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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 17, 1999
---------------------------------
(Date of earliest event reported)
TEREX CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 1-10702 34-1531521
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
500 Post Road East, Suite 320, Westport, CT 06880
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(Address of principal executive offices) (zip code)
(203) 222-7170
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On June 17, 1999, Terex Corporation (the "Company") entered into an
Underwriting Agreement (the "Underwriting Agreement") with Salomon Smith Barney
Inc. (the "Underwriter"), relating to the sale and issuance by the Company of
3,500,000 shares of its Common Stock, par value $0.01 per share (the "Common
Stock"), plus up to 525,000 additional shares which may be issued upon the
exercise of an option granted to the Underwriter to cover over-allotments. A
copy of the Underwriting Agreement is attached hereto as Exhibit 1 and is hereby
incorporated herein by reference. A copy of the final Prospectus Supplement,
dated June 17, 1999, to the Prospectus dated June 17, 1999, relating to the
offer and sale of these shares of Common Stock is attached hereto as Exhibit 2
and is hereby incorporated herein by reference. It is expected that the sale and
issuance of the Common Stock contemplated by the Underwriting Agreement will be
consummated on or around June 22, 1999.
Item 7. Financial Statements and Exhibits
(c) Exhibits
(1) Underwriting Agreement, dated as of June 17, 1999,
between Terex Corporation and Salomon Smith Barney
Inc.
(2) Prospectus Supplement, dated June 17, 1999, to
Prospectus dated June 17, 1999 of Terex Corporation
relating to the offer and sale of 3,500,000 shares of
its Common Stock, par value $0.01 per share, plus up
to 525,000 additional shares which may be issued upon
the exercise of an option granted to the underwriter
named therein to cover over-allotments.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TEREX CORPORATION
By: /s/ Eric I Cohen
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Name: Eric I Cohen
Title: Senior Vice President
and General Counsel
Date: June 18, 1999
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EXHIBIT INDEX
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Exhibit
No.
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1 Underwriting Agreement, dated as of June
17, 1999, between Terex Corporation and
Salomon Smith Barney Inc.
2 Prospectus Supplement, dated June 17,
1999, to Prospectus dated June 17, 1999
of Terex Corporation relating to the
offer and sale of 3,500,000 shares of its
Common Stock, par value $0.01 per share,
plus up to 525,000 additional shares
which may be issued upon the exercise of
an option granted to the underwriter
named therein to cover over-allotments.
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3,500,000 Shares
TEREX CORPORATION
Common Stock
(par value $.01)
UNDERWRITING AGREEMENT
June 17, 1999
SALOMON SMITH BARNEY INC.
Seven World Trade Center,
New York, N.Y. 10048
Dear Sirs:
1. Introductory. Terex Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell 3,500,000 shares of its Common Stock, par
value $.01 per share ("Securities") (such 3,500,000 shares of Securities being
hereinafter referred to as the "Firm Securities"). The Company also proposes to
sell to the Underwriter (as defined below), at the option of the Underwriters,
an aggregate of not more than 525,000 additional shares of its Securities (such
525,000 additional shares of Securities being hereinafter referred to as the
"Optional Securities"). The Firm Securities and the Optional Securities are
herein collectively called the "Offered Securities". The Company hereby agrees
with the Underwriter named in Schedule A hereto ("Underwriter") as follows:
2. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with,
the Underwriter that:
(i) A registration statement (No. 333-52933), including a
basic prospectus, relating to certain of the Company's equity and debt
securities and warrants and rights (including the Offered Securities) and the
offering thereof from time to time in accordance with Rule 415 under the
Securities Act of 1933, as amended (the "Act") has been filed with the
Securities and Exchange Commission ("Commission") and has been declared
effective under the Act and the Offered Securities all have been duly registered
under the Act pursuant to such registration statement. For purposes of this
Agreement, "Effective Time" with respect to such registration statement means
the date and time as of which such
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registration statement, or the most recent post-effective amendment thereto (if
any) filed prior to the execution and delivery of this Agreement, was declared
effective by the Commission. "Effective Date" with respect to such registration
statement means the date of the Effective Time thereof. Such registration
statement, as amended as of the date hereof, including all material incorporated
by reference therein, is hereinafter referred to as the "Registration
Statement". The basic prospectus included in such Registration Statement, as
supplemented by the filing of a prospectus supplement (the "Prospectus
Supplement") as contemplated by Section 5 hereof to reflect the terms of the
offering of the Offered Securities, as first filed with the Commission pursuant
to and in accordance with Rule 424(b) ("Rule 424(b)") under the Act (or if no
such filing is required, as included in the Registration Statement), except
that, if such basic prospectus is amended or supplemented on or prior to the
date on which the Prospectus Supplement is first filed pursuant to Rule 424(b),
the term "Prospectus" shall refer to the basic prospectus as so amended or
supplemented and as supplemented by the Prospectus Supplement, in either case,
including all material incorporated by reference in such basic prospectus and
Prospectus Supplement, is hereinafter referred to as the "Prospectus". No
document has been or will be prepared or distributed in reliance on Rule 434
under the Act.
(ii) On the Effective Date of the Registration Statement,
the Registration Statement conformed in all material respects to the
requirements of the Act, the Trust Indenture Act of 1939, as amended (the "TIA")
and the published rules and regulations of the Commission ("Rules and
Regulations") and did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and on the date of this Agreement,
the Registration Statement and the basic prospectus included therein conform,
and at the time of filing of the final Prospectus Supplement pursuant to Rule
424(b), the Registration Statement and the Prospectus will conform, in all
material respects to the requirements of the Act, the TIA and the Rules and
Regulations, and none of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under which they were
made) not misleading. The preceding sentence does not apply to statements in or
omissions from the Registration Statement or the Prospectus based upon written
information furnished to the Company by the Underwriter specifically for use
therein, it being understood and agreed that the only such information is that
described as such in Section 7(b) hereof. The Company's Annual Report on Form
10-K most recently filed with the Commission and all subsequent reports
(collectively, the "Exchange Act Reports") which have been filed by the Company
with the Commission or sent to stockholders pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act") did not include, as of their respective dates,
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Such documents, when they were filed with
the Commission, conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder.
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(iii) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of Delaware,
with the corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified and in good
standing could not reasonably be expected, individually or in the aggregate, to
have a material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole (a "Material Adverse Effect").
(iv) Each subsidiary of the Company that (i) generates 5%
or more of the revenues, (ii) generates 5% or more of the operating income, or
(iii) holds 5% or more of the assets, in each case, of the Company and its
subsidiaries on a consolidated basis (each a "Significant Subsidiary"), has been
duly incorporated and is an existing corporation in good standing under the laws
of the jurisdiction of its incorporation, with the corporate power and authority
to own its properties and conduct its business as described in the Prospectus;
and each Significant Subsidiary of the Company is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good standing
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; all of the issued and outstanding capital stock of each
Significant Subsidiary of the Company has been duly authorized and validly
issued and is fully paid and nonassessable; and, except as expressly disclosed
or incorporated by reference in the Prospectus and except for (i) pledges in
favor of Credit Suisse First Boston, as collateral agent for the lenders under
the Company's Credit Agreement, dated as of March 6, 1998, among the Company,
certain of its subsidiaries and the lenders named therein and (ii) the purchase
money security interest in respect of 49% of the share capital of Gru Comedil
SpA, the capital stock of each Significant Subsidiary owned by the Company,
directly or through subsidiaries, is owned free from liens, encumbrances and
defects.
(v) The Offered Securities, when issued pursuant to this
Agreement, will be, and all other outstanding shares of capital stock of the
Company have been, duly authorized and validly issued, will be or are, as the
case may be, fully paid and nonassessable, and conform in all material respects
to the description thereof contained in the Prospectus; and the stockholders of
the Company have no preemptive rights with respect to the Securities.
(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or the Underwriter for a
brokerage commission, finder's fee or other like payment in connection with this
offering.
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(vii) Except for (a) that certain Registration Rights
Agreement, dated as of December 9, 1994, by and among Randolph W. Lenz, David J.
Langevin, Marvin B. Rosenberg and the Company, (b) that certain Warrant
Registration Rights Agreement, dated as of December 20, 1993, by and among the
Company and the parties signatory thereto, (c) that certain Registration Rights
Agreement, dated May 9, 1995, between the Company, Jefferies & Company, Inc.,
and Dillon, Read & Co. Inc., and (d) that certain Agreement, dated as of
November 2, 1995, between the Company and Randolph W. Lenz, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such securities
in the securities registered pursuant to a Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Act.
(viii) The Company has filed an application to list the
Offered Securities on the New York Stock Exchange and has received notification
that the listing has been approved subject to notice of issuance.
(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required to be
obtained or made by the Company for the performance by the Company of its
obligations under this Agreement, except such as have been obtained and made
under the Act and such as may be required under state securities laws.
(x) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any Significant Subsidiary of the Company or
any of their properties, or any agreement or instrument to which the Company or
any Significant Subsidiary is a party or by which the Company or any Significant
Subsidiary is bound or to which any of the properties of the Company or any
Significant Subsidiary is subject, or the charter or by-laws of the Company or
any Significant Subsidiary, except in each such case, (i) that any rights to
indemnity and contribution herein may be limited by federal and state securities
laws and public policy considerations and (ii) for such breaches, violations and
defaults as could not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) Except as disclosed in the Prospectus, the Company
and its Significant Subsidiaries have good title to all real properties and all
other properties and assets owned by them that are material to the Company and
its subsidiaries taken as a whole,
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in each case free from liens and encumbrances that would materially affect the
value thereof or materially interfere with the use made or to be made thereof by
them; and except as disclosed in the Prospectus, the Company and its Significant
Subsidiaries hold any leased real or personal property that is material to the
Company and its subsidiaries taken as a whole under valid and enforceable leases
with no exceptions that would materially interfere with the use made or to be
made thereof by them.
(xiii) The Company and its subsidiaries (A) possess all
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by them, except for
those which the failure to so possess could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and (B)
have not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or any of its subsidiaries, could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(xiv) Except as disclosed in the Prospectus, no labor
strike, slowdown, stoppage or dispute (except for routine disciplinary and
grievance matters) with the employees of the Company or any subsidiary exists
or, to the knowledge of the Company, is imminent, that could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess, have
the right to use, or can acquire on reasonable terms, adequate trademarks, trade
names and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property (collectively,
"intellectual property rights") used in the conduct of the business now operated
by them, except for such failures to so own, possess or have the right to use or
acquire such intellectual property rights as which could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and have not received any notice of infringement of or conflict with asserted
rights of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(xvi) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries (i) is in violation of any statute, any
rule, regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), (ii) owns or operates any real property
that to the knowledge of the Company is contaminated with any substance that is
subject to any environmental laws, (iii) is to the knowledge of the Company
liable for any off-site disposal or contamination pursuant to any environmental
laws, or (iv) is to the knowledge of the Company subject to any claim relating
to any environmental laws, in each case of clauses (i), (ii), (iii) or (iv)
above, which violation, contamination, liability or claim would individually or
in the aggregate have a
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Material Adverse Effect; and the Company is not aware of any pending
investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that have a reasonable
likelihood of being adversely determined and, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate have
a Material Adverse Effect, or would materially and adversely affect the ability
of the Company to perform its obligations under this Agreement, or which are
otherwise material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened in writing or, to the
Company's knowledge, contemplated.
(xviii) The financial statements included or incorporated
by reference in the Registration Statement and the Prospectus present fairly in
all material respects the financial position, as applicable, (a) of the Company
and its consolidated subsidiaries, (b) of PPM Cranes, Inc. and its consolidated
subsidiaries, in each case as of the dates shown and their results of operations
and cash flows for the periods shown (subject in the case of interim financial
statements to normal year-end adjustments), and such financial statements have
been prepared in conformity with generally accepted accounting principles in the
United States applied on a consistent basis and the schedules included in the
Registration Statement present fairly the information required to be stated
therein.
(xix) Except as disclosed in the Prospectus, since the
date of the latest financial statements included in the Prospectus, there has
been no material adverse change, nor any development or event that could
reasonably be expected to result in a material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Prospectus, there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its capital
stock.
(xx) The Company is not, and after giving effect to the
offering and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus will not be, an "investment company" as
defined in the Investment Company Act of 1940.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, at a
purchase price of $29.625 per share, the Firm Securities.
The Company will deliver the Firm Securities to the Underwriter,
against payment of the purchase price in Federal (same day) funds by wire
transfer to an account at a United States financial institution designated in
advance in writing by the Company, at the office of Skadden, Arps, Slate,
Meagher & Flom LLP, at 9:00 A.M., New York time, on June 22,
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1999, or at such other time not later than seven full business days thereafter
as Salomon Smith Barney Inc. ("Salomon Smith Barney") and the Company determine,
such time being herein referred to as the "First Closing Date". The certificates
for the Firm Securities to be so delivered will be in definitive form, in such
denominations and registered in such names as Salomon Smith Barney requests and
will be made available for checking and packaging at the above office at least
24 hours prior to the First Closing Date.
In addition, upon written notice from Salomon Smith Barney given to the
Company from time to time not more than 30 days subsequent to the date of the
Prospectus Supplement, the Underwriter may purchase all or less than all of the
Optional Securities at the purchase price per Security to be paid for the Firm
Securities. The Company agrees to sell to the Underwriter the number of Optional
Securities specified in such notice and the Underwriter agrees to purchase such
Optional Securities. Such Optional Securities shall be purchased for the account
of the Underwriter and may be purchased by the Underwriter only for the purpose
of covering over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold and delivered. The
right to purchase the Optional Securities or any portion thereof may be
exercised from time to time in accordance with this Section 3 and to the extent
not previously exercised may be surrendered and terminated at any time upon
notice by Salomon Smith Barney to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by Salomon
Smith Barney but shall be not later than five full business days after written
notice of election to purchase Optional Securities is given. The Company will
deliver the Optional Securities being purchased on each Optional Closing Date to
the Underwriter, against payment of the purchase price therefor in Federal (same
day) funds by wire transfer to an account at a United States financial
institution designated in advance in writing by the Company, at the office of
Skadden, Arps, Slate, Meagher & Flom LLP. The certificates for the Optional
Securities being purchased on each Optional Closing Date will be in definitive
form, in such denominations and registered in such names as Salomon Smith Barney
requests upon reasonable notice prior to such Optional Closing Date and will be
made available for checking and packaging at the above office at least 24 hours
in advance of such Optional Closing Date.
4. Offering by Underwriter. It is understood that the Underwriter
proposes to offer the Offered Securities for sale to the public as set forth in
the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
Underwriter that:
(a) Immediately following the execution of this Agreement, the
Company will prepare a final Prospectus Supplement that complies with the Act
and the Rules and
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Regulations and that reflects the terms of the offering of the Offered
Securities and such other information as the Underwriter and the Company deem
appropriate. The Company will file the Prospectus Supplement with the Commission
pursuant to and in accordance with subparagraph (2) (or if applicable and if
consented to by Salomon Smith Barney, subparagraph (5)) of Rule 424(b) not later
than the second business day following the execution and delivery of this
Agreement. The Company will advise Salomon Smith Barney promptly of any such
filing pursuant to Rule 424(b).
(b) The Company will advise Salomon Smith Barney promptly of
any proposal to amend or supplement the Registration Statement or the Prospectus
prior to the termination of the offering of the Offered Securities and will not
effect such amendment or supplementation without Salomon Smith Barney's consent,
which consent shall not be unreasonably withheld or delayed; and, prior to the
termination of the offering of the Offered Securities, the Company will also
advise Salomon Smith Barney promptly of the effectiveness of any amendment or
supplementation of the Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of the
Registration Statement and will use its reasonable best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its lifting,
if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with sales by
the Underwriter or any dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will promptly notify Salomon Smith Barney of
such event and will promptly prepare and file with the Commission, at its own
expense, an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance. Neither Salomon
Smith Barney's consent to, nor the Underwriter's delivery of, any such amendment
or supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(d) As soon as practicable, but not later than 16 months,
after the date of this Agreement, the Company will make generally available to
its securityholders an earnings statement covering a period of at least 12
months beginning after the later of (i) the first effective date of the
Registration Statement relating to the Offered Securities, (ii) the effective
date of the most recent post-effective amendment to the Registration Statement
to become effective prior to the date of this Agreement and (iii) the date of
the Company's most recent Annual Report on Form 10-K filed with the Commission
prior to the date of this Agreement, which will satisfy the provisions of
Section 11(a) of the Act.
(e) The Company will furnish to the Underwriter one copy of
the Registration Statement (which will contain conformed signatures and will
include all exhibits), each related preliminary prospectus supplement, and, so
long as a prospectus relating to the
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Offered Securities is required to be delivered under the Act in connection with
sales by the Underwriter or any dealer, the Prospectus and all amendments and
supplements to such documents, in each case in such quantities as Salomon Smith
Barney reasonably requests. The Prospectus shall be so furnished on or prior to
3:00 P.M., New York time, on the business day following the execution and
delivery of this Agreement. All other such documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Underwriter all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as Salomon
Smith Barney reasonably designates and will continue such qualifications in
effect so long as required for the distribution.
(g) During the period of two years hereafter, the Company will
furnish to the Underwriter, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and the Company
will furnish to the Underwriter as soon as available, a copy of each report and
any definitive proxy statement of the Company filed with the Commission under
the Exchange Act, or mailed to stockholders.
(h) For a period of 90 days after the date of the initial
public offering of the Offered Securities, the Company will not offer, sell,
contract to sell, announce their intention to sell, pledge or otherwise dispose
of, directly or indirectly, or file with the Commission a registration statement
under the Act relating to, any additional shares of its Securities or securities
convertible into or exchangeable or exercisable for any shares of its
Securities, or publicly disclose the intention to make any such offer, sale,
pledge, disposition or filing, without the prior written consent of Salomon
Smith Barney, and the Company shall, concurrently with the execution of this
Agreement, deliver an agreement executed by each of the officers and directors
of the Company listed on Schedule B hereto to the effect that each such person
will not engage in any of the foregoing transactions (other than bona fide
pledges) with respect to any Securities or securities convertible into or
exchangeable or exercisable for any Securities, in each case beneficially owned
by such person during such period. The foregoing shall not apply to (i) any
Securities issuable upon the exercise or redemption of an option or warrant or
the conversion or exchange of a security, in each case outstanding on the date
of the Prospectus Supplement and in accordance with its terms of the respective
securities, (ii) any securities of the Company sold or granted pursuant to the
Company's incentive and other benefit plans as in effect as of the date of the
Prospectus Supplement, (iii) any shares of its Securities issued upon exercise
of the Company's issued and outstanding Equity Rights in accordance with the
terms thereof, (iv) any warrants or securities convertible into its Securities
issued in exchange for any of the Company's warrants, options or Equity Rights
outstanding on the date of the Prospectus Supplement, and (v) securities issued
as consideration for any acquisition (pursuant to a merger or otherwise) of one
or more entities.
(i) The Company agrees with the Underwriter that the Company
will pay all expenses incident to the performance of the obligations of the
Company under this Agreement, for any filing fees and other expenses (including
reasonable fees and disburse-
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ments of counsel) in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions as Salomon Smith Barney reasonably
designates and the printing of memoranda relating thereto, for the filing fee
incident to the review by the National Association of Securities Dealers, Inc.
of the Offered Securities, for any travel expenses of the Company's officers and
employees and any other expenses of the Company in connection with attending or
hosting meetings with prospective purchasers of the Offered Securities and for
expenses incurred in distributing preliminary prospectuses and the Prospectus
(including any amendments and supplements thereto) to the Underwriter.
(j) The Company agrees that it will use the net proceeds to it
from the Offered Securities in the manner described in the Prospectus Supplement
under the caption "Use of Proceeds".
6 Conditions of the Obligations of the Underwriter. The obligations of
the Underwriter to purchase and pay for the Firm Securities on the First Closing
Date and the Optional Securities to be purchased on each Optional Closing Date
will be subject to the accuracy in all material respects of the representations
and warranties on the part of the Company herein, to the accuracy of the
statements of Company officers made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions precedent:
(a) The Underwriter shall have received a letter, dated the
date of delivery thereof (which shall be on or prior to the date of this
Agreement), of PricewaterhouseCoopers LLP confirming that they are independent
public accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and
schedules examined by them and included or incorporated by reference in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards No. 71,
Interim Financial Information, on the unaudited financial statements included in
or incorporated by reference in the Registration Statement;
(iii) on the basis of the review referred to in clause
(ii) above, a reading of the latest available interim financial statements of
the Company, and of all subsidiaries of the Company for which such interim
financial statements are provided, inquiries of officials of the Company, and of
such subsidiaries, who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their attention that caused them
to believe that:
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(A) the unaudited financial statements included in
or incorporated by reference in the Registration Statement do not comply as to
form in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations or any material
modifications should be made to such unaudited financial statements for them to
be in conformity with generally accepted accounting principles;
(B) at the date of the latest available balance
sheet read by such accountants, or at a subsequent specified date not more than
three business days prior to the date of this Agreement, there was any change in
the capital stock or any increase in total debt or any decrease in consolidated
net current assets (working capital) or decrease in shareholders' equity of the
Company and its consolidated subsidiaries, as compared with amounts shown on the
latest balance sheet included or incorporated by reference in the Prospectus; or
(C) for the period from the closing date of the
latest income statement included or incorporated by reference in the Prospectus
to the closing date of the latest available income statement read by such
accountants there were any decreases, as compared with the corresponding period
of the previous year and with the period of corresponding length ended the date
of the latest income statement included or incorporated by reference in the
Prospectus, in consolidated net sales or in the total or per share amounts of
consolidated net income;
(D) based on inquiries of Company officials, at a
subsequent specified date, not more than three business days prior to the date
of this Agreement, there was any change in common stock or increase in total
debt of the Company and its consolidated subsidiaries, as compared with amounts
shown on the latest balance sheet included or incorporated by reference in the
Prospectus; or
(E) for the period from the closing of the latest
income statement included or incorporated by reference in the Prospectus to a
subsequent specified date, not more than three business days prior to the date
of this Agreement, based on inquiries of Company officials, there were any
decreases, as compared with the corresponding period of the previous year, in
consolidated net sales or in the total or per share amounts of consolidated net
income;
except in all cases set forth in clauses (B) (C), (D) or (E) above for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter;
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial information
contained in the Registration Statement (in each case to the extent that such
dollar amounts, percentages and other financial information are derived from the
general accounting records of the Company and its subsidiaries subject to the
internal controls of the Company's accounting system or are
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derived directly from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records and other
procedures specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with such
results, except as otherwise specified in such letter.
All financial statements and schedules included in material
incorporated by reference into the Prospectus shall be deemed included in the
Registration Statements.
(b) The Prospectus Supplement shall have been filed with the
Commission in accordance with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Company or the Underwriter, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development or
event that could reasonably be expected to result in a change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole, which, in the judgment of the
Underwriter, is material and adverse to the Company and its subsidiaries taken
as a whole and makes it impractical or inadvisable to proceed with completion of
the public offering or the sale of and payment for the Offered Securities; (ii)
any downgrading in the rating of any debt securities of the Company by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating in effect on the date
of this Agreement of any debt securities or preferred stock of the Company
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating); (iii) any
suspension or material limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (iv) any banking moratorium declared
by U.S. Federal or New York authorities; or (v) any outbreak or escalation of
major hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Underwriter, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the public offering or the sale of and
payment for the Offered Securities.
(d) The Underwriter shall have received an opinion, dated such
Closing Date, of Robinson Silverman Pearce Aronsohn & Berman LLP, counsel to the
Company, to the effect that:
(i) The Company and each Significant Subsidiary organized
under the laws of the State of Delaware are corporations duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and have all requisite corporate power and
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authority to own their respective properties and carry on their respective
businesses as described in the Prospectus;
(ii) The Offered Securities to be issued pursuant to this
Agreement have been duly authorized for issuance to the Underwriter and upon the
issuance and delivery of the Offered Securities and the receipt by the Company
of all consideration therefor in accordance with the terms of this Agreement,
the Offered Securities will be validly issued, fully paid and non-assessable,
and free of preemptive rights pursuant to law or in the Company's certificate of
incorporation or by-laws, and the Offered Securities will conform in all
material respects to the description thereof contained in the Prospectus.
