UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
F O R M 10 - Q
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10702
Terex Corporation
(Exact name of registrant as specified in its charter)
Delaware 34-1531521
(State of Incorporation) (IRS Employer Identification No.)
500 Post Road East, Suite 320, Westport, Connecticut 06880
(Address of principal executive offices)
(203) 222-7170
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -------
Number of outstanding shares of common stock: 27.5 million as of August 5, 1999.
The Exhibit Index appears on page 33.
<PAGE>
INDEX
TEREX CORPORATION AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Terex Corporation ("Terex" or the
"Company") includes financial information with respect to the following
subsidiaries of the Company (all of which are wholly-owned except PPM Cranes,
Inc.) which are guarantors (the "Guarantors") of the Company's $150 million
principal amount of 8-7/8% Senior Subordinated Notes due 2008 (the "1998 Senior
Subordinated Notes") and the Company's $100 million principal amount of 8-7/8%
Senior Subordinated Notes due 2008 (the "1999 Senior Subordinated Notes"). See
Note I to the Company's June 30, 1999 Condensed Consolidated Financial
Statements.
tate or other jurisdiction of I.R.S. employer
Guarantor incorporation or organization identification number
Terex Cranes, Inc. Delaware 06-1513089
PPM Cranes, Inc. Delaware 39-1611683
Koehring Cranes, Inc. Delaware 06-1423888
Terex-Telelect, Inc. Delaware 41-1603748
Terex-RO Corporation Kansas 44-0565380
Terex Aerials, Inc. Wisconsin 39-1028686
Terex Mining Equipment, Inc. Delaware 06-1503634
Payhauler Corp. Illinois 36-3195008
The American Crane Corporation North Carolina 56-1570091
O & K Orenstein & Koppel, Inc. Delaware 58-2084520
Amida Industries, Inc. South Carolina 57-0531390
Page No.
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
TEREX CORPORATION
Condensed Consolidated Statement of Operations --
Three months and six months
ended June 30, 1999 and 1998........................................3
Condensed Consolidated Balance Sheet
- June 30, 1999 and December 31, 1998...............................4
Condensed Consolidated Statement of Cash Flows --
Six months ended June 30, 1999 and 1998..............................5
Notes to Condensed Consolidated
Financial Statements -- June 30, 1999...............................6
PPM CRANES, INC.
Condensed Consolidated Statement of Operations --
Three months and six months
ended June 30, 1999 and 1998.......................................17
Condensed Consolidated Balance Sheet
- June 30, 1999 and December 31, 1998..............................18
Condensed Consolidated Statement of Cash Flows --
Six months ended June 30, 1999 and 1998.............................19
Notes to Condensed Consolidated
Financial Statements -- June 30, 1999..............................20
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations.................22
Item 3 Quantitative and Qualitative Disclosures
About Market Risk.............................................29
PART II OTHER INFORMATION
Item 1 Legal Proceedings.................................................30
Item 2 Changes in Securities and Use of Proceeds.........................30
Item 3 Defaults Upon Senior Securities...................................30
Item 4 Submission of Matters to a Vote of Security Holders...............30
Item 5 Other Information.................................................30
Item 6 Exhibits and Reports on Form 8-K..................................31
SIGNATURES ..................................................................32
EXHIBIT INDEX ...............................................................33
Page 2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales.....................................................$ 448.1 $ 333.5 $ 871.4 $ 594.1
Cost of goods sold............................................ 371.4 272.9 723.8 488.7
------------- ------------- ------------- -------------
Gross profit............................................. 76.7 60.6 147.6 105.4
Selling, general and administrative expenses.................. 29.7 27.4 60.1 48.4
------------- ------------- ------------- -------------
Income from operations................................... 47.0 33.2 87.5 57.0
Other income (expense):
Interest income.......................................... 0.7 0.7 1.2 0.8
Interest expense......................................... (15.6) (12.2) (28.9) (21.0)
Other income (expense) - net............................. (1.0) (0.7) (1.9) (1.2)
------------- ------------- ------------- -------------
Income before income taxes and extraordinary items............ 31.1 21.0 57.9 35.6
Provision for income taxes.................................... (0.7) (0.4) (1.5) (0.6)
------------- ------------- ------------- -------------
Income before extraordinary items............................. 30.4 20.6 56.4 35.0
Extraordinary loss on retirement of debt...................... --- --- --- (38.3)
------------- ------------- ------------- -------------
Net income (loss).............................................$ 30.4 $ 20.6 $ 56.4 $ (3.3)
============= ============= ============= =============
============= ============= ============= =============
EARNINGS PER SHARE:
Basic
Income before extraordinary items.......................$ 1.40 $ 1.00 $ 2.65 $ 1.70
Extraordinary loss on retirement of debt................ --- --- --- (1.86)
-------------
============= ============= =============
Net income (loss).....................................$ 1.40 $ 1.00 $ 2.65 $ (0.16)
============= ============= ============= =============
Diluted
Income before extraordinary items.......................$ 1.30 $ 0.92 $ 2.45 $ 1.57
Extraordinary loss on retirement of debt................ --- --- --- (1.72)
------------- ------------- ------------- -------------
Net income (loss).....................................$ 1.30 $ 0.92 $ 2.45 $ (0.15)
============= ============= ============= =============
Weighted average number of common and common equivalent
shares outstanding in per share calculation
Basic................................................. 21.7 20.7 21.3 20.6
Diluted............................................... 23.4 22.4 23.0 22.3
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
1999 1998
--------- ----------
ASSETS
Current assets
Cash and cash equivalents.......................... $ 104.7 $ 25.1
Trade receivables (net of allowance of
$5.1 at June 30, 1999 and
$5.6 at December 31, 1998)....................... 373.4 249.8
Net inventories.................................... 482.3 472.8
Other current assets............................... 30.0 23.9
---------- ----------
Total current assets........................... 990.4 771.6
Long-term assets
Property, plant and equipment - net................ 97.5 99.5
Goodwill - net..................................... 270.5 240.9
Other assets - net................................. 32.0 39.2
---------- ----------
Total assets............................................ $ 1,390.4 $ 1,151.2
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current portion of long-term debt $ 27.9 $ 44.7
Trade accounts payable............................. 275.1 226.9
Accrued compensation and benefits.................. 24.2 24.7
