indenture, but in no event to exceed the maximum
rate allowed by law. All interest payable hereunder shall be computed on the
basis of a 360day year over the actual number of days elapsed. Any such amounts
advanced or incurred by the Mortgagee, together with the interest thereon, shall
be payable on demand, shall, until paid, be secured by this Mortgage as a Lien
on the Mortgaged Property and shall be deemed a part of the Indebtedness.
Section 2.14 Costs of Enforcement. The Mortgagor agrees to bear and pay all
expenses (including, without limitation, reasonable attorneys' fees and
expenses) of or incidental to (i) the enforcement of any provision hereof, (ii)
the enforcement of this Mortgage, the Notes, the Security Documents, the
Indenture and for the curing thereof, (iii) subject to Section 2.12 hereof,
defending the rights and claims of the Mortgagee in respect of this Mortgage,
the Notes, the Indenture and/or the Security Documents, by litigation or
otherwise, and (iv) the appointment of a receiver or receivers as hereinafter
contemplated. All rights and remedies of the Mortgagee shall be cumulative and
may be exercised singly or concurrently. Notwithstanding anything herein
contained to the contrary, the Mortgagor: (i) HEREBY WAIVES TRIAL BY JURY; and,
to the fullest extent allowed by law, (ii) shall not (a) at any time insist
upon, or plead, or in any manner whatever claim or take any benefit or advantage
of any stay or extension or moratorium law, any exemption from execution or sale
of the Mortgaged Property or any part thereof, wherever enacted, now or at any
time hereafter in force, which may affect the covenants and terms of performance
of this Mortgage, nor (b) after any such sale or sales, claim or exercise any
right under any statute heretofore or hereafter enacted to redeem the property
so sold or any part thereof; (iii) hereby expressly waives all benefit or
advantage of any such law or laws; and (iv) covenants not to hinder, delay or
impede the execution of any power herein granted or delegated to the Mortgagee,
but to suffer and permit the execution of every power as though no such law or
laws had been made or enacted. The Mortgagor, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have the
Mortgaged Property or any part thereof marshalled upon any foreclosure hereof.
The appraisement of the Mortgaged Property is hereby expressly waived or not
waived at the option of the Mortgagee, its successors or assigns, such option to
be exercised prior to or at the time judgment is rendered in any foreclosure
hereof.
Section 2.15 Filing Charges, Recording Fees, Taxes, etc. The Mortgagor
shall pay any and all taxes, charges, filing, registration and recording fees,
excises and levies imposed upon the Mortgagee by reason of its interest in the
Mortgaged Property and this Mortgage or any mortgage supplemental hereto, any
security instrument with respect to any interest of the Mortgagor in and to any
fixture or personal property at the Mortgaged Property or any instrument of
further assurance, other than income, franchise, succession, inheritance,
business and similar taxes, and shall pay all other taxes, if any, required to
be paid on the debt evidenced by the Notes. In the event the Mortgagor fails to
make such payment within ten (10) days after written notice thereof to the
Mortgagor, then the Mortgagee shall have the right, in its sole discretion, to
elect either to (i) declare the entire Indebtedness immediately due and payable
or (ii) to pay the amount due, and the Mortgagor shall reimburse the Mortgagee
for said amount, together with interest thereon computed at the Default Rate.
Section 2.16 Restrictive Covenants and Leasing Requirements. Promptly
following the execution hereof, Mortgagor shall deliver a notice, in form and
substance reasonably satisfactory to Mortgagee, to all existing tenants or other
occupants of the Mortgaged Property, which notice shall indicate that this
Mortgage has been executed and, subject to the terms hereof, all Leases have
been assigned to Mortgagee. Mortgagor shall not hereafter execute or permit to
be executed any lease or other occupancy agreement, whether singly or in a
series of transactions, for all or substantially all of the Mortgaged Property,
without first delivering to Mortgagee a subordination and attornment agreement
to and for the benefit of Mortgagee in form and substance reasonably
satisfactory to Mortgagee. Notwithstanding the foregoing, the Mortgagor shall be
permitted, without the delivery of a separate subordination and attornment
agreement, to lease up to onehalf of the Mortgaged Property, provided (i) such
lease is to a bona fide thirdparty tenant on commercially reasonable terms, (ii)
Mortgagor gives notice to the Mortgagee of such lease, or any such amendment,
modification or extension thereof with a copy thereof, and (iii) Mortgagor gives
prior written notice of this Mortgage to the tenant or other occupant under any
such lease, amendment, modification or extension.
Section 2.17 Assignment of Rents. The Mortgagor hereby absolutely,
presently and unconditionally assigns to the Mortgagee, as further security for
the payment of the Indebtedness and performance of the Obligations, all of its
interest in the rents, issues and profits of the Mortgaged Property, together
with its interest in all Leases of all or any portion thereof and other
documents evidencing such rents, issues and profits now or hereafter in effect
and its interest in any and all deposits held as security under any such Leases,
and shall deliver to the Mortgagee a true and correct copy of an executed
counterpart of each such Lease or other material documents to which it is a
party and which affects the Mortgaged Property. Nothing contained in the
foregoing sentence shall be construed to bind the Mortgagee to the performance
of any of the covenants, conditions or provisions contained in any such Lease or
other document or otherwise to impose any obligation on the Mortgagee,
including, without limitation, any liability under the covenants contained in
any such Lease. To the fullest extent permitted by applicable laws, the
Mortgagor hereby grants to the Mortgagee the present right (i) to collect and
receive any and all rents, issues and profits and to enter upon and take
possession of the Mortgaged Property for the purpose of collecting the said
rents, issues and profits, (ii) to dispossess by the usual summary proceedings
(or any other proceedings of the Mortgagee's selection) any tenant defaulting in
the payment thereof to the Mortgagee, (iii) to let the Mortgaged Property, or
any part thereof, and (iv) to apply said rents, issues and profits, after
payment of all necessary charges and expenses (including, without limitation,
costs of required maintenance and operation of the Mortgaged Property, costs of
collection, default associated charges, past due interest and late charges and
similar charges and expenses) , on account of the Indebtedness. This Mortgage
constitutes and evidences the irrevocable consent of the Mortgagor to the entry
upon and taking possession of the Mortgaged Property by the Mortgagee pursuant
to such grant, whether foreclosure has been instituted or not and without
applying for a receiver; provided, however, that so long as no Event of Default
shall have occurred and be continuing, the Mortgagor shall have a revocable
license to collect and receive said rents, issues and profits and to otherwise
manage the Mortgaged Property, including, without limitation, a revocable
license to exercise the rights granted to Mortgagee pursuant to subsections (i),
(ii), (iii) and (iv) above. If an Event of Default shall have occurred and be
continuing, any rental or other income from the Mortgaged Property received by
the Mortgagor shall be deemed to be received by the Mortgagor in trust for the
Mortgagee and shall be paid over to the Mortgagee immediately upon receipt by
the Mortgagor. This license of the Mortgagor to collect and receive said rents,
issues and profits shall be automatically revoked without the requirement of any
action by the Mortgagee upon the occurrence and during the continuance of an
Event of Default. Upon the occurrence and during the continuance of an Event of
Default, the Mortgagor hereby appoints the Mortgagee as its attorneyinfact,
coupled with an interest, to receive and collect all rent, additional rent and
other sums due under the terms of each Lease to which the Mortgagor is a party
and to direct any such tenant, by written notice or by mail or in person to the
Mortgagee. If an Event of Default shall have occurred and be continuing,
Mortgagee may, without thereby becoming or being deemed a mortgagee in
possession or incurring any liability under any Lease, notify any lessee,
tenant, concessionaire, licensee or other occupant of all or any part of the
Mortgaged Property to pay all rental or other income payable by it, him or her
to the Mortgagee and all such rental and other income shall thereafter be paid
directly to the Mortgagee until the Mortgagee agrees otherwise. If an Event of
Default has occurred and is continuing, to facilitate the Mortgagee's collection
of rental and other income, the Mortgagor hereby irrevocably authorizes and
empowers the Mortgagee to endorse on behalf of the Mortgagor and in the
Mortgagor's name all checks and other instruments received by the Mortgagee as
payment of rental or other income. The Mortgagee shall apply to the Indebtedness
the net amount (after deducting all costs and expenses, including attorneys'
fees and expenses, incident to the collection thereof, and after deducting all
costs and expenses of operation, maintenance and repairs of the Mortgaged
Property) of any such rental or other income received by it.
Section 2.18 Transfer Restrictions. Except as either permitted or not
prohibited by the provisions of Section 4.10 of the Indenture, the Mortgagor may
not, without the prior written consent of the Mortgagee, further mortgage,
encumber, hypothecate, sell, transfer, convey, assign or sublet all or any part
of the Mortgaged Property or the leases and rents affecting the Mortgaged
Property or any other interest in the Mortgaged Property or such leases and
rents or suffer any of the foregoing to occur involuntarily or by operation of
law or otherwise. In the event of a sale, transfer or other conveyance of any of
the Mortgaged Property permitted by this section, Mortgagee shall, subject to
the terms of Section 10.3 of the Indenture, at the sole cost and expense of
Mortgagor, execute such documents as Mortgagor shall reasonably request to
evidence the release of the Lien of this Mortgage with respect to such Mortgaged
Property.