(iii) Except for those agreements referred to in the
representation in Section 2(a)(vii) above, there are no contracts, agreements or
understandings known to such counsel between the Company and any person granting
such person the right to require the Company to include any securities in the
securities registered pursuant to the Registration Statement;
(iv) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(v) The Company and each Significant Subsidiary
incorporated under the laws of the State of New York or the State of Delaware
("Domestic Significant Subsidiaries") are not required to obtain any consent,
approval, authorization of, order of, or declaration, filing or registration
with, any governmental authority under any Applicable Law (as defined) in
connection with or as a condition to consummation by the Company of the
transactions contemplated by this Agreement in connection with the sale of the
Offered Securities, except such consents, approvals, authorizations, orders,
declarations, filings or registrations as have been obtained and made under the
Act and such as may be required under state securities laws (with respect to
which such counsel need express no opinion).
(vi) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement has been validly executed
and delivered by the Company. The execution, delivery and performance by the
Company of this Agreement, and compliance by it therewith, do not and will not
(a) conflict with, constitute a default under or violate (i) any provision of
the certificate of incorporation or by-laws of the Company or any Domestic
Significant Subsidiary, (ii) any Applicable Law (except state securities and
blue sky laws, as to which such counsel need express no opinion and except that
any rights to indemnity and contribution herein may be limited by federal and
state securities laws and public policy considerations); (iii) to such counsel's
knowledge, any judgment, order, writ, injunction or decree to which the Company,
its Domestic Significant Subsidiaries or any of their respective properties are
subject, or (iv) any agreement or instrument filed as an exhibit to the
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Registration Statement or any Exchange Act filing incorporated by reference in
the Registration Statement.
(vii) The Registration Statement was declared effective
under the Act at 10:00 a.m. on July 9, 1998, the Prospectus was filed with the
Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion
on the date specified therein, and, to the best of the knowledge of such counsel
based solely upon not having heard anything to the contrary in conversations
with the staff of the Securities Exchange Commission, no stop order suspending
the effectiveness of the Registration Statement has been issued under the Act or
proceedings therefor instituted, threatened, pending, or contemplated by the
Commission, and the Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or issue dates
and as of such Closing Date (except as to financial statements and related
notes, and financial and statistical data and supporting schedules included or
incorporated by reference therein, as to which such counsel need express no
opinion) complied as to form in all material respects with the requirements of
the Act and the Rules and Regulations; and that while such counsel is not
passing upon and does not assume responsibility for, and shall not be deemed to
have independently verified the accuracy, completeness or fairness of the
statements contained in the Registration Statement or any Prospectus (except
statements made under the captions "Description of Debt Securities,"
"Description of Preferred Stock," "Description of Common Stock," "Description of
Warrants" and "Description of Rights" in the basic prospectus and "Description
of Common Stock" in the Prospectus Supplement, insofar as they relate to legal
matters), such counsel shall state that based upon such participation but
without independent review or verification, nothing has come to such counsel's
attention which causes such counsel to believe that, at the time the
Registration Statement or any amendment thereto became effective or as of such
Closing Date, the Registration Statement (except as to financial statements and
related notes, and financial and statistical data and supporting schedules
included or incorporated by reference therein, as to which such counsel need
express no opinion), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; or at such Closing Date the Registration Statement or
Prospectus (except as aforesaid) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; the descriptions in the Registration
Statement and Prospectus of statutes, legal and governmental proceedings and
contracts and other documents are accurate in all material respects and fairly
present the information required to be shown; and such counsel do not know of
any legal or governmental proceedings that are required to be described in the
Registration Statement or the Prospectus which are not described as required or
of any contracts or documents of a character that are required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement which are not described and filed as required.
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Such counsel may state that, as it relates to enforceability, the
opinions expressed in clause (viii) are limited by (1) bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights generally and
(2) equitable principles of general applicability. Such counsel may also qualify
such opinion in other respects reasonably acceptable to Salomon Smith Barney.
(e) The Underwriter shall have received an opinion, dated such
Closing Date, of Eric I Cohen, general counsel of the Company, to the effect
that:
(i) The Company and each Significant Subsidiary
incorporated within the United States of America (the "Domestic Significant
Subsidiaries") have been duly incorporated and are existing corporations in good
standing under the laws of their respective jurisdictions of incorporation, with
corporate power and authority to own their respective properties and conduct
their respective businesses as described in the Prospectus; and the Company and
each Domestic Significant Subsidiary are duly qualified to do business as
foreign corporations in good standing in all other jurisdictions in which their
ownership or lease of property or the conduct of their business requires such
qualifications, except to the extent that the failure to be so qualified and in
good standing could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Based on my review of
organizational documents (or English translations thereof) of each Significant
Subsidiary incorporated outside the United States of America (the "Foreign
Significant Subsidiaries") and interviews and statements of persons who are
informed as to the formation and status of the Foreign Significant Subsidiaries,
the Foreign Significant Subsidiaries have been duly incorporated and are
existing corporations in good standing under the laws of their respective
countries of organization, with corporate power and authority to own their
respective properties and conduct their respective businesses as described in
the Prospectus; based on my review of organizational documents (or English
translations thereof) of the Foreign Significant Subsidiaries and interviews and
statements of persons who are informed as to the formation and status of the
Foreign Significant Subsidiaries, the Foreign Significant Subsidiaries are duly
qualified to do business as foreign corporations in good standing in all other
jurisdictions in which their ownership or lease of property or the conduct of
their business requires such qualifications, except to the extent that the
failure to be so qualified and in good standing could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(ii) Based upon my examination of the corporate stock
books and records of each of the Domestic Significant Subsidiaries and the
corporate stock books and records (or English translations thereof) of the
Foreign Significant Subsidiaries and interviews and statements of persons who
are informed as to the status of the Foreign Significant Subsidiaries, the
Offered Securities, when issued in accordance with the Underwriting Agreement,
will be, and all other outstanding shares of the capital stock of the Company
and each Significant Subsidiary have been, duly authorized and validly issued,
are fully paid and nonassessable and conform in all material respects to the
description thereof
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<PAGE>
contained in the Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Offered Securities;
(iii) Except for those agreements referred to in the
representation set forth in Section 2(a)(vii) hereof, there are no contracts,
agreements or understandings known to such counsel between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the Company to include
such securities in the securities registered pursuant to the Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act;
(iv) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required to be
obtained or made by the Company or any Significant Subsidiary under any
Applicable Law for the consummation of the transactions contemplated by this
Agreement in connection with the sale of the Offered Securities, except such as
have been obtained and made under the Act and such as may be required under
state securities laws (with respect to which such counsel need express no
opinion);
(v) The execution and delivery of, and performance by the
Company of its obligations under, this Agreement will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any Applicable Law or order known to such counsel of any governmental agency or
body or any court having jurisdiction over the Company or any Significant
Subsidiary or any of their respective properties (except that any rights to
indemnity and contribution herein may be limited by federal and state securities
laws and public policy considerations), or any agreement or instrument to which
the Company or any Significant Subsidiary is a party or by which the Company or
any Significant Subsidiary is bound or to which any of properties of the Company
or any Significant Subsidiary is subject, or the charter or by-laws of the
Company or any Significant Subsidiary.
(vi) The Registration Statement was declared effective
under the Act at 10:00 a.m. on July 9, 1998, the Prospectus was filed with the
Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion
on the date specified therein, and, to the best of the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Act, and
the Registration Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates and as of such Closing
Date, complied as to form in all material respects with the requirements of the
Act and the Rules and Regulations; and that while such counsel is not passing
upon and does not assume responsibility for, and shall not be deemed to have
independently verified the accuracy, completeness or fairness of the statements
contained in the Registration Statement or any Prospectus (except statements
made under the captions "Description of Debt Securities," "Description of
Preferred Stock,"
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"Description of Common Stock," "Description of Warrants" and "Description of
Rights" in the basic prospectus and "Description of Common Stock" in the
Prospectus Supplement, insofar as they relate to legal matters), such counsel
shall state that no facts have come to such counsel's attention in the course of
participating with officers and representatives of the Company in the
preparation of the Registration Statement (except for financial statements and
schedules and other financial and statistical data contained therein, as to
which such counsel need express no opinion) to lead it to believe that any part
of the Registration Statement or any amendment thereto, as of its effective date
or as of such Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; or that the Prospectus or any
amendment or supplement thereto, as of its issue date or as of such Closing
Date, contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; the descriptions
in the Registration Statement and Prospectus of statutes, legal and governmental
proceedings and contracts and other documents are accurate and fairly present
the information required to be shown; and such counsel do not know of any legal
or governmental proceedings required to be described in the Registration
Statement or the Prospectus which are not described as required or of any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed as required; and
(vii) This Agreement has been duly authorized, executed
and delivered by the Company.
Such counsel may state that, as it relates to enforceability,
the opinions expressed in clause (vii) are limited by (1) bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors' rights
generally and (2) equitable principles of general applicability. Such counsel
may also qualify such opinion in other respects reasonably acceptable to Salomon
Smith Barney.
(f) The Underwriter shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriter, such opinion or
opinions, dated such Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities delivered on such Closing Date,
the Registration Statement, the Prospectus and other related matters as the
Underwriter may require, and the Company shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass upon
such matters.
(g) The Underwriter shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to their
knowledge after reasonable investigation, shall state that: the representations
and warranties of the Company in this Agreement are true and correct in all
material respects; the Company has complied in all material respects with all
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agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date; no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are contemplated by the Commission;
and, subsequent to the date of the most recent financial statements incorporated
by reference in the Prospectus, there has been no material adverse change, nor
any development or event that could reasonably be expected to result in a
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole except as set forth in or contemplated by the Prospectus or as described
in such certificate.
(h) The Underwriter shall have received a letter, dated such
Closing Date, of PricewaterhouseCoopers LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred to in
such subsection will be a date not more than three business days prior to such
Closing Date for the purposes of this subsection.
(i) The Offered Securities shall have been approved for
listing on the New York Stock Exchange, subject only to notice of issuance.
(j) The Company will furnish the Underwriter with such
conformed copies of such opinions, certificates, letters and documents as the
Underwriter reasonably requests. The Underwriter may in its sole discretion
waive compliance with any conditions to the obligations of the Underwriter
hereunder, whether in respect of an Optional Closing Date or otherwise.
7 Indemnification and Contribution.
(a) The Company will indemnify and hold harmless the
Underwriter against any losses, claims, damages or liabilities, to which the
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Underwriter for any legal or
other expenses reasonably incurred by the Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability (or actions in respect thereof) arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in conformity with written information furnished to
the Company by the Underwriter specifically for use therein, it being understood
and agreed that the only such information furnished by the Underwriter consists
of the information described as such in subsection (b) below.
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(b) The Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in conformity with written information furnished to the Company by the
Underwriter specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by the Underwriter consists of the following information in the
Prospectus Supplement furnished on behalf of the Underwriter: the concession and
reallowance figures appearing in the fourth paragraph under the caption
"Underwriting", and the last paragraph under the caption "Underwriting"
concerning over-allotments and stabilizing.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. In no event shall the
indemnifying party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action. An indemnifying party shall not be liable for any settlement of
any proceeding effected without its prior written consent;
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provided, however, that if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees it shall be liable for any settlement
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Underwriter from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriter in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Underwriter shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriter. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
the Underwriter (as hereinafter defined) within the meaning of the Act; and the
obligations of the Underwriter under this Section shall
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be in addition to any liability which the Underwriter may otherwise have and
shall extend, upon the same terms and conditions, to each director of the
Company, to each officer of the Company who has signed the Registration
Statement and to each person, if any, who controls the Company within the
meaning of the Act.
8 Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Underwriter set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If for any reason the purchase of the
Offered Securities by the Underwriter is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Company and the Underwriter
pursuant to Section 7 shall remain in effect; if any Offered Securities have
been purchased hereunder, the Company shall remain responsible for the expenses
to be paid or reimbursed by them pursuant to Section 5 and the respective
obligations of the Company and the Underwriter pursuant to Section 7 shall
remain in effect, and the representations and warranties in Section 2 and all
other obligations under Section 5 shall also remain in effect. If the purchase
of the Offered Securities by the Underwriter is not consummated for any reason
other than solely because of the occurrence of any event specified in clause
(iii), (iv) or (v) of Section 6(c), the Company will reimburse the Underwriter
for all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by them in connection with the offering of the Offered
Securities.
9 Notices. All communications hereunder will be in writing and, if sent
to the Underwriter, will be mailed, delivered or telegraphed and confirmed to
the Underwriter, c/o Salomon Smith Barney Inc., Seven World Trade Center, New
York, N.Y. 10048, Attention: Henrik Ekberg, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at Terex Corporation, 500
Post Road East, Westport, CT 06880, Attention: Eric I Cohen.
10 Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
12 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws. The Company hereby submits to the non-exclusive
jurisdiction of the
21
<PAGE>
Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
22
<PAGE>
If the foregoing is in accordance with the Underwriter's understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Company and the
Underwriter in accordance with its terms.
Very truly yours,
TEREX CORPORATION
By
--------------------------------------
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
SALOMON SMITH BARNEY INC.
By SALOMON SMITH BARNEY INC.
By
---------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Number of
Firm Securities
Underwriter to be Purchased
- ----------- ----------------
Salomon Smith Barney Inc. 3,500,000
----------
Total 3,500,000
<PAGE>
SCHEDULE B
Ronald M. DeFeo
Marvin B. Rosenberg
G. Chris Andersen
William H. Fike
Don DeFosset
David A. Sachs
Donald P. Jacobs
Joseph F. Apuzzo
Brian J. Henry
Steven E. Hooper
Fil Filipov
Eric I Cohen
Ernest R. Verebelyi
Jack Lascar
<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 17, 1999
3,500,000 SHARES
[Terex Logo]
COMMON STOCK
------------------
The last reported sale price of the Common Stock, par value $.01 per share,
which is listed on the New York Stock Exchange under the symbol "TEX", on June
16, 1999, was $32.00 per share.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
PAGE S-9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
------------ ------------- ------------
<S> <C> <C> <C>
Per Share....................................................... $30.50 $0.875 $29.625
Total(1)........................................................ $106,750,000 $3,062,500 $103,687,500
</TABLE>
- ------------------
(1) Terex has granted the Underwriter an option, exercisable for 30 days from
the date of this Prospectus Supplement, to purchase a maximum of 525,000
additional shares of Common Stock to cover over-allotments of shares.
Delivery of the shares of Common Stock will be made on or about June 22,
1999, against payment in immediately available funds.
------------------
SALOMON SMITH BARNEY
Prospectus Supplement dated June 17, 1999
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FORWARD-LOOKING STATEMENTS................................................................................. S-3
PROSPECTUS SUPPLEMENT SUMMARY.............................................................................. S-4
RISK FACTORS............................................................................................... S-9
Debt of Terex............................................................................................ S-9
Restrictive Debt Covenants............................................................................... S-9
Acquisition Strategy; Integration of New Businesses...................................................... S-9
Industry Cycles and Competition.......................................................................... S-10
Tax Audit Issues......................................................................................... S-10
Ability to Use Net Operating Loss Carryovers............................................................. S-10
Reliance on Key Management............................................................................... S-11
Foreign Currencies; International Operations............................................................. S-11
Environmental and Related Matters........................................................................ S-11
Restrictions on Dividends................................................................................ S-11
THE COMPANY................................................................................................ S-12
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY............................................................ S-14
USE OF PROCEEDS............................................................................................ S-15
CAPITALIZATION............................................................................................. S-16
SELECTED CONSOLIDATED FINANCIAL DATA....................................................................... S-17
INDUSTRY OVERVIEW AND OUTLOOK FOR PRINCIPAL PRODUCTS....................................................... S-19
BUSINESS................................................................................................... S-22
DESCRIPTION OF COMMON STOCK................................................................................ S-32
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS........................................ S-33
UNDERWRITING............................................................................................... S-35
LEGAL MATTERS.............................................................................................. S-36
EXPERTS.................................................................................................... S-36
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................................................... 2
INCORPORATION OF DOCUMENTS BY REFERENCE.................................................................... 2
THE COMPANY................................................................................................ 3
RATIOS OF EARNINGS TO FIXED CHARGES........................................................................ 5
USE OF PROCEEDS............................................................................................ 5
DESCRIPTION OF DEBT SECURITIES............................................................................. 5
DESCRIPTION OF PREFERRED STOCK............................................................................. 21
DESCRIPTION OF COMMON STOCK................................................................................ 27
DESCRIPTION OF WARRANTS.................................................................................... 28
DESCRIPTION OF RIGHTS...................................................................................... 28
PLAN OF DISTRIBUTION....................................................................................... 29
ERISA MATTERS.............................................................................................. 30
LEGAL OPINIONS............................................................................................. 30
EXPERTS.................................................................................................... 30
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement, the accompanying Prospectus and the documents
incorporated by reference contain and refer to forward-looking statements that
involve risks and uncertainties. Generally, the words "may," "expects,"
"intends," "anticipates," "plans," "projects," "estimates" or similar words are
intended to identify forward-looking statements. However, the absence of these
words does not mean that the statement is not forward-looking. We have based
these forward-looking statements on our current expectations and projections
about future events. These statements are not guarantees of future performance.
It is possible that actual events and results will differ materially as future
events are difficult to predict. In addition, many of the risks, uncertainties
and assumptions about Terex are beyond our control. Some of these risks,
uncertainties and assumptions are:
o construction and mining activity are affected by interest rates,
government spending and general economic conditions;
o our ability to successfully integrate new businesses may affect our
future performance;
o changes in our key management personnel;
o our businesses are in very competitive industries and may be
affected by pricing, product and other actions taken by our
competitors;
o changes in laws and regulations;
o we manufacture and sell our products in many countries and we may be
affected by changes in exchange rates between currencies, as well as
international politics;
o our ability to manufacture and deliver our products to customers on
a timely basis;
o the ability of our suppliers to supply us with parts and components
at competitive prices on a timely basis;
o continued use of net operating loss carryovers;
o our ability to pay dividends may be limited by the terms of our
existing debt agreements and state law;
o we have a significant amount of debt and our debt agreements contain
a number of restrictive covenants;
o certain of our federal income tax returns are being audited by the
Internal Revenue Service; and
o we are subject to various environmental laws and regulations.
The forward-looking statements made or referred to in this Prospectus
Supplement, the accompanying Prospectus and the documents incorporated by
reference reflect our expectations and projections at the time the statement was
made. We do not undertake any obligation to update publicly any forward-looking
statement which may result from changes in events, conditions, circumstances or
expectations on which we have based any forward-looking statement.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere in this Prospectus
Supplement. This summary is not complete and may not contain all of the
information that you should consider before investing in the Common Stock. You
should read the entire Prospectus Supplement and the accompanying Prospectus
carefully, including the "Risk Factors" section and the financial statements and
notes to those statements located in this Prospectus Supplement or in Terex's
filings with the Securities and Exchange Commission. References in this
Prospectus Supplement to "Terex" are generally meant to refer to Terex
Corporation and its subsidiaries, unless indicated otherwise.
THE COMPANY
Terex is a global manufacturer of a broad range of construction and mining
related capital equipment. Terex strives to manufacture high quality machines
which are low cost, simple to use and easy to maintain. We operate in two
business segments: Terex Lifting and Terex Earthmoving. Our products are
manufactured at 21 plants in the United States and Europe and are sold primarily
through a worldwide network of dealers in over 750 locations to the global
construction, infrastructure and surface mining markets. We believe that Terex
is benefiting from industry trends. For example, Terex Lifting is benefitting
from the growing importance of rental fleet operators, and Terex Earthmoving is
benefitting from an increasing level of worldwide development of infrastructure.
The principal executive offices of Terex are located at 500 Post Road East,
Westport, Connecticut 06880 and our telephone number is (203) 222-7170.
Terex Lifting
Terex Lifting manufactures and sells telescopic mobile cranes (including
rough terrain, truck and all terrain mobile cranes), tower cranes, lattice boom
cranes, aerial work platforms (including scissor, articulated boom and straight
telescoping boom aerial work platforms), utility aerial devices (including
digger derricks and articulated aerial devices), telescopic material handlers
(including container stackers and rough terrain lift trucks), truck mounted
cranes (boom trucks) and related components and replacement parts. Construction
and industrial customers, as well as utility companies, are the primary users of
these products. Customers use these products to lift equipment, material or
workers to various heights. Terex believes that it is the second largest
manufacturer of rough terrain, truck and all terrain telescopic mobile cranes in
the United States and the leading manufacturer in France and Italy.
Terex Earthmoving
Terex Earthmoving manufactures and sells articulated and rigid off-highway
trucks, high capacity surface mining trucks, large hydraulic mining shovels, and
related components and replacement parts. Construction, mining and government
customers are the primary users of these products. Customers use hydraulic
excavators to load coal, copper ore, iron ore, other mineral-bearing materials
or rocks into trucks. Terex believes that it has the leading global market share
for large hydraulic mining shovel models having machine weights in excess of 200
tons.
S-4
<PAGE>
INDUSTRY OVERVIEW AND OUTLOOK FOR PRINCIPAL PRODUCTS
Terex Lifting
We believe that Terex Lifting's markets will benefit from a number of
industry trends:
o The large number of telescopic mobile cranes produced in the late 1970s
in North America are beginning to reach the end of their useful lives. We
have seen an increase in industry demand for telescopic mobile cranes as
users begin to replace their aging equipment.
o Most of the primary markets in which Terex Lifting sells its telescopic
mobile cranes are undergoing a strong and sustained period of
construction activity and infrastructure development.
o In North America, rental fleet operators purchase an estimated 85% of all
new telescopic mobile cranes and an estimated 90% of all new aerial work
platforms. We aim to take advantage of rental fleet operators' desire to
maximize returns on product investment through our 'best value' strategy
of providing high quality products which are low cost, simple to use and
easy to maintain.
o There is a trend in the utility industry to subcontract maintenance
functions to private contractors in order to reduce costs. We expect that
our sales of utility aerial devices will benefit from Terex's strong
relationships with these private contractors and our ability to supply
these products at a low cost.
Terex Earthmoving
We believe that Terex Earthmoving will benefit from the following trends in
its primary markets:
o The primary markets for Terex's articulated and rigid frame off-highway
trucks are the worldwide large private construction project market and
the public infrastructure development market. The primary customers for
Terex Earthmoving's products are rental fleet operators and contractors
and large construction companies. Terex's best value strategy for its
off-highway trucks appeals to these customers because of their focus on
availability, reliability and hauling efficiency at a low cost.
o The worldwide surface mining market is Terex's largest market for its
high capacity surface mining trucks and large hydraulic excavators. The
advanced technology included in Terex's high capacity surface mining
trucks and hydraulic mining shovels allows Terex to market cost efficient
machines that are more reliable and productive than the machines offered
by competing technologies.
o Mining companies tend to extract material from smaller mines with shorter
lives than had previously been the practice. Mine operators are also more
selective in what they extract from mines. These changes favor Terex's
hydraulic mining shovels which offer high maneuverability and greater
operating time at a lower initial investment than comparably sized
alternatives sold by competitors.
o Mining companies often use mining products around the clock in intensive
earthmoving operations. This use generates a profitable replacement parts
and service business for Terex because customers require replacement
parts and service in order to keep the mining products operating
continuously. In addition, as Terex sells more original equipment, there
is greater demand for replacement parts and service.
S-5
<PAGE>
BUSINESS STRATEGY
Under the direction of Ronald M. DeFeo, Terex's Chairman of the Board and
Chief Executive Officer, and our management team, we have implemented a series
of interrelated strategic initiatives designed to improve manufacturing
efficiency, offer our products at a lower cost than our competitors and increase
market share. While these initiatives are designed to increase sales and
earnings of current operations, Terex also focuses on accelerating its growth
through acquisitions.
Increase Sales Through Best Value Strategy--We have focused our product
lines on products which we can manufacture at lower cost than our competitors.
We have eliminated unprofitable product lines and simplified our product
designs. We have also increased the number of interchangeable parts between
models. This strategy has enabled Terex to offer many of its products at prices
that we believe are often 10% to 15% below those offered by our competitors with
virtually the same usefulness and marketability as the competition's products.
We believe that as a result we are able to offer our customers a more attractive
return on their invested capital than our competitors. The key targets of this
strategy are rental fleet operators, Terex Lifting's primary customers. Rental
fleet operators are generally unable to charge a premium rental rate for
equipment that has sophisticated, but nonessential features. Terex believes that
by offering its customers a simplified product design at a lower price, it can
increase sales and gain market share.
Focus on Core Businesses--Over the past several years we have focused on
growing and improving operations of our core lifting and earthmoving businesses.
We have also expanded the size and scope of our core businesses both through
acquisitions and through development of new products in order to increase our
market share. Management believes that these initiatives have helped insulate
Terex from potential cyclical changes in any one market. These initiatives have
also expanded Terex's product lines within its core businesses, added new
technology and improved Terex's distribution network.