Accrued warranties and product liability........... 37.4 36.0
Other current liabilities.......................... 105.5 93.1
---------- ----------
Total current liabilities...................... 470.1 425.4
Non-current liabilities
Long-term debt, less current portion............... 639.5 586.6
Other.............................................. 39.3 41.1
Commitments and contingencies
Stockholders' equity
Warrants to purchase common stock.................. 0.8 0.8
Equity rights...................................... 3.1 3.1
Common stock, $.01 par value - authorized
150.0 shares; issued and outstanding
24.9 and 20.8 at June 30, 1999 and
December 31, 1998, respectively............... 0.2 0.2
Additional paid-in capital......................... 293.3 179.0
Accumulated deficit................................ (24.5) (80.9)
Accumulated other comprehensive income............. (31.4) (4.1)
---------- ----------
Total stockholders' equity..................... 241.5 98.1
---------- ----------
Total liabilities and stockholders' equity.............. $ 1,390.4 $ 1,151.2
========== ==========
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------------
1999 1998
---------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss).............................................................. $ 56.4 $ (3.3)
Adjustments to reconcile net income to cash used in operating activities:
Depreciation.............................................................. 6.3 5.1
Amortization.............................................................. 5.5 2.9
Extraordinary loss on retirement of debt.................................. --- 38.3
Changes in operating assets and liabilities (net of effects of
acquisitions):
Trade receivables....................................................... (137.5) (63.8)
Net inventories......................................................... (26.2) (27.3)
Trade accounts payable.................................................. 53.1 28.0
Other, net.............................................................. 2.8 5.0
-------------- -------------
Net cash used in operating activities................................ (39.6) (15.1)
-------------- -------------
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired................................ (21.3) (176.1)
Capital expenditures........................................................... (8.9) (6.3)
Proceeds from sale of excess assets............................................ 2.4 1.9
-------------- -------------
Net cash used in investing activities................................ (27.8) (180.5)
-------------- -------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock......................................... 103.6 ---
Proceeds from issuance of long-term debt, net of issuance costs................ 94.9 508.6
Principal repayments of long-term debt......................................... (32.1) (169.8)
Net incremental borrowings (repayments) under revolving line of credit
agreements.................................................................... (24.6) (82.2)
Payment of premiums on early extinguishment of debt............................ --- (29.0)
Other.......................................................................... 4.9 (1.8)
-------------- -------------
Net cash provided by financing activities............................ 146.7 225.8
-------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS...................................................... 0.3 (1.3)
-------------- -------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS............................................................... 79.6 28.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................. 25.1 28.7
============== =============
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................................ $ 104.7 $ 57.6
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE>
TEREX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(in millions, unless otherwise noted)
NOTE A -- BASIS OF PRESENTATION
Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements of Terex Corporation and subsidiaries as of June 30, 1999
and for the three months and six months ended June 30, 1999 and 1998 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles to be included in
full year financial statements. The accompanying condensed consolidated balance
sheet as of December 31, 1998 has been derived from the audited consolidated
balance sheet as of that date.
The condensed consolidated financial statements include the accounts of Terex
Corporation and its majority owned subsidiaries ("Terex" or the "Company"). All
material intercompany balances, transactions and profits have been eliminated.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a normal
recurring nature. Operating results for the three months and six months ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes a new model for
accounting for derivative and hedging activities and supersedes and amends a
number of existing standards. Upon initial application, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. In addition, all
hedging relationships must be reassessed and documented pursuant to the
provisions of SFAS No. 133. In June 1999, the Financial Accounting Standards
Board delayed the effective date of SFAS No. 133 by one year so that it would be
effective for fiscal years beginning after June 15, 2000. The Company does not
expect adoption of this statement to have a significant impact on its financial
position or results of operations.
NOTE B - INVENTORIES
Net inventories consist of the following:
June 30, December 31,
1999 1998
----------------- ----------------
Finished equipment......................... $ 129.6 $ 148.9
Replacement parts.......................... 180.2 150.9
Work-in-process............................ 68.3 59.4
Raw materials and supplies................. 104.2 113.6
---------------- ----------------
Net inventories............................ $ 482.3 $ 472.8
================ ================
Page 6
<PAGE>
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following:
June 30, December 31,
1999 1998
----------------- -----------------
Property................................... $ 8.6 $ 13.6
Plant...................................... 48.7 44.6
Equipment.................................. 90.9 90.8
---------------- -----------------
148.2 149.0
Less: Accumulated depreciation............ (50.7) (49.5)
================ =================
Net property, plant and equipment.......... $ 97.5 $ 99.5
================ =================
NOTE D - LONG-TERM DEBT AND STOCKHOLDERS' EQUITY
On March 9, 1999, Company issued and sold $100.0 aggregate principal amount of
8-7/8 % Series C Senior Subordinated Notes due 2008 (the "1999 Senior
Subordinated Notes"). The 1999 Senior Subordinated Notes were issued at a
discount with the Company receiving net proceeds of $94.9. The 1999 Senior
Subordinated Notes are jointly and severally guaranteed by certain domestic
subsidiaries (see Note I). The 1999 Senior Subordinated Notes were issued in a
private placement made in reliance upon an exemption from registration under the
Securities Act of 1933, as amended. The net proceeds from the offering were used
to repay a portion of the outstanding indebtedness under Terex's credit
facilities and for acquisitions.