Section 2.19 Indemnity. The Mortgagor agrees that it shall indemnify,
defend and hold harmless the Mortgagee from and against all loss, liability,
obligation, claim, damage, penalty, cause of action, cost and expense,
including, without limitation, any assessments, levies, impositions, judgments,
reasonable attorneys' fees and disbursements, cost of appeal bonds and printing
costs, imposed upon or incurred by or asserted against the Mortgagee by reason
of (a) ownership of this Mortgage (other than taxes, if any, in the nature of
income taxes imposed on the Mortgagee as the result of its ownership of this
Mortgage); (b) any accident, injury to or death of persons or loss of or damage
to property occurring on or about the Mortgaged Property (except to the extent
the same shall be caused by the Mortgagee's own gross negligence or willful
misconduct); (c) any use, nonuse or condition of the Mortgaged Property (except
to the extent the same shall be caused by the Mortgagee's own gross negligence
or willful misconduct); (d) performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof for maintenance or otherwise; (e) the imposition of
any mortgage, real estate or governmental tax incurred as a result of this
Mortgage or the Notes, other than income, franchise, succession, inheritance,
business and similar taxes payable by the Mortgagee, or (f) any violation or
alleged violation by the Mortgagor of any law. Any amounts payable under this
Section 2.19 shall be immediately due and payable without demand, shall be
deemed a part of the Indebtedness secured hereby, and until paid shall bear
interest at the Default Rate. If any action is brought against the Mortgagee by
reason of any of the foregoing occurrences, the Mortgagor will have the right to
defend and resist such action, suit or proceeding, at the Mortgagor's sole cost
and expense by counsel reasonably approved by the Mortgagee. The Mortgagor's
obligations under this Section 2.19 shall survive any change in law, the payment
in full of the Indebtedness, any discharge, release or satisfaction of this
Mortgage and/or the delivery of one or more deeds in lieu of foreclosure with
respect to this Mortgage.
Section 2.20 Security Interest in Fixtures.
(i) As provided in the granting clauses hereinabove, this Mortgage
shall constitute a security agreement and shall create and evidence a
security interest in all Fixtures in which a security interest or lien may
be granted or a common law pledge created pursuant to the UCC as in effect
in the state in which the Mortgaged Property is located or under common law
in such state, which security interest is hereby granted to Mortgagee as
"secured party" (as such term is defined in the UCC), securing the
Indebtedness and the Obligations of the Mortgagor hereunder and upon
recordation in the real property records of the County in which the
Mortgaged Property is located, shall constitute a "fixture filing" within
the meaning of Article 9 of the UCC creating a perfected security interest
in all fixtures now or hereafter located upon the Mortgaged Property. The
Mortgagor, immediately upon the execution and delivery of this Mortgage,
and thereafter from time to time, shall cause this Mortgage, any security
instrument evidencing or perfecting the Lien hereof in the Fixtures, and
each instrument of further assurance, including, without limitation, UCC
financing statements and continuation statements, to be filed, registered
or recorded in such manner and in such places as may be required by any
present or future law in order to publish notice of and fully to perfect,
preserve and protect the lien hereof upon the Mortgaged Property. The
Mortgagor hereby appoints and authorizes the Mortgagee to act on behalf of
the Mortgagor upon the Mortgagor's failure to comply with the provisions of
this Section 2.20.
(ii) To the extent the mortgage foreclosure laws of the state in which
the Mortgaged Property is located do not provide for foreclosure against
some or all of the Fixtures, upon the occurrence of any Event of Default,
in addition to the remedies set forth in Article III hereof, the Mortgagee
shall have the power to foreclose the Mortgagor's right of redemption in
the Fixtures by sale of the Fixtures in accordance with the UCC as enacted
in the state in which the Mortgaged Property is located or under other
applicable law in such state. It shall not be necessary that any Fixtures
offered be physically present at any such sale or constructively be in the
possession of the Mortgagee or the person conducting the sale. Upon the
occurrence and during the continuance of any Event of Default, the
Mortgagee may sell the Fixtures or any portion thereof at public or private
sale with notice to the Mortgagor as hereinafter provided. The proceeds of
any such sale, after deducting all expenses of the Mortgagee in taking,
storing, repairing and selling the Fixtures or any part thereof (including,
without limitation, attorneys' fees and expenses) shall be applied in the
manner set forth in Section 3.2 hereof. At any sale, public or private, of
the Fixtures or any part thereof, the Mortgagee may purchase any or all of
the Fixtures offered at such sale.
(iii) The Mortgagee shall give Mortgagor notice of any sale of the
Fixtures or any portion thereof pursuant to the provisions of this Section
2.20. Any such notice shall conclusively be deemed to be effective if such
notice is mailed at least ten (10) business days prior to any sale, by
first class or certified mail, postage prepaid, to the Mortgagor at its
address determined in accordance with the provisions of Section 4.3 hereof.
Section 2.21 Compliance with Agreements. The Mortgagor shall timely comply
and perform all of the obligations imposed upon it by the Notes, the Indenture
and the Security Documents.
Section 2.22 Environmental. Except as could not, singly or in the
aggregate, have a Material Adverse Effect:
(i) Mortgagor (a) has obtained all Permits that are required with
respect to the operation of the Mortgaged Property under the Environmental
Laws (as defined below) and is in compliance with all terms and conditions
of such required Permits, and (b) is in compliance with all Environmental
Laws (including, without limitation, compliance with standards, schedules
and timetables therein);
(ii) no portion of or interest in the Mortgaged Property is listed or
proposed for listing on the National Priorities List or the Comprehensive
Environmental Response, Compensation, and Liability Information System,
both promulgated under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or on any
other state or local list established pursuant to any Environmental Law,
and Mortgagor has not received any notification of potential or actual
liability or request for information under CERCLA or any comparable state
or local law;
(iii) no underground storage tank or other underground storage
receptacle, or related piping, is located on the Mortgaged Property;
(iv) there have been no releases (including, without limitation, any
past or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping,
onsite or, to the best of Mortgagor's knowledge after due inquiry, offsite)
of Hazardous Materials (as defined below) by Mortgagor or, to the best of
Mortgagor's knowledge after due inquiry, any predecessor in interest, or
any person or entity whose liability for any release of Hazardous
Materials, Mortgagor or any of its affiliates has retained or assumed
either contractually or by operation of law at, on, under, from or into any
portion of the Mortgaged Property;
(v) neither Mortgagor nor any person or entity whose liability
Mortgagor or any of its affiliates has retained or assumed either
contractually or by operation of law has any liability, absolute or
contingent, under any Environmental Law, and there is no civil, criminal or
administrative action, suit, demand, hearing, notice of violation or
deficiency, investigation, proceeding, notice or demand letter pending or,
to the best of their knowledge after due inquiry, threatened against any of
them under any Environmental Law;
(vi) there are no events, activities, practices, incidents or actions
or, to the best of Mortgagor's knowledge after due inquiry, conditions,
circumstances or plans that may interfere with or prevent compliance by
Mortgagor with any Environmental Law, or that may give rise to any
liability under any Environmental Laws; and
(vii) in the ordinary course of its businesses, Mortgagor conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of Mortgagor in the course of which it identifies
and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for cleanup,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and
any potential liabilities to third parties). On the basis of such review,
Mortgagor has reasonably concluded that such associated costs and
liabilities could not reasonably be expected to, singly or in the
aggregate, have a Material Adverse Effect on Mortgagor, taken as a whole.
"Environmental Laws" means all Applicable Laws, now or hereafter in
effect, relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to (1) emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous constituents, substances or
wastes, including, without limitation, asbestos or asbestoscontaining
materials, polychlorinated biphenyls, petroleum or any constituents
relating to or arising out of any oil production activities, including
crude oil or any fraction thereof, or any petroleum product or other
wastes, chemicals or substances regulated by any Environmental Law
(collectively referred to as "Hazardous Materials"), into the environment
(including, without limitation, ambient air, surface water, ground water,
land surface or subsurface strata), (2) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of Hazardous Materials and (3) underground storage tanks and
related piping, and emissions, discharges, releases or threatened releases
therefrom.
ARTICLE III
Default and Remedies
Section 3.1 Events of Default. The following shall each constitute an
"Event of Default" under this Mortgage:
(i) the occurrence of any Event of Default under the Notes, the
Indenture, the Guaranty or any of the Security Documents;
(ii) if the Mortgagor shall fail to make any other payment required by
this Mortgage within ten (10) days after written notice thereof to the
Mortgagor by the Mortgagee;
(iii) if any representation or warranty contained herein shall be
false or incorrect in any material respect when made; or
(iv) if the Mortgagor fails to keep, observe and/or perform any of the
other covenants, conditions, Obligations or agreements contained in this
Mortgage, and such default continues for a period of thirty (30) days after
written notice to the Mortgagor by the Mortgagee; provided, however, that
it shall not be an Event of Default hereunder if the default is such that
cannot reasonably be cured within 30 days and the Mortgagor commences to
cure the default within such thirtyday period, diligently pursues a cure,
and cures such default within 120 days from the date of the initial written
notice of default thereof to the Mortgagor by the Mortgagee.
Section 3.2 Remedies. Upon the occurrence and during the continuance of any
Event of Default, the Mortgagee may:
(i) in addition to any rights or remedies available to it hereunder,
take such action as it deems advisable to protect and enforce its rights
against the Mortgagor and in and to the Mortgaged Property, including,
without limitation, the following actions, each of which may be pursued
concurrently or otherwise, at such time and in such order as the Mortgagee
may determine, in its sole discretion, without impairing or otherwise
affecting any of the other rights and remedies of the Mortgagee: (1)
declare the entire unpaid Indebtedness to be immediately due and payable;
or (2) after accelerating the Indebtedness, to the extent permitted by law,
immediately enter into or upon the Mortgaged Property, either personally or
by its agents, nominees or attorneys and dispossess the Mortgagor and its
agents and servants therefrom, and at once take possession of the Mortgaged
Property, and thereupon the Mortgagee may (a) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all and
every part of the Mortgaged Property and conduct the business thereat; (b)
complete any construction on the Mortgaged Property in such manner and form
as the Mortgagee deems advisable; (c) make such alterations, additions,
renewals, replacements and improvements to or on the Improvements and the
balance of the Mortgaged Property necessary or advisable as determined by
the Mortgagee to continue to operate the business; (d) exercise all rights
and powers of the Mortgagor with respect to the Mortgaged Property, whether
in the name of the Mortgagor or otherwise, including, without limitation,
the right to make, cancel, enforce or modify leases, obtain and evict
tenants, and sue for, collect and receive all earnings, revenues, rents,
issues, profits and other income of the Mortgaged Property and every part
thereof; and (e) apply the receipts from the Mortgaged Property to the
payment of the Indebtedness, after deducting therefrom all expenses
(including reasonable attorneys' fees and disbursements) incurred in
connection with the aforesaid operations and all amounts necessary to pay
the taxes, assessments, insurance and other charges in connection with the
Mortgaged Property, as well as just and reasonable compensation for the
services of the Mortgagee, its counsel, agents and employees; or (3)
institute proceedings for the complete foreclosure of this Mortgage in
which case the Mortgaged Property may be sold for cash or credit in one or
more parcels; or (4) with or without entry and, to the extent permitted,
and pursuant to the procedures provided by applicable law, institute
proceedings for the foreclosure of this Mortgage for the portion of the
Indebtedness then due and payable, subject to the Lien of this Mortgage
continuing unimpaired and without loss of priority so as to secure the
balance of the Indebtedness not then due; or (5) institute an action, suit
or proceeding in equity for the specific performance of any covenants,
condition or agreement contained herein; or (6) recover judgment on the
Notes or any guaranty either before, during or after or in lieu of any
proceedings for the enforcement of this Mortgage; or (7) apply for the
appointment of a trustee, receiver, liquidator or conservator of the
Mortgaged Property, without regard for the adequacy of the security for the
Indebtedness and without regard for the solvency of the Mortgagor, any
guarantor or of any person, firm or other entity liable for the payment of
the Indebtedness or performance of the Obligations to which appointment the
Mortgagor does hereby consent; or (8) to the extent permitted by applicable
law, to proceed under the POWER OF SALE granted herein and sell the
Mortgaged Property or any part thereof to the extent permitted and pursuant
to the procedures provided by the laws of the State in which the Mortgaged
Property is located, and all estate, right, title and interest, claim and
demand therein, and right of redemption thereof, at one or more sales, as
an entirety or in parcels, and at such time and place, upon such terms and
after such notice thereof as may be required by applicable law or (9)
pursue such other remedies as the Mortgagee may have under applicable law.