Grow through Acquisitions--During the past several years, we have invested
approximately $460 million to strengthen our core lifting and earthmoving
businesses through 11 strategic acquisitions listed below:
<TABLE>
<CAPTION>
ACQUIRED OR LICENSED
DATE ACQUISITION PURCHASE PRICE OPERATING LOCATIONS PRODUCTS BRAND NAMES
- ------------ --------------- -------------- ---------------------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C>
5/95 PPM $105 million South Carolina, Telescopic Mobile P&H, PPM, BENDINI
France, Italy Cranes
4/97 Simon Access $90 million Kansas, South Dakota, Aerial Work Platforms, SIMON, TELELECT, RO,
Wisconsin, Ireland, Utility Aerial Devices, CELLA
Italy Boom Trucks
4/97 Baraga Products (terms not Michigan Telescopic Rough SQUARE SHOOTER
disclosed) Terrain Lift Trucks
1/98 Payhauler (terms not Illinois Heavy Duty Rigid PAYHAULER
disclosed) Hauling Trucks
3/98 O&K Mining $168 million Germany Large Hydraulic Mining O&K
Shovels
5/98 Holland Lift $4 million The Netherlands Scissor Lifts HOLLAND LIFT
8/98 American Crane $18 million North Carolina Lattice Boom Cranes AMERICAN
11/98 Italmacchine (terms not Italy Telescopic Material ITALMACCHINE
disclosed) Handlers
11/98 Peiner HTS (terms not Germany Tower Cranes PEINER
disclosed)
12/98 Gru Comedil (terms not Italy Tower Cranes COMEDIL
disclosed)
4/99 Amida (terms not South Carolina Light Towers AMIDA
disclosed)
</TABLE>
Terex expects that acquisitions will continue to be an important component
of our growth strategy and is continually reviewing opportunities to make
additional acquisitions, some of which, individually or in the aggregate, could
be material to Terex. As with our previous acquisitions, Terex will continue to
pursue strategic acquisitions which accomplish the following goals:
o complement Terex's core operations;
o offer cost reduction opportunities as well as distribution and purchasing
synergies; and
o provide product diversification.
S-6
<PAGE>
Reduce Costs and Improve Manufacturing Efficiency--Over the past few years,
we have initiated several programs to reduce costs and improve manufacturing
efficiency in order to increase profitability. As part of this strategy, we
evaluate the cost of every aspect of our existing and acquired businesses.
Typically we:
o combine manufacturing operations;
o increase the efficiency of manufacturing processes by improving the flow
of materials through the various stages of production;
o subcontract specific tasks to third parties;
o reduce fixed costs; and
o emphasize those products that are the most profitable, including the
replacement parts business.
Some recent examples of our cost reduction initiatives include:
o Terex acquired P.P.M. S.A. and certain of its subsidiaries and Legris
Industries, Inc. in May 1995. Since the acquisition, we have reduced the
total number of PPM employees from approximately 840 to approximately 580
at March 31, 1999 and reduced the number of employees not directly
involved in the manufacture and sale of equipment from approximately 430
to approximately 210 at March 31, 1999. During that same period, sales at
PPM increased. In addition, we reduced selling, general and
administrative expenses as a percentage of total sales from approximately
21.0% in 1994 to approximately 6.6% for the three months ended March 31,
1999.
o Terex acquired certain of the former subsidiaries of Simon Engineering
plc in April 1997. During the 90 days immediately following the
acquisition, we reduced the total number of Simon employees by
approximately 130, primarily those employees not directly involved in the
manufacture and sale of equipment. In addition, we reduced selling,
general and administrative expenses as a percentage of total sales from
approximately 13.8% in 1996 to approximately 5.7% for the three months
ended March 31, 1999.
o Terex acquired O&K Mining GmbH in March 1998. As a result of the
acquisition, the number of employees at Terex Earthmoving has been
reduced by approximately 140. In addition, we estimate cost reduction
initiatives have reduced annual operating expenses by over $8.5 million.
RECENT DEVELOPMENTS
On June 15, 1999, Terex announced that it had agreed with the board of
directors of Powerscreen International plc on terms of an offer to Powerscreen's
shareholders to acquire all of the issued and to be issued ordinary share
capital of Powerscreen for consideration of 195.0 pence per share (approximately
$3.17 per share), valuing the entire issued share capital of Powerscreen at
pounds 181 million (approximately $294 million). The acquisition of Powerscreen
will be fully financed by new banking facilities. Powerscreen, headquartered in
Dungannon, North Ireland, is a leader in the manufacturing and marketing of
screening and crushing equipment for the quarrying, construction and demolition
industries. The transaction remains subject to normal regulatory approvals and
closing conditions and, assuming a tender of a sufficient number of shares of
Powerscreen, is expected to be completed in the third quarter of 1999.
Powerscreen is primarily a manufacturer of screening and crushing equipment
in the United Kingdom, the Irish Republic and the United States. It manufactures
and markets mobile and static screening equipment used for sorting and grading
sand and gravel in quarries and waste materials on landfill sites. Crushing
equipment is used for processing rock into sand and gravel and construction
waste into re-useable materials.
For the fiscal year ended March 31, 1999, Powerscreen reported from
continuing operations, under U.K. GAAP, turnover (or sales) of approximately
pounds 225.1 million (approximately $372.2 million), operating profit of
approximately pounds 25.2 million (approximately $41.7 million), net debt of
approximately pounds 4.5 million (approximately $7.3 million) and equity
shareholders' funds of approximately pounds 58.5 million (approximately
$94.3 million). Powerscreen's screening and crushing equipment represented
approximately 60% of its 1999 sales. The remaining approximately 40% of sales
were generated by the sale of truck-mounted material handlers, dumper trucks,
mixers and compaction equipment. For the fiscal year ended March 31, 1999,
Powerscreen had an operating margin of approximately 11%. Terex expects
substantial cost savings from the integration of the two companies.
S-7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered...................... 3,500,000 shares
Common Stock to be outstanding after the
offering (a)............................ 24,888,682 shares
Dividend policy........................... We do not plan to pay cash dividends in the near term. We intend to
retain all future earnings to repay indebtedness and to fund the
development and growth of our business. Moreover, our debt
instruments restrict the payment of cash dividends.
Use of proceeds........................... Repayment of debt and other general corporate purposes.
New York Stock Exchange symbol............ TEX
Risk factors.............................. For a discussion of certain risks you should consider before
investing in the Common Stock, see "Risk Factors."
</TABLE>
- ------------------
(a) Excludes a total of 2,233,318 additional shares reserved for issuance upon
the exercise of outstanding options, warrants and equity rights.
S-8
<PAGE>
RISK FACTORS
Investing in shares of Common Stock can be risky. Before you invest in
shares of our Common Stock, you should carefully consider the following factors
and other information contained or incorporated in this Prospectus Supplement or
the accompanying Prospectus.
DEBT OF TEREX
As of March 31, 1999, Terex had total debt of approximately $679 million,
which represented approximately 86% of our total capitalization. Terex will use
a portion of the funds received from this offering to repay some of our debt.
After we repay this debt with funds from this offering, on a pro forma basis as
of March 31, 1999, Terex's total debt would have been approximately
$644 million, which would have represented approximately 75% of our total
capitalization. In addition, Terex expects to incur substantial additional
indebtedness in connection with the acquisition of Powerscreen.
There are several important consequences of having debt, including the
following:
o a substantial portion of our cash from operating activities will be
dedicated to payment of principal and interest on our debt;
o competitive pressures and adverse economic conditions are more likely to
have a negative effect on our business; and
o our ability to make acquisitions and to take advantage of significant
business opportunities may be negatively affected.
Terex's ability to pay the required interest and principal payments on our
debt depends on the future performance of our business. The performance of our
business is subject to general economic conditions and other financial and
business factors. Many of these factors are beyond our control. If Terex does
not have enough cash flow in the future to pay the required interest or
principal payments on our debt, we may be required to refinance all or a part of
our debt or borrow additional amounts. Terex does not know if refinancing our
debt will be possible at that time or if we will be able to find someone who
will lend us more money.
In addition, because part of Terex's debt bears interest at floating rates,
an increase in interest rates could adversely affect our ability to make the
required interest and principal payments on our debt. Terex has entered into
agreements covering part of our floating rate debt which place a cap on the
applicable interest rates.
RESTRICTIVE DEBT COVENANTS
Terex's existing debt agreements contain a number of significant covenants.
These covenants limit our ability to, among other things, borrow additional
money, make capital expenditures, pay dividends, dispose of assets and acquire
new businesses. These covenants also require us to meet certain financial tests.
Changes in economic or business conditions, results of operations or other
factors could cause us to default under our existing debt agreements. If we are
unable to comply with these covenants, there would be a default under our
existing debt agreements. A default, if not waived by our lenders, could result
in acceleration of Terex's debt and possibly bankruptcy.
ACQUISITION STRATEGY; INTEGRATION OF NEW BUSINESSES
Terex expects to continue its strategy of identifying and acquiring
businesses with complementary products and services which we believe will
enhance our operations and profitability. Terex may pay for future acquisitions
from internally generated funds, bank borrowings, public offerings, private
sales of stock or bonds, or some combination of these methods. However, we
cannot give any assurance that Terex will be able to continue to find suitable
businesses to purchase or that Terex will be able to raise the money necessary
to complete future acquisitions. In addition, we cannot guarantee that we will
be able to successfully integrate any business we purchase into our existing
business or that any acquired businesses will be profitable. The successful
integration of new businesses depends on our ability to manage these new
businesses and cut excess costs. If Terex is unable to complete the integration
of new businesses in a timely manner, it could have a materially adverse effect
on our results of operations and financial condition.
S-9
<PAGE>
INDUSTRY CYCLES AND COMPETITION
The demand for our products depends upon the general economic conditions of
the markets in which we compete. Downward economic cycles result in reductions
in sales of our products, which may reduce Terex's profits. We have taken a
number of steps to reduce our fixed costs of operations to decrease the negative
impact of these cycles.
Terex competes in a highly competitive industry. To compete successfully,
our products must excel in terms of quality, price, product line, ease of use,
safety and comfort, and we must also provide excellent customer service. The
greater financial resources of certain of our competitors may put Terex at a
competitive disadvantage.
TAX AUDIT ISSUES
Terex's federal income tax returns for the years 1987 through 1989 are
currently being audited by the Internal Revenue Service ("IRS"). In December
1994, we received an examination report from the IRS proposing a large tax
deficiency. The examination report raised many issues. Among these issues are
substantiation for certain tax deductions and whether we were able to use
certain net operating loss carryovers ("NOLs") to offset taxable income. In
April 1995, Terex filed an administrative appeal to the examination report. The
IRS is currently reviewing information we provided to it. The final outcome of
this audit is subject to the resolution of complicated legal and factual issues.
If the IRS prevails on all the issues raised, the amount of the tax we
would have to pay would be approximately $56.0 million plus penalties of
approximately $12.8 million and interest through March 31, 1999 of approximately
$116.2 million. The penalties claimed by the IRS are between 20% and 25% of the
amount of the tax deficiency assessed against us. Interest on the amount of tax
deficiency and penalties assessed against us is currently accruing at a rate of
9% per annum. If Terex is required to pay a significant portion of the tax
deficiency claimed by the IRS, we may not have or be able to obtain the money
necessary to pay the tax deficiency. If this were to occur, we may not be able
to continue in business.
Terex believes, however, that it has provided adequate documentation for a
large part of the tax deductions the IRS has disallowed. The IRS has also
advised us that they will no longer challenge our past and future use of the
NOLs questioned by the IRS. As a result, Terex does not believe that the outcome
of the audit will have a material adverse effect on its financial condition or
results of operations. However, we may lose or have to use some of our NOLs as a
result of the audit. In addition, we will have to pay some amount of tax,
penalties and interest to the IRS to resolve this matter. The final outcome of
the audit cannot be determined or estimated at this time. Accordingly, Terex
does not have any additional reserves for money which might be due as a result
of the audit because the loss ranges from zero to $56 million plus interest and
penalties.
ABILITY TO USE NET OPERATING LOSS CARRYOVERS
As of March 31, 1999, Terex had federal NOLs of approximately $243.5
million. Currently there is no limitation on our ability to use NOLs to reduce
future income taxes. However, if an ownership change as defined in Section 382
of the Internal Revenue Code of 1986, as amended (the "Code"), occurs with
respect to our capital stock, our ability to use NOLs would be limited to
specific annual amounts. Generally, an ownership change occurs if certain
persons or groups increase their aggregate ownership by more than 50 percentage
points of our total capital stock in any three-year period.
If an ownership change occurs, our ability to use NOLs to reduce income
taxes is limited to an annual amount based on the fair market value of Terex
immediately prior to the ownership change multiplied by the long-term tax-exempt
interest rate. The long-term tax-exempt interest rate is published monthly by
the IRS. As of the date of this Prospectus Supplement, the rate is approximately
4.85%. The 15-year period to use NOLs is not affected by the ownership change
limitations. Our use of new NOLs arising after the date of an ownership change
would not be affected.
It is impossible for Terex to ensure that an ownership change will not
occur in the future. We do not have the ability to restrict the purchase or sale
of our capital stock so as to prevent an ownership change. At any time, the
actions of one or more persons or groups under certain circumstances could by
themselves cause an ownership change and result in a limitation on our ability
to use NOLs. However, Terex has entered
S-10
<PAGE>
into an agreement with Mr. Randolph W. Lenz which limits his ability to purchase
and sell shares of our capital stock. Mr. Lenz is our former Chairman of the
Board and an owner of approximately 6.63% of our Common Stock after this
offering. Nevertheless, Terex cannot prevent an ownership change from occurring.
In addition, we may decide in the future that it is necessary or in our interest
to take certain actions which result in an ownership change. If an ownership
change occurs, our future after-tax earnings per share and cash flow will be
reduced.
RELIANCE ON KEY MANAGEMENT
The success of Terex's business is dependent upon the management and
leadership skills of Ronald M. DeFeo, Chairman of the Board, President and Chief
Executive Officer. Mr. DeFeo is not bound by an employment agreement with Terex.
The loss of Mr. DeFeo could have a significant, negative impact upon Terex.
FOREIGN CURRENCIES; INTERNATIONAL OPERATIONS
Terex's products are sold in over 50 countries around the world. Thus, our
revenues are generated in foreign currencies, including the British Pound
Sterling, French Franc, Deutsche Mark, Italian Lira, Dutch Gilder and Australian
Dollar, while costs incurred to generate those revenues are only partly incurred
in the same currencies. Since Terex's financial statements are denominated in
U.S. dollars, changes in currency exchange rates between the U.S. dollar and
other currencies have had, and will continue to have, an impact on Terex's
earnings. To date, this impact has not been material on the earnings of Terex.
To reduce this currency exchange risk, Terex may buy protecting or offsetting
positions (known as "hedges") in certain currencies to reduce the risk of an
adverse currency exchange movement. Terex has not engaged in any speculative or
profit motivated hedging activities. Although Terex partially hedges its
revenues and costs, currency fluctuations will impact Terex's financial
performance in the future.
Terex's international operations are also subject to a number of potential
risks. Such risks include, among others, currency exchange controls, labor
unrest, regional economic uncertainty, political instability, restrictions on
the transfer of funds into or out of a country, export duties and quotas,
domestic and foreign customs and tariffs, current and changing regulatory
environments, difficulty in obtaining distribution support and potentially
adverse tax consequences. These factors may have an adverse effect on Terex or
its international operations in the future.
ENVIRONMENTAL AND RELATED MATTERS
Terex generates hazardous and nonhazardous wastes in the normal course of
its manufacturing operations. As a result, Terex is subject to a wide range of
federal, state, local and foreign environmental laws and regulations. These laws
and regulations govern actions that may have adverse environmental effects and
also require compliance with certain practices when handling and disposing of
hazardous and nonhazardous wastes. These laws and regulations also impose
liability for the costs of, and damages resulting from, cleaning up sites, past
spills, disposals and other releases of hazardous substances.
Compliance with these laws and regulations has, and will continue to
require, Terex to make expenditures. Terex does not expect that these
expenditures will have a material adverse effect on its business or
profitability.
RESTRICTIONS ON DIVIDENDS
Terex's ability to pay dividends on its Common Stock is limited under the
terms of Terex's existing debt agreements. In addition, Delaware law generally
restricts Terex from paying dividends in circumstances where the payment would
make our liabilities exceed our assets or where the payment would make us unable
to pay our debts as they become due.
Terex does not plan on paying dividends on its Common Stock in the near
term. Instead, we intend to retain any earnings to repay indebtedness and to
fund the development and growth of our business. Any future payments of cash
dividends will depend on our financial condition, capital requirements and
earnings, as well as other factors that the Board of Directors may consider.
S-11
<PAGE>
THE COMPANY
Terex is a global manufacturer of a broad range of construction and mining
related capital equipment. Terex strives to manufacture high quality machines
which are low cost, simple to use and easy to maintain. Terex's principal
products include telescopic mobile cranes, tower cranes, lattice boom cranes,
aerial work platforms, utility aerial devices, telescopic material handlers,
truck mounted mobile cranes, rigid and articulated off-highway trucks and high
capacity surface mining trucks, large hydraulic mining shovels and related
components and replacement parts. Terex's products are manufactured at 21 plants
in the United States and Europe and are sold primarily through a worldwide
network of dealers in over 750 locations to the global construction,
infrastructure and surface mining markets.
Terex's operations began in 1983 with the purchase of Northwest Engineering
Company, Terex's original business and name. Since 1983, we have expanded and
changed Terex's business through a series of acquisitions and dispositions. In
1988, Northwest Engineering Company merged into a subsidiary acquired in 1986
named Terex Corporation, with Terex Corporation as the surviving entity. As a
result of the completion of the PPM Acquisition (as defined below) in May 1995,
Terex's operations were divided into three principal segments: Material
Handling, Heavy Equipment and Mobile Cranes. On November 27, 1996, Terex
completed the sale of its worldwide material handling segment, which was
originally acquired in July 1992. Currently Terex operates in two business
segments: Terex Lifting and Terex Earthmoving.
TEREX LIFTING
Terex Lifting manufactures and sells telescopic mobile cranes (including
rough terrain, truck and all terrain mobile cranes), tower cranes, lattice boom
cranes, aerial work platforms (including scissor, articulated boom and straight
telescoping boom aerial work platforms), utility aerial devices (including
digger derricks and articulated aerial devices), telescopic material handlers
(including container stackers, scrap handlers and telescopic rough terrain boom
forklifts), truck mounted cranes (boom trucks) and related components and
replacement parts. These products are primarily used by construction and
industrial customers and utility companies. Terex Lifting is comprised of a
number of divisions and subsidiaries.
Terex Lifting was established as a separate business segment as a result of
the acquisition (the "PPM Acquisition") in May 1995 of substantially all of the
shares of P.P.M. S.A. and certain of its subsidiaries, including P.P.M. SpA,
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 (collectively, "PPM Europe"), from
Potain S.A., and all of the capital stock of Legris Industries, Inc., which
owned 92.4% of the capital stock of PPM Cranes, Inc. ("Terex Lifting--Conway
Operations;" PPM Europe and Terex Lifting--Conway Operations are collectively
referred to herein as "PPM") from Legris Industries, S.A. Concurrently with the
completion of the PPM Acquisition, Terex contributed the assets (subject to
liabilities) of its Koehring Cranes and Excavators and Mark Industries division
to Terex Cranes, Inc., a wholly-owned subsidiary of Terex. The former division
now operates as Koehring Cranes, Inc., a wholly-owned subsidiary of Terex
Cranes, Inc.
During 1997, Terex completed two acquisitions to augment its Terex Lifting
segment. On April 7, 1997, Terex completed the acquisition of substantially all
of the capital stock of certain of the former subsidiaries of Simon Engineering
plc (the "Simon Access Companies") for $90 million (subject to adjustment under
certain circumstances). The Simon Access Companies consist principally of
business units in the United States and Europe engaged in the manufacture, sale
and worldwide distribution of access equipment designed to position people and
materials to work at heights. The Simon Access Companies' products include
utility aerial devices, aerial work platforms and truck mounted cranes (boom
trucks) which are sold to customers in the industrial and construction markets,
as well as utility companies. Specifically, Terex acquired 100% of the
outstanding common stock of (i) Simon Telelect, Inc. (now named Terex-Telelect,
Inc.), a Delaware corporation, (ii) Simon Aerials, Inc. (now named Terex
Aerials, Inc.), a Wisconsin corporation and parent company of Terex-RO
Corporation ("Terex RO"), (iii) Sim-Tech Management Limited, a private limited
company incorporated under the laws of Hong Kong, (iv) Simon Cella, S.r.1., a
company incorporated under the laws of Italy, and (v) Simon Aerials Limited (now
named Terex Aerials Limited), a company incorporated under the laws of Ireland;
and 60% of the outstanding common stock of Simon-Tomen
S-12
<PAGE>
Engineering Company Limited, a limited liability stock company organized under
the laws of Japan. On April 14, 1997, Terex completed the acquisition of all of
the capital stock of Baraga Products, Inc. and M&M Enterprises of Baraga, Inc.
(together, the "Square Shooter Business"), which manufacture the Square Shooter,
a rough terrain telescopic lift truck designed to lift materials to heights
where they are used in construction.
Since January 1, 1998, Terex completed five additional acquisitions to
augment its Terex Lifting segment. On May 4, 1998, Terex purchased all of the
outstanding shares of Holland Lift International B.V. ("Holland Lift") for a
purchase price of approximately $4.4 million. Holland Lift, which is
headquartered just outside Amsterdam, The Netherlands, manufactures and sells
self-propelled scissor lifts (commonly referred to as aerial work platforms). On
August 4, 1998, Terex purchased all of the outstanding shares of American Crane
Corporation ("American Crane") for a purchase price of $18 million. American
Crane, which is based in Wilmington, North Carolina, manufactures and sells
lattice boom cranes. On November 3, 1998, Terex purchased all of the outstanding
shares of Italmacchine, SpA ("Italmacchine"). Italmacchine, which is based near
Perugia, Italy, manufactures and sells telescopic material handlers. On November
13, 1998, Terex purchased from Noell Service und Maschinentechnik GmbH the
assets of its division, Peiner HTS ("Peiner"). Peiner, which is based in Trier,
Germany, manufactures and sells tower cranes. On December 18, 1998, Terex
purchased all of the outstanding shares of Gru Comedil SpA ("Comedil"). Comedil,
based in Fontanafredda, Italy, manufactures and sells tower cranes.
TEREX EARTHMOVING
Terex Earthmoving currently manufactures and sells articulated and rigid
off-highway trucks and high capacity surface mining trucks, and related
components and replacement parts. These products are used primarily by
construction, mining and government customers. On January 5, 1998, Terex also
acquired Payhauler Corp. ("Payhauler"), which manufactures and markets 30 and 50
ton all wheel drive rigid frame trucks designed to move material in more severe
operating conditions than a standard rear wheel drive rigid frame truck. On
March 31, 1998, Terex purchased all of the outstanding shares of O&K Mining GmbH
from Orenstein & Koppel AG for net aggregate consideration of approximately $168
million, subject to certain post-closing adjustments. O&K Mining is engaged in
the manufacture, sale and worldwide distribution of heavy duty hydraulic
excavators primarily used to load coal, copper ore, iron ore, other
mineral-bearing materials or rocks into trucks. These products are used by
mining equipment contractors, mining and quarrying companies and large
construction companies involved in infrastructure projects worldwide. Terex
Earthmoving is comprised of Terex Equipment Limited ("TEL"), located in
Motherwell, Scotland, Unit Rig ("Unit Rig") and Payhauler, each located in
Tulsa, Oklahoma, and O&K Mining, located in Dortmund, Germany.
S-13
<PAGE>
PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY
Our Common Stock is listed on the New York Stock Exchange under the symbol
"TEX." The following table sets forth for the quarters indicated, the high and
low sales prices of our Common Stock as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
PRICE RANGE
-------------
LOW HIGH
--- ----
<S> <C> <C>
1997
First Quarter ended March 31, 1997...................................................... $9 1/2 $ 13 1/2
Second Quarter ended June 30, 1997...................................................... $13 1/8 $ 19 1/2
Third Quarter ended September 30, 1997.................................................. $18 3/4 $ 24 1/2
Fourth Quarter ended December 31, 1997.................................................. $18 15/16 $ 25 1/2
1998
First Quarter ended March 31, 1998...................................................... $20 $ 27 7/16
Second Quarter ended June 30, 1998...................................................... $26 7/8 $ 31 1/2
Third Quarter ended September 30, 1998.................................................. $14 $ 29 9/16
Fourth Quarter ended December 31, 1998.................................................. $13 3/8 $ 28 15/16
1999
First Quarter ended March 31, 1999...................................................... $22 1/8 $ 28 1/2
Second Quarter (through June 16, 1999).................................................. $23 1/4 $ 35 1/2
</TABLE>
The last reported sale of our Common Stock on the NYSE Composite Tape on
June 16, 1999 was $32.00 per share. As of June 16, 1999, there were
approximately 629 record holders of our Common Stock.