NOTE E - EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30,
(in millions, except per share data)
-------------------------------------------------------------------------
1999 1998
------------------------------------ ------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------------ ----------- ----------- ----------- ----------- ----------
Basic earnings per share
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary items...... $ 30.4 21.7 $ 1.40 $ 20.6 20.7 $ 1.00
Effect of dilutive securities
Warrants..............................s --- 0.1 --- 0.1
Stock Options.......................... --- 0.9 --- 0.8
Equity Rights.......................... --- 0.7 --- 0.8
------------ ----------- -------- -----------
Income available to common
Stockholders - diluted.................. $ 30.4 23.4 $ 1.30 $ 20.6 22.4 $ 0.92
============ =========== =========== ========== ============= ===========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
(in millions, except per share data)
-------------------------------------------------------------------------
1999 1998
------------------------------------ ------------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------------ ----------- ----------- ----------- ----------- ----------
Basic earnings per share
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary items...... $ 56.4 21.3 $ 2.65 $ 35.0 20.6 $ 1.70
Effect of dilutive securities
Warrants..............................s --- 0.1 --- 0.2
Stock Options.......................... --- 0.9 --- 0.8
Equity Rights.......................... --- 0.7 --- 0.7
------------ ----------- -------- -----------
Income available to common
Stockholders - diluted.................. $ 56.4 23.0 $ 2.45 $ 35.0 22.3 $ 1.57
</TABLE>
Page 7
<PAGE>
NOTE F - COMPREHENSIVE INCOME
Total non-shareowner changes in equity (comprehensive income) include all
changes in equity during a period except those resulting from investments by,
and distributions to, shareowners. The specific components include: net income,
deferred gains and losses resulting from foreign currency translation, and
minimum pension liability adjustments. For the three months ended June 30, 1999
and June 30, 1998 and the six months ended June 30, 1999 and 1998, total
comprehensive income was $16.1 and $17.8, $29.1 and $(14.1), respectively.
NOTE G -- LITIGATION AND CONTINGENCIES
The Company is subject to a number of contingencies and uncertainties including
product liability claims, self-insurance obligations, tax examinations and
guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, management does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
adverse effect on the Company. When it is probable that a loss has been or will
be incurred and possible to make reasonable estimates of the Company's liability
with respect to such matters, a provision is recorded for the amount of such
estimate or for the minimum amount of a range of estimates when it is not
possible to estimate the amount within the range that is most likely to occur.
The Company generates hazardous and nonhazardous wastes in the normal course of
its operations. As a result, the Company is subject to a wide range of federal,
state, local and foreign environmental laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act ("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 nonhazardous wastes, and (ii) impose liability for
the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances. Compliance with
such laws and regulations has, and will, require expenditures by the Company on
a continuing basis.
The Company's federal income tax returns for the years 1987 through 1989 are
currently being audited by the Internal Revenue Service (the "IRS"). In December
1994, the Company 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 the Company was able
to use certain net operating loss carryovers ("NOLs") to offset taxable income.
In April 1995, the Company filed an administrative appeal to the examination
report. The IRS is currently reviewing information the Company 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 the Company
would have to pay would be approximately $56 million plus penalties of
approximately $12.8 million and interest through June 30, 1999 of approximately
$120.9 million. The penalties claimed by the IRS are between 20% and 25% of the
amount of the tax deficiency assessed against the Company. Interest on the
amount of tax deficiency and penalties assessed against the Company is currently
accruing at a rate of 10% per annum. If the Company is required to pay a
significant portion of the tax deficiency claimed by the IRS, it may not have or
be able to obtain the money necessary to pay the tax deficiency and continue in
business.
The Company believes that it is able to provide adequate documentation for a
large part of the tax deductions the IRS has disallowed. In addition, the IRS
has advised the Company that it is no longer challenging the Company's right to
use the NOLs in question. As a result, the Company does not believe that the
outcome of the audit will have a material adverse effect on its financial
condition or results of operations. However, the Company may lose or have to use
some of its NOLs as a result of the audit. In addition, there is also a
possibility that the Company 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, the Company does
not have any additional reserves for amounts which might be due as a result of
the audit because the loss ranges from zero to $56 million plus interest and
penalties.