(ii) In addition to any other remedies available to the Mortgagee
hereunder or at law or in equity, the Mortgagor hereby confers unto the
Mortgagee a power of sale for the Mortgaged Property exercisable upon an
Event of Default under this Mortgage and agrees that the Mortgagee, at its
option, may proceed under this power of sale pursuant to the applicable
procedures provided therefor by the laws of the State in which the
Mortgaged Property is located or foreclose this Mortgage as provided by
such laws. The Mortgagor represents and warrants that the Mortgaged
Property is not the Mortgagor's homestead and that the Indebtedness is not
an extension of credit made primarily for agricultural purposes.
Notwithstanding anything contained in this Mortgage to the contrary,
any notices of sale given in accordance with the applicable requirements
provided therefor by the laws of the State in which the Mortgaged Property
is located shall constitute sufficient notice of sale. The conduct of a
sale pursuant to a power of sale shall be sufficient hereunder if conducted
in accordance with such requirements in effect at the time of such sale,
notwithstanding any other provision contained in this Mortgage to the
contrary. The proceeds of any sale of the Mortgaged Property pursuant to
the power of sale herein granted shall be applied in accordance with such
requirements in effect at the time of such sale.
(iii) The proceeds of any sale made under or by virtue of this Article
III, together with any other sums which then may be held by the Mortgagee
under this Mortgage, whether under the provisions of this Article III or
otherwise, shall be applied:
First: To the payment of the costs and expenses of any such sale, or
the costs and expenses of entering upon, taking possession of, removing
from, holding, operating and/or managing the Mortgaged Property or any part
thereof, as the case may be, and of all expenses, liabilities and advances
made or incurred by the Mortgagee under this Mortgage, together with
interest at the Default Rate as provided herein on all advances made by the
Mortgagee and all taxes or assessments, except any taxes, assessments or
other charges subject to which the Mortgaged Property shall have been sold.
Second: In accordance with the provisions of Section 6.10 of the
Indenture.
The Mortgagee and any receiver of the Mortgaged Property or any part
thereof shall be liable to account for only those rents, issues and profits
actually received by it.
(iv) The Mortgagee may adjourn from time to time any sale by it to be
made under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales; and
except as otherwise provided by any applicable provision of law, the
Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.
(v) Upon the completion of any sale or sales made by the Mortgagee
under or by virtue of this Article III, the Mortgagee, or an officer of any
court empowered to do so, shall execute and deliver to the accepted
purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, granting, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold.
The Mortgagee is hereby irrevocably appointed the true and lawful
attorneyinfact of the Mortgagor (coupled with an interest), in its name and
stead, to make all necessary conveyances, assignments, transfers and
deliveries of the Mortgaged Property and rights so sold and for that
purpose the Mortgagee may execute all necessary instruments of conveyance,
assignment, transfer and delivery, and may substitute one or more persons
with like power, the Mortgagor hereby ratifying and confirming all that
said attorneyinfact or such substitute or substitutes shall lawfully do by
virtue hereof. Nevertheless, the Mortgagor, if so requested by the
Mortgagee, shall ratify and confirm any such sale or sales by executing and
delivering to the Mortgagee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of the Mortgagee, for the
purpose, and as may be designated in such request. Any such sale or sales
made under or by virtue of this Article III, whether made under the POWER
OF SALE herein granted or under or by virtue of judicial proceedings or of
a judgment or decree of foreclosure and sale, shall operate to divest all
of the estate, right, title, interest, claim and demand whatsoever, whether
at law or in equity, of the Mortgagor in and to the properties and rights
so sold, and shall be a perpetual bar both at law and in equity against the
Mortgagor and against any and all persons claiming or who may claim the
same or any part thereof from, through or under the Mortgagor.
(vi) In the event of any sale made under or by virtue of this Article
III (whether made under the POWER OF SALE provided for herein or under or
by virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale), the entire Indebtedness, if not previously due and payable,
immediately thereupon shall, anything in any Note, the Indenture, any of
the Security Documents or in this Mortgage to the contrary notwithstanding,
become due and payable.
(vii) Upon any sale made under or by virtue of this Article III
(whether made under the POWER OF SALE provided for herein or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale), the Mortgagee may bid for and acquire the Mortgaged Property or
any part thereof or interest therein and in lieu of paying cash therefor
may make settlement for the purchase price by crediting upon the
Indebtedness of the Mortgagor secured by this Mortgage the net sales price
after deducting therefrom the expenses of the sale and the costs of the
action (including attorneys' fees and expenses) and any other sums which
the Mortgagee is authorized to deduct under this Mortgage.
(viii) No recovery of any judgment by the Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or any part
thereof or upon any other property of the Mortgagor shall effect in any
manner or to any extent, the lien of this Mortgage upon the Mortgaged
Property or any part thereof, or any liens, rights, powers or remedies of
the Mortgagee hereunder, but such Liens, rights, powers and remedies of the
Mortgagee shall continue unimpaired as before.
Section 3.3 Payment of Indebtedness After Default. Upon the occurrence of
any Event of Default and the acceleration of the maturity of the Indebtedness as
provided herein, if, at any time prior to foreclosure sale, the Mortgagor or any
other person tenders payment of the amount necessary to satisfy the
Indebtedness, the same shall constitute an evasion of the payment terms hereof
and/or the Indenture or the Security Documents or the Notes and shall be deemed
to be a voluntary prepayment hereunder, in which case such payment must include
the premium and/or fee required under the prepayment provision, if any,
contained herein or in the Notes, the Security Documents and/or the Indenture.
This provision shall be of no force or effect if at the time that such tender of
payment is made, the Mortgagor has the right under this Mortgage, the Security
Documents, the Indenture or the Notes to prepay the Indebtedness without penalty
or premium.
Section 3.4 Intentionally Omitted.
Section 3.5 Mortgagor's Actions After Default. Effective after the
happening of any Event of Default and immediately upon the commencement of any
action, suit or other legal proceedings by the Mortgagee to obtain judgment for
the Indebtedness, or of any other nature in aid of the enforcement of the Notes,
the Indenture, the Guaranty, the Security Documents or this Mortgage, the
Mortgagor hereby (i) waives the issuance and service of process in any such
action, suit or proceeding, provided, however, that notice of such process is
given to Mortgagor in accordance with Section 4.3 hereof, (ii) waives the right
to trial by jury and (iii) if required by the Mortgagee, consents to the
appointment of a receiver or receivers with respect to the Mortgaged Property
and of all the earnings, revenues, rents, issues, profits and income thereof.
Section 3.6 Control by Mortgagee After Default. Upon and following the
appointment of any receiver, liquidator or trustee of the Mortgagor, or of any
of its property, or of the Mortgaged Property or any part thereof, the Mortgagee
shall be entitled to possession and control of all property now and hereafter
covered by this Mortgage, and shall not be deemed to be a mortgageeinpossession
as a result thereof.
ARTICLE IV
Miscellaneous
Section 4.1 Credits Waived. The Mortgagor will not claim or demand or be
entitled to any credit or credits against the Indebtedness for so much of the
taxes assessed against the Mortgaged Property or any part thereof, as is equal
to the tax rate applied to the amount due on this Mortgage or any part thereof,
and no deductions shall otherwise be made or claimed from the taxable value of
the Mortgaged Property or any part thereof by reason of this Mortgage or the
payment of the Indebtedness and the performance of the Obligations secured
hereby.
Section 4.2 No Releases. The Mortgagor agrees, that in the event the
Mortgaged Property or any part thereof or interest therein is sold pursuant to
the prior written consent of the Mortgagee as provided herein, and the Mortgagee
enters into any agreement with the then owner of the Mortgaged Property
extending the time of payment of the Indebtedness or performance of the
Obligations, or otherwise modifying the terms hereof, the Mortgagor shall
continue to be liable to pay the Indebtedness and perform the Obligations
according to the tenor of any such agreement unless expressly released and
discharged in writing by the Mortgagee.
Section 4.3 Notices. All notices, requests, demands and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or by
prepaid telex or telegram (with messenger delivery specified in the case of a
telegram), or by telecopier, or overnight air courier guaranteeing next day
delivery and shall be deemed to be delivered for purposes of this Mortgage when
delivered in person, upon acknowledged receipt if delivered by telecopy or
telex, or five (5) business days after depositing it in the United States mail,
registered or certified, with postage prepaid and properly addressed, and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. Unless otherwise specified in a notice
sent or delivered in accordance with the foregoing provisions of this Section
4.3, notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties at their respective addresses (or
to their respective telex or telecopier numbers) indicated below:
If to Mortgagor:
PPM Cranes, Inc.
c/o Terex Corporation
500 Post Road East
Westport, Connecticut 06880
Attention: Marvin Rosenberg, Esq.