No dividends were declared or paid in 1997 or 1998. Certain of Terex's debt
agreements contain restrictions as to the payment of cash dividends. In
addition, payment of dividends is limited by Delaware law. Terex intends
generally to retain any earnings to repay indebtedness and to fund the
development and growth of its business. Terex does not plan on paying dividends
on the Common Stock in the near term. Any future payments of cash dividends will
depend on the financial condition, capital requirements and earnings of Terex,
as well as other factors that the Board of Directors may consider.
S-14
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby will be
approximately $103.6 million (or approximately $119.1 million if the
Underwriter's over-allotment option is exercised in full). Such proceeds will be
used by Terex as follows:
o first, to repay in full the outstanding indebtedness under Terex's
revolving credit facility (approximately $47.6 million); and
o second, the balance will be used for general corporate purposes which may
include acquisitions and prepayment of debt.
Amounts due under Terex's revolving credit facility currently bear interest
at an all-in drawn cost of approximately 5.0% per annum. The revolving credit
facility will terminate in March 2004. We have used amounts that we borrowed
under our revolving credit facility for working capital and general corporate
purposes. Terex has also used borrowings under our revolving credit facility to
fund a portion of the purchase price for some of our recent acquisitions. We may
reborrow the amounts that we repay under the revolving credit facility.
The outstanding principal amount of the Term Loan A currently bears
interest at an all-in drawn cost of approximately 6.1% per annum. The
outstanding principal amount of the Term Loan B currently bears interest at an
all-in drawn cost of approximately 7.5% per annum. The Term Loan A is due in
March 2004, and the Term Loan B is due in March 2005. We used the proceeds of
the Term Loan A and the Term Loan B to redeem a portion of Terex's then
outstanding senior secured notes, to repay outstanding indebtedness and related
fees and expenses under Terex's then existing credit facilities and to fund a
portion of the purchase price for O&K Mining GmbH.
Interest periods on certain outstanding indebtedness under Terex's bank
credit facility that we intend to repay as described above expire at various
intervals not exceeding 90 days from the date of the completion of this
offering. We intend to repay such indebtedness on or prior to the expiration of
the applicable interest periods. Pending application of the net proceeds from
this offering, Terex will invest net proceeds from the offering in interest
bearing accounts and short-term, interest bearing securities.
S-15
<PAGE>
CAPITALIZATION
The following table shows the consolidated capitalization of Terex as of
March 31, 1999, and as adjusted at that date for this offering. This table
should be read together with the historical consolidated financial statements
and related notes incorporated by reference in this Prospectus Supplement and
the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
(DOLLARS IN MILLIONS)
-----------------------------------
HISTORICAL AS
TEREX ADJUSTED(1)
-------------------- -----------
<S> <C> <C>
Cash and cash equivalents................................................................ $ 22.0 $ 90.8
------ -------
------ -------
Notes payable and current portion of long-term debt...................................... $ 17.4 $ 17.4
Long-term debt, less current portion..................................................... 661.1 626.3
Minority interest, including redeemable preferred stock of a subsidiary.................. 0.6 0.6
Stockholders' equity:
Warrants to purchase common stock...................................................... 0.8 0.8
Equity rights.......................................................................... 3.1 3.1
Common stock, $0.01 par value--authorized 150 million shares;
20.9 million shares issued and outstanding; 24.4 million shares
issued and outstanding pro forma.................................................... 0.2 0.2
Additional paid-in capital............................................................... 179.1 282.7
Accumulated deficit...................................................................... (54.9) (54.9)
Accumulated other comprehensive income................................................... (17.1) (17.1)
------ -------
Total stockholders' equity............................................................. 111.2 214.8
------ -------
Total capitalization................................................................... $790.3 $ 859.1
------ -------
------ -------
</TABLE>
- ------------------
(1) Adjusted to reflect the net proceeds of $103.6 million received by Terex
from this offering and the repayment in full of the outstanding indebtedness
under Terex's revolving credit facility, which was approximately
$34.8 million as of March 31, 1999.
S-16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The selected historical consolidated financial data of Terex shown below as
of and for the five years ended December 31, 1998 have been derived from the
audited historical consolidated financial statements of the Company and the
related notes incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. The selected historical consolidated financial data as
of and for the three month periods ended March 31, 1998 and 1999 have been
derived from the unaudited interim financial statements of Terex and the related
notes incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. Operating results for interim periods will not always
indicate results for the entire fiscal year. The following data should be read
together with the historical financial statements of Terex and the related notes
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH
31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------------------------------- -------
1994 1995 1996 1997 1998 1998
------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................................... $ 314.1 $ 501.4 $ 678.5 $ 842.3 $ 1,233.2 $ 260.6
Cost of goods sold............................ 266.0 431.0 609.3(2) 702.7 1,007.4 215.8
------- ------- ------- ------- --------- -------
Gross profit.................................. 48.1 70.4 69.2(2) 139.6 225.8 44.8
Selling, general and administrative
expenses.................................... 37.7 57.6 64.1(3) 68.5 103.8 21.0
------- ------- ------- ------- --------- -------
Income (loss) from operations................. 10.4 12.8 5.1(4) 71.1 122.0 23.8
Interest income............................... 0.5 0.7 1.2 0.9 2.7 0.1
Interest expense.............................. (28.3) (38.7) (44.8)(5) (39.4) (47.2) (8.8)
Amortization of debt issuance costs........... (2.3) (2.3) (2.6) (2.6) (2.1) (0.5)
Gain on sale of stock of former subsidiary.... 26.0 1.0 -- -- -- --
Other income (expense), net................... (1.4) (5.6) (1.1) 1.0 (0.9) --
------- ------- ------- ------- --------- -------
Income (loss) from continuing operations
before income taxes and extraordinary
items....................................... 4.9 (32.1) (42.2) 31.0 74.5 14.6
Provision for income taxes.................... -- -- (12.1)(6) (0.7) 1.7 (0.2)
------- ------- ------- ------- --------- -------
Income (loss) from continuing operations
before extraordinary items.................. 4.9 (32.1) (54.3) 30.3 72.8 14.4
Income (loss) from discontinued operations.... 3.7 4.4 102.0(7) -- -- --
------- ------- ------- ------- --------- -------
Income (loss) before extraordinary
operations.................................. 1.2 (27.7) 47.7 30.3 72.8 14.4
Extraordinary loss on retirement of debt...... (0.7) (7.5) -- (14.8)(9) (38.3)(11) (38.3)(11)
------- ------- ------- ------- --------- -------
Net income (loss)............................. 0.5 (35.2) 47.7 15.5 34.5 (23.9)
Less preferred stock accretion................ (6.0) (7.3) (22.9)(8) (4.8)(10) -- --
------- ------- ------- ------- --------- -------
Income (loss) applicable to common stock...... $ (5.5) $ (42.5) $ 24.8 $ 10.7 $ 34.5 $ (23.9)
------- ------- ------- ------- --------- -------
------- ------- ------- ------- --------- -------
Per common and common equivalent share(1):
Basic
Income (loss)from continuing operations..... $ (0.10) $ (3.79) $ (6.54) $ 1.57 $ 3.52 $ 0.70
Income (loss) from discontinued
operations................................ (0.36) 0.42 8.64 -- -- --
------- ------- ------- ------- --------- -------
Income (loss) before extraordinary items.... (0.46) (3.37) 2.10 1.57 3.52 0.70
Extraordinary loss on retirement of debt.... (0.07) (0.72) -- (0.91) (1.85) (1.86)
------- ------- ------- ------- --------- -------
Net income (loss)........................... $ (0.53) $ (4.09) $ 2.10 $ 0.66 $ 1.67 $ (1.16)
------- ------- ------- ------- --------- -------
------- ------- ------- ------- --------- -------
Diluted
Income (loss) from continuing operations.... $ (0.10) $ (3.79) $ (5.81) $ 1.44 $ 3.25 $ 0.65
Income (loss) from discontinued
operations................................ (0.36) 0.42 7.67 -- -- --
------- ------- ------- ------- --------- -------
Income (loss) before extraordinary items.... (0.46) (3.37) 1.86 1.44 3.25 0.65
Extraordinary loss on retirement of debt.... (0.07) (0.72) -- (0.84) (1.71) (1.73)
------- ------- ------- ------- --------- -------
Net income (loss)........................... $ (0.53) $ (4.09) $ 1.86 $ 0.60 $ 1.54 $ (1.08)
------- ------- ------- ------- --------- -------
------- ------- ------- ------- --------- -------
Average number of Common and Common Equivalent
Shares Outstanding in Per Share Calculation
(in millions)
Basic....................................... 10.3 10.4 11.8 16.2 20.7 20.6
Diluted..................................... 10.3 10.4 13.3 17.7 22.4 22.2
------- ------- ------- ------- --------- -------
------- ------- ------- ------- --------- -------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................... $ 56.5 $ 115.7 $ 195.2 $ 190.4 $ 346.2 $ 350.1
Total assets.................................. 401.6 478.9 471.2 588.5 1,151.2 932.1
Total debt.................................... 190.9 329.9 281.3 300.1 631.3 573.5
Stockholders' equity (deficit)................ (55.7) (96.9) (71.7) 59.6 98.1 28.0
<CAPTION>
THREE
MONTHS
ENDED
MARCH
31,
1999
---------
<S> <C>
INCOME STATEMENT DATA:
Net sales..................................... $ 423.3
Cost of goods sold............................ 352.4
---------
Gross profit.................................. 70.9
Selling, general and administrative
expenses.................................... 30.4
---------
Income (loss) from operations................. 40.5
Interest income............................... 0.5
Interest expense.............................. (13.3)
Amortization of debt issuance costs........... (0.5)
Gain on sale of stock of former subsidiary.... --
Other income (expense), net................... (0.4)
---------
Income (loss) from continuing operations
before income taxes and extraordinary
items....................................... 26.8
Provision for income taxes.................... (0.8)
---------
Income (loss) from continuing operations
before extraordinary items.................. 26.0
Income (loss) from discontinued operations.... --
---------
Income (loss) before extraordinary
operations.................................. 26.0
Extraordinary loss on retirement of debt...... --
---------
Net income (loss)............................. 26.0
Less preferred stock accretion................ --
---------
Income (loss) applicable to common stock...... $ 26.0
---------
---------
Per common and common equivalent share(1):
Basic
Income (loss)from continuing operations..... $ 1.25
Income (loss) from discontinued
operations................................ --
---------
Income (loss) before extraordinary items.... 1.25
Extraordinary loss on retirement of debt.... --
---------
Net income (loss)........................... $ 1.25
---------
---------
Diluted
Income (loss) from continuing operations.... $ 1.16
Income (loss) from discontinued
operations................................ --
---------
Income (loss) before extraordinary items.... 1.16
Extraordinary loss on retirement of debt.... --
---------
Net income (loss)........................... $ 1.16
---------
---------
Average number of Common and Common Equivalent
Shares Outstanding in Per Share Calculation
(in millions)
Basic....................................... 20.8
Diluted..................................... 22.5
---------
---------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................... $ 435.4
Total assets.................................. 1,251.2
Total debt.................................... 678.5
Stockholders' equity (deficit)................ 111.2
</TABLE>
(footnotes on following page)
S-17
<PAGE>
(footnotes from previous page)
- ------------------------
(1) Effective with the fourth quarter of 1997, Terex implemented SFAS No. 128
which establishes new standards for calculating and presenting earnings per
share data and requires the disclosure of basic and diluted amounts.
Earnings per share amounts for all prior periods have been restated.
(2) Cost of goods sold includes $27.1 million in nonrecurring charges.
Excluding these charges, gross profit would have been $96.3 million or
14.2% of net sales.
(3) Selling, general and administrative expenses includes $2.8 million in
nonrecurring charges. Excluding these charges, selling, general and
administrative expenses would have been $61.3 million.
(4) Includes the effect of the nonrecurring charges set forth in (2) and
(3) above. Excluding these charges, income from operations would have been
$35.1 million.
(5) On November 27, 1996, Terex sold its former subsidiary Clark Material
Handling Company and certain affiliated companies (the "Clark Material
Handling Segment"). As a result, the Clark Material Handling Segment was
accounted for as a discontinued operation for the year ended December 31,
1996. Generally accepted accounting principles permit, but do not require,
the allocation of interest expense between continuing operations and
discontinued operations. We did not allocate interest expense to
discontinued operations. This allocation, although permitted, would not
necessarily have reflected the use of proceeds from the sale of the Clark
Material Handling Segment and the effect on interest expense of our
continuing operations. As a result, loss from our continuing operations
includes most of Terex's interest expense, and income from our discontinued
operations does not include any material interest expense.
(6) This charge primarily reflects the utilization of acquired net operating
losses by P.P.M. S.A.
(7) Represents income from operations of $17.5 million of the Clark Material
Handling Segment, and the gain on its sale of $84.5 million.
(8) Includes:
o annual accretion on Terex's Series A Cumulative Redeemable Convertible
Preferred Stock of $7.7 million, which was irrevocably called for
redemption in December 1996;
o annual accretion on Terex's Series B Cumulative Redeemable Convertible
Preferred Stock of $0.1 million, which was converted in December 1997 into
87,300 shares of our Common Stock;
o annual accretion of redeemable preferred stock of one of our subsidiaries
of $0.6 million, which was exchanged in December 1997 for 705,969 shares
of our Common Stock; and
o a $14.5 million nonrecurring charge as a result of the redemption of
Terex's Series A Cumulative Redeemable Convertible Preferred Stock.
(9) Represents the effect of:
o the 9.46% redemption premium and the pro rata write-off of debt
origination costs and original issue discount on the redemption of a
portion of our then existing senior secured notes; and
o the early termination fee and the write-off of debt origination costs on
the termination of the then existing domestic credit facility in April
1997.
(10) Includes a $3.2 million nonrecurring charge as a result of the redemption
of the redeemable preferred stock of one of our subsidiaries.
(11) Represents the effect of:
o the premium and the write-off of debt origination fees and original issue
discount on the purchase of all of our then outstanding senior secured
notes; and
o the fees and expenses and the write-off of debt origination costs on the
early termination of certain of our then existing credit facilities.
S-18
<PAGE>
INDUSTRY OVERVIEW AND OUTLOOK FOR PRINCIPAL PRODUCTS
TELESCOPIC MOBILE CRANES
Mobile cranes with telescoping booms were developed in the 1950s as
advanced hydraulics became available. Telescopic mobile cranes are generally
used only for a limited period during the later stages of a construction
project. As each project may require differing boom lengths and lifting
capacities, contractors tend to rent specific machines as needed rather than own
a fleet of machines of varying capabilities. As a result, according to industry
sources, approximately 85% of all new telescopic mobile crane sales in North
America are made to rental fleets. Because of the market's rental orientation
and the fact that cranes are used in the later stages of construction projects,
the demand for new telescopic mobile cranes typically lags behind the demand for
other construction equipment by between 12 and 24 months during a cyclical
economic recovery. Initially in an economic recovery, rising end-user demand is
first reflected in rising rental fleet utilization rates rather than in new
crane orders. As rental fleet utilization reaches a practical maximum level,
generally new orders for telescopic mobile cranes increase. New telescopic
mobile crane orders also result from fleet replacement demand, which is affected
by the aging of the telescopic mobile crane population. From 1974 through 1981,
the North American telescopic mobile crane market consumed an average of over
3,500 machines per year. During the recession which began in 1982, North
American telescopic mobile crane consumption declined to a low of 600 machines
and many competitors exited the industry. During the period from 1990 through
1997, the North American telescopic mobile crane market consumed an average of
approximately 1,300 machines per year, with a high of over 2,200 machines in
1990 and a low of approximately 1,000 machines in 1992 and 1993.
We believe that the North American telescopic mobile crane industry is
entering a period of growth due to three principal factors: one, there is
currently a strong and sustained period of construction activity in North
America; two, the increasing importance of rental fleet operators; and three,
the fact that the unusually large number of telescopic mobile cranes that were
built in the late 1970s are beginning to reach the end of their useful lives
(which Terex estimates to be approximately 20 years). These factors have
contributed to a 24% increase in telescopic mobile crane shipments in 1996, as
compared with 1995, and a 15% increase in telescopic mobile crane shipments in
1997, as compared with 1996. Terex believes that it is well positioned to
capitalize on the continued growth of the North American telescopic mobile crane
market. The increasing importance of rental fleet operators and their desire to
maximize returns on product investment has led Terex Lifting to focus on a best
value strategy. This strategy seeks to improve customer productivity by
providing high quality products which are low cost, simple to use and easy to
maintain. By pursuing a strategy oriented toward improving customers'
productivity and investment returns, Terex Lifting has increased its market
share. Terex believes that such a strategy will lead to further market share
gains as growth continues in the North American market.
The European telescopic mobile crane market, which is approximately the
same size as the North American market (ranging between 1,000 and 2,000 unit
shipments per year), has not had an increase in demand to the extent experienced
in North America. Excluding Germany and Spain, construction activity has
remained at recessionary levels for the last four years. We believe that this
was due initially to a cyclical downturn and more recently to fiscal tightening
as European countries attempted to meet the budget deficit targets established
by the Maastricht Treaty. Terex's principal markets in Europe are in France and
Italy, where we believe we have the largest market shares. The French and
Italian markets are less dominated by rental fleets than the North American
market; we believe that approximately 55% of new telescopic mobile crane sales
in France and Italy are to rental fleet operators with the balance to end users.
An increase in construction activity in those countries, therefore, would tend
to have a more immediate impact on new telescopic mobile crane sales than would
a similar increase in North America. We believe that we are well positioned to
participate in any cyclical increase in demand in France and Italy due to our
local manufacturing, strong local distribution and low cost relative to our
major European competitors.
Terex also manufactures truck mounted cranes (boom trucks), which are
telescopic cranes mounted on production truck chassis. Over the past 20 years,
boom trucks have replaced truck mobile cranes in the market for under 30 ton
lifting devices. Conditions in the North American market for boom trucks remain
positive due to overall construction activity in North America.
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AERIAL WORK PLATFORMS
The aerial work platform industry in North America has developed over the
past 20 years as an efficient alternative to scaffolding and ladders. The
industry has also been supported by regulations mandating minimum safety
standards for people working at heights. Aerial work platforms are used for
indoor or outdoor applications in a variety of construction, industrial and
commercial settings which require workers to be lifted to heights to perform
their jobs. Terex believes that approximately 90% of all aerial work platform
sales in North America are to rental fleets. The aerial work platform market has
developed into a rental market because (i) contractors require workers to be
elevated only for limited times during a given job, and different jobs require
different platform heights making ownership of a single specification unit
impractical, and (ii) industrial customers are increasingly outsourcing their
equipment requirements to rental providers. Recently, the equipment rental
industry has been undergoing a process of consolidation. As a result, the larger
aerial work platform rental fleet operators are increasingly demanding products
that are low cost, simple to use and easy to maintain. To meet the objectives of
the equipment rental industry, Terex has designed its aerial work platforms to
incorporate these characteristics.
UTILITY AERIAL DEVICES
Terex also manufactures utility aerial devices which are used to set
telephone poles and move transformers and other material to work areas at the
top of poles (digger derricks), and to elevate workers to work areas at the top
of poles or in trees. Customers include electric utilities, local telephone
companies, private utility repair contractors and tree trimmers. We believe that
utilities are increasingly outsourcing maintenance to private contractors in an
effort to reduce costs. We believe that we are well positioned to capitalize on
this trend due to our strategy to manufacture simplified products at lower cost,
our existing dealer relationships and our direct relationships with major
private contractors.
TELESCOPIC CONTAINER STACKERS
Telescopic container stackers were developed in the early 1980s to
manipulate shipping containers efficiently in port storage areas and inland
terminals. Telescopic container stackers are particularly effective in storage
areas where containers are continually added and removed, and where the
efficient manipulation of, and access to, specific containers is required. Terex
believes that because of the efficiency of telescopic container stackers, demand
has steadily grown, primarily outside the United States in port areas where
storage capacity is constrained. Demand has been particularly strong in South
America and Europe. Terex believes that the United States market offers growth
potential as the benefits of this product are better recognized.
TOWER CRANES
Tower cranes were developed in Europe in the 1950s to lift construction
material to various heights and to accurately place the material at the point
where it is being used. Tower cranes are used worldwide for infrastructures such
as ports and dams, but especially in public and commercial projects where large,
multi-story superstructures are built. On such projects tower cranes lift and
place material faster and with greater accuracy than alternative lifting
methods. Tower cranes are most prevalent in Europe, where they are used on both
larger and smaller projects, including some residential construction. Tower
crane usage in the United States has been historically low, and there is
currently no domestic manufacturer. Terex believes that this market represents a
growth opportunity as the cost effectiveness of tower cranes in a variety of
construction applications becomes more widely known and accepted.
LATTICE BOOM CRANES
Lattice boom cranes are principally used in infrastructure development and
heavy construction applications. Lattice boom cranes are more difficult to
transport and erect than mobile telescopic cranes, but are still generally the
most economical lifting tool for capacity requirements of over 100 tons. The
lattice boom crane industry has shown strong growth in North America over the
past three years as construction activity has continued to increase. We believe
that we can participate in that growth by reducing the cost of
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our cranes to rental operators and end users while at the same time continuing
to improve crane design and performance.
OFF-HIGHWAY TRUCKS
Off-highway trucks, which include articulated trucks and rigid frame
trucks, are generally sold to construction companies, to fleet contractors who
provide trucks to large construction companies, and to dealer rental fleets.
According to industry sources, North America and Europe account for a majority
of the global market. These markets are dependent on large private construction
project activity and public infrastructure development, both of which have been
soft in Europe in recent years and strong in the United States. Terex believes
that it is well positioned to capitalize on any demand that may arise from such
activity or development. Terex believes that fleet operators and large
construction companies generally prefer products that are low cost, simple to
use and easy to maintain, and that its products have these characteristics.
Terex also believes that it is well positioned to capitalize on future growth in
Europe as a result of its acquisition in March 1998 of O&K Mining GmbH, a
manufacturer of large hydraulic mining shovels, and in China through an existing
joint venture relationship.
HIGH CAPACITY SURFACE MINING TRUCKS
High capacity surface mining trucks are designed to haul coal or ore. They
range in capacities from 120 to 300 tons, and are used in larger surface mines
around the world. The trucks are typically operated around the clock, seven days
a week, often running several weeks between maintenance stops. Accordingly, of
critical concern to mine operators are (i) reliability--that the truck is
operating in excess of 90% of the time and (ii) hauling efficiency-- the
operating cost per ton hauled, including fuel consumption, tire wear and
maintenance. There are two types of trucks offered: electric and mechanical
drive. We offer electric drive trucks in which a diesel engine drives an
alternator which powers two wheel motors, one in each rear wheel. We believe
that electric drive vehicles are more efficient than mechanical drive trucks. As
a result of the efficiency and reliability of its trucks, Terex has been able to
increase its market share slightly in recent years despite difficult competitive
conditions in the industry. We believe that we are the third largest
manufacturer of high capacity surface mining trucks. The recent Coal India
contract to supply 160 trucks is an example of Terex's recent success in this
market. To respond to the continuing demand of large mines to improve financial
returns through lower costs and higher hauling capacities, Terex is taking
several strategic actions including reducing the manufacturing cost of its
trucks through component outsourcing and modular assembly process
implementation, as well as development of a 320 ton capacity truck (as compared
to 260 tons, its current largest truck) with a new generation electric drive
system. We believe that the current demand levels will continue, with earnings
opportunities from the development of more cost efficient designs and
manufacturing processes.
LARGE HYDRAULIC MINING SHOVELS
The large hydraulic mining shovels are used primarily in surface mines
worldwide and in large scale infrastructure projects with needs for massive
earth moving, such as dams and highways. Growth in demand for coal, copper and
iron ore is a function of population growth and improvement in standards of
living worldwide. In particular, growth in energy consumption (particularly
coal) and metal consumption (particularly ore) caused by metal intensity in
industries like automotive, telecommunications and appliances leads to growth in
demand for coal, copper and iron ore. Most of this growth will come from regions
with large mineral resources, including Australia, South Africa, West Africa,
India, Indonesia, Brazil, China and Kazakhstan. Excavator sales are also
sensitive to the level of large scale private construction project activity and
public infrastructure development, both of which have been soft in Europe in
recent years and strong in the United States. While the market for new surface
mining equipment is somewhat cyclical, the after-market for parts and services
is more stable. This is because hydraulic excavators are typically kept in
continuous operation for 10 to 15 years and require regular maintenance and
repair throughout their productive lives.