Page 8
<PAGE>
NOTE H - BUSINESS SEGMENT INFORMATION
The Company operates in two industry segments: Terex Lifting and Terex
Earthmoving. Industry segment information is presented below:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
-------------- ------------- ------------- -------------
Sales
<S> <C> <C> <C> <C>
Terex Lifting...................................... $ 263.0 $ 191.2 $ 504.4 $ 373.7
Terex Earthmoving.................................. 174.6 140.8 355.3 217.4
General/Corporate/Eliminations..................... 10.5 1.5 11.7 3.0
-------------- ------------- ------------- -------------
Total............................................ $ 448.1 $ 333.5 $ 871.4 $ 594.1
============== ============= ============= =============
Income (Loss) from Operations
Terex Lifting...................................... $ 28.2 $ 21.5 $ 52.7 $ 39.9
Terex Earthmoving.................................. 19.0 12.0 36.5 18.6
General/Corporate/Eliminations..................... (0.2) (0.3) (1.7) (1.5)
-------------- ------------- ------------- -------------
Total............................................ $ 47.0 $ 33.2 $ 87.5 $ 57.0
============== ============= ============= =============
</TABLE>
NOTE I -- CONSOLIDATING FINANCIAL STATEMENTS
On March 31, 1998, the Company issued and sold $150.0 aggregate principal amount
of 8-7/8% Senior Subordinated Notes due 2008 (the "1998 Senior Subordinated
Notes"). On March 9, 1999, the Company issued and sold $100.0 aggregate
principal amount of the 1999 Senior Subordinated Notes. The 1998 Senior
Subordinated Notes and the 1999 Senior Subordinated Notes are each jointly and
severally guaranteed by the following wholly-owned subsidiaries of the Company
(the "Wholly-owned Guarantors"): Terex Cranes, Inc., Koehring Cranes, Inc.,
Terex-Telelect, Inc., Terex-RO Corporation, Terex Aerials, Inc., Terex Mining
Equipment, Inc., Payhauler Corp., O & K Orenstein & Koppel, Inc., The American
Crane Corporation and Amida Industries, Inc. The financial results of O & K
Orenstein & Koppel, Inc., The American Crane Corporation and Amida Industries,
Inc. are included in the results of the Wholly-owned Guarantors since March 31,
1998, July 31, 1998 and April 1, 1999, their respective dates of acquisition.
The 1998 Senior Subordinated Notes and the 1999 Senior Subordinated Notes are
each also jointly and severally guaranteed by PPM Cranes, Inc., which is 92.4%
owned by Terex.
The following subsidiaries of the Company have not provided a guarantee of
either the 1998 Senior Subordinated Notes nor the 1999 Senior Subordinated
Notes: Terex Equipment Limited, Unit Rig Australia (Pty) Ltd., Unit Rig South
Africa (Pty) Ltd., Unit Rig (Canada) Ltd., PPM S.A., PPM S.p.A., Brimont
Agraire, PPM Deutschland GmbH, PPM of Australia Pty Ltd., PPM Far East Private
Ltd, Terex Aerials Limited, Terex Italia, S.r.l., Sim-Tech Management Limited,
Simon-Tomen Engineering Company Limited, O&K Mining GmbH, Holland Lift
International B.V., American Crane International B.V., Italmacchine S.r.l.,
Terex-Peiner GmbH and Gru Comedil S.p.A. (collectively, the "Non-guarantor
Subsidiaries"). The financial results of O & K Mining GmbH, Holland Lift
International B.V., American Crane International B.V., Italmacchine S.r.l.,
Terex-Peiner GmbH and Gru Comedil S.p.A. are included in the results of the
Non-guarantor Subsidiaries since March 31, 1998, May 4, 1998, July 31, 1998,
November 3, 1998, November 13, 1998 and December 18, 1998, their respective
dates of acquisition.
The following summarized condensed consolidating financial information for the
Company segregates the financial information of Terex Corporation, the
Wholly-owned Guarantors, PPM Cranes, Inc. and the Non-guarantor Subsidiaries.
Terex Corporation consists of parent company operations. Subsidiaries of the
parent company are reported on the equity basis.
Wholly-owned Guarantors combine the operations of the Wholly-owned Guarantor
subsidiaries. Subsidiaries of Wholly-owned Guarantors that are not themselves
guarantors are reported on the equity basis.
PPM Cranes, Inc. consists of the operations of PPM Cranes, Inc. Its subsidiaries
(PPM of Australia Pty Ltd and PPM Far East Private Ltd) are reported on an
equity basis.
Non-guarantor Subsidiaries combine the operations of subsidiaries which have not
provided a guarantee of the obligations of Terex Corporation under the 1998
Senior Subordinated Notes and the 1999 Senior Subordinated Notes.
Debt and Goodwill allocated to subsidiaries is presented on an accounting
"push-down" basis.