If to the Mortgagee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attn: Corporate Trust Department
Section 4.4 Binding Obligations. The provisions and covenants of this
Mortgage shall run with the land, shall be binding upon the Mortgagor and shall
inure to the benefit of the Mortgagee, subsequent holders of this Mortgage, and
the respective successors and assigns of the foregoing. For the purpose of this
Mortgage, the term "Mortgagor" shall include and refer to the Mortgagor named
herein, any subsequent owners of the Mortgaged Property (or any part thereof or
interest therein), and their respective heirs, executors, legal representatives,
successors and assigns. If there is more than one Mortgagor, all of their
undertakings hereunder shall be deemed to be joint and several.
Section 4.5 Legal Construction. The creation of this Mortgage, the
perfection of the lien or security interest thereof in the Mortgaged Property,
and the rights and remedies of the Mortgagee with respect to the Mortgaged
Property, as provided herein and by the laws of the state wherein the Mortgaged
Property is located, shall be governed by and construed in accordance with the
internal laws of the state wherein the Mortgaged Property is located without
regard to principles of conflict of law. Otherwise, to the extent permitted by
applicable law, this Mortgage, the Notes, the Security Documents, the Indenture
and all other obligations of the Mortgagor (including, without limitation, the
liability of the Mortgagor for any deficiency following a foreclosure of all or
any part of the Mortgaged Property) shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflicts of laws, such state being the state where such documents
were executed and delivered. Nothing in this Mortgage, the Notes, the Indenture
or in any other agreement between the Mortgagor and the Mortgagee shall require
the Mortgagor to pay, or the Mortgagee to accept, interest in an amount which
would subject the Mortgagee to any penalty or forfeiture under applicable law.
All agreements between the Mortgagor and the Mortgagee, whether now existing or
hereafter arising and whether oral or written, are hereby expressly limited so
that in no contingency or event whatsoever shall the amount paid or agreed to be
paid by the Mortgagor for the use, forbearance or detention of the money to be
loaned under the Indenture, the Security Documents, the Notes or any related
document, or for the payment or performance of any covenant or obligation
contained herein, in the Indenture, the Security Documents or in the Notes
exceed the maximum amount permissible under applicable Federal or state usury
laws. If under any circumstances whatsoever fulfillment of any such provision,
at the time performance of such provision shall be due, shall involve exceeding
the limit of validity prescribed by law, then the obligation to be fulfilled
shall be reduced to the limit of such validity. If under any circumstances the
Mortgagor shall have paid an amount deemed interest by applicable law, which
would exceed the highest lawful rate, such amount shall be applied to the
reduction of the principal amount owing in respect of the Indebtedness and not
to the payment of interest, or if such excessive interest exceeds such unpaid
balance of principal and any other amounts due hereunder or under the Notes, the
Indenture or any of the Security Documents, the excess shall be refunded to the
Mortgagor. All sums paid or agreed to be paid for the use, forbearance or
detention of the principal under any extension of credit by the Mortgagee shall,
to the extent permitted by applicable law, and to the extent necessary to
preclude exceeding the limit of validity prescribed by law, be amortized,
prorated, allocated and spread from the date of this Mortgage until payment in
full of such sums so that the actual rate of interest on account of such
principal amounts is uniform throughout the term hereof.
Section 4.6 Captions. The captions of the Sections of this Mortgage are for
the purpose of convenience only and are not intended to be a part of this
Mortgage and shall not be deemed to modify, explain, enlarge or restrict any of
the provisions hereof.
Section 4.7 Further Assurances. The Mortgagor shall do, execute,
acknowledge and deliver, at the sole cost and expense of the Mortgagor, such
further acts, deeds, documents, instruments, conveyances, mortgages,
assignments, estoppel certificates, financing statements, fixture filings,
continuation statements, notices of assignment, transfers and assurances as the
Mortgagee may reasonably require from time to time in order to assure, convey,
grant, assign, transfer and confirm unto the Mortgagee the rights now or
hereafter intended to be granted to the Mortgagee under this Mortgage, any other
instrument executed in connection with this Mortgage or any other instrument
under which the Mortgagor may be or may hereafter become bound to convey,
mortgage or assign to the Mortgagee for carrying out the intention of
facilitating the performance of the terms of this Mortgage. The Mortgagor hereby
appoints the Mortgagee its attorneyinfact to execute, acknowledge and deliver
for and in the name of the Mortgagor any and all of the instruments mentioned in
this Section 4.7 and this power, being coupled with an interest, shall be
irrevocable as long as any part of the Indebtedness remains unpaid or any
Obligations remain unperformed, provided, however, that the Mortgagee shall not
exercise its powers as attorneyinfact without giving Mortgagor five (5) days'
prior written notice of its intention to do so.
Section 4.8 Severability. Any provision of this Mortgage which is
prohibited or unenforceable in any jurisdiction or prohibited or unenforceable
as to any person or entity shall, as to such jurisdiction, person or entity or
circumstance be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction or as to any other person or entity or circumstance.
Section 4.9 General Conditions.
additional to and not exclusive of the rights conferred under the
provisions of any other applicable law. To the extent any specific
provision of this Mortgage and the provisions of any applicable law
conveying any beneficial rights to either party directly conflict, the
terms of this Mortgage shall control.
(ii) This Mortgage cannot be altered, amended, modified or discharged
orally and no executory agreement shall be effective to modify or discharge
it in whole or in part, unless it is in writing and signed by the party
against whom enforcement of the modification, alteration, amendment or
discharge is sought.
(iii) No remedy herein conferred upon or reserved to the Mortgagee is
intended to be exclusive of any other remedy or remedies, and each and
every such remedy shall be cumulative, and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. No delay or omission of the Mortgagee in exercising
any right or power accruing upon any Event of Default shall impair any such
right or power, or shall be construed to be a waiver of any such Event of
Default, or any acquiescence therein. Acceptance of any payment (other than
a monetary payment in cure of a monetary default) after the occurrence of
an Event of Default shall not be deemed a waiver of or a cure of such Event
of Default and every power and remedy given by this Mortgage to the
Mortgagee may be exercised from time to time as often as may be deemed
expedient by the Mortgagee. Nothing in this Mortgage or in the Notes shall
limit or diminish the obligation of the Mortgagor to pay the Indebtedness
in the manner and at the time and place therein respectively expressed.
(iv) No waiver by the Mortgagee or the Mortgagor shall be effective
unless it is in writing and then only to the extent specifically stated.
Without limiting the generality of the foregoing, any payment made by the
Mortgagee for insurance premiums, taxes, assessments, water rates, sewer
rentals, levies, fees or any other charges affecting the Mortgaged Property
shall not constitute a waiver of the Mortgagor's default in making such
payments and shall not obligate the Mortgagee to make any further payments.
(v) The Mortgagee shall have the right to appear in and defend any
action or proceeding, in the name and on behalf of the Mortgagor which the
Mortgagee in its discretion determines may adversely affect the Mortgaged
Property or this Mortgage, provided, however, that the Mortgagor shall have
the right to defend any such action with counsel reasonably acceptable to
the Mortgagee. In the event that any such action or proceeding is one
covered by title insurance, defense thereof may be made by counsel to the
title company; if the proceeding is one covered by insurance, defense
thereof may be made by counsel to the insurance company; notwithstanding
the foregoing, if the action is one not covered by insurance, the Mortgagor
shall defend such action with counsel reasonably satisfactory to the
Mortgagee. The Mortgagee shall also have the right, upon reasonable prior
notice to Mortgagor (except in the case of an emergency or other imminent
danger to the Mortgaged Property or Mortgagee's interest therein, in which
event no prior notice shall be required), to institute any action or
proceeding which the Mortgagee in its reasonable discretion determines
should be brought to protect its interest in the Mortgaged Property or its
rights hereunder. All costs and expenses incurred by the Mortgagee in
connection with any such action or proceedings, including, without
limitation, attorneys' fees and expenses shall be paid by the Mortgagor and
shall be secured by this Mortgage.
(vi) In the event of the passage after the date of this Mortgage of
any law of any governmental authority having jurisdiction hereof or of the
Mortgaged Property, deducting from the value of land for the purpose of
taxation, affecting any lien thereon or changing in any way the laws for
the taxation of mortgages or debts secured by mortgages for federal, state
or local purposes, or the manner of the collection of any such taxes, so as
to affect this Mortgage, the Mortgagor shall promptly pay to the Mortgagee,
on demand, all taxes, costs and charges for which the Mortgagee is or may
be liable as a result thereof; provided that if said payment shall be
prohibited by law, render the Notes usurious or subject the Mortgagee to
any penalty or forfeiture, then and in such event the Indebtedness shall,
at the option of the Mortgagee, be immediately due and payable.
(vii) The Mortgagor hereby appoints the Mortgagee as its
attorneyinfact in connection with the personal property and fixtures
covered by this Mortgage, where permitted by law, to file on its behalf any
financing statements or other statements in connection therewith with the
appropriate public office signed by the Mortgagee, as secured party. This
power being coupled with an interest, shall be irrevocable so long as any
part of the Indebtedness remains unpaid.