Historically, the leading technologies used in open cast mining have been
bucket wheel excavators and electric rope shovels. Both of these technologies
require substantially greater capital outlays than for hydraulic mining shovels,
and often are relatively inflexible. Hydraulic mining shovels exhibit high
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maneuverability and higher output rates relative to comparably sized electric
rope shovel or bucket wheel excavators. An increasing trend toward smaller,
shorter lived mines and more selective mining practices has resulted in
increasing substitution of the hydraulic mining shovels for the two older
technologies. We believe that our leading technological position in these
products leaves us well placed to take advantage of this trend.
LIGHT CONSTRUCTION EQUIPMENT
Light construction equipment produced by Terex consists of light towers,
concrete products and traffic safety devices.
Light towers are used in road construction, commercial construction,
surface mining, and in miscellaneous commercial applications. Light tower demand
has grown over the past five years as construction activity has increased, and
is expected to benefit from increased road construction over the next four to
five years, particularly given that government mandates may force an increasing
portion of that construction to be performed at night to minimize traffic
congestion. Light towers are primarily rented, and Terex believes that its
success in penetrating rental customers with cost effective products, including
telescopic handlers and aerial work platforms, will help to increase its
penetration of the light tower market.
Concrete products include vibratory screeds and power buggies which are
used to move and flatten concrete. Vibratory screeds are cut-to-length
triangular lattices made of aluminum or steel which have a flat, vibrating edge
that is pulled across freshly poured concrete. The combination of screed weight
and vibration expel air pockets from the concrete and leave a smooth, stable
surface prior to curing. Power buggies are small motorized dumpers, either
ride-on or walk behind, that serve primarily to move concrete from the mixer to
the pouring site. They are also used to move demolition debris and in a variety
of landscaping and commercial applications. Vibratory screeds are typically sold
through dealers to end users, and power buggies are primarily rental products.
Traffic safety devices include directional arrowboards, which are used in
road construction to provide direction for temporary lane changes around
construction sites. Arrowboards are sold through dealers to construction
contractors, although they are increasingly becoming a rental product. In
addition to construction contractors, arrowboards are also sold to barricade
houses to which contractors often sub-contract traffic management activity in
connection with road construction work.
BUSINESS
GENERAL
Terex is a global manufacturer of a broad range of construction and mining
related capital equipment. Terex strives to manufacture machines which are low
cost, simple to use and easy to maintain. Terex operates in two business
segments: Terex Lifting and Terex Earthmoving. Terex's products are manufactured
at 21 plants in the United States and Europe and are sold primarily through a
worldwide network of dealers in over 750 locations to the global construction,
infrastructure and surface mining markets. Terex believes that it is benefitting
from several industry trends, including the growing importance of rental fleet
operators with respect to Terex Lifting and an increasing level of global
infrastructure development with respect to Terex Earthmoving.
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PRODUCTS
Telescopic Mobile Cranes
Telescopic mobile cranes are used primarily for industrial applications, in
commercial and public works construction and in maintenance applications, to
lift equipment or material to heights in excess of 50 feet. The Terex Lifting
segment manufactures the following types of telescopic mobile cranes:
[GRAPHIC] Rough Terrain Cranes--are designed to lift
materials and equipment on rough or uneven terrain.
Rough terrain cranes are most often located on a
single construction or work site such as a building
site, a highway or a utility project for long
periods of time. Rough terrain cranes cannot be
driven on highways and accordingly must be
transported by truck to the work site. Rough terrain
cranes manufactured by Terex Lifting have maximum
lifting capacities of up to 90 tons and maximum tip
heights of up to 205 feet. Terex Lifting
manufactures its rough terrain cranes at its
facilities located at Waverly, Iowa, Conway, South
Carolina, Montceau-les-Mines, France, and
Crespellano, Italy under the brand names TEREX,
LORAIN, P&H, PPM and BENDINI.
[GRAPHIC] Truck Cranes--have two cabs and can travel
rapidly from job site to job site at highway speeds.
In contrast to rough terrain cranes which are often
located for extended periods at a single work site,
truck cranes are often used for multiple local jobs,
primarily in urban or suburban areas. Truck cranes
manufactured by Terex Lifting have maximum lifting
capacities of up to 75 tons and maximum tip heights
of up to 193 feet. Terex Lifting manufactures truck
cranes at its Waverly, Iowa and Conway, South
Carolina facilities under the brand names P&H and
LORAIN.
[GRAPHIC] All Terrain Cranes--were developed in Europe as
a cross between rough terrain and truck cranes in
that they are designed to travel across both rough
terrain and highways. All terrain cranes have two
cabs and are versatile and highly maneuverable. All
terrain cranes manufactured by Terex Lifting have
lifting capacities of up to 130 tons and maximum tip
heights of up to 223 feet. Terex Lifting
manufactures its all terrain cranes at its
Montceau-les-Mines, France facility under the brand
names TEREX and PPM.
Truck Mounted Cranes (Boom Trucks)
Terex Lifting manufactures telescopic boom cranes for mounting on
commercial truck chassis. Terex also distributes truck mounted articulated
cranes under the EFFER brand name which are manufactured by Effer SpA. Truck
mounted cranes are used primarily in the construction industry to lift equipment
or materials to various heights. Boom trucks are generally lighter and have a
lower lifting capacity than truck cranes, and are used for many of the same
applications when lower lifting capabilities are required. An advantage of a
boom truck is that the equipment or material to be lifted by the crane can be
transported by the truck which can travel at highway speeds. Applications
include the installation of air conditioners and other roof equipment. The Terex
Lifting segment manufactures the following types of cranes for installation on
truck chassis:
[GRAPHIC] Telescopic Boom Truck Mounted Cranes--enable an
operator to reach heights of up to 167 feet and have
a maximum lifting capacity of up to 37.5 tons. Terex
Lifting manufactures its telescopic boom truck
mounted cranes at its Olathe, Kansas facility under
the brand name RO-STINGER.
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[GRAPHIC] Articulated Boom Truck Mounted Cranes--are for
users who prefer greater capacities over the greater
vertical reach provided by a telescopic boom truck
mounted crane. At its Olathe, Kansas facility, Terex
Lifting acts as the master distributor for the EFFER
brand line of articulated boom truck mounted cranes
which have maximum capacities up to 87,305 pounds
and horizontal reach to 66 feet.
Tower Cranes
Tower cranes lift construction material to heights and place the material
at the point where it is being used. They include a stationary vertical tower
near the top of which is a horizontal jib with a counterweight. On the jib is a
trolley through which runs a load carrying cable and which moves the load along
the jib length. On larger cranes, the operator is located above the worksite
where the tower and jib meet, providing superior visibility. The jib also
rotates 360 degrees, creating a large working area equal to twice the jib
length. Luffing jib tower cranes have an angled jib with no trolley, and operate
like a traditional lattice boom crane mounted on a tower. Luffing jib tower
cranes are often used in urban areas where space is constrained. Tower cranes
are currently produced by Terex under the PEINER brand name and the COMEDIL
name. After the acquisition of Comedil SpA, Terex will produce the following
types of tower cranes:
[GRAPHIC] Self-Erecting Tower Cranes--are trailer mounted
and unfold from four sections (two for the tower and
two for the jib); certain larger models have a
telescopic tower and folding jib. These cranes can
be assembled on site in a few hours. Applications
include residential and small commercial
construction. Crane heights range from 50-75 feet
and jib lengths from 60-100 feet.
[GRAPHIC] Hammerhead Tower Cranes--have a tower and a
horizontal jib assembled from sections. The tower
extends above the jib to which suspension cables
supporting the jib are attached. These cranes are
assembled on-site in one to three days depending on
height, and can increase in height with the project;
they have a maximum free-standing height of 200 feet
and a maximum jib length of 240 feet.
[GRAPHIC] Flat Top Tower Cranes--have a tower and a
horizontal jib assembled from sections. There is no
tower extension above the jib, which reduces cost
and facilitates assembly; the jib is self-supporting
and consists of reinforced jib sections. These
cranes are assembled on site in one to two days, and
can increase in height with the project; they have a
maximum free-standing height of 305 feet and a
maximum jib length of 280 feet.
[GRAPHIC] Luffing Jib Tower Cranes--have a tower and an
angled jib assembled from sections. The tower
extends above the jib to which suspension cables
supporting the jib are attached. Unlike other tower
cranes, there is no trolley to control lateral
movement of the load, which is accomplished by
changing the jib angle. These cranes are assembled
on site in two to three days, and can increase in
height with the project; they have a maximum
free-standing height of 185 feet and a maximum jib
length of 200 feet.
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Lattice Boom Cranes
Terex produces crawler and truck mounted lattice boom cranes.
[GRAPHIC] The crawler mounted cranes are designed to lift
material on rough terrain and can maneuver while
bearing a load. Truck mounted lattice boom cranes
are used on-road, typically in urban areas. Both
types consist of a boom made of tubular steel
sections which are transported to and erected,
together with the base unit, at a construction site.
We manufacture lattice boom crawler cranes with
lifting capacities from 125 to 450 tons, and lattice
boom truck cranes with lifting capacities from 125
to 300 tons
Aerial Work Platforms
Aerial work platforms are self propelled devices which position workers and
materials easily and quickly to elevated work areas. These products have
developed over the past 20 years as alternatives to scaffolding and ladders. The
work platform is mounted on either a telescoping and/or articulating boom or on
a vertical lifting scissor mechanism.
[GRAPHIC] Scissor Lifts--are used in open areas in indoor
or outdoor applications in a variety of
construction, industrial and commercial settings.
Scissor lifts manufactured by Terex Lifting have
maximum working heights of up to 52 feet and maximum
load capacities of up to 2,000 pounds. Terex Lifting
manufactures scissor aerial work platforms at its
Waverly, Iowa, Milwaukee, Wisconsin and Amsterdam,
The Netherlands facilities under the brand names
TEREX, SIMON, MARK and HOLLAND LIFT.
[GRAPHIC] Straight Telescopic Boom Lifts--are used
primarily outdoors in residential, commercial and
industrial new construction and maintenance
projects. Straight telescopic boom lifts
manufactured by Terex Lifting have maximum working
heights of up to 126 feet and maximum load
capacities of up to 650 pounds. Terex Lifting
manufactures its straight telescopic aerial work
platforms at its Waverly, Iowa and Milwaukee,
Wisconsin facilities under the brand names TEREX,
SIMON and MARK.
[GRAPHIC] Articulating Telescopic Boom Lifts--are
generally used in industrial environments where the
articulation allows the user to access elevated
areas over machines or structural obstacles which
prevent access with a scissor lift or straight boom.
Articulating lifts available from Terex Lifting have
maximum working heights of up to 70 feet and maximum
load capacities of up to 500 pounds. Terex Lifting
manufactures its articulating telescopic boom lifts
at its Waverly, Iowa and Milwaukee, Wisconsin
facilities under the brand name TEREX AERIALS.
Utility Aerial Devices
Utility aerial devices are used to set utility poles and move workers and
materials to work areas at the top of utility poles and towers. Utility aerial
devices are mounted on commercial truck chassis which include separately
installed steel cabinets for tool and material storage. Most utility aerial
devices are insulated to permit live wire work.
[GRAPHIC] Articulated Aerial Devices--are used to elevate
workers to work areas at the top of utility poles or
in trees and include one or two man baskets.
Articulated aerial devices available from Terex
Lifting include telescopic, non-overcenter and
overcenter models and range in working heights from
32 to 203 feet. Articulated aerial devices are
manufactured by Terex Lifting at its Watertown,
South Dakota facility under the brand names TELELECT
and HI-RANGER.
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[GRAPHIC] Digger Derricks--are used to set telephone
poles. The digger derricks include a telescopic boom
with an auger mounted at the tip which digs a hole,
and a device to grasp, manipulate and set the pole.
Digger derricks available from Terex Lifting have
sheave heights exceeding 70 feet and lifting
capacities up to 48,000 pounds. Digger derricks are
manufactured by Terex Lifting at its Watertown,
South Dakota facility under the brand names
TELELECT.
Telescopic Material Handlers
Telescopic material handlers are used to lift containers or other material
from one location to another at the same job site.
[GRAPHIC] Telescopic Container Stackers--are used to pick
up and stack containers at dock and terminal
facilities. At the end of a telescopic container
stacker's boom is a spreader which enables it to
attach to containers of varying lengths and weights
and to rotate the container up to 360 degrees.
Telescopic container stackers are particularly
effective in storage areas where containers are
continually added and removed, and where the
efficient manipulation of, and access to, specific
containers is required. Telescopic container
stackers manufactured by Terex Lifting have lifting
capacities up to 49.5 tons, can stack up to six full
or nine empty containers and are able to maneuver
through very narrow areas. Terex Lifting
manufactures its telescopic container stackers under
the brand names PPM and P&H SUPERSTACKERS at its
Conway, South Carolina and Montceau-les-Mines,
France facilities.
[GRAPHIC] Rough Terrain Telescopic Boom Forklifts--serve
a similar function as smaller size rough terrain
telescopic mobile cranes and are used exclusively to
move and place materials on new residential and
commercial job sites. Terex Lifting manufactures
rough terrain telescopic boom forklifts with load
capacities of up to 10,000 pounds and with a maximum
extended reach of up to 31 feet and lift
capabilities of up to 48 feet. Terex Lifting
manufactures rough terrain telescopic boom forklifts
at its facilities in Baraga, Michigan and Perugia,
Italy under the brand name SQUARE SHOOTER and
ITALMACCHINE.
Rigid and Articulated Off-Highway Trucks
Terex Earthmoving manufactures two distinct types of off-highway trucks
with hauling capacities from 25 to 100 tons: articulated and rigid frame.
[GRAPHIC] Articulated Off-Highway Trucks--are three axle,
six wheel drive machines with a capacity range of 25
to 40 tons. Their differentiating feature is an
oscillating connection between the cab and body
which allows the cab and body to move independently.
This enables all six tires to maintain ground
contact for improved traction on rough terrain. This
also allows the truck to move effectively through
extremely rough or muddy off-road conditions.
Articulated off-highway trucks are typically used
together with an excavator or wheel loader to move
dirt in connection with road, tunnel or other
infrastructure construction and commercial,
industrial or major residential construction
projects. Terex's articulated trucks are
manufactured in Motherwell, Scotland, under the
brand names TEREX and O&K.
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[GRAPHIC] Rigid Off-Highway Trucks--are two axle machines
which generally have larger capacities than
articulated trucks but can operate only on improved
or graded surfaces. The capacities of rigid
off-highway trucks range from 35 to 100 tons, and
off-highway trucks have applications in large
construction or infrastructure projects, aggregates
and smaller surface mines. Terex Earthmoving's rigid
trucks are manufactured in Motherwell, Scotland,
under the TEREX and O&K brand names and in Batavia,
Illinois, under the PAYHAULER brand name.
[GRAPHIC] High Capacity Surface Mining Trucks--are off
road dump trucks with capacities in excess of 120
tons primarily for surface mining. Terex
Earthmoving's haulers are 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 trucks with
payload capabilities ranging from 120 to 260 tons,
and bottom dump trucks with capacities ranging from
180 to 270 tons. Terex Earthmoving's high capacity
surface mining trucks are manufactured at Unit Rig,
located in Tulsa, Oklahoma, under the UNIT RIG and
LECTRA HAUL brand names.
Large Hydraulic Excavators
Terex Earthmoving sells hydraulic excavators which are shovels primarily
used to load coal, copper ore, iron ore, other mineral-bearing materials or
rocks into trucks. These products are primarily utilized for quarrying
construction materials or digging in opencast mines. Additional applications
include large construction projects with difficult working conditions and large
amounts of solid material and rock to be moved.
[GRAPHIC] Terex Earthmoving offers a complete range of
large hydraulic excavators, with operating weights
from 58 to 800 tons. In 1997, O&K Mining introduced
the RH 400, the world's largest hydraulic excavator
with an 800 ton machine weight and 80 ton bucket
capacity. This expansion of Terex Earthmoving's
product line enables it to compete with the most
popular electric rope shovel size class and
represents a significant growth opportunity for
Terex Earthmoving. Most hydraulic excavators sold by
Terex Earthmoving are manufactured under the O&K
brand name by O&K Mining in Dortmund, Germany. The
smallest model sold by Terex Earthmoving is
manufactured by Orenstein & Koppel in Berlin,
Germany, pursuant to a private label supply
agreement.
Light Construction Equipment
Light construction equipment produced by Terex consists of light towers,
concrete products and traffic safety devices.
Light Towers--are used primarily to light work
areas for night construction activity. They are
towed to the work-site where the telescopic tower is
extended and outriggers are deployed for stability.
They are diesel powered and provide adequate light
for construction activity for a radius of
approximately 300 feet from the tower
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Power Buggies--are used primarily to transport
concrete from the mixer to the pouring site.
Terex/Amida power buggies include dump capacities
from 10 to 21 cubic feet with 3 walk-behind and 3
ride-on models.
Directional Arrowboards--are used to direct
traffic around road construction sites. They are
primarily solar-powered, with solar panels
continuously recharging batteries, which provide
power during night hours. Terex Amida arrowboards
include 15 and 25 light configurations.
BACKLOG
Terex's backlog as of December 31, 1997 and 1998, and March 31, 1998 and
1999, was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- ----------------
1997 1998 1998 1999
------ --------- -------- -------
(DOLLARS IN MILLIONS)
<S> <S> <C> <C> <C> <C>
Terex Lifting........................................................... $187 $222 $224 $223
Terex Earthmoving....................................................... 30 196 49 162
---- ---- ---- ----
Total............................................................ $217 $418 $273 $385
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
Substantially all of Terex'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. Terex's backlog orders represent
primarily new machine orders. Parts orders are generally filled on an as-ordered
basis.
Terex Lifting's backlog at December 31, 1998 increased $35 million to
$222 million as compared to $187 million at December 31, 1997. The increase in
backlog was due to the effect of the businesses acquired in 1998 (approximately
$19 million in backlog) as well as an approximately 9% increase in the
businesses other than the 1998 acquisitions. The backlog at Terex Earthmoving
increased to $196 million at December 31, 1998 from $30 million at December 31,
1997, principally because of O&K Mining and the receipt of a $157 million order
of Unit Rig trucks from Coal India, a government agency for coal management in
India, in October 1998.
Terex Lifting's backlog was $223 million at March 31, 1999, compared to
$222 million at December 31, 1998 and $224 million at March 31, 1998. Backlog at
Terex Earthmoving was $162 million at March 31, 1999 compared to $196 million at
December 31, 1998 and $49 million at March 31, 1998.
DISTRIBUTION
Terex Lifting distributes its products primarily through a global network
of dealers and national accounts in over 750 different locations. Terex
Lifting's telescopic mobile cranes are marketed in the great majority of the
United States under the TEREX brand name. Terex Lifting's European distribution
is carried out primarily under three brand names, TEREX, PPM and BENDINI,
through a distribution network comprised of both distributors and a direct sales
force. Terex Lifting sells its utility aerial devices under the TEREX TELELECT
brand name principally through a network of North American distributors. Terex
Lifting sells its aerial work platform products through a distribution network
throughout the world, but principally in North America and Europe. Terex
Lifting's aerial work platform products are sold under the brand names TEREX
AERIALS and HOLLAND LIFT. Terex Lifting sells its tower cranes through a
distribution network under the PEINER and COMEDIL brand names. Terex Lifting's
material and container handlers products are sold through a distribution network
under the brand names of TEREX, PPM, P&H and ITALMACCHINE. Terex Lifting sells
its lattice boom cranes through a distribution network under the TEREX AMERICAN
brand name.
S-28
<PAGE>
With respect to Terex Earthmoving products, TEL markets machines and
replacement parts primarily through worldwide dealership networks. TEL's truck
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 Terex's
products, each dealer generally carries only one manufacturer's "brand" of each
particular type of product. Terex employs sales representatives who service
these dealers from offices located throughout the world. Payhauler distributes
its products primarily through a dealership network. Unit Rig distributes its
products and services directly to customers primarily through its own
distribution system. O&K Mining sells its hydraulic excavators and after-market
parts and services primarily through its export sales department in Dortmund,
Germany, through O&K Mining's global network of wholly-owned foreign
subsidiaries and through dealership networks.
RESEARCH AND DEVELOPMENT
Terex maintains engineering staffs at several of its locations who design
new products and improvements in existing product lines. Terex's engineering
expenses are primarily incurred in connection with the improvements of existing
products, efforts to reduce costs of existing products and, in certain cases,
the development of products which may have additional applications or represent
extensions of the existing product line. Such costs incurred in the development
of new products or significant improvements to existing products of continuing
operations amounted to $8.2 million, $6.2 million and $6.1 million in 1998, 1997
and 1996, respectively.
MATERIALS
Principal materials used by Terex in its various manufacturing processes
include steel, castings, engines, tires, hydraulic cylinders, 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 Terex's
requirements and standards. Electric wheel motors and controls used in the Unit
Rig product line are currently supplied exclusively by General Electric Company.
Terex is endeavoring to develop alternative sources and has entered into a
contract with General Atomics, a former defense contractor, to develop electric
wheel motors for Unit Rig trucks. If Terex is unable to develop alternative
sources, or if there is disruption or termination of its relationship with
General Electric Company (which is not governed by a written contract), it could
have a material adverse effect on Unit Rig's operations.
WORKING CAPITAL ITEMS
Terex, in the ordinary course of business, does not provide right of return
on merchandise sold, nor does it provide extended payment terms to customers.
COMPETITION
Telescopic Mobile Cranes--The domestic telescopic mobile crane industry is
comprised primarily of three manufacturers. Terex believes that Terex Lifting is
the second largest domestic manufacturer. Terex believes that the number one
domestic manufacturer is Grove Worldwide, and the number three domestic
manufacturer is Link-Belt, a subsidiary of Sumitomo Corp. Terex's principal
markets in Europe are in France and Italy, where Terex believes it has the
largest market shares. In Europe, Terex Lifting's primary competitors are Grove
Cranes Ltd. (including the recently acquired Krupp Mobilkran), Liebherr and
Mannesmann Dematic.
Truck Mounted Cranes (Boom Trucks)--The United States boom truck industry
is dominated by four manufacturers, of which Terex believes Terex RO is the
second largest behind Grove National.
Tower Cranes--The tower crane industry includes two principal competitors,
Liebherr and Potain, who combined represent well over half of the worldwide
market. Terex and Wolf are the only other competitors with a multi-national
presence; other manufacturers are small and regional.
S-29
<PAGE>
Lattice Boom Cranes--The lattice boom crane industry includes Manitowoc,
Link-Belt, Mannesmann Dematic, Liebherr, and Hitachi. Manitowoc is the world
leader in lifting capacities over 125 tons, and represents over half of the
United States lattice boom crane market.
Aerial Work Platforms--The aerial work platform industry in North America
is fragmented, with seven major competitors. Terex believes that it is the fifth
largest manufacturer of aerial work platforms in North America, behind JLG,
Genie, Grove Manlift and Snorkel. Terex believes that approximately 42,000
aerial platforms were sold in the United States during 1997, of which
approximately 70% were scissor lifts, 19% were articulated boom lifts, and 11%
were straight boom lifts. Terex believes that its market share in boom lifts is
greater than its market share in scissor lifts.
Utility Aerial Devices--The utility aerial device industry is comprised
primarily of three manufacturers. Terex believes that it is the second largest
manufacturer in the United States of utility aerial devices behind Altec.
Outside the United States, Terex is focusing primarily on the Mexican and
Caribbean markets.
Telescopic Container Stackers--Terex believes that three manufacturers
account for a majority of the global market for telescopic container stackers.
Terex believes that it is the second largest manufacturer behind Kalmar. Other
manufacturers include Valmet Belloti and Taylor.
Telescopic Rough Terrain Lift Trucks--OmniQuip and Gradall are the largest
manufacturers of telescopic rough terrain lift trucks.
Off-Highway Trucks--North America and Europe account for a majority of the
global market. Four manufacturers dominate the global market. Terex believes
that it is the third largest of these manufacturers (behind Volvo and
Caterpillar).
High Capacity Surface Mining Trucks--The high capacity surface mining truck
industry includes three principal manufacturers: Caterpillar, Komatsu-Dresser
and Terex. Terex believes that it is the third largest manufacturer.
Large Hydraulic Excavators--The large hydraulic excavator industry is
comprised of primarily seven manufacturers, the largest of which are Hitachi,
Komatsu-DeMag, Liebherr and Caterpillar. Terex believes it is the largest
manufacturer of hydraulic excavators having machine weights in excess of 200
tons. The largest hydraulic excavators also compete against electric mining
shovels (rope excavators) from competitors such as Harnischfeger Corporation and
Bucyrus International, Inc. and, for some applications, against bucket wheel
loaders from competitors such as Caterpillar, Volvo and Komatsu-Dresser.