Page 9
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 126.3 $ 160.5 $ 20.2 $ 202.4 $ (61.3) $ 448.1
Cost of goods sold................... 109.1 134.3 17.6 169.7 (59.3) 371.4
------------- ------------- ------------- ------------ ------------- -------------
Gross profit............................ 17.2 26.2 2.6 32.7 (2.0) 76.7
Selling, general & administrative 6.7 5.8 1.8 15.4 --- 29.7
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 10.5 20.4 0.8 17.3 (2.0) 47.0
Interest income....................... 0.2 0.1 --- 0.4 --- 0.7
Interest expense...................... (5.0) (1.8) (1.0) (7.8) --- (15.6)
Income (loss) from equity investees... 24.8 (1.6) 0.1 (0.6) (22.7) ---
Other income (expense) - net.......... 0.2 (0.3) --- (0.9) --- (1.0)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 30.7 16.8 (0.1) 8.4 (24.7) 31.1
Provision for income taxes............ (0.3) --- --- (0.4) --- (0.7)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 30.4 16.8 (0.1) 8.0 (24.7) 30.4
Extraordinary loss on retirement of debt --- --- --- --- --- ---
============= ============= ============= ============= ============= =============
Net income (loss)....................... $ 30.4 $ 16.8 $ (0.1) $ 8.0 $ (24.7) $ 30.4
============= ============= ============= ============= ============= =============
</TABLE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 65.0 $ 107.2 $ 23.3 $ 196.2 $ (58.2) $ 333.5
Cost of goods sold................... 54.6 87.0 20.7 167.5 (56.9) 272.9
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 10.4 20.2 2.6 28.7 (1.3) 60.6
Selling, general & administrative 4.9 5.7 0.9 15.9 --- 27.4
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 5.5 14.5 1.7 12.8 (1.3) 33.2
Interest income....................... 0.5 --- --- 0.2 --- 0.7
Interest expense...................... (5.5) (1.9) (1.3) (3.5) --- (12.2)
Income (loss) from equity investees... 20.6 3.5 0.1 --- (24.2) ---
Other income (expense) - net.......... (0.4) --- --- (0.3) --- (0.7)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 20.7 16.1 0.5 9.2 (25.5) 21.0
Provision for income taxes............ (0.1) --- --- (0.3) --- (0.4)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 20.6 16.1 0.5 8.9 (25.5) 20.6
Extraordinary loss on retirement of debt --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 20.6 $ 16.1 $ 0.5 $ 8.9 $ (25.5) $ 20.6
============= ============= ============= ============= ============= =============
</TABLE>
Page 10
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 238.6 $ 293.5 $ 39.2 $ 379.8 $ (79.7) $ 871.4
Cost of goods sold................... 207.8 245.4 34.7 312.4 (76.5) 723.8
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 30.8 48.1 4.5 67.4 (3.2) 147.6
Selling, general & administrative 13.3 11.8 2.7 32.3 --- 60.1
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 17.5 36.3 1.8 35.1 (3.2) 87.5
Interest income....................... 0.4 0.1 --- 0.7 --- 1.2
Interest expense...................... (7.9) (3.7) (2.2) (15.1) --- (28.9)
Income (loss) from equity investees... 47.1 (0.6) 0.2 (0.6) (46.1) ---
Other income (expense) - net.......... --- (0.6) (0.1) (1.2) --- (1.9)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 57.1 31.5 (0.3) 18.9 (49.3) 57.9
Provision for income taxes............ (0.7) 0.1 --- (0.9) --- (1.5)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 56.4 31.6 (0.3) 18.0 (49.3) 56.4
Extraordinary loss on retirement of debt --- --- --- --- --- ---
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ 56.4 $ 31.6 $ (0.3) $ 18.0 $ (49.3) $ 56.4
============= ============= ============= ============= ============= =============
</TABLE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 107.5 $ 220.5 $ 48.2 $ 309.6 $ (91.7) $ 594.1
Cost of goods sold................... 90.8 179.4 43.1 264.9 (89.5) 488.7
------------- ------------- ------------- ------------- ------------- -------------
Gross profit............................ 16.7 41.1 5.1 44.7 (2.2) 105.4
Selling, general & administrative 9.5 12.7 1.7 24.5 --- 48.4
expenses
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) from operations........... 7.2 28.4 3.4 20.2 (2.2) 57.0
Interest income....................... 0.5 --- --- 0.3 --- 0.8
Interest expense...................... (7.6) (4.1) (2.9) (6.4) --- (21.0)
Income (loss) from equity investees... 6.0 6.9 (0.2) --- (12.7) ---
Other income (expense) - net.......... (0.8) --- (0.1) (0.3) --- (1.2)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes and
extraordinary items................... 5.3 31.2 0.2 13.8 (14.9) 35.6
Provision for income taxes............ (0.1) --- --- (0.5) --- (0.6)
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items 5.2 31.2 0.2 13.3 (14.9) 35.0
Extraordinary loss on retirement of debt (8.5) (5.0) (10.4) (14.4) --- (38.3)
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)....................... $ (3.3) $ 26.2 $ (10.2) $ (1.1) $ (14.9) $ (3.3)
============= ============= ============= ============= ============= =============
</TABLE>
Page 11
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 1999
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- -------------- ------------- ------------ ------------- --------------
Assets
Current assets
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.......... $ 88.1 $ 1.4 $ 0.1 $ 15.1 $ --- $ 104.7
Trade receivables - net............ 72.1 105.4 21.0 174.9 --- 373.4
Intercompany receivables........... 6.6 21.9 18.1 42.1 (88.7) ---
Net inventories.................... 135.8 104.7 19.3 228.8 (6.3) 482.3
Other current assets............... 4.6 2.9 --- 22.5 --- 30.0
------------- ------------- ------------- ------------ ------------- -------------
Total current assets............. 307.2 236.3 58.5 483.4 (95.0) 990.4
Long-term assets
Property, plant & equipment - net.. 11.2 28.6 0.2 57.5 --- 97.5
Investment in and advances
to (from) subsidiaries........... 181.6 (139.7) (22.7) (59.9) 40.7 ---
Goodwill - net..................... 40.9 103.0 12.5 114.1 --- 270.5
Other assets - net................. 6.0 12.7 1.1 12.2 --- 32.0
------------- ------------- ------------- ------------ ------------- -------------
Total assets............................ $ 546.9 $ 240.9 $ 49.6 $ 607.3 $ (54.3) $ 1,390.4
============= ============= ============= ============ ============= =============
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 5.3 $ 3.3 $ 0.8 $ 18.5 $ --- $ 27.9
Trade accounts payable............. 49.8 59.9 10.0 155.4 --- 275.1
Intercompany payables.............. 22.5 20.5 2.5 43.2 (88.7) ---
Accruals and other current 58.1 16.2 8.2 84.6 --- 167.1
liabilities......................