Section 4.10 Multistate Real Estate Transaction. The Mortgagor acknowledges
that this Mortgage is one of a number of other mortgages, deeds of trust and
assignments of leases and rents and other security documents (hereinafter
collectively the "Other Security Documents") which secure the payment of the
Indebtedness and performance of the Obligations in whole or in part. The
Mortgagor agrees that the lien of this Mortgage shall, subject to the terms
hereof, be absolute and unconditional and shall not in any manner be affected or
impaired by any acts or omissions whatsoever of the Mortgagee and, without
limiting the generality of the foregoing, the lien hereof shall not be impaired
by any acceptance by the Mortgagee of any security for or guarantors upon any of
the Indebtedness or by any failure, neglect or omission on the part of the
Mortgagee to realize upon or protect any of the Indebtedness or any collateral
or security therefor. The lien hereof shall not in any manner be impaired or
affected by any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, renewal, extension, indulgence, alteration,
changing, modification or any disposition of any of the Indebtedness or of any
of the collateral or security therefor. The Mortgagee may exercise any of the
rights and remedies under the Other Security Documents without first exercising
or enforcing any of its rights and remedies hereunder, or may foreclose,
exercise any power of sale, or exercise any other right available under this
Mortgage without first exercising or enforcing any of its rights and remedies
under any or all of the Other Security Documents. Such exercise of the
Mortgagee's rights and remedies under any or all of the Other Security Documents
shall not in any manner impair the Indebtedness or lien of this Mortgage, and
any exercise of the rights or remedies of the Mortgagee hereunder shall not
impair the lien of any of the Other Security Documents or any of the Mortgagee's
rights and remedies thereunder. The Mortgagor specifically consents and agrees
that the Mortgagee may exercise its rights and remedies hereunder and under the
Other Security Documents separately or concurrently and in any order that the
Mortgagee may deem appropriate.
Section 4.11 Agreement Paramount. If and to the extent that any of the
provisions of this Mortgage conflict or are otherwise inconsistent with any of
the provisions of the Indenture, the provisions of the Indenture shall prevail.
Notwithstanding the foregoing, the failure of the Indenture to speak to or
address a provision expressly set forth in this Mortgage shall not be deemed to
be such an inconsistency or conflict.
IN WITNESS WHEREOF, this Mortgage has been duly executed and delivered by
the Mortgagor as of the date first above written.
PPM CRANES, INC.
Witnesses:
______________________________ By:__________________________
Name:
______________________________ Title:
Attest:_______________________
Name:
Title:
<PAGE>
STATE OF ________________________ )
COUNTY OF _______________________ )
PERSONALLY appeared before me the undersigned witness and made oath that
s/he saw the within named PPM Cranes, Inc., by _____________________, its
_______________________, sign, seal and, as its act and deed, deliver the within
written document for the uses and purposes therein mentioned and that s/he, with
the other witness whose signature appears above witnessed the execution thereof.
SWORN to before me this ____________)
day of ______________________, 1995.)
)
____________________________(L.S. ) ____________________
Notary Public for __________________) Witness
My Commission expires:______________)
<PAGE>
EXHIBIT 11.1
(PAGE 1 OF 4)
TEREX CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in millions except per share amounts)
Year Ended December 31,
1995 1994 1993
PRIMARY:
Income (loss) before extraordinary item .........$ (27.7) $ 1.2 $ (65.0)
Less: Accretion of Preferred Stock ............ (7.3) (6.0) (0.2)
Income (loss) before extraordinary item
applicable to common stock ..................... (35.0) (4.8) (65.2)
Extraordinary loss on retirement of debt ........ (7.5) (0.7) (1.5)
Net income (loss) applicable to common stock ....$ (42.5) $ (5.5) $ (66.7)
Weighted average shares outstanding
during the period .............................. 10.4 10.3 10
Assumed exercise of warrants at ratio determined
as of December 31, 1995 ........................ ---(a) ---(a) ---(b)
Assumed exercise of stock options ............... ---(a) ---(a) ---(a)
Primary shares outstanding ...................... 10.4 10.3 10.0
PRIMARY INCOME PER COMMON SHARE
Income (loss) before extraordinary item .......$ (3.37)$ (0.46)$ (6.55)
Extraordinary loss ............................ (0.72) (0.07) (0.15)
Net income (loss) .............................$ (4.09)$ (0.53)$ (6.70)
(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 4)
TEREX CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in millions except per share amounts)
Year Ended December 31,
1995 1994 1993
FULLY DILUTED:
Income (loss) before extraordinary item .... $ (27.7) $ 1.2 $ (65.0)
Less: Accretion of Preferred Stock ....... (7.3) (6.0) (0.2)
Income (loss) before extraordinary item
applicable to common stock ................ (35.0) (4.8) (65.2)
Add: Accretion of Preferred stock assumed
converted at beginning of period .......... --- --- ---
(35.0) (4.8) (65.2)
Extraordinary loss on retirement of debt ... (7.5) (0.7) (1.5)
Net income (loss) applicable to common stock $ (42.5) $ (5.5) $ (66.7)
Weighted average shares outstanding
during the period ......................... 10.4 10.3 10.0
Assumed exercise of warrants at ratio
determined as of December 31, 1994 ....... ---(a) ---(a) ---(a)
Assumed conversion of Preferred Stock ...... ---(a) ---(a) ---(b)
Assumed exercise of stock options .......... ---(a) ---(a) ---(a)
Fully diluted shares outstanding ........... 10.4 10.3 10.0
FULLY DILUTED INCOME PER COMMON SHARE
Income (loss) before extraordinary item .. $ (3.37)$ (0.46)$ (6.55)
Extraordinary loss ....................... (0.72) (0.07) (0.15)
Net income (loss) ........................ $ (4.09)$ (0.53)$ (6.70)
(a) Excluded from the computation because the effect is anti-dilutive.
(b) Not issued or outstanding during these periods.
<PAGE>
EXHIBIT 11.1
(Page 3 of 4)
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
(in millions except per share amounts)
Three Months Ended
March 31,
1996 1995
PRIMARY:
Net income (loss) ..................................... $ 0.5 $ (1.9)
Less: Accretion of Preferred Stock .................... (1.9) (1.7)
Net income (loss) applicable to common stock .......... $ (1.4) $ (3.6)
Weighted average shares outstanding during the period . 10.6 10.3
Assumed exercise of warrants at ratio
determined as of March 31, 1995 ..................... --- (a) --- (a)
Assumed exercise of stock options ..................... --- (a) --- (a)
Primary shares outstanding ............................ 10.6 10.3
Primary income (loss) per common share ................ $ (0.13)$ (0.35)
(a) Excluded from the computation because the effect is anti-dilutive.
<PAGE>
EXHIBIT 11.1
(Page 4 of 4)
TEREX CORPORATION AND SUBSIDIARIES
Computation of Earnings per Common Share
(in millions except per share amounts)
Three Months Ended
March 31,
1996 1995
FULLY DILUTED:
Net income (loss) ................................ $ 0.5 $ (1.9)
Less: Accretion of Preferred Stock ............... (1.9) (1.7)
Net income (loss) applicable to common stock ..... $ (1.4) $ (3.6)
Weighted average shares outstanding during the period 10.6 10.3
Assumed exercise of warrants at ratio
determined as of March 31, 1995 .................. --- (a) --- (a)
Assumed exercise of stock options ................ --- (a) --- (a)
Primary shares outstanding ....................... 10.6 10.3
Fully diluted income (loss) per common share ..... $ (0.13)$ (0.35)
(a) Excluded from the computation because the effect is anti-dilutive.
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
TEREX CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(amounts in millions)
Three Months Ended Year Ended December 31,
March 31, Pro Forma
1996 1995 1995 1995 1994 1993 1992 * 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income (loss) before taxes and
minority interest ..................... $ 0.5 $ (1.8) $ (27.7) $ (53.0) $ 2.0 $ (64.9) $ 3.0 $ (41.9)
Adjustments:
Minority interest in losses of
consolidated subsidiaries ............. -- -- -- -- -- -- -- --
Undistributed (income) loss of
less than 50% owned investments ....... -- -- -- -- -- 0.7 3.7 (5.8)
Distributions from less than
50% owned investments ................. -- -- -- -- -- -- -- 1.7
Fixed charges ......................... 14.5 9.7 51.3 58.4 41.2 34.8 27.2 36.2
Earnings .............................. 15.0 7.9 23.6 5.4 43.2 (29.4) 33.9 (9.8)
Combined fixed charges, including
preferred accretion
Interest expense, including debt
discount amortization ................. 11.5 7.0 39.5 45.6 30.5 31.2 23.3 31.5
Accretion of redeemable convertible
preferred stock ....................... 1.9 1.7 7.3 8.1 5.9 0.2 -- --
Amortization/writeoff of debt
issuance costs ........................ 0.6 0.5 2.3 2.5 2.3 1.3 1.7 1.6
Portion of rental expense
representative of interest factor
(assumed to be 33%) ................... 0.5 0.5 2.2 2.2 2.5 2.1 2.2 3.1
Fixed charges ......................... $ 14.5 $ 9.7 $ 51.3 $ 58.4 $ 41.2 $ 34.8 $ 27.2 $ 36.2
Ratio of earnings to combined fixed
charges ............................... 1.0 (1) (1) (1) 1.0 (1) 1.2 (1)
Amount of earnings deficiency for
coverage of combined fixed charges .... $ -- $ 1.8 $ 27.7 $ 53.0 $ -- $ 64.2 $ -- $ 46.0
<FN>
(1) Less than 1.0x.
*Fruehauf deconsolidated as of January 1, 1992
</FN>
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Terex Corporation of our report dated
March 22, 1996 relating to the financial statements of Terex Corporation as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 and of our report dated March 22, 1996 relating to the
financial statements of PPM Cranes, Inc. as of December 31, 1995 and for the
eight month period ended December 31, 1995, which appear in such Prospectus. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Stamford, Connecticut
June 4, 1996
<PAGE>
Exhibit 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the caption "Experts" and to the
use of our report dated August 22, 1995 with respect to the combined financial
statements of PPM S.A. and Legris Industries, Inc. and our report dated August
22, 1995 with respect to the consolidated financial statements of PPM Cranes,
Inc. included in Amendment No. 1 to the Registration Statement (Form S-4 No.
33-01449) and related Prospectus of Terex Corporation for the registration of
Series B 13 1/4% Senior Secured Notes due 2002.
/s/ Ernst & Young LLP
Greenville, South Carolina
June 10, 1996
<PAGE>
Exhibit 23.3
(Page 1 of 2)
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Terex Corporation of our report dated 30
January 1995 relating to the financial statements of PPM of Australia Pty Ltd as
at 31 December 1994. We also consent to the reference to the Australian firm of
Price Waterhouse under the heading "Experts" in the context as experts in
accounting and auditing in such Prospectus.