Light Towers, Concrete Products and Traffic Safety Devices--The principal
competitors are small, privately held companies such as Allmand Brothers and
Coleman Engineering in light towers, Allen Engineering and MBW in screeds, and
ADDCO and Protection Services in directional arrowboards.
EMPLOYEES
As of March 31, 1999, Terex had approximately 4,182 employees. Terex
considers its relations with its personnel to be satisfactory. Approximately 25%
of Terex's employees are represented by labor unions which have entered into or
are in the process of entering into various separate collective bargaining
agreements with Terex.
PATENTS, LICENSES AND TRADEMARKS
Several of the trademarks and trade names of Terex, in particular the
TEREX, LORAIN, UNIT RIG, MARK, P&H, PPM, SIMON, TELELECT, SQUARE SHOOTER,
PAYHAULER, O&K, HOLLAND LIFT, AMERICAN, ITALMACCHINE, PEINER, COMEDIL and AMIDA
trademarks, are important to the business of Terex. Terex owns and maintains
trademark registrations and patents in countries where it conducts business, and
monitors the status of its trademark registrations and patents to maintain them
in force and renews them as required. Terex also protects its trademark, trade
name and patent rights when circumstances warrant such action, including the
initiation of legal proceedings, if necessary. P&H is a registered trademark of
Harnischfeger Corporation which Terex has the right to use for certain products
pursuant to a license agreement until 2011. Pursuant to the terms of the
acquisition agreements for the Simon
S-30
<PAGE>
Access Companies, Terex has the right to use the SIMON name (which is a
registered trademark of Simon Engineering plc) for certain products until
April 7, 2000. CELLA is a trademark of Sergio Cella. EFFER is a trademark of
Effer SpA. Terex also has the right to use the O&K and Orenstein & Koppel names
(which are registered trademarks of Orenstein & Koppel) for most applications in
the mining business for an unlimited period of time. All other trademarks and
tradenames referred to in this Prospectus Supplement are registered trademarks
of Terex or its subsidiaries.
ENVIRONMENTAL CONSIDERATIONS
Terex generates hazardous and non-hazardous wastes in the normal course of
its operations. As a result, Terex 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 ("CERCLA"),
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 non-hazardous 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 Terex on a
continuing basis. However, Terex has not incurred, and does not expect to incur
in the future, any material capital expenditures for environmental control
facilities.
SEASONAL FACTORS
Terex markets a large portion of its products in North America and Europe,
and its sales of trucks and cranes during the fourth quarter of each year 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 trucks and excavators to the mining
industry are generally less affected by such seasonal factors.
LEGAL PROCEEDINGS
In December 1994, Terex received an examination report from the IRS
proposing a substantial tax deficiency. This deficiency was based upon an
alleged inability of Terex to substantiate certain deductions taken by Terex
from 1987 to 1989 and Terex's utilization of certain NOLs. This matter is
currently pending in the Milwaukee audit division of the IRS. For a discussion
of this matter, see "Risk Factors--Tax Audit Issues."
Terex is involved in various other legal proceedings which have arisen in
the normal course of its operations. The outcome of these other legal
proceedings, if determined adversely to Terex, is unlikely to have a material
adverse effect on Terex.
DISCONTINUED OPERATIONS
On November 27, 1996, Terex sold substantially all of the assets and
liabilities of the Clark Material Handling Segment for an aggregate cash
purchase price of approximately $140 million. Prior to the disposition, the
Clark Material Handling Segment consisted of Clark Material Handling Company and
certain affiliated companies which were acquired by Terex in July 1992 from
Clark Equipment Company. The Clark Material Handling Segment designed,
manufactured and marketed a complete line of internal combustion and electric
lift trucks, electric walkies and related components and replacement parts under
the CLARK trademark.
S-31
<PAGE>
DESCRIPTION OF COMMON STOCK
Each outstanding share of Common Stock entitles the holder to one vote,
either in person or by proxy, on all matters submitted to a vote of
stockholders, including the election of directors. There is no cumulative voting
in the election of directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the directors then standing
for election. Subject to preferences which may be applicable to any outstanding
shares of preferred stock, holders of Common Stock have equal ratable rights to
any dividends that may be declared by the Board of Directors out of legally
available funds.
Holders of Common Stock have no conversion, redemption or preemptive rights
to subscribe for any securities of Terex. All outstanding shares of Common Stock
are fully paid and nonassessable. In the event of any liquidation, dissolution
or winding-up of the affairs of Terex, holders of Common Stock will be entitled
to share ratably in the assets of Terex remaining after providing for the
payment of liabilities to creditors and preferences applicable to outstanding
shares of preferred stock. The rights, preferences and privileges of holders of
Common Stock are subject to the rights of the holders of any outstanding shares
of preferred stock.
Terex's Restated Certificate of Incorporation provides that directors of
Terex shall not be personally liable to Terex or its stockholders for monetary
damages for breach of fiduciary duties as directors except to the extent
otherwise required by Delaware law. The Restated By-laws of Terex provide for
indemnification of the officers and directors of Terex to the fullest extent
permitted by Delaware law.
S-32
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS
A general discussion of certain United States federal income and estate tax
consequences of the ownership and disposition of Common Stock applicable to
Non-U.S. Holders (as defined) is set forth below. In general, a "Non-U.S.
Holder" is a person other than: (i) a citizen or resident (as defined for United
States Federal income or estate tax purposes, as the case may be) of the United
States; (ii) a corporation organized in or under the laws of the United States
or a political subdivision thereof; (iii) an estate the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. trustees
has the authority to control all substantial decisions of the trust. The
discussion is based on current law and is provided for general information only.
The discussion set forth in this section does not address aspects of United
States Federal taxation other than income and estate taxation and does not
address all aspects of Federal income and estate taxation. The discussion does
not consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder and does not address all aspects of United States Federal income
tax law that may be relevant to Non-U.S. Holders that may be subject to special
treatment under such law (for example, insurance companies, tax-exempt
organizations, financial institutions or broker-dealers). Accordingly,
prospective investors are urged to consult their tax advisors regarding the
United States Federal, state, local and non-U.S. current and possible future
income and other tax consequences of holding and disposing of Common Stock.
DIVIDENDS
In general, the gross amount of dividends paid to a Non-U.S. Holder will be
subject to United States withholding tax at a 30% rate (or any lower rate
prescribed by an applicable tax treaty) unless the dividends are effectively
connected with a trade or business carried on by the Non-U.S. Holder within the
United States. In determining the applicability of a tax treaty that provides
for a lower rate of withholding, dividends paid to an address in a foreign
country are presumed under current regulations of the Treasury Department to be
paid to a resident of that country. Under United States Treasury regulations not
currently in effect, however, a Non-U.S. Holder would be required to file
certain forms in order to claim the benefit of an applicable treaty rate.
Dividends effectively connected with a trade or business carried on by a
Non-U.S. Holder within the United States will generally not be subject to
withholding (if the Non-U.S. Holder properly files IRS Form 4224 with the payor
of the dividend) and will generally be subject to United States Federal income
tax at ordinary Federal income tax rates. Effectively connected dividends may be
subject to different treatment under an applicable tax treaty depending on
whether such dividends are attributable to a permanent establishment of the
Non-U.S. Holder in the United States. In addition, in the case of a Non-U.S.
Holder which is a corporation, effectively connected income may be subject to
the branch profits tax (which is generally imposed on a foreign corporation at a
rate of 30% of the deemed repatriation from the United States of "effectively
connected earnings and profits") except to the extent that an applicable tax
treaty provides otherwise. A Non-U.S. Holder eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.
SALE OF COMMON STOCK
Generally, a Non-U.S. Holder will not be subject to United States Federal
income tax on any gain realized upon the disposition of his Common Stock unless:
(i) Terex has been, is, or becomes a "U.S. real property holding corporation"
for Federal income tax purposes and certain other requirements are met;
(ii) the gain is effectively connected with a trade or business carried on by
the Non-U.S. Holder (or by a partnership, trust or estate in which the Non-U.S.
Holder is a partner or beneficiary) within the United States; or (iii) the
Common Stock is disposed of by an individual Non-U.S. Holder who holds the
Common Stock as a capital asset and is present in the United States for
183 days or more in the taxable year of the disposition, and the gains are
considered derived from sources within the United States. Terex believes that it
has not been, is not currently and, based upon its current business plans, is
not likely to become a U.S. real property holding corporation.
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<PAGE>
A Non-U.S. Holder also may be subject to tax pursuant to the provisions of
United States tax law applicable to certain United States expatriates. Non-U.S.
Holders should consult applicable treaties, which may exempt from United States
taxation gains realized upon the disposition of Common Stock in certain cases.
ESTATE TAX
Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be includible in the individual's gross estate for United
States Federal estate tax purposes, unless an applicable treaty provides
otherwise, and may be subject to United States Federal estate tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Terex must report annually to the IRS and to Non-U.S. Holders the amount of
dividends paid to, and the tax withheld with respect to, each Non-U.S. Holder.
These information reporting requirements apply regardless of whether withholding
was reduced by an applicable tax treaty or if withholding was not required
because the dividends were effectively connected with a trade or business in the
United States of the Non-U.S. Holder. Copies of these information returns also
may be made available under the provisions of a specific treaty or agreement to
the tax authorities in the country in which the Non-U.S. Holder resides or is
established. Under current law, United States backup withholding tax (which
generally is a withholding tax imposed at the rate of 31% on certain payments to
persons that fail to furnish the information required under the United States
information reporting and backup withholding rules) generally will not apply to
dividends paid on Common Stock to a Non-U.S. Holder at an address outside the
United States, absent actual knowledge by the payor that the payee is not a
Non-U.S. Holder or to dividends paid to Non-U.S. Holders that are either subject
to the U.S. withholding tax (whether at 30% or a reduced treaty rate) or that
are exempt from such withholding because such dividends constitute effectively
connected income. Under United States Treasury regulations not currently in
effect, however, a Non-U.S. Holder will be subject to backup withholding unless
applicable certification requirements are met. Backup withholding and
information reporting generally will apply to dividends paid on Common Stock to
a Non-U.S. Holder at an address inside the United States unless such Non-U.S.
Holder owner, under penalties of perjury, certifies, among other things, its
status as a Non-U.S. Holder or otherwise establishes an exemption.
The payment of the proceeds from the disposition of Common Stock to or
through the United States office of a broker will be subject to information
reporting and backup withholding unless the owner certifies its foreign status
as described above or otherwise establishes an exemption. The payment of the
proceeds from the disposition of Common Stock to or through a foreign office of
a non-United States broker will not be subject to backup withholding and
generally will not be subject to information reporting. Unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder and
certain conditions are met or the holder otherwise establishes an exemption,
information reporting generally will apply to dispositions through (a) a
non-United States office of a United States broker and (b) a non-United States
office of a non-United States broker that is either a "controlled foreign
corporation" for United States Federal income tax purposes or a person 50% or
more of whose gross income from all sources for a three year testing period was
effectively connected with a United States trade or business.
The backup withholding and information reporting rules are currently under
review by the Treasury Department and their application to the Common Stock is
subject to change.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder would be allowed as a credit against such Non-U.S. Holder's
United States Federal income tax and any amounts withheld in excess of such
Non-U.S. Holder's United States Federal income tax liability would be refunded,
provided that required information is furnished to the IRS.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated June 17, 1999 (the "Underwriting Agreement"), the Underwriter
named below (the "Underwriter") has agreed to purchase from Terex the following
number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------------------------------- ---------
<S> <C>
Salomon Smith Barney Inc............................................................. 3,500,000
---------
Total........................................................................... 3,500,000
---------
---------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all of the shares of Common Stock offered hereby, if any
are purchased.
Terex has granted to the Underwriter an option, expiring at the close of
business on the 30th day after the date of this Prospectus Supplement, to
purchase up to 525,000 additional shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions, all as set forth
on the cover page of this Prospectus Supplement. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock. To the
extent such option is exercised, the Underwriter will become obligated, subject
to certain conditions, to purchase such additional shares of Common Stock.
Terex has been advised by the Underwriter that the Underwriter proposes to
offer the Common Stock to the public initially at the public offering price set
forth on the cover page of this Prospectus Supplement and, through the
Underwriter, to certain dealers at such price less a concession of $0.30 per
share, and the Underwriter and such dealers may allow a discount of $0.10 per
share on sales to certain other dealers. After the initial public offering, the
public offering price and concession and discount to dealers may be changed by
the Underwriter.
The following table summarizes the compensation to be paid to the
Underwriter by Terex and the expenses payable by Terex.
<TABLE>
<CAPTION>
TOTAL
--------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions paid by Terex............. $0.875 $3,062,500 $3,521,875
Expenses payable by Terex........................................ $0.03 $100,000 $100,000
</TABLE>
Terex and certain of its executive officers and directors have agreed that
they will not offer, sell, contract to sell, announce their intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to, any shares of Common Stock or securities convertible into or
exchangeable or exercisable for any shares of Common Stock without the prior
written consent of Salomon Smith Barney Inc. for a period of 90 days after the
date of this Prospectus Supplement, except (i) any shares of Common Stock
issuable upon the exercise or redemption of an option or warrant or the
conversion or exchange of a security outstanding on the date of this Prospectus
Supplement and in accordance with the terms of the relevant security, (ii) any
securities of Terex sold or granted under Terex's incentive and other benefit
plans as in effect on the date of this Prospectus Supplement, (iii) any shares
of Common Stock issued upon the exercise of Terex's outstanding equity rights,
(iv) any warrants or securities convertible into Common Stock issued in exchange
for any of Terex's warrants, options or stock appreciation rights outstanding on
the date of this Prospectus Supplement, and (v) securities issued as
consideration for the acquisition (pursuant to a merger or otherwise) of one or
more entities.
Terex has agreed to indemnify the Underwriter against certain liabilities,
including civil liabilities under the Securities Act, or contribute to payments
which the Underwriter may be required to make in respect thereof.
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<PAGE>
The Underwriter and its affiliates provide, and have in the past provided,
certain financial and investment advisory services to Terex.
The Underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriter to reclaim a selling concession from a
syndicate member when the shares of Common Stock originally sold by such
syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Common Stock to be
higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on The New York Stock Exchange or otherwise and, if
commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock offered
hereby will be passed upon for Terex by Robinson Silverman Pearce Aronsohn &
Berman LLP, 1290 Avenue of the Americas, New York, New York 10104, and for the
Underwriter by Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022. Skadden, Arps, Slate, Meagher & Flom LLP has from time to
time represented, and is currently representing, Terex with respect to various
unrelated legal matters.
EXPERTS
The consolidated financial statements of Terex Corporation and PPM, Cranes,
Inc. as of and for each of the three years in the period ended December 31, 1998
incorporated in the accompanying Prospectus by reference to the Annual Report on
Form 10-K of Terex Corporation for the year ended December 31, 1998 have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
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<PAGE>
PROSPECTUS
TEREX CORPORATION
$300,000,000
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK, WARRANTS AND RIGHTS
Terex Corporation ("Terex" or the "Company") may from time to time offer
and/or issue in one or more series its (i) unsecured debt securities, which may
be either senior debt securities ("Senior Securities") or subordinated debt
securities ("Subordinated Securities," and together with Senior Securities, the
"Debt Securities"), (ii) preferred stock, par value $.01 per share ("Preferred
Stock"), (iii) common stock, par value $.01 per share ("Common Stock"),
(iv) warrants to purchase Debt Securities, Preferred Stock or Common Stock
(collectively, "Warrants"), or (v) rights to purchase Preferred Stock or Common
Stock ("Rights"), with an aggregate initial public offering price of up to
$300,000,000 on terms to be determined at the time of offering. Debt Securities,
Preferred Stock, Common Stock, Warrants and Rights (collectively, the "Offered
Securities") may be offered, separately or together, in separate series in
amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, currency,
form (which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder, terms for sinking fund payments, terms
for conversion into Preferred Stock or Common Stock, certain covenants, other
terms and conditions, and the initial public offering price; (ii) in the case of
Preferred Stock, the number, specific title and stated value, any distribution,
liquidation, redemption, conversion, voting and other terms and conditions, and
the initial public offering price; (iii) in the case of Common Stock, any
initial public offering price; (iv) in the case of Warrants, the number and
terms thereof, the designation and the number of securities issuable upon their
exercise, the exercise price, the terms of the offering and sale thereof and,
where applicable, the duration and detachability thereof; and (v) in the case of
Rights, the duration, exercise price and transferability thereof.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
------------------------
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 JUNE 17, 1999.
<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 files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at its offices at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. 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. For further information on the operation of the public
reference rooms, please call 1-800-SEC-0330. Additionally, the Commission
maintains a Web site containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address for such Web site is http://www.sec.gov.
In addition, the Common Stock is listed on the New York Stock Exchange,
Inc. ("NYSE") under the symbol "TEX" and reports, proxy statements and other
information concerning the Company may also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments, exhibits, schedules, and supplements thereto,
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities 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, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is hereby made to the Registration Statement, which may be inspected
and copied at the Public Reference Section 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 or otherwise filed with the Commission, each such
statement being qualified in all respects by such reference.
The Company furnishes stockholders with annual reports containing audited
financial statements. The Company also furnishes its holders of Common Stock
with proxy material for its annual meetings complying with the proxy
requirements of the Exchange Act.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
2. The Company's Notice of Annual Meeting of Stockholders and Proxy
Statement dated April 1, 1999.
3. The Company's Quarterly Report on Form 10-Q for the Three Months
Ended March 31, 1999, dated May 14, 1999 and filed on May 14, 1999.
4. The Company's Current Report on Form 8-K dated March 1, 1999 and
filed on March 1, 1999.
5. The Company's Current Report on Form 8-K dated March 10, 1999 and
filed on March 11, 1999.
6. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated February 22, 1991.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of the Offering of the Offered
Securities made hereby shall be deemed to be incorporated herein by reference
and to be a part hereof on and from the date of filing such documents. Any
statement contained in a document incorporated
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<PAGE>
or deemed to be incorporated by reference in this Prospectus shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or incorporated herein by reference or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any and all documents incorporated by reference in this Prospectus (not
including exhibits to such information, unless such exhibits are specifically
incorporated by reference in such information). Such requests should be directed
to Terex Corporation, Attention: Secretary, 500 Post Road East, Westport,
Connecticut 06880 (telephone (203) 222-7170).
THE COMPANY
Terex is a global manufacturer of a broad range of construction and mining
related capital equipment. The Company strives to manufacture high quality
machines which are low cost, simple to use and easy to maintain. The Company's
principal products include telescopic mobile cranes, aerial work platforms,
utility aerial devices, telescopic material handlers, truck mounted mobile
cranes, rigid and articulated off-highway trucks and high capacity surface
mining trucks, large hydraulic mining shovels and related components and
replacement parts. The Company's products are manufactured at 21 plants in the
United States and Europe and are sold primarily through a worldwide network of
dealers in over 750 locations to the global construction, infrastructure and
surface mining markets.
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 and changed the Company's business through a series of
acquisitions and dispositions. In 1988, Northwest Engineering Company merged
into a subsidiary acquired in 1986 named Terex Corporation, with Terex
Corporation as the surviving entity. As a result of the completion of the PPM
Acquisition (as defined below) in May 1995, the Company's operations were
divided into three principal segments: Material Handling, Heavy Equipment and
Mobile Cranes. On November 27, 1996, the Company completed the sale of its
worldwide material handling segment, which was originally acquired in July 1992,
and currently the Company operates in two business segments: Terex Lifting
(formerly known as Terex Cranes) and Terex Earthmoving (formerly known as Terex
Trucks). 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.
Terex Lifting (formerly known as Terex Cranes) manufactures and sells
telescopic mobile cranes (including rough terrain, truck and all terrain mobile
cranes), aerial work platforms (including scissor, articulated boom and straight
telescoping boom aerial work platforms), utility aerial devices (including
digger derricks and articulated aerial devices), telescopic material handlers
(including container stackers, scrap handlers and telescopic rough terrain boom
forklifts), truck mounted cranes (boom trucks) and related components and
replacement parts. These products are primarily used by construction and
industrial customers and utility companies. Terex Lifting is comprised of a
number of divisions and subsidiaries.
Terex Lifting was established as a separate business segment as a result of
the acquisition (the "PPM Acquisition") in May 1995 of substantially all of the
shares of P.P.M. S.A. and certain of its subsidiaries, including P.P.M. SpA,
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 (collectively, "PPM Europe"), from
Potain S.A., and all of the capital stock of Legris Industries, Inc., which
owned 92.4% of the capital stock of PPM Cranes, Inc. ("Terex Lifting--Conway
Operations"; PPM Europe and Terex Lifting--Conway Operations are collectively
referred to herein as "PPM") from Legris Industries, S.A. Concurrently with the
completion of the PPM Acquisition, the Company contributed the assets (subject
to liabilities) of its Koehring Cranes and Excavators and Mark Industries
division to Terex Cranes, Inc., a wholly-owned subsidiary of the Company. The
former division now operates as Koehring Cranes, Inc., a wholly owned subsidiary
of Terex Cranes, Inc.
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During 1997, the Company completed two acquisitions to augment its Terex
Lifting segment. On April 7, 1997, the Company completed the acquisition of
substantially all of the capital stock of certain of the former subsidiaries of
Simon Engineering plc (the "Simon Access Companies") for $90 million (subject to
adjustment under certain circumstances). The Simon Access Companies consist
principally of business units in the United States and Europe engaged in the
manufacture, sale and worldwide distribution of access equipment designed to
position people and materials to work at heights. The Simon Access Companies'
products include utility aerial devices, aerial work platforms and truck mounted
cranes (boom trucks) which are sold to customers in the industrial and
construction markets, as well as utility companies. Specifically, the Company
acquired 100% of the outstanding common stock of (i) Simon Telelect, Inc. (now
named Terex Telelect, Inc.), a Delaware corporation, (ii) Simon Aerials, Inc.
(now named Terex Aerials, Inc.), a Wisconsin corporation and parent company of
Terex-RO Corporation ("Terex RO"), (iii) Sim-Tech Management Limited, a private
limited company incorporated under the laws of Hong Kong, (iv) Simon Cella,
S.r.1., a company incorporated under the laws of Italy, and (v) Simon Aerials
Limited (now named Terex Aerials Limited), a company incorporated under the laws
of Ireland; and 60% of the outstanding common stock of Simon-Tomen Engineering
Company Limited, a limited liability stock company organized under the laws of
Japan. On April 14, 1997, the Company completed the acquisition of all of the
capital stock of Baraga Products, Inc. and M&M Enterprises of Baraga, Inc.
(together, the "Square Shooter Business"), which manufacture the Square Shooter,
a rough terrain telescopic lift truck designed to lift materials to heights
where they are used in construction.
Terex Earthmoving (formerly known as Terex Trucks) manufactures and sells
articulated and rigid off-highway trucks, high capacity surface mining trucks,
large hydraulic mining shovels, and related components and replacement parts.
These products are used primarily by construction, mining and government
customers. On January 5, 1998, the Company also acquired Payhauler Corp.
("Payhauler"), which manufactures and markets 30 and 50 ton all wheel drive
rigid frame trucks designed to move material in more severe operating conditions
than a standard rear wheel drive rigid frame truck. On March 31, 1998, the
Company purchased all of the outstanding shares of O&K Mining GmbH ("O&K
Mining") from O&K Orenstein & Koppel AG for net aggregate consideration of
approximately $168 million, subject to certain post-closing adjustments. O&K
Mining is engaged in the manufacture, sale and worldwide distribution of large
hydraulic mining shovels primarily used to load coal, copper ore, iron ore,
other mineral-bearing materials or rocks into trucks. These products are used by
mining equipment contractors, mining and quarrying companies and large
construction companies involved in infrastructure projects worldwide. Terex
Earthmoving is comprised of Terex Equipment Limited ("TEL"), located in
Motherwell, Scotland, Unit Rig ("Unit Rig"), located in Tulsa, Oklahoma,
Payhauler, located in Batavia, Illinois, and O&K Mining, located in Dortmund,
Germany.