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities........ 135.7 99.9 21.5 301.7 (88.7) 470.1
Non-current liabilities
Long-term debt less current portion 156.1 100.1 59.6 323.7 --- 639.5
Other long-term liabilities........ 13.6 10.3 0.6 14.8 --- 39.3
Stockholders' equity (deficit)....... 241.5 30.6 (32.1) (32.9) 34.4 241.5
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 546.9 $ 240.9 $ 49.6 $ 607.3 $ (54.3) $ 1,390.4
============= ============= ============= ============= ============= =============
</TABLE>
Page 12
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- -------------- -------------
Assets
Current assets
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.......... $ 9.3 $ 0.5 $ 0.1 $ 15.2 $ --- $ 25.1
Trade receivables - net............ 19.7 51.9 18.0 160.2 --- 249.8
Intercompany receivables........... 7.0 16.9 12.8 96.5 (133.2) ---
Inventories - net.................. 113.9 101.1 30.0 235.2 (7.4) 472.8
Other current assets............... 4.8 4.1 0.1 14.9 --- 23.9
------------- ------------- ------------- ------------ ------------- -------------
Total current assets............. 154.7 174.5 61.0 522.0 (140.6) 771.6
Property, plant & equipment - net.... 10.8 28.4 --- 60.3 --- 99.5
Investment in and advances to
(from) subsidiaries.............. 75.2 (92.7) (1.4) (49.0) 67.9 ---
Goodwill - net....................... 30.3 80.4 13.7 116.5 --- 240.9
Other assets - net................... 9.9 12.7 1.3 15.3 --- 39.2
------------- ------------- ------------- ------------ ------------- -------------
Total assets............................ $ 280.9 $ 203.3 $ 74.6 $ 665.1 $ (72.7) $ 1,151.2
============= ============= ============= ============ ============= =============
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities
Notes payable and current portion
of long-term debt................ $ 13.5 $ 3.4 $ 0.8 $ 27.0 $ --- $ 44.7
Trade accounts payable............. 29.4 53.7 8.4 135.4 --- 226.9
Intercompany payables.............. 13.1 15.2 26.5 78.4 (133.2) ---
Accruals and other current 44.8 22.6 9.3 77.1 --- 153.8
liabilities......................
------------- ------------- ------------- ------------ ------------- -------------
Total current liabilities........ 100.8 94.9 45.0 317.9 (133.2) 425.4
Non-current liabilities
Long-term debt less current 69.9 100.1 60.8 355.8 --- 586.6
portion..........................
Other long-term liabilities...... 12.1 9.3 0.6 19.1 --- 41.1
Stockholders' equity (deficit)....... 98.1 (1.0) (31.8) (27.7) 60.5 98.1
------------- ------------- ------------- ------------ ------------- -------------
Total liabilities and stockholders'
equity (deficit)..................... $ 280.9 $ 203.3 $ 74.6 $ 665.1 $ (72.7) $ 1,151.2
============= ============= ============= ============ ============= =============
</TABLE>
Page 13
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------ -----------------------------
Net cash provided by (used in)
<S> <C> <C> <C> <C> <C> <C>
operating activities................. $ (78.5) $ (0.5) $ 0.2 $ 39.2 $ --- $ (39.6)
------------- ------------- ------------- ------------ ------------- -------------
Cash flows from investing activities
Acquisition of businesses, net of
cash acquired...................... (21.3) --- --- --- --- (21.3)
Capital expenditures................. (2.3) (0.9) (0.2) (5.5) --- (8.9)
Proceeds from sale of excess assets.. 0.1 2.0 --- 0.3 --- 2.4
------------- ------------- ------------- ------------ ------------- -------------
Net cash provided by (used in)
investing activities.............. (23.5) 1.1 (0.2) (5.2) --- (27.8)
------------- ------------- ------------- ------------ ------------- -------------
Cash flows from financing activities
Proceeds from issuance of common stock 103.6 --- --- --- --- 103.6
Proceeds from issuance of long-term
debt, net of issuance costs....... 94.9 --- --- --- --- 94.9
Principal repayments of long-term debt (17.7) (0.2) --- (14.2) --- (32.1)
Net incremental borrowings
(repayments) under
revolving line of credit agreements --- --- --- (24.6) --- (24.6)
Payment of premiums on early
extinguishment of debt............. --- --- --- --- --- ---
Other................................ --- 0.5 --- 4.4 --- 4.9
------------- ------------- ------------- ------------ ------------- -------------
Net cash provided by (used in)
financing activities............. 180.8 0.3 --- (34.4) --- 146.7
------------- ------------- ------------- ------------ ------------- -------------
Effect of exchange rates on cash and
cash equivalents..................... --- --- --- 0.3 --- 0.3
------------- ------------- ------------- ------------ ------------- -------------
Net increase (decrease) in cash and cash
equivalents.......................... 78.8 0.9 --- (0.1) --- 79.6
Cash and cash equivalents, beginning of
period............................... 9.3 0.5 0.1 15.2 --- 25.1
============= ============= ============= ============ ============= =============
Cash and cash equivalents,
end of period........................ $ 88.1 $ 1.4 $ 0.1 $ 15.1 $ --- $ 104.7
============= ============= ============= ============ ============= =============
</TABLE>
Page 14
<PAGE>
TEREX CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998
(in millions)
<TABLE>
<CAPTION>
Wholly- Non-
Terex owned PPM Guarantor Intercompany
Corporation Guarantors Cranes, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
<S> <C> <C> <C> <C> <C> <C>
operating activities................. $ 15.6 $ 2.6 $ (2.0) $ (31.3) $ --- $ (15.1)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from investing activities
Acquisition of businesses, net of
cash acquired...................... (176.1) --- --- --- --- (176.1)
Capital expenditures................. (0.5) (2.5) (0.1) (3.2) --- (6.3)
Proceeds from sale of excess assets.. --- 1.9 --- --- --- 1.9
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities.............. (176.6) (0.6) (0.1) (3.2) --- (180.5)
------------- ------------- ------------- ------------- ------------- -------------
Cash flows from financing activities
Proceeds from issuance of common stock --- --- --- --- --- ---
Proceeds from issuance of long-term
debt, net of issuance costs....... 254.4 85.8 58.6 109.8 --- 508.6