PRICE WATERHOUSE
Melbourne, Australia
7 June 1996
<PAGE>
Exhibit 23.3
(Page 2 of 2)
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF PPM OF AUSTRALIA PTY LTD
Scope
We have audited the financial statements of the Company for the year ended 31
December 1994 as set out on pages 4 to 22. The directors are responsible for the
preparation and presentation of the financial statements and the information
contained therein. We have conducted an independent audit of the financial
statements in order to express an opinion on them to the members of the Company.
Our audit has been conducted in accordance with Australian Accounting Standards
to provide reasonable assurance as to whether the financial statements are free
of material misstatement. Our procedures include examination, on a test basis,
of evidence supporting the amounts and other disclosures in the financial
statements, and the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an opinion as to
whether, in all material respects, the financial statements are presented fairly
in accordance with Australian Accounting Standards and the Corporations Law so
as to present a view which is consistent with our understanding of the Company's
state of affairs, the results of its operations and its cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In our opinion, the financial statements of PPM of Australia Pty Ltd are
properly drawn up:
(a) so as to give a true and fair view of:
(i) the state of affairs of the Company as at 31 December 1994 and its
results and cash flows for the financial year ended on that date; and
(ii) the other matters required by Divisions 4, 4A and 4B of Part 3.8 of
the Corporations Law to be dealt with in the financial statements;
(b) in accordance with provisions of the Corporations Law; and
(c) in accordance with applicable accounting standards and Australian
Accounting Standards.
/s/ Price Waterhouse
Price Waterhouse
Chartered Accountants
/s/ WD Russell
WD Russell
Partner
Melbourne, Australia
30 January 1995
<PAGE>
EXHIBIT 24.1
(Page 1 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Ronald M. DeFeo and Marvin B.
Rosenberg, or either of them, as his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any an all amendments
(including, without limitation, post-effective amendments) to Form S-1/A
Registration Statements for Preferred Stock and Common Stock and Common Stock
Purchases Warrants and Common Stock, and to file the same with all exhibits
thereto, and all document in connection therewith, with the Securities and
Exchange Commission, granting said attorney-in-fact and agent, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof, during 1996.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Ronald M. DeFeo President, Chief Executive Officer, April 26, 1996
Ronald M. DeFeo Chief Operating Officer and Director
(Principal Executive Officer)
/s/ Ralph T. Brandifino Senior Vice President and April 26, 1996
Ralph T. Brandifino Chief Financial Officer
(Principal Financial Officer)
/s/ Marvin B. Rosenberg Senior Vice President, General April 26, 1996
Marvin B. Rosenberg Counsel, Secretary and Director
/s/ Joseph F. Apuzzo Vice President and Controller April 26, 1996
Joseph F. Apuzzo (Principal Accounting Officer)
/s/ G. Chris Andersen Director April 26, 1996
G. Chris Andersen
/s/ William H. Fike Director April 26, 1996
William H. Fike
/s/ Bruce I. Raben Director April 26, 1996
Bruce I. Raben
/s/ David A. Sachs Director April 26, 1996
David A. Sachs
/s/ Adam E. Wolf Director April 26, 1996
Adam E. Wolf
<PAGE>
EXHIBIT 24.1
(Page 2 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Ronald M. DeFeo and Marvin B. Rosenberg, or
either of them, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the Form S-4/A Registration Statement for the
Senior Secured Notes, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Fil Filipov President June 5, 1996
Fil Filipov (Principal Executive Officer)
/s/ David J. Langevin Vice President, Treasurer and Director June 5, 1996
David J. Langevin (Principal Financial and
Accounting Officer)
/s/ Marvin B. Rosenberg Vice President, Secretary and Director June 5, 1996
Marvin B. Rosenberg
/s/ Ronald M. DeFeo Director June 5, 1996
Ronald M. DeFeo
<PAGE>
EXHIBIT 24.1
(Page 3 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Ronald M. DeFeo and Marvin B. Rosenberg, or
either of them, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the Form S-4/A Registration Statement for the
Senior Secured Notes, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Fil Filipov President June 5, 1996
Fil Filipov (Principal Executive Officer)
/s/ David J. Langevin Vice President, Treasurer and Director June 5, 1996
David J. Langevin (Principal Financial and
Accounting Officer)
/s/ Marvin B. Rosenberg Vice President, Secretary and Director June 5, 1996
Marvin B. Rosenberg
/s/ Ronald M. DeFeo Director June 5, 1996
Ronald M. DeFeo
Director
K. Thor Lundgren
<PAGE>
EXHIBIT 24.1
(Page 4 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Ronald M. DeFeo and Marvin B. Rosenberg, or
either of them, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the Form S-4/A Registration Statement for the
Senior Secured Notes, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Fil Filipov President June 5, 1996
Fil Filipov (Principal Executive Officer)
/s/ David J. Langevin Vice President, Treasurer and Director June 5, 1996
David J. Langevin (Principal Financial and
Accounting Officer)
/s/ Marvin B. Rosenberg Vice President, Secretary and Director June 5, 1996
Marvin B. Rosenberg
/s/ Ronald M. DeFeo Director June 5, 1996
Ronald M. DeFeo
<PAGE>
EXHIBIT 24.1
(Page 5 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Marvin B. Rosenberg, as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to the Form S-4/A
Registration Statement for the Senior Secured Notes, and to file the same with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
Signature Title Date
/s/ Martin Dorio President and Chief Executive Officer June 5, 1996
Martin Dorio (Principal Executive Officer)
/s/ Joseph F. Lingg Vice President Finance June 5, 1996
Joseph F. Lingg (Principal Financial and
Accounting Officer)
/s/ Marvin B. Rosenberg Secretary and Director June 5, 1996
Marvin B. Rosenberg
<PAGE>
EXHIBIT 24.1
(Page 6 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Ronald M. DeFeo and Marvin B. Rosenberg, or
either of them, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the Form S-4/A Registration Statement for the
Senior Secured Notes, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Ronald M. DeFeo President June 5, 1996
Ronald M. DeFeo (Principal Executive, Financial and
Accounting Officer)
/s/ Marvin B. Rosenberg Vice President, Secretary June 5, 1996
Marvin B. Rosenberg and Director
<PAGE>
EXHIBIT 24.1
(Page 7 of 7)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Ronald M. DeFeo and Marvin B. Rosenberg, or
either of them, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the Form S-4/A Registration Statement for the
Senior Secured Notes, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Ronald M. DeFeo President June 5, 1996
Ronald M. DeFeo (Principal Executive, Financial and
Accounting Officer)
/s/ Marvin B. Rosenberg Vice President, Secretary June 5, 1996
Marvin B. Rosenberg and Director
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM T-1
STATEMENT
OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
_________________________________
UNITED STATES TRUST COMPANY OF NEW YORK
___________________________________________________________________________
(Exact name of trustee as specified in its charter)
New York 13-3818954
___________________________________________________________________________
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street
New York, New York (Zip Code) 10036-1532
___________________________________________________________________________
(Address of principal executive offices)
__________________________
TEREX CORPORATION
___________________________________________________________________________
(Exact name of obligor as specified in its charters)
Delaware 34-1531521
___________________________________________________________________________
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
500 Post Road East
Westport, Connecticut 06880
(203) 222-7170
___________________________________________________________________________
(Address of principal executive offices)
__________________________
Series B 13 1/4% Senior Secured Notes Due 2002
<PAGE>
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting Securities of the Trustee
2,999,020 shares of Common Stock - par value $5 per share
4. Trusteeships under Other Indentures
Not applicable.
5. Interlocking Directorates and Similar Relationships with the Obligor
or Underwriters
Not applicable.
<PAGE>
6. Voting Securities of the Trustee Owned by the Obligor or its Officials
Not applicable.
7. Voting Securities of the Trustee Owned by Underwriters or their
Officials
Not applicable.
8. Securities of the Obligor Owned or Held by the Trustee
Not applicable.
9. Securities of Underwriters Owned or Held by the Trustee
Not applicable.
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Securities Holders of the Obligor
Not applicable.
11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or More of the Voting Securities of the Obligor
Not applicable.
12. Indebtedness of the Obligor to the Trustee
Not applicable.
13. Defaults by the Obligor
Not applicable.
14. Affiliations with the Underwriters
Not applicable.
15. Foreign Trustee
Not applicable.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on
October 6, 1995 with the Commission pursuant to the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990 in an amended
filing to an original Registration Statement filed on August 28, 1995
(Registration No. 33-96262).
T-1.2 - Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New York,
as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed
on October 6, 1995 with the Commission pursuant to the Trust Indenture Act
of 1939, as amended by the Trust Indenture Reform Act of 1990 in an amended
filing to an original Registration Statement filed on August 28, 1995
(Registration No. 33-96262).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or examining
authority.
NOTE
As of June 6, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and will
rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
_____________________
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, United States Trust Company of New York, a
corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York,
on the 6th day of June, 1996.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: _______________________________________
John Guiliano
Vice President
JG/pg
(rev:kk060696)
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the
Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform
Act of 1990, and subject to the limitations set forth therein,
United States Trust Company of New York ("U.S. Trust") hereby
consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by
such authorities to the Securities and Exchange Commission upon
request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: S/Gerard F. Ganey
_______________________________
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1995
($ IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 86,275
Short-Term Investments 50
Securities, Available for Sale 676,970
Loans
1,257,372
Less: Allowance for Credit Losses 13,254
__________
Net Loans 1,244,118
Premises and Equipment 57,692
Other Assets 129,999
__________
Total Assets $2,195,104
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 471,642
Interest Bearing 1,306,996
__________
Total Deposits 1,778,638
Short-Term Credit Facilities 114,789
Accounts Payable and Accrued Liabilities 146,307
__________
Total liabilities $2,039,734
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 41,944
Retained Earnings 96,878
Unrealized Gains on Securities Available
for Sale (Net of Taxes) 1,553
__________
Total Stockholder's Equity 155,370
__________
Total Liabilities and
Stockholder's Equity $2,195,104
==========
<PAGE>
I, RICHARD E. BRINKMANN, SENIOR VICE PRESIDENT & COMPTROLLER of
the named bank do hereby declare that this Statement of
Condition has been prepared in conformance with the instructions
issued by the appropriate regulatory authority and is true to
the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
December 31, 1995
RL/pg
<PAGE>
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
___________________, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE").
TEREX CORPORATION
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
Series B 13,% Senior Secured Notes due 2002
for
Series A 13,% Senior Secured Noted due 2002
To: United States Trust Company of New York, The Exchange Agent
By Registered or Certified Mail: By Overnight Courier:
United States Trust Company of United States Trust Company of New York
New York 770 Broadway
P.O. Box 844 Cooper Station New York, New York 10003
New York, New York 10276-0844
Attention: Corporate Trust Operations
By Hand: By Facsimile:
United States Trust Company (212) 420-6152
of New York Attention: Customer Service
65 Beaver Street
New York, New York 10005
Attention: Ground Level Confirm by telephone:
Corporate Trust Operations (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE
ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE
THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the
Prospectus dated ________, 1996 (the "Prospectus") of Terex Corporation, a
Delaware corporation (the "Company") and this Letter of Transmittal (the
"Letter of Transmittal"), which together constitute the Company's offer
(the "Exchange Offer") to exchange $1,000 principal amount of its 13,%
Senior Secured Notes due 2002, Series B (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which the Prospectus is a
part, for each $1,000 principal amount of its outstanding 13,% Senior
Secured Notes due 2002, Series A (the "Old Notes"), of which $250,000,000
principal amount is outstanding. Other capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
The Letter of Transmittal is to be used by Holders of Old Notes (i) if
certificates representing the Old Notes are to be physically delivered
herewith or (ii) if tender of Old Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus are to be
utilized.