4
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratios of earnings
to fixed charges for the Company for the periods indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------- ---------------------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............. 1.1x -- -- 1.6x 2.4x 2.5x 2.8x
</TABLE>
In calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) from continuing operations before income taxes and extraordinary
items plus fixed charges. Fixed charges consist of interest expense, preferred
stock accretion, amortization of indebtedness issuance costs, and rental expense
representative of the interest factor. Earnings were insufficient to cover fixed
charges by $32.1 million and $42.2 million during the years ended December 31,
1995, and 1996, respectively.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use any net proceeds received by it from the sale of the
Offered Securities for general corporate purposes, which may include
acquisitions and other business combinations as suitable opportunities arise,
the repayment of indebtedness outstanding at such time, the satisfaction of the
Company's obligations under its outstanding equity rights and working capital.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities being offered and the extent to which
such general provisions may apply will be described in a Prospectus Supplement
relating to such Debt Securities.
The Senior Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Securities Indenture"), between the
Company and a trustee to be selected by the Company (the "Senior Securities
Trustee") and the Subordinated Securities are to be issued under an Indenture,
as amended or supplemented from time to time (the "Subordinated Securities
Indenture"), between the Company and a trustee to be selected by the Company
(the "Subordinated Securities Trustee"). The Senior Securities Indenture and the
Subordinated Securities Indenture are referred to herein individually as the
"Indenture" and collectively as the "Indentures," and the Senior Securities
Trustee and the Subordinated Securities Trustee are referred to herein
individually as the "Trustee" and collectively as the "Trustees." A form of the
Senior Securities Indenture and a form of the Subordinated Securities Indenture
will be filed as exhibits to the Registration Statement of which this Prospectus
is a part and will be available for inspection at the corporate trust offices of
the respective Trustees or as described above under "Available Information." The
Indentures will be subject to and governed by the Trust Indenture Act of 1939,
as amended (the "TIA"). The description of the Indentures set forth below
assumes that the Company has entered into the Indentures. The Company will
execute the applicable Indenture when and if the Company issues Debt Securities.
The statements made hereunder relating to the Indentures and the Debt Securities
to be issued thereunder are summaries of certain provisions thereof and do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indentures and such Debt Securities.
Unless otherwise specified, all capitalized terms used but not defined
herein shall have the meanings set forth in the Indentures.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Company.
Senior Securities will rank pari passu with certain other senior debt of the
Company that may be outstanding from time to time, and will rank senior to all
Subordinated Securities that may be outstanding from time to time. Subordinated
Securities will be subordinated in right of payment to the prior payment in full
of the Senior Debt of the Company, as described under "Subordination."
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<PAGE>
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee shall be appointed by the Company, by
or pursuant to a resolution adopted by the Board of Directors of the Company, to
act with respect to such series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a Trustee of a trust under the applicable Indenture separate
and apart from the trust administered by any other Trustee thereunder, and,
except as otherwise indicated herein or therein, any action described herein or
therein to be taken by the Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Trustee under the applicable Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the classification of such Debt Securities as Senior Securities or
Subordinated Securities;
(3) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(4) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion
of the principal amount of such Debt Securities which is convertible
into Common Stock or Preferred Stock, or the method by which any such
portion shall be determined;
(5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates
for such Interest Payment Dates, or the method by which such dates
shall be determined, the person to whom such interest shall be
payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any) and
interest and other amounts, if any, on such Debt Securities will be
payable, such Debt Securities may be surrendered for conversion or
registration of transfer or exchange and notices or demands to or upon
the Company in respect of such Debt Securities and the applicable
Indenture may be served;
(9) the period or periods within which, the price or prices (including
premium, if any) at which and the terms and conditions upon which such
Debt Securities may be redeemed, in whole or in part, at the option of
the Company, if the Company is to have such an option;
(10) the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
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<PAGE>
(12) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or other method may, but need not, be based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which such amounts shall be determined;
(13) whether such Debt Securities will be issued in the form of one or more
global securities and whether such global securities are to be
issuable in a temporary global form or permanent global form;
(14) any additions to, modifications of or deletions from the terms of such
Debt Securities with respect to the Events of Default or covenants set
forth in the applicable Indenture;
(15) whether the principal of (and premium, if any) or interest or other
amounts, if any, on such Debt Securities are to be payable, at the
election of the Company or a Holder, in one or more currencies other
than that in which such Debt Securities are denominated or stated to
be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and
manner of, and identity of the exchange rate agent with responsibility
for, determining the exchange rate between the currency or currencies
in which such Debt Securities are denominated or stated to be payable
and the currency or currencies in which such Debt Securities are to be
so payable;
(16) whether such Debt Securities will be issued in certificated or
book-entry form;
(17) whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and the terms and conditions relating thereto;
(18) the applicability, if any, of the defeasance and covenant defeasance
provisions of the applicable Indenture;
(19) if such Debt Securities are to be issued upon the exercise of
Warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(20) the terms, if any, upon which such Debt Securities may be convertible
into Common Stock or Preferred Stock and the terms and conditions upon
which such conversion will be effected, including, without limitation,
the initial conversion price or rate and the conversion period;
(21) whether and under what circumstances the Company will pay any other
amounts as contemplated in the applicable Indenture on such Debt
Securities in respect of any tax, assessment or governmental charge
and, if so, whether the Company will have the option to redeem such
Debt Securities in lieu of making such payment;
(22) the name of the applicable Trustee and the address of its corporate
trust office; and
(23) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") or that the principal amount thereof
payable at their stated maturity may be more or less than the principal face
amount thereof at original issuance ("Indexed Securities"). Special U.S. federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities and Index Securities will be described in the applicable
Prospectus Supplement.
Except as set forth below under "Certain Covenants--Senior Securities
Indenture Limitations on Incurrence of Indebtedness," neither Indenture contains
any other provisions that would limit the ability of the Company to incur
indebtedness or that would afford holders of Debt Securities protection in the
event of a highly leveraged or similar transaction involving the Company or in
the event of a change of control. See "Description of Preferred Stock" and
"Description of Common Stock."
Reference is made to the applicable Prospectus Supplement for information
with respect to any deletions from, modifications of or additions to the Events
of Default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
7
<PAGE>
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Unless otherwise described in the applicable
Prospectus Supplement, the Debt Securities of any series issued in bearer form
will be issuable in denominations of $5,000.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at an office or agency established by the Company in accordance
with the Indenture, provided that, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the Security Register or by wire transfer of funds to
such person at an account maintained within the United States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice whereof shall be given to the Holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more completely described in the
applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee or at an
office or agency established by the Company in accordance with the Indenture. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
exchange or registration of transfer thereof at the corporate trust office of
the applicable Trustee or at an office or agency established by the Company in
accordance with the Indenture. Every Debt Security surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. If the applicable Prospectus Supplement refers to any
transfer agent (in addition to the Trustee) initially designated by the Company
with respect to any series of Debt Securities, the Company may at any time
rescind the designation of any such transfer agent or approve a change in the
location through which any such transfer agent acts, except that the Company
will be required to maintain a transfer agent in each place of payment for such
series. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities.
Neither the Company nor any Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid.
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CERTAIN COVENANTS
Certain Definitions
As used herein,
"Acquired Indebtedness" means Indebtedness of a person or any of its
Subsidiaries (the "Acquired person") (i) existing at the time such person
becomes a Restricted Subsidiary of the Company or at the time it merges or
consolidates with the Company or any of its Restricted Subsidiaries or
(ii) assumed in connection with the acquisition of assets from such person.
"Asset Disposition" means any sale, lease, transfer, conveyance or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger or consolidation (each referred to for the purposes of this definition
as a "disposition"), of (i) any shares of capital stock of a Restricted
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a person other than the Company or a Restricted
Subsidiary), (ii) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary or (iii) any other assets
of the Company or any Restricted Subsidiary outside of the ordinary course of
business of the Company or such Restricted Subsidiary (other than, in the case
of (i), (ii) and (iii) above, a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary; provided, however, that each of (a) the consummation of any sale or
series of related sales of assets or properties of the Company and the
Restricted Subsidiaries by the Company and any Restricted Subsidiaries having an
aggregate fair market value of less than $1 million in any fiscal year and
(b) the discounting of accounts receivable or the sale of inventory, in each
case in the ordinary course of business, shall not be deemed an Asset
Disposition.
"Bank Indebtedness" means (i) the Indebtedness outstanding or arising under
any credit facility, (ii) all obligations and other amounts owing to the holders
of such Indebtedness or any agent or representative thereof outstanding or
arising under any credit facility (including, but not limited to, interest
(including interest accruing on or after the filing of any petition in
bankruptcy, reorganization or similar proceeding relating to the Company or any
Restricted Subsidiary, whether or not a claim for such interest is allowed in
such proceeding), fees, charges, indemnities, expense reimbursement obligations
and other claims under any credit facility), and (iii) all Hedging Obligations
arising in connection therewith with any party to any credit facility.
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such capital lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Cash Flow" for any period means the Consolidated Net Income for such
period, plus the following (but without duplication) to the extent deducted in
calculating such Consolidated Net Income for such period: (i) income tax
expense, (ii) Consolidated Interest Expense, (iii) depreciation expense and
amortization expense, provided that consolidated depreciation and amortization
expense of a Subsidiary that is not a Wholly Owned Subsidiary shall only be
added to the extent of the equity interest of the Company in such Subsidiary and
(iv) all other non-cash charges (other than any recurring non-cash charges to
the extent such charges represent an accrual of or reserve for cash expenditures
in any future period). Notwithstanding clause (iv) above, there shall be
deducted from Cash Flow in any period any cash expended in such period that
funds a non-recurring, non-cash charge accrued or reserved in a prior period
which was added back to Cash Flow pursuant to clause (iv) in such prior period.
"Consolidated Cash Flow Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of Cash Flow for the period of the
most recent four consecutive fiscal quarters for which financial statements are
available to (ii) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that (1) if the Company or any Restricted Subsidiary has
issued any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated
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Cash Flow Coverage Ratio is an issuance of Indebtedness, or both, Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been issued on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the Cash Flow for
such period shall be reduced by an amount equal to the Cash Flow (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the Cash Flow
(if negative), directly attributable thereto for such period, and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Dispositions for such period (or, if
the capital stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or
an acquisition of assets (including capital stock of a Subsidiary), including
any acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, Cash Flow and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the issuance of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and (4) if since the
beginning of such period any person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset Disposition or any
Investment that would have required an adjustment pursuant to clause (2) or
(3) above if made by the Company or a Restricted Subsidiary during such period,
Cash Flow and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition or Investment
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto, and the amount of Consolidated Interest
Expense associated with any Indebtedness issued in connection therewith, the pro
forma calculations shall be determined in good faith by a responsible financial
or accounting Officer of the Company. If any Indebtedness bears a floating rate
of interest and is being given pro forma effect, the interest of such
Indebtedness shall be calculated as if the average interest rate for the period
up to the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a remaining
term in excess of 12 months). For purposes of this definition, whenever pro
forma effect is to be given to any Indebtedness Incurred pursuant to a revolving
credit facility the amount outstanding under such Indebtedness shall be equal to
the average of the amount outstanding during the period commencing on the first
day of the first of the four most recent fiscal quarters for which financial
statements are available and ending on the date of determination.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such interest expense but Incurred by the Company or
its Restricted Subsidiaries, (i) interest expense attributable to capital
leases, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) original issue discount and non-cash interest payments or accruals,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs under
Hedging Obligations (including amortization of fees), (vii) dividends in respect
of all Disqualified Stock held by persons other than the Company, a Subsidiary
Guarantor or a Wholly Owned Subsidiary, (viii) interest Incurred in connection
with investments in discontinued operations, (ix) the interest portion of any
deferred payment obligations constituting Indebtedness, and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust. For purposes of this definition, interest expense
attributable to any Indebtedness represented by the guarantee (other than
(a) Guarantees permitted by the terms of clauses (b)(x) and (xi), respectively,
of the covenants described under "--Certain Covenants--Limitation on
Indebtedness" and "--Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries" and (b) Guarantees by the Company of
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Indebtedness of a consolidated Restricted Subsidiary or by a consolidated
Restricted Subsidiary of the Company or another consolidated Restricted
Subsidiary) by such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Currency Agreement Obligations" means the obligations of any person under
a foreign exchange contract, currency swap agreement or other similar agreement
or arrangement to protect such person against fluctuations in currency values.
"Disqualified Stock" means, with respect to any person, any capital stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
prior to the 91st day after the stated maturity of the Debt Securities, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock prior to the
91st day after the stated maturity of the Debt Securities or (iii) is redeemable
at the option of the holder thereof, in whole or in part on or prior to the 91st
day after the stated maturity of the Debt Securities.
"Floor Plan Guarantees" means guarantees (including but not limited to
repurchase or remarketing obligations) by the Company or a Restricted Subsidiary
Incurred in the ordinary course of business consistent with past practice of
Indebtedness Incurred by a franchise dealer, or other purchaser or lessor, for
the purchase 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 such inventory to such franchise dealer and any related
reasonable fees and expenses (including financing fees), provided, however, that
(1) 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 (2) 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 (q) title to such
inventory, (r) a valid assignment of a perfected first priority lien in such
inventory or (s) the net proceeds of any resale of such inventory.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those 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.
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing in any manner any Indebtedness or other
obligation of any person and any obligation, direct or indirect, contingent or
otherwise, of such person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements of negotiable instruments for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any person means the obligations of such person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such person against changes
in interest rates or foreign exchange rates.
"Indebtedness" of any person means, without duplication, and whether or not
contingent,
(i) the principal of and premium (if any) in respect of (A) indebtedness of
such person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
person is responsible or liable;
(ii) all Capital Lease Obligations of such person;
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(iii) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such person and
all obligations of such person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of such person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction;
(v) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock (measured at
the greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends);
(vi) to the extent not otherwise included in this definition, all Hedging
Obligations;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee (other than in each case by reason of activities described in the
proviso to the definition of "Guarantee"); and
(viii) all obligations of the type referred to in clauses (i) through
(vii) of other persons secured by any lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the amount of
such obligation being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock as if such Disqualified
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value to be determined in good faith by the Board of Directors. For purposes
hereof, the amount of any Indebtedness issued with original issue discount shall
be the original purchase price plus accrued interest, provided, however, that
such accretion shall not be deemed an incurrence of Indebtedness.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" in any person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable or deposits on the balance sheet of the person
making the advance or loan, in each case in accordance with GAAP) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of capital stock , Indebtedness or other
similar instruments issued by such person and shall include the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary. For purposes of the
definition of "Unrestricted Subsidiary," the definition of "Restricted Payment"
and the covenant described under "-- Certain Covenants--Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent investment in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation, and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
Notwithstanding the foregoing, in no event shall any issuance of capital stock
(other than Preferred Stock or Disqualified Stock, or capital stock
exchangeable, exercisable or convertible for any of the foregoing) of the
Company in exchange for capital stock , property or assets of another person
constitute an Investment by the Company in such person.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
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"Senior Debt" means with respect to the Company or any Subsidiary Guarantor
(x) Bank Indebtedness and (y) any other Indebtedness that, by the terms of the
instrument creating or evidencing such Indebtedness, is expressly made senior in
right of payment to the Notes or the applicable Guarantee, other than (1) any
obligation of such person to any subsidiary of such person or to any officer,
director or employee of such person or any such subsidiary, (2) any liability of
such person for federal, state, local or other taxes owed or owing by such
person, (3) any accounts payable or other liability of such person to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness,
Guarantee or obligation of such person which is, expressly by its terms,
subordinate or junior in any respect to any other Indebtedness, Guarantee or
obligation of such person, (5) that portion of any Indebtedness of such person
which at the time of issuance is issued in violation of the Indenture, (6)
Indebtedness of such person represented by Disqualified Stock or (7) Capital
Lease Obligations.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meanings of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Subsidiary" means (a) any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) the Company,
(ii) the Company and one or more Subsidiaries or (iii) one or more Subsidiaries
or (b) any limited partnership of which the Company or any Subsidiary is a
general partner, or (c) any other person (other than a corporation or limited
partnership) in which the Company, or one or more other Subsidiaries or the
Company and one or more other Subsidiaries, directly or indirectly, has more
than 50% of the outstanding partnership or similar interests or has the power,
by contract or otherwise, to direct or cause the direction of the policies,
management and affairs thereof. Unless the context other wise requires,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Subsidiary Guarantor" means any Subsidiary of the Company that Guarantees
the Company's obligations with respect to the Debt Securities.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than a
Subsidiary Guarantor) designated as such pursuant to and in compliance with the
covenant described under "Limitation on Designations of Unrestricted
Subsidiaries." Any such designation may be revoked by a resolution of the Board
of Directors of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"Voting Stock" of a person means capital stock of such person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances 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 stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means (i) a Restricted Subsidiary all the capital
stock of which (other than directors' qualifying shares and shares held by other
persons to the extent such Shares are required by applicable law to be held by a
person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries and (ii) each of Terex Cranes,
Inc., P.P.M. Cranes, Inc., P.P.M. S.A., and any future wholly owned subsidiaries
of any of the foregoing, in each case so long as the Company or one or more
Wholly Owned Subsidiaries maintains a percentage ownership interest in such
entity equal to or greater than such ownership interest (on a fully diluted
basis) on the later of (a) the applicable Indenture or (b) the date such entity
is incorporated or acquired by the Company or one or more Wholly Owned
Subsidiaries.
Senior Securities Indenture Limitations on Incurrence of Indebtedness. The
Company will not, and will not permit any Subsidiary to, incur any Indebtedness
if the Consolidated Cash Flow Coverage Ratio at the date on which such
additional Indebtedness is to be incurred shall have been less than 2.0 to 1.0.
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company will not be required to preserve
any right or franchise if it determines that the preservation thereof is no
longer desirable in the conduct of its business and that the loss thereof is not
disadvantageous in any material respect to the holders of the Debt Securities.
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Maintenance of Properties. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Company and its Subsidiaries shall not be prevented
from selling or otherwise disposing for value its properties in the ordinary
course of business.
Insurance. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties adequately insured against loss or damage
with financially sound and reputable insurance companies.
Payment of Taxes and Other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges levied or imposed upon it or
any Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary, unless such lien would not have a material adverse effect upon such
property; provided, however, that the Company will not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings or for which the Company has set apart and maintains
an adequate reserve.
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 or 15(d) (the "Financial
Statements"), or which the Company would have been so required if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company is or
would have been so required to file such documents if the Company is or were so
subject. The Company will also in any event (x) within 15 days of each Required
Filing Date (i) transmit by mail to all holders of Debt Securities, as their
names and addresses appear in the Security Register, without cost to such
holders, copies of the annual reports and quarterly reports which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act, or which the Company would have been so required if the Company
were subject to such Sections and (ii) file with the Trustees copies of annual
reports, quarterly reports and other documents which the Company is required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, or
which the Company would have been so required if the Company were subject to
such Sections, and (y) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder.
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MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets shall expressly assume payment of the principal of (and premium, if any)
and interest (and any other amounts) on all of the Debt Securities and the due
and punctual performance and observance of all of the covenants and conditions
contained in the Indentures; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default
under the Indentures, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustees.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture will provide that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder:
(a) default for 30 days in the payment of any installment of interest or other
amounts on any Debt Security of such series; (b) default in the payment of the
principal of (or premium, if any, on) any Debt Security of such series when due;
(c) default in making any sinking fund payment as required for any Debt Security
of such series; (d) default in the performance of any other covenant of the
Company contained in the applicable Indenture (other than a covenant added to
such Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series) continued for 60 days after written notice as
provided in such Indenture; (e) default in the payment of an aggregate principal
amount exceeding $10,000,000 of any evidence of indebtedness for borrowed money
of the Company or any mortgage, indenture or other instrument under which such
indebtedness is issued or by which such indebtedness is secured, such default
having occurred after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled; (f) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company, any
Significant Subsidiary or the property of the Company or any Significant
Subsidiary or all or substantially all of either of its property; and (g) any
other Event of Default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" means each significant subsidiary
(as defined in Regulation S-X promulgated under the Securities Act) of the
Company.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the Trustee or the holders of not less than 25% in principal
amount of the outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of the outstanding Debt Securities of
that series to be due and payable immediately by written notice thereof to the
Company (and to the applicable Trustee if given by the holders). However, at any
time after such a declaration of acceleration with respect to Debt Securities of
such series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be) has been made, but before a judgment or decree
for payment of the money due has been obtained by the applicable Trustee, the
holders of not less than a majority in principal amount of Debt Securities then
outstanding of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest, and any other amounts, on the Debt Securities of such series (or of
all Debt Securities then outstanding under the applicable Indenture, as the case
may be), plus certain fees, expenses, disbursements and advances of the Trustee
and (b) all Events of Default, other than the non-payment of accelerated
principal (or specified portion thereof and the premium, if any, or interest),
with respect to Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in the applicable Indenture. Each Indenture also provides
that the holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) may waive any
past default with respect to such series and its consequences, except a default
(x) in
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the payment of the principal of (premium, if any) or interest or other amounts
on any Debt Security of such series or (y) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the Holder of each outstanding Debt Security affected thereby.
Each Trustee is required to give notice to the holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that the Trustee may withhold notice to the holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest payable on or any
other amounts with respect to any Debt Security of such series or in the payment
of any sinking fund installment in respect of any Debt Security of such series)
if the Responsible Officers of the Trustee consider such withholding to be in
the interest of such holders.
Each Indenture provides that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
applicable Indenture or for any remedy thereunder, except in the case of failure
of the Trustee thereunder for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of reasonable indemnity. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on, and other amounts payable with respect to,
such Debt Securities at the respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, each Trustee is under no obligation to exercise any of its rights or
powers under the applicable Indenture at the request or direction of any holders
of any series of Debt Securities then outstanding under such Indenture, unless
such holders shall have offered to the Trustee reasonable security or indemnity.
The holders of not less than a majority in principal amount of the applicable
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred
upon the Trustee. However, the Trustee may refuse to follow any direction which
is in conflict with any law or the applicable Indenture, which may involve the
Trustee in personal liability or which may be unduly prejudicial to the holders
of Debt Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, the Company must
deliver to each Trustee a certificate, signed by two officers, one of whom must
be the principal financial officer or principal accounting officer, stating
whether or not such officers have knowledge of any default under the applicable
Indenture and, if so, specifying each such default and the nature and status
thereof.
MODIFICATION OF THE INDENTURES
Except as described below, modifications and amendments of each Indenture
may be made with the consent of the holders of not less than a majority in
principal amount of all outstanding Debt Securities issued under such Indenture
which are affected by such modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
such Debt Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest or other amounts payable on (or
premium, if any) any such Debt Security; (b) reduce the principal amount of, or
the rate or amount of interest on, or any premium payable on redemption of, or
change any obligation of the Company to pay any other amounts set forth in the
Indenture relating to, or reduce any other amounts payable with respect to, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security or premium, if any, that would be due and payable upon
declaration of acceleration of the maturity thereof or would be payable in
bankruptcy, or adversely affect any right of repayment of the Holder of any such
Debt Security; (c) change the place of payment, or the coin or currency, for
payment of principal of (and premium, if any), or interest on, or any other
amounts payable with respect to, any such Debt Security; (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Debt Security; (e) reduce the percentage of outstanding Debt Securities of any
series necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in such
Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to
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provide that certain other provisions may not be modified or waived without the
consent of the Holder of such Debt Security.
The holders of not less than a majority in principal amount of outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Company with certain covenants in the applicable Indenture.
Modifications and amendments of each Indenture may be made by the Company
and the applicable Trustee without the consent of any Holder of Debt Securities
issued thereunder for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under the applicable
Indenture; (ii) to add to the covenants of the Company for the benefit of the
holders of all or any series of Debt Securities or to surrender any right or
power conferred upon the Company in the applicable Indenture; (iii) to add
Events of Default for the benefit of the holders of all or any series of Debt
Securities; (iv) to add or change any provisions of the applicable Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
in bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided that such action shall not adversely affect the
interests of the holders of the Debt Securities of any series in any material
respect; (v) to change or eliminate any provision of the applicable Indenture,
provided that any such change or elimination shall become effective only when
there are no Debt Securities outstanding of any series issued thereunder created
prior thereto which are entitled to the benefit of such provision; (vi) to
secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series, including the provisions and procedures, if
applicable, for the conversion of such Debt Securities into Preferred Stock or
Common Stock; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the applicable
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in the applicable Indenture, provided that such action will not
adversely affect the interests of holders of Debt Securities of any series in
any material respect; (x) to close the applicable Indenture with respect to the
authentication and delivery of additional series of Debt Securities or to
qualify or maintain qualification of, the applicable Indenture under the TIA; or
(xi) to supplement any of the provisions of the applicable Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of such Debt Securities, provided that such action will not adversely affect the
interests of the holders of the Debt Securities of any series in any material
respect.
Each Indenture provides that, in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding will be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a currency other than U.S. dollars that shall
be deemed outstanding will be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an Indexed Security that will be deemed
outstanding will be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the applicable Indenture, and (iv) Debt Securities owned by
the Company or any other obligor upon the Debt Securities or any Affiliate of
the Company or of such other obligor will be disregarded.