Principal repayments of long-term debt (38.3) (20.1) (47.9) (63.5) --- (169.8)
Net incremental borrowings
(repayments) under
revolving line of credit agreements (17.6) (64.1) --- (0.5) --- (82.2)
Payment of premiums on early
extinguishment of debt............. (6.0) (3.7) (8.6) (10.7) --- (29.0)
Other................................ --- --- --- (1.8) --- (1.8)
------------- ------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
financing activities............. 192.5 (2.1) 2.1 33.3 --- 225.8
------------- ------------- ------------- ------------- ------------- -------------
Effect of exchange rates on cash and
cash equivalents..................... (0.4) 0.5 --- (1.4) --- (1.3)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents.......................... 31.1 0.4 --- (2.6) --- 28.9
Cash and cash equivalents, beginning of
period............................... 5.6 0.1 --- 23.0 --- 28.7
============= ============= ============= ============= ============= =============
Cash and cash equivalents,
end of period........................ $ 36.7 $ 0.5 $ --- $ 20.4 $ --- $ 57.6
============= ============= ============= ============= ============= =============
</TABLE>
Page 15
<PAGE>
NOTE J - SUBSEQUENT EVENTS
The Company announced on June 15, 1999 an offer to acquire all of the issued and
to be issued share capital of Powerscreen International plc ("Powerscreen").
Powerscreen, headquartered in Dungannon, Northern Ireland, is a manufacturer and
marketer of screening and crushing equipment for the quarrying, construction and
demolition industries. The purchase price of GBP 181 (approximately $294) will
be financed with a $325 loan under a bank credit facility maturing March 2006.
This loan currently bears interest, at the Company's option, at a rate of 3.00%
per annum in excess of the adjusted Eurodollar rate or 2.00% in excess of the
prime rate. As of August 6, 1999, Terex owned over 80% of Powerscreen's issued
share capital and had taken management and operational control of Powerscreen.
On July 20, 1999, the Company announced that it has signed a definitive
agreement to acquire Cedarapids, Inc. ("Cedarapids") for $170. Cedarapids,
headquartered in Cedar Rapids, Iowa, is a manufacturer of mobile crushing and
screening equipment, asphalt pavers and asphalt material mixing plants. The
acquisition is expected to be financed through cash on hand and approximately
$100-125 in additional debt under a bank credit facility.
On July 28, 1999, the Company issued 2 million shares of common stock. The
shares were sold in a transaction initiated by Wellington Management Company,
LLP on behalf of one of its funds. The net proceeds to the Company totaled
$59.1.
Page 16
<PAGE>
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months
June 30, Ended June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales............................................$ 22.3 $ 24.4 $ 43.3 $ 53.3
Cost of goods sold................................... 19.3 21.4 38.1 47.1
------------- ------------- ------------- --------------
Gross profit.................................... 3.0 3.0 5.2 6.2
Engineering, selling and administrative expenses..... 2.1 1.2 3.2 2.3
------------- ------------- ------------- --------------
Income from operations.......................... 0.9 1.8 2.0 3.9
Other income (expense):
Interest expense................................ (1.0) (1.2) (2.2) (3.0)
Amortization of debt issuance costs............. --- (0.1) (0.1) (0.2)
------------- ------------- ------------- --------------
Income (loss) before income taxes and extraordinary
items.............................................. (0.1) 0.5 (0.3) 0.7
Provision for income taxes........................... --- --- --- ---
------------- ------------- ------------- --------------
Income (loss) before extraordinary items............. (0.1) 0.5 (0.3) 0.7
Extraordinary loss on retirement of debt............. --- --- --- (10.9)
------------- ------------- ------------- --------------
Net income (loss)....................................$ (0.1) $ 0.5 $ (0.3) $ (10.2)
============= ============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 17
<PAGE>
PPM CRANES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents........................................... $ 0.3 $ 0.2
Trade accounts receivables (net of allowance of $0.6 at June 30,
1999 and $0.8 at December 31, 1998)............................... 22.3 19.3
Net inventories..................................................... 23.0 30.4
Due from affiliates................................................. 18.5 15.1
Prepaid expenses and other current assets........................... 0.1 0.1
---------------- -----------------
Total current assets.............................................. 64.2 65.1
Property, plant and equipment - net................................. 0.2 ---
Goodwill - net...................................................... 13.8 14.4
Other assets - net.................................................. 1.1 1.3
---------------- -----------------
Total assets........................................................... $ 79.3 $ 80.8
================ =================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable.............................................. $ 10.1 $ 10.6
Accrued warranties and product liability............................ 7.0 8.0
Accrued expenses.................................................... 1.3 1.8
Due to affiliates................................................... 5.2 26.4
Due to Terex Corporation............................................ 22.4 0.3
Current portion of long-term debt................................... 1.1 0.8
---------------- -----------------
Total current liabilities......................................... 47.1 47.9
---------------- -----------------
Non-current liabilities:
Long-term debt, less current portion................................ 63.3 63.9
Other non-current liabilities....................................... 0.9 0.8
---------------- -----------------
Total non-current liabilities..................................... 64.2 64.7
---------------- -----------------
Commitments and contingencies
Shareholders' deficit
Common stock, Class A, $.01 par value -