The term "Holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder. The undersigned has completed, executed and delivered
this Letter of Transmittal to indicate the action the undersigned desires
to take with respect to the Exchange Offer. Holders who wish to tender
their Old Notes must complete this letter in its entirety.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
DESCRIPTION OF 13,% SENIOR SECURED NOTES DUE 2002 (OLD NOTES)
Name(s) and Address(es) Aggregate Principal Amount
Name(s) and Address(es) Principal Tendered (must be
Registered Holder(s) Amount Rep- in intergral
(Please fill in, Certificate resented by multiple
if blank) Number(s) Certificate(s) of $1,000)*
- ------------------------ ----------- -------------- -----------------
___________ ______________ _________________
___________ ______________ _________________
___________ ______________ _________________
___________ ______________ _________________
Total ______________ _________________
* Unless indicated in the column labeled "Principal Amount Tendered",
any tendering Holder of Old Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate
numbers and principal amounts on a separate signed schedule and affix
the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old
Notes. Tenders in excess of such minimum must be in integral
multiples of $1,000.
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered or not accepted for exchange, or New Notes issued in exchange
for Old Notes accepted for exchange, are to be issued in the name of
someone other than the undersigned.
Issue certificate(s) to:
Name___________________________________
(Please Print)
Address_________________________________
________________________________________
(Include Zip Code)
________________________________________
(Tax Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered or not accepted for exchange, or New Notes issued in exchange
for Old Notes accepted for exchange, are to be sent to someone other than
the undersigned, or to the undersigned at an address other than that shown
above.
Mail to:
Name__________________________________
(Please Print)
Address________________________________
_______________________________________
(Include Zip Code)
_______________________________________
(Tax Identification or Social Security No.)
____ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_______________________________________________________________
Address:____________________________________________________________
____________________________________________________________
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange
of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned sells, assigns and transfers to, or
upon the order of, the Company all right, title and interest in and to the
Old Notes tendered hereby. The undersigned hereby irrevocably constitutes
and appoints the Exchange Agent its agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as the agent of the Company)
with respect to the tendered Old Notes with full power of substitution to
(i) deliver certificates for such Old Notes to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order
of, the Company and (ii) present such Old Notes for transfer on the books
of the Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with the terms
of the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are
acquired by the Company. The undersigned hereby further represents that
any New Notes acquired in exchange for Old Notes tendered hereby will have
been acquired in the ordinary course of business of the person receiving
such New Notes, whether or not such person is the Holder, that neither the
Holder nor any such other person has an arrangement with any person to
participate in the distribution of such New Notes within the meaning of the
Securities Act and that neither the Holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the
Company or any of its subsidiaries or, if such Holder is an "affiliate,"
that such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes,
it represents that the Old Notes to be exchanged for New Notes were
acquired as a result of market-making activities or other trading
activities, and it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. The
undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Old
Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old
Notes will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under
"Special Payment Instructions" as promptly as practicable after the
Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures
for Tendering" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange and return any Old Notes not tendered
or not exchanged in the name(s) of the undersigned. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and any certificates for Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In
the event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the
New Notes issued in exchange for the Old Notes accepted for exchange and
return any Old Notes not tendered or not exchanged in the name(s) of, and
send said certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special
Payment Instructions" and "Special Delivery Instructions" to transfer any
Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered.
Holders of the Old Notes who wish to tender their Old Notes and (i)
whose Old Notes are not immediately available or (ii) who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date, may tender their
Old Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures." See Instruction 1 regarding the completion of the Letter of
Transmittal printed below.
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X__________________________________________ ____________________
Date
X__________________________________________ ____________________
Signature(s) of Registered Holder(s) Date
or Authorized Signatory
Area Code and Telephone Number: ____________________
The above lines must be signed by the registered holder(s) of Old Notes
as their name(s) appear(s) on the Old Notes or by person(s) authorized to
become registered holder(s) by a properly completed bond power from the
registered holder(s), a copy of which must be transmitted with this Letter
of Transmittal. If Old Notes to which this Letter of Transmittal relates
are held of record by two or more joint holders, then all such holders must
sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
must (i) set forth his or her full title below and (ii) unless waived by
the Company, submit evidence satisfactory to the Company of such person's
authority so to act. See Instruction 4 regarding the completion of this
Letter of Transmittal printed below.
Name(s) ____________________________________________________________
(Please Print)
Capacity: ____________________________________________________________
Address: ____________________________________________________________
Include Zip Code
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4
____________________________________________________________
(Authorized Signature)
____________________________________________________________
(Title)
____________________________________________________________
(Name of Firm)
Dated:_________________________________, 1996
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes. The tendered
Old Notes, as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof and any other documents required
by this Letter of Transmittal, must be received by the Exchange Agent at
its address set forth herein prior to 5:00 P.M., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this
Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the Holder and, except as otherwise
provided below, the delivery will be deemed made only when actually
received by the Exchange Agent. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service.
However, if sent by mail, it is recommended that registered mail, return
receipt requested, be used, prior insurance obtained. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent
before the Expiration Date. No Letter of Transmittal or Old Notes should
be sent to the Company.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration
Date, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedures: (i)
such tender must be made by or through a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution"
(an "Eligible Institution") within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended; (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Old Notes, the certificate number or numbers
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the certificate(s) representing the Old
Notes and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Old Notes in proper form for transfer, must be
received by the Exchange Agent within five business days after the
Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures." Any Holder of Old Notes
who wishes to tender his or her Old Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent
receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a
Notice of Guaranteed Delivery will be sent to Holders who wish to tender
their Old Notes according to the guaranteed delivery procedures set forth
above.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered
Old Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old
Notes the Company's acceptance of which would, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the right to waive
any defects or irregularities or conditions of tender as to the Exchange
Offer and/or particular Old Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Old Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the Exchange Agent to the tendering Holders of Old
Notes, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
2. Tender by Holder. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial Holder of Old Notes who is not
the registered Holder and who wishes to tender should arrange with the
registered Holder to execute and deliver this Letter of Transmittal on his
or her behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his or her Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such Holder's name
or obtain a properly completed bond power from the registered Holder.
3. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of
any Old Notes is tendered, the tendering Holder should fill in the
principal amount tendered in the fourth column of the box entitled
"Description of 13,% Senior Secured Notes due 2002 (Old Notes)" above. The
entire principal amount of Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and a certificate or
certificates representing New Notes issued in exchange for any Old Notes
accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this
Letter of Transmittal and Consent, promptly after the Old Notes are
accepted for exchange.
4. Withdrawal of Tenders. To withdraw a tender of Old Notes in the
Exchange Offer, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the registered number or numbers
and principal amount of such Old Notes or, in the case of Old Notes
transferred by book-entry transfer, the name and number of the account at
the Book-Entry Transfer Facility to be credited), (iii) be signed by the
Holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient
to have United States Trust Company of New York, the trustee with respect
to the Old Notes (the "Trustee"), register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the
name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined
by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are
validly re-tendered. Properly withdrawn Old Notes may be retendered by
following one of the procedures set forth in this letter at any time prior
to 5:00 p.m., New York City time, on the Expiration Date.
5. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal (or
facsimile hereof) is signed by the record Holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written
on the face of the Old Notes without alteration, enlargement or any change
whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor are to be issued (or
any untendered principal amount of Old Notes is to be reissued) to the
registered Holder, the said Holder need not and should not endorse any
tendered Old Notes, nor provide a separate bond power. In any other case,
such Holder must either properly endorse the Old Notes tendered or transmit
a properly completed separate bond power with this Letter of Transmittal,
with the signatures on the endorsement or bond power guaranteed by an
Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Old Notes listed,
such Old Notes must be endorsed or accompanied by appropriate bond powers
signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the
Company of their authority so to act must be submitted with this Letter of
Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal (or facsimile hereof) must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal need not be
guaranteed if (i) this Letter of Transmittal is signed by the registered
Holder(s) of the Old Notes tendered herewith and such Holder(s) have not
completed the box set forth herein entitled "Special Payment Instructions"
or the box entitled "Special Delivery Instructions" or (ii) such Old Notes
are tendered for the account of an Eligible Institution.
6. Special Payment and Delivery Instructions. Tendering Holders
should indicate, in the applicable box or boxes, the name and address to
which New Notes or substitute Old Notes for principal amounts not tendered
or not accepted for exchange are to be issued or sent, if different from
the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or
social security number of the person named must also be indicated.