Each Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. A meeting may be called at any time by the
applicable Trustee, and also, upon request, by the Company, pursuant to a
resolution adopted by the Board of Directors of the Company, or the holders of
at least 10% in principal amount of the outstanding Debt Securities of such
series, in any such case upon notice given as provided in the applicable
Indenture. Except for any consent that must be given by the Holder of each Debt
Security affected by certain modifications and amendments of the applicable
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or
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adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with the applicable Indenture will be binding on all holders
of Debt Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; provided, however, that, if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the applicable Indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all outstanding Debt
Securities affected thereby, or of the holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting and (ii) the principal amount of the outstanding Debt Securities of such
series that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
applicable Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may discharge certain obligations to holders of any series of
Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest and other amounts payable to the date of such
deposit (if such Debt Securities have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be.
Each Indenture provides that, under certain circumstances, the Company may
elect to (a) defease and be discharged from any and all obligations with respect
to such Debt Securities (except for the obligation to pay other amounts, if any,
upon the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on such Debt Securities and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") and/or (b) be released from its obligations with respect
to such Debt Securities under the applicable Indenture (being the restrictions
described under "Certain Covenants") or, under certain circumstances, its
obligations with respect to any other covenant, and any omission to comply with
such obligations will not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are payable at Stated
Maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
the applicable Indenture) to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of
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the Internal Revenue Service (the "IRS") or a change in applicable United States
federal income tax law occurring after the date of the Indenture.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the currency (if
other than U.S. dollars) in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or
(ii) obligations of a person controlled or supervised by and acting as an agency
or instrumentality of the United States of America or such government which
issued the currency (if other than U.S. dollars) in which the Debt Securities of
such series are payable, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the option
of the issuer thereof, and will also include a depository receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
the Government Obligation evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if,
after the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency (other than U.S. dollars,
the ECU or other currency unit), both by the government of the country which
issued such currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community,
(ii) the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a currency other than
U.S. dollars that ceases to be used by its government of issuance will be made
in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (d) under "Events of Default, Notice and Waiver" under certain
circumstances or described in clause (g) under "Events of Default, Notice and
Waiver" under certain circumstances, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their Stated Maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Preferred Stock or Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Preferred Stock or Common
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (the "Global Securities")
that will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the applicable Prospectus Supplement relating to such series.
Global Securities are expected to be deposited with The Depository Trust
Company, as Depositary. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual
Debt Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee of such
Depositary to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable Prospectus
Supplement, the Company anticipates that the following provisions will apply to
depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary ("participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in such Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depositary or its nominee (with respect to
beneficial interests of participants) and records of participants (with respect
to beneficial interests of persons who hold through participants). The laws of
some states require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and laws may impair the
ability to own, pledge or transfer beneficial interest in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as provided below or in the applicable Prospectus
Supplement, owners of a beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities of the series represented
by such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Debt Securities of such series
in definitive form and will not be considered the owners or holders thereof
under the applicable Indenture.
Payments of principal of, any premium on, and any interest on, or any other
amounts payable with respect to, individual Debt Securities represented by a
Global Security registered in the name of a Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the registered
owner of the Global Security representing such Debt Securities. None of the
Company, the Trustees, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
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The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt Securities,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security for such Debt Securities as shown on the records of such
Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such participants.
If a Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may, at any time and in its
sole discretion, subject to any limitations described in the applicable
Prospectus Supplement relating to such Debt Securities, determine not to have
any Debt Securities of such series represented by one or more Global Securities
and, in such event, will issue individual Debt Securities of such series in
exchange for the Global Security or Securities representing such series of Debt
Securities. Individual Debt Securities of such series so issued will be issued
in denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Securities Indenture in right of payment to the prior payment in
full of all Senior Debt, but the obligation of the Company to make payment of
the principal and interest on the Subordinated Securities will not otherwise be
affected. No payment of principal or interest may be made on the Subordinated
Securities at any time if a default on Senior Debt exists that permits the
holders of such Senior Debt to accelerate its maturity and the default is the
subject of judicial proceedings or the Company receives notice of the default.
After all Senior Debt is paid in full and until the Subordinated Securities are
paid in full, holders will be subrogated to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt. By reason of such subordination, in the event of a distribution of
assets upon insolvency, certain general creditors of the Company may recover
more, ratably, than holders of the Subordinated Securities.
There will be no restrictions in the Subordinated Securities Indenture upon
the creation of additional Senior Debt. However, the Senior Securities Indenture
will contain limitations on incurrence of indebtedness by the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter.
DESCRIPTION OF PREFERRED STOCK
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), authorizes the Company to issue up to
50,000,000 shares of preferred stock of the Company. The Board of Directors of
the Company is granted the power to authorize the issuance of one or more series
of preferred stock. As of the date hereof, there are not shares of preferred
stock of the Company issued and outstanding.
The following description of the Preferred Stock which may be offered
pursuant to a Prospectus Supplement sets forth certain general terms and
provisions of the Preferred Stock to which any Prospectus Supplement may relate.
The particular terms of the Preferred Stock being offered and the extent to
which such general provisions may or may not apply will be described in a
Prospectus Supplement relating to such Preferred Stock. The statements below
describing the Preferred Stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the Certificate of
Incorporation and the Company's Bylaws, as in effect.
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GENERAL
Subject to limitations prescribed by Delaware law and the Certificate of
Incorporation, the Board of Directors of the Company is authorized to fix the
number of shares constituting each series of Preferred Stock and the
designations and powers, preferences and the relative participating, optional or
other special rights and qualifications, limitations or restrictions thereof,
including such provisions as may be desired concerning voting, redemption,
distributions, dissolution or the distribution of assets, conversion or
exchange, and such other subjects or matters as may be fixed by resolution of
the Board of Directors of the Company or a duly authorized committee thereof.
The Preferred Stock will, when issued, be fully paid and nonassessable and will
have no preemptive rights. The Register and Transfer Agent for any Preferred
Stock will be set forth in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock being offered, the
liquidation preference per share and the offering price of such
Preferred Stock;
(3) the distribution rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Stock;
(4) the date from which distributions on such Preferred Stock shall
accumulate, if applicable;
(5) the procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) the provision for a sinking fund, if any, for such Preferred
Stock;
(7) the provisions for redemption, if applicable, of such Preferred
Stock;
(8) any listing of such Preferred Stock on any securities exchange;
(9) the terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into Common Stock, including
the conversion price (or manner of calculation thereof);
(10) a discussion of federal income tax considerations applicable to
such Preferred Stock;
(11) the relative ranking and preferences of such Preferred Stock as
to distribution rights (including whether any liquidation
preference as to the Preferred Stock will be treated as a
liability for purposes of determining the availability of assets
of the Company for distributions to holders of Stock remaining
junior to the Preferred Stock as to distribution rights) and
rights upon liquidation, dissolution or winding up of the affairs
of the Company;
(12) any limitations on issuance of any series of preferred stock
ranking senior to or on a parity with such series of Preferred
Stock as to distribution rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and
(13) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock will, with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock, and to all equity securities ranking junior
to such Preferred Stock with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, as the case may be;
(ii) on a parity with all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, as the case may be; and
(iii) junior to all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank senior to the Preferred
Stock with respect to distribution rights and/or rights upon liquidation,
dissolution or
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winding up of the Company, as the case may be. As used in the Certificate of
Incorporation, for these purposes, the term "equity securities" does not include
convertible debt securities.
DISTRIBUTIONS
Holders of Preferred Stock shall be entitled to receive, when, as and if
authorized by the Board of Directors of the Company, out of assets of the
Company legally available for payment, cash distributions at such rates (or
method of calculation thereof) and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such distribution shall be payable to
holders of record as they appear on the share transfer books of the Company on
such record dates as shall be fixed by the Board of Directors of the Company.
Distributions on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Distributions, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to authorize a distribution payable on a distribution payment date
on any series of the Preferred Stock for which distributions are noncumulative,
then the holders of such series of the Preferred Stock will have no right to
receive a distribution in respect of the distribution period ending on such
distribution payment date, and the Company will have no obligation to pay the
distribution accrued for such period, whether or not distributions on such
series are authorized for payment on any future distribution payment date.
If any shares of Preferred Stock of any series are outstanding, no full
distributions shall be authorized or paid or set apart for payment on the
preferred stock of the Company of any other series ranking, as to distributions,
on a parity with or junior to the Preferred Stock of such series for any period
unless (i) if such series of Preferred Stock has a cumulative distribution, full
cumulative distributions have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof set apart for such
payment on the Preferred Stock of such series for all past distribution periods
and the then current distribution period or (ii) if such series of Preferred
Stock does not have a cumulative distribution, full distributions for the then
current distribution period have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set apart for
such payment on the Preferred Stock of such series. When distributions are not
paid in full (or a sum sufficient for such full payment is not so set apart)
upon the Preferred Stock of any series and the shares of any other series of
preferred stock ranking on a parity as to distributions with the Preferred Stock
of such series, all distributions authorized upon the Preferred Stock of such
series and any other series of Preferred Stock ranking on a parity as to
distributions with such Preferred Stock shall be authorized pro rata so that the
amount of distributions authorized per share on the Preferred Stock of such
series and such other series of preferred stock shall in all cases bear to each
other the same ratio that accrued and unpaid distributions per share on the
Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid distributions for prior distribution periods if such shares of
Preferred Stock do not have a cumulative distribution) and such other series of
preferred shares bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or payments on
Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative distribution, full cumulative
distributions on the Preferred Stock of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof set apart for payment for all past distribution periods and
the then current distribution period and (ii) if such series of Preferred Stock
does not have a cumulative distribution, full distributions on the Preferred
Stock of such series have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for the then current distribution period, no distributions (other than in Common
Stock or other shares of capital stock ranking junior to the Preferred Stock of
such series as to distributions and upon liquidation, dissolution or winding up
of the affairs of the Company) shall be authorized or paid or set aside for
payment or other distribution upon the Common Stock or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to distributions or upon liquidation, dissolution or
winding up of the affairs of the Company, nor shall any Common Stock or any
other shares of capital stock of the Company ranking junior to or on a parity
with the Preferred Stock of such series as to distributions or upon liquidation,
dissolution or winding up of the affairs of the Company be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking
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fund for the redemption of any shares of capital stock ) by the Company (except
by conversion into or exchange for other shares of capital stock of the Company
ranking junior to the Preferred Stock of such series as to distributions and
upon liquidation, dissolution or winding up of the affairs of the Company).
Any distribution payment made on a series of Preferred Stock shall first be
credited against the earliest accrued but unpaid distribution due with respect
to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
of any series will be subject to mandatory redemption or redemption at the
option of the Company, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid distributions thereon
(which shall not, if such Preferred Stock does not have a cumulative
distribution, include any accumulation in respect of unpaid distributions for
prior distribution periods) to the date of redemption. The redemption price may
be payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is payable
only from the net proceeds of the issuance of shares of capital stock of the
Company, the terms of such Preferred Stock may provide that, if no such shares
of capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
shares of the applicable shares of capital stock of the Company pursuant to
conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative distribution, full cumulative distributions on all shares of
such series have been or contemporaneously are authorized and paid or authorized
and a sum sufficient for the payment thereof set apart for payment for all past
distribution periods and the then current distribution period and (ii) if such
series of Preferred Stock does not have a cumulative distribution, full
distributions on all shares of such series have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment thereof
set apart for payment for the then current distribution period, no shares of
such series of Preferred Stock shall be redeemed unless all outstanding
Preferred Stock of such series are simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Preferred Stock of such series, and, unless
(i) if such series of Preferred Stock has a cumulative distribution, full
cumulative distributions on all outstanding shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof set apart for payment for all past distribution periods and
the then current distribution period and (ii) if such series of Preferred Stock
does not have a cumulative distribution, full distributions on all shares of
such series have been or contemporaneously are authorized and paid or authorized
and a sum sufficient for the payment thereof set apart for payment for the then
current distribution period, the Company shall not purchase or otherwise acquire
directly or indirectly any Preferred Stock of such series (except by conversion
into or exchange for shares of capital stock of the Company ranking junior to
the Preferred Stock of such series as to distributions and upon liquidation).
If fewer than all of the outstanding Preferred Stock of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Company and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of record of Preferred Stock
of any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that distributions on
the shares to be redeemed will cease to accrue on such redemption date; and
(vi) the date upon which the holder's
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conversion rights, if any, as to such shares shall terminate. If fewer than all
the Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred Stock
to be redeemed from each such holder. If notice of redemption of any Preferred
Stock has been properly given and if the funds necessary for such redemption
have been irrevocably set aside by the Company in trust for the benefit of the
holders of any Preferred Stock so called for redemption, then from and after the
redemption date distributions will cease to accrue on such Preferred Stock, such
Preferred Stock shall no longer be deemed outstanding and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price. Any moneys so deposited which remain unclaimed by the holders
of such Preferred Stock at the end of two years after the redemption date will
be returned by the applicable bank or trust company to the Company.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of shares
of capital stock of the Company ranking junior to any series of Preferred Stock
in the distribution of assets upon any liquidation, dissolution or winding up of
the Company, the holders of such series of Preferred Stock shall be entitled to
receive, after payment or provision for payment of the Company's indebtedness
and other liabilities, out of assets of the Company legally available for
distribution to shareholders, liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all distributions accrued and unpaid
thereon (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such Preferred Stock do not have
a cumulative distribution). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of such series of
Preferred Stock will have no right or claim to any of the remaining assets of
the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Company are insufficient to pay the amount of the liquidating distributions on
all such outstanding Preferred Stock and the corresponding amounts payable on
all shares of other classes or series of shares of capital stock of the Company
ranking on a parity with such series of Preferred Stock in the distribution of
assets upon liquidation, dissolution or winding up, then the holders of such
series of Preferred Stock and all other such classes or series of shares of
capital stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If the liquidating distributions shall have been made in full to all
holders of a series of Preferred Stock, the remaining assets of the Company
shall be distributed among the holders of any other classes or series of shares
of capital stock ranking junior to such series of Preferred Stock upon
liquidation, dissolution or winding up, according to their respective rights and
preferences and in each case according to their respective number of shares. For
purposes of this section, a distribution of assets in any dissolution, winding
up or liquidation will not include (i) any consolidation or merger of the
Company with or into any other corporation, (ii) any dissolution, liquidation,
winding up, or reorganization of the Company immediately followed by
organization of another entity to which such assets are distributed or (iii) a
sale or other disposition of all or substantially all of the Company's assets to
another entity; provided that, in each case, effective provision is made in the
charter of the resulting and surviving entity or otherwise for the recognition,
preservation and protection of the rights of the holders of Preferred Stock.
VOTING RIGHTS
Holders of any series of Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of a majority of the shares of each
series of Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting (such series voting separately as a class),
(i) authorize, create or issue, or increase the authorized or issued amount of,
any class or series of shares of capital stock ranking prior to such series of
Preferred Stock with respect to payment of distributions or the distribution of
assets upon liquidation, dissolution or winding up, or reclassify any authorized
shares of capital stock of the Company into any such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or
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(ii) amend, alter or repeal the provisions of the Certificate of Incorporation,
including the applicable Certificate of Designation for such series of Preferred
Stock, whether by merger, consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such series
of Preferred Stock or the holders thereof; provided, however, that any increase
in the amount of the authorized Preferred Stock or the creation or issuance of
any other series of Preferred Stock, or any increase in the amount of authorized
shares of such series or any other series of Preferred Stock, in each case
ranking on a parity with or junior to the Preferred Stock of such series with
respect to payment of distributions or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be affected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
Whenever distributions on any Preferred Stock shall be in arrears for six
or more consecutive quarterly periods, the holders of such Preferred Stock
(voting together as a class with all other series of Preferred Stock upon which
like voting rights have been conferred and are exercisable) will be entitled to
vote for the election of two additional directors of the Company until, (i) if
such series of Preferred Stock has a cumulative distribution, all distributions
accumulated on such Preferred Stock for the past distribution periods and the
then current distribution period shall have been fully paid or authorized and a
sum sufficient for the payment thereof set aside for payment or (ii) if such
series of Preferred Stock does not have a cumulative distribution, four
consecutive quarterly distributions shall have been fully paid or authorized and
a sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Directors of the Company will be increased by two directors.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
are convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the Preferred Stock are convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of the Preferred
Stock or the Company, the events requiring an adjustment of the conversion price
and provisions affecting conversion in the event of the redemption of such
Preferred Stock.
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DESCRIPTION OF COMMON STOCK
GENERAL
The Company's Certificate of Incorporation authorizes the Company to issue
up to 150,000,000 shares of Common Stock of the Company. As of June 30, 1998,
the Company had outstanding 20,768,208 shares of Common Stock. The following
description of the Common Stock sets forth certain general terms and provisions
of the Common Stock to which any Prospectus Supplement may relate, including a
Prospectus Supplement providing that Common Stock will be issuable upon
conversion of Debt Securities or Preferred Stock or upon the exercise of
Warrants or Rights. The statements below describing the Common Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Certificate of Incorporation and the Company's
Bylaws.
Holders of Common Stock will be entitled to receive distributions when, as
and if authorized and declared by the Board of Directors of the Company, out of
funds legally available therefor. Upon any liquidation, dissolution or winding
up of the Company, holders of Common Stock will be entitled to share equally and
ratably in any assets available for distribution to them, after payment or
provision for payment of the indebtedness and other liabilities of the Company
and the preferential amounts owing with respect to any outstanding Preferred
Stock. The Common Stock will possess ordinary voting rights for the election of
directors and in respect of other corporate matters, each share entitling the
holder thereof to one vote. Holders of Common Stock will not have cumulative
voting rights in the election of directors, which means that holders of more
than 50% of all of the outstanding shares of Common Stock voting for the
election of directors can elect all of the directors if they choose to do so and
the holders of the remaining shares cannot elect any directors. Approval of the
following matters requires the affirmative vote of the holders of a majority of
all outstanding shares of Common Stock: certain amendments to the Certificate of
Incorporation, termination of the Company, removal of a director, certain
mergers, reorganizations or consolidations of the Company or the sale,
conveyance, exchange or other disposition of all or substantially all of the
Company's property. Holders of Common Stock will not have preemptive rights,
which means they have no right to acquire any additional shares of Common Stock
that may be issued by the Company at a subsequent date. The Common Stock will,
when issued, be fully paid and nonassessable.
The Restated Certificate of Incorporation provides that directors of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duties as a director except to the
extent otherwise required by Delaware Law. The Restated By-Laws of the Company
provide for indemnification of the officers and directors of the Company to the
fullest extent permitted by Delaware Law.
The Registrar and Transfer Agent for the Company's Common Stock is American
Stock Transfer Company.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is a Delaware corporation and is subject to Section 203 of the
General Corporation Law of Delaware ("Delaware Law"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owing 15% or
more of the Company's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with the Company for three years
following the date that person becomes an interested stockholder unless
(a) before that person became an interested stockholder, the Company's Board of
Directors approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination, (b) upon completion
of the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85% of the
Company's voting stock outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the Company and by
employee stock plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer), or (c) following the transaction in which that person
became an interested stockholder, the business combination is approved by the
Company's Board of Directors and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the outstanding
Company voting stock not owned by the interested stockholder.
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Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the Company's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors who were directors before any person
became an interested stockholder in the previous three years or who were
recommended for election or elected to succeed such directors by a majority of
such directors then in office.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Debt Securities,
Preferred Stock or Common Stock. Warrants may be issued independently or
together with any Offered Securities and may be attached to or separate from
such securities. Each series of Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent ("Warrant Agent"). The Warrant Agent will act solely as an
agent of the Company in connection with the Warrants of such series and will not
assume any obligation or relationship of agency or trust for or with any holders
or beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants and
the applicable Warrant Agreement will be set forth in the applicable Prospectus
Supplement.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (1) the title of such Warrants; (2) the aggregate number of such
Warrants; (3) the price or prices at which such Warrants will be issued;
(4) the currencies in which the price of such Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the securities purchasable
upon exercise of such Warrants; (6) the designation and terms of the Offered
Securities with which such Warrants are issued and the number of such Warrants
issued with each such security; (7) the currency or currencies, including
composite currencies, in which the principal of or any premium or interest on
the securities purchasable upon exercise of such Warrants will be payable;
(8) if applicable, the date on and after which such Warrants and the related
securities will be separately transferable; (9) the price at which and currency
or currencies, including composite currencies, in which the securities
purchasable upon exercise of such Warrants may be purchased; (10) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (11) the minimum or maximum amount of such Warrants
which may be exercised at any one time; (12) information with respect to
book-entry procedures, if any; (13) a discussion of certain Federal income tax
considerations; and (14) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF RIGHTS
The Company may issue Rights to its stockholders for the purchase of shares
of Preferred Stock or Common Stock. Each series of Rights will be issued under a
separate rights agreement (a "Rights Agreement") to be entered into between the
Company and a bank or trust company, as Rights agent, all as set forth in the
Prospectus Supplement relating to the particular issue of Rights. The Rights
agent will act solely as an agent of the Company in connection with the
certificates relating to the Rights and will not assume any obligation or
relationship of agency or trust for or with any holders of Rights certificates
or beneficial owners of Rights. The Rights Agreement and the Rights certificates
relating to each series of Rights will be filed with the Commission and
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part at or prior to the time of the issuance of such series
of Rights.
The applicable Prospectus Supplement will describe the terms of the Rights
to be issued, including the following where applicable: (i) the date for
determining the stockholders entitled to the Rights distribution; (ii) the
aggregate number of shares of Preferred Stock or Common Stock purchasable upon
exercise of such Rights and the exercise price; (iii) the aggregate number of
Rights being issued; (iv) the date, if any, on and after which such Rights may
be transferable separately; (v) the date on which the right to exercise such
Rights shall commence and the date on which such right shall expire; (vi) any
special Federal income tax consequences; and
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(vii) any other terms of such Rights, including terms, procedures and
limitations relating to the distribution, exchange and exercise of such Rights.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents, or may issue Offered Securities to satisfy
obligations of the Company, or upon the exchange, conversion or exercise of
other securities of the Company, or through a combination of any such methods of
sale. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Company also may offer and sell
the Offered Securities in exchange for one or more of its then outstanding
issues of indebtedness or convertible debt securities. The Company also may,
from time to time, authorize underwriters acting as the Company's agents to
offer and sell the Offered Securities upon the terms and conditions as are set
forth in the applicable Prospectus Supplement. In connection with the sale of
Offered Securities, underwriters may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of Offered Securities for whom they may
act as agent. Underwriters may sell Offered Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act. In the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange. Any shares of Common Stock sold pursuant to a Prospectus Supplement
will be listed on the NYSE, subject to official notice of issuance. The Company
may elect to list the Offered Securities on an exchange, but is not obligated to
do so. It is possible that one or more underwriters may make a market in the
Offered Securities, but will not be obligated to do so and may discontinue any
market making at any time without notice. Therefore, no assurance can be given
as to the liquidity of, or the trading market for, the Offered Securities.
If so indicated in a Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Offered Securities of the series to which such Prospectus
Supplement relates providing for payment and delivery on a future date specified
in such Prospectus Supplement. There may be limitations on the minimum amount
which may be purchased by any such institutional investor or on the portion of
the aggregate principal amount of the particular Offered Securities which may be
sold pursuant to such arrangements. Institutional investors to which such offers
may be made, when authorized, include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and such other institutions as may be approved by the Company. The
obligations of any such purchasers pursuant to such delayed delivery and payment
arrangements will not be subject to any conditions except that (i) the purchase
by an institution of the particular Offered Securities shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject, and (ii) if the particular Offered
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of such Offered Securities or number of
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Warrants less the principal amount or number thereof, as the case may be,
covered by such arrangements. Underwriters will not have any responsibility in
respect of the validity of such arrangements or the performance of the Company
or such institutional investors thereunder.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Offered Securities may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.
ERISA MATTERS
The Company may be considered a "party in interest" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Code with respect to
certain employee benefit plans. Certain transactions between an employee benefit
plan and a party in interest or disqualified person may result in "prohibited
transactions" within the meaning of ERISA and the Code, unless such transactions
are effected pursuant to an applicable exemption. Any employee benefit plan or
other entity subject to such provisions of ERISA or the Code proposing to invest
in the Offered Securities should consult with its legal counsel.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman LLP, New York, New York.
EXPERTS
The consolidated financial statements of Terex Corporation and PPM Cranes,
Inc. as of and for each of the three years in the period ended December 31, 1998
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
of Terex Corporation for the year ended December 31, 1998 have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
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TEREX [LOGO APPEARS HERE]