authorized 8,000 shares; issued and outstanding 5,000 shares...... --- ---
Common stock, Class B, $.01 par value -
authorized 2,000 shares; issued and outstanding 413 shares........ --- ---
Accumulated deficit................................................. (32.0) (31.7)
Foreign currency translation adjustment............................. --- (0.1)
---------------- -----------------
Total shareholders' deficit....................................... (32.0) (31.8)
---------------- -----------------
Total liabilities and shareholders' deficit............................ $ 79.3 $ 80.8
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 18
<PAGE>
PPM CRANES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
--------------------------
1999 1998
------------- ------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss..................................................................... $ (0.3) $ (10.2)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization............................................ 0.7 1.0
Extraordinary loss on retirement of debt................................. --- 10.9
Other.................................................................... --- 0.2
Changes in operating assets and liabilities:
Trade accounts receivable.............................................. (3.0) (1.7)
Net inventories........................................................ 7.4 1.0
Trade accounts payable................................................. (0.5) 1.6
Net amounts due to affiliates.......................................... (2.5) (0.9)
Other, net............................................................. (0.9) (0.9)
------------- --------------
Net cash provided by operating activities............................ 0.9 1.0
------------- --------------
INVESTING ACTIVITIES
Capital expenditures......................................................... (0.2) (0.1)
------------- --------------
------------- --------------
Net cash used in investing activities...................................... (0.2) (0.1)
------------- --------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net of issuance costs.............. --- 60.0
Net repayments under revolving line of credit agreements..................... --- (0.2)
Principal repayments of long-term debt....................................... (0.6) (50.8)
Payment of premiums on early extinguishment of debt.......................... --- (8.6)
Other........................................................................ --- (1.5)
------------- --------------
Net cash used in financing activities...................................... (0.6) (1.1)
------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS.................................................... --- 0.4
------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS....................................... 0.1 0.2
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................ 0.2 0.2
------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 0.3 $ 0.4
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 19
<PAGE>
PPM CRANES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(in millions unless otherwise noted)
NOTE 1 -- Description of the Business and Basis of Presentation
PPM Cranes, Inc. (sometimes referred to as Terex Cranes - Conway Operations)
(the "Company" or "PPM") is engaged in the design, manufacture, marketing and
worldwide distribution and support of construction equipment, primarily
hydraulic cranes and related spare parts.
On May 9, 1995 (the "date of acquisition"), Terex Corporation, through its
wholly-owned subsidiary Terex Cranes, Inc., a Delaware corporation, completed
the acquisition of all of the capital stock of Legris Industries, Inc., a
Delaware corporation, which then owned 92.4% of the capital stock of PPM.
The condensed consolidated financial statements reflect Terex Corporation's
basis in the assets and liabilities of the Company which was accounted for as a
purchase transaction. As a result, the debt and goodwill associated with the
acquisition have been "pushed down" to the Company's financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist only of those of a normal
recurring nature. Operating results for the three months and six months ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999. For further information, refer to the
Company's consolidated financial statements and footnotes thereto for the year
ended December 31, 1998.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All material intercompany
transactions and profits have been eliminated.
NOTE 2 -- Inventories
Net inventories consist of the following:
June 30, December 31,
1999 1998
----------------- ----------------
Finished equipment........................ $ 5.2 $ 9.3
Replacement parts......................... 7.7 9.1
Work-in-process........................... 1.9 1.6
Raw materials and supplies................ 8.2 10.4
================ =================
$ 23.0 $ 30.4
================ =================
note 3 -- Property, Plant and Equipment
Net property, plant and equipment consists of the following:
June 30, December 31,
1999 1998
----------------- -----------------
Property, plant and equipment............. $ 0.4 $ 0.2
Less: Accumulated depreciation........... (0.2) (0.2)
================ =================
Net property, plant and equipment......... $ 0.2 $ ---
================ =================
Page 20
<PAGE>
NOTE 4 - COMMITMENTS AND Contingencies
The Company is involved in product liability and other lawsuits incident to the
operation of its business. Insurance with third parties is maintained for
certain of these items. It is management's opinion that none of these lawsuits
will have a materially adverse effect on the Company's financial position.
On March 31, 1998, Terex Corporation issued and sold $150.0 aggregate principal
amount of 8-7/8% Senior Subordinated Notes due 2008, which notes were exchanged
by Terex Corporation for 8-7/8% Senior Subordinated Notes due 2008 registered
under the Securities Act of 1933, as amended (the "1998 Senior Subordinated
Notes"). On March 9, 1999, Terex Corporation issued and sold $100.0 aggregate
principal amount of 8-7/8% Series C Senior Subordinated Notes due 2008 (the
"1999 Senior Subordinated