7. Tax Identification Number. Federal income tax law requires that a
Holder whose offered Old Notes are accepted for exchange must provide the
Company (as payor) with his, her or its correct Taxpayer Identification
Number ("TIN"), which, in the case of an exchanging Holder who is an
individual, is his or her social security number. If the Company is not
provided with the correct TIN or an adequate basis for exemption, such
Holder may be subject to a $50 penalty imposed by the Internal Revenue
Service (the "IRS"). In addition, delivery to such Holder of New Notes may
be subject to backup withholding in an amount equal to 31% of the gross
proceeds resulting from the Exchange Offer. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS by the Holder.
Exempt Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9."
To prevent backup withholding, each exchanging Holder must provide his,
her or its correct TIN by completing the Substitute Form W-9 enclosed
herewith, certifying that the TIN provided is correct (or that such Holder
is awaiting a TIN) and that (i) the Holder is exempt from backup
withholding, (ii) the Holder has not been notified by the IRS that he, she
or it is subject to backup withholding as a result of a failure to report
all interest or dividends or (iii) the IRS has notified the Holder that he,
she or it is no longer subject to backup withholding. In order to satisfy
the Exchange Agent that a foreign individual qualifies as an exempt
recipient, such Holder must submit a statement signed under penalty of
perjury attesting to such exempt status. Such statements may be obtained
from the Exchange Agent. If the Old Notes are in more than one name or are
not in the name of the actual owner, consult the Substitute Form W-9 for
information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until
you furnish your TIN to the Company.
8. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer.
If, however, certificates representing New Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered Holder of the Old Notes tendered hereby, or if tendered Old
Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the
registered Holder or on any other persons) will be payable by the tendering
Holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
9. Waiver of Conditions. The Company reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the
case of any Old Notes tendered.
10. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for
further instructions.
11. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the
Prospectus or this Letter of Transmittal may be directed to the Exchange
Agent at the address specified in the Prospectus. Holders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
Certificate Old Notes Old Notes
Surrendered Tendered Accepted
_____________ __________ __________
_____________ __________ __________
_____________ __________ __________
Delivery Prepared by _____________ Checked By_________ Date ___________________
Delivery Prepared by _______________ Checked By_________Date __________________
<PAGE>
PAYOR'S NAME: TEREX CORPORATION
SUBSTITUTE Name (if joint names, list first and circle the name of the
person or entity whose number you enter in Part I below. See
instructions if your name has changed.)
FROM W-9 Address
__________________________________________________________
Department City, state and ZIP code
of the __________________________________________________________
Treasury List Account number(s) here (optional)
__________________________________________________________
Internal Part 1 - - PLEASE PROVIDE YOUR TAXPAYER
Revenue IDENTIFICATION NUMBER ("TIN") IN THE BOX Social security
Service AT RIGHT AND CERTIFY BY SIGNING AND DATING number or TIN
BELOW
Part 2 - Check the box if you are NOT subject to backup
withholding under the provisions of section 3408(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified you that you are no
longer subject to backup withholding. ____
Payor's CERTIFICATION - UNDER THE PENALTIES OF PERJURY. PART 3-
for I CERTIFY THAT THE INFORMATION PROVIDED ON THIS
TIN FORM IS TRUE, CORRECT AND COMPLETE AWAITING
TIN
Signature _____________________________ Date ________ ___
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to
Give the Payor. Social Security numbers have nine digits
separated by two hyphens: i.e. 000-00-0000. Employer
identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine
the number to give the payor.
For this type of account Give the SOCIAL SECURITY number
of
1. An individual account The individual
2. Two or more individuals The actual owner of the account
(joint account) or, if combined funds, the first
individual on the account (1)
3. Custodian account of a The minor (2)
(Uniform Gift to Minors Act)
4. (a) The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
(b) So-called trust account The actual owner (1)
that is not a legal or valid
trust under state law
5. Sole proprietorship account The Owner (3)
- -----------------------------------------------------------------
For this type of account Give the EMPLOYER IDENTIFICATION
number of
6. Sole proprietorship The owner (3)
account
7. A valid trust, estate, or The legal entity (Do not furnish
pension trust the identifying number of the
personal representative or
trustee unless the legal entity
itself is not designed in the
account title.)(4)
8. Corporate account The corporation
9. Association, club, The organization
religious, charitable
educational or other
tax-exempt organizational
account
10. Partnership account The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a state or local government,
school district, or prison)
that receives agricultural
program payments
(1) List first and circle the name of the person whose number
you furnish.
(2) Circle the minor's name and furnish the minor's social
security number.
(3) Show the name of the individual. You may also enter the
business name.
(4) List first and circle the name of the legal trust, estate,
or pension trust.
Note: If no name is circled when there is more than
one name, the number will be considered to be
that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you do not
know your number, obtain Form SS-5, Application for a Social
Security Number Card, or Form SS-4, Application for Employer
Identification Number, at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL
payments include the following:
- - A corporation.
- - An organization exempt from tax under section 501(a), or an
individual retirement plan, or a custodial account under
Section 403(b)(7).
- - The United States or any agency or instrumentality thereof.
- - A state, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
- - A foreign government or any political subdivision, agency or
instrumentality thereof.
- - An international organization or any agency or instrumentality
thereof.
- - A foreign central bank of issue.
- - A registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
- - A futures commission merchant registered with the Commodity
Futures Trading Commission.
- - A real estate investment.
- - An entity registered at all times during the tax year under
the Investment Company Act of 1940.
- - A common trust fund operated by a bank under section 584(a).
- - A financial institution.
- - A middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List.
- - A trust exempt from tax under section 664 as described in
section 4947.
Payments of dividends and patronage dividends not generally
subject to backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under
section 1441.
- - Payments to partnerships not engaged in a trade or business in
the U.S. and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is
not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding
include the following:
- - Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the
payor's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- - Payments described in section 6049(b)(5) to nonresident
aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE
PAYOR, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE
"EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYOR.
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage
dividends that are not subject to information reporting are also
not subject to backup withholding. For details, see the
regulations under sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A and 6050N.
Privacy Act Notice. -- Section 6109 requires most recipients of
dividend interest or other payments to give taxpayer
identification numbers to payors who must report the payments to
the IRS. The IRS uses the numbers for identification purposes.
Payors must be given the numbers whether or not recipients are
required to file tax returns. Payors must generally withhold 20%
of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a
payor. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification
Number. -- If you fail to furnish your taxpayer identification
number to a payor, you are subject to a penalty of $50 for each
such failure unless your failure is due to reasonable cause and
not to willful neglect.
(2) Civil Penalty for False Information With Respect to
Withholding. -- If you make a false statement with no reasonable
basis which results in no imposition of backup withholding, you
are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.~Willfully
falsifying certifications or affirmations may subject you to
criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE>
EXHIBIT 99.2
Notice of Guaranteed Delivery
for
Exchange of
Series B 13,% Senior Secured Notes due 2002
for
Series A 13,% Senior Secured Notes due 2002
of
TEREX CORPORATION
This form must be used to accept the Exchange Offer of Terex
Corporation (the "Company") made pursuant to the Prospectus dated
________________, 1996 (the "Prospectus") if certificates for the 13,%
Senior Secured Notes due 2002, Series A (the "Old Notes") of the Company
are not immediately available or if the Old Notes, the Letter of
Transmittal or any other documents required thereby cannot be delivered to
the Exchange Agent prior to 5:00 P.M., New York City time, on the
Expiration Date (as defined in the Prospectus). Such form may be delivered
by hand or transmitted by facsimile transmission, overnight courier or mail
to the Exchange Agent. Capitalized terms used but not defined herein have
the meaning given to them in the Prospectus.
To: United States Trust Company of New York, The Exchange Agent
By Registered or Certified Mail: By Overnight Courier:
United States Trust Company United States Trust Company
of New York of New York
P.O. Box 844 Cooper Station 770 Broadway
New York, New York 10276-0844 New York, New York 10003
Attention: Corporation Trust
Operations
By Hand: By Facsimile:
United States Trust Company
of New York (212) 420-6152
65 Beaver Street Attention: Customer Service
New York, New York 10005
Attention: Ground Level Confirm by telephone:
Corporate Trust Operations (800) 548-6565
Delivery of this instrument to an address, or transmission of
instructions via a facsimile, other than as set forth above, does not
constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature
on the Letter of Transmittal to be used to tender Old Notes is required to
be guaranteed by an "Eligible Institution" under the instructions thereto,
such signature guarantee must appear in the applicable space provided in
the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Terex Corporation, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which is hereby acknowledged,
__________________________ Old Notes pursuant to the guaranteed delivery
(number of Old Notes)
procedures set forth in Instruction 1 of the Letter of Transmittal.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
Certificate No(s). for Old Notes Name(s) of Record Holder(s)
(if available)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Please Print or Type
Address . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Area Code and Tel. No. . . . . . .
Signature(s) . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Dated: . . . . . . . . . . . . . .
This Notice of Guaranteed Delivery must be signed by the registered
Holder(s) of Old Notes exactly as its (their) name(s) appear on
certificates for Old Notes or on a security position listing as the owner
of Old Notes, or by person(s) authorized to become registered Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed
Delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following
information.
Please print name(s) and address(es)
Name(s): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capacity: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address(es):. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the
time period set forth and that failure to do so could result in financial
loss to the undersigned.
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), hereby (a) represents that the above named person(s)
"own(s)" the Old Notes tendered hereby within the meaning of Rule 10b-4
under the Exchange Act, (b) represents that such tender of Old Notes
complies with Rule 10b-4 under the Exchange Act and (c) guarantees that
delivery to the Exchange Agent of certificates for the Old Notes tendered
hereby, in proper form for transfer, with delivery of a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signature and any other required documents, will
be received by the Exchange Agent at one of its addresses set forth above
within five business days after the Expiration Date. The undersigned
acknowledges that it must deliver the Letter of Transmittal and Old Notes
tendered hereby to the Exchange Agent within the time period set forth and
that failure to do so could result in financial loss to the undersigned.
Name of Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .
Authorized Signature
Address . . . . . . . . . . . . . Name . . . . . . . . . . . . . .
Please Print or Type
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . Title . . . . . . . . . . . . . .
Zip Code
Area Code and Tel. No. . . . . . . Date . . . . . . . . . . . . . . .
Dated: . . . . . . . . . , 1996
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE
EXCHANGE AGENT WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION
DATE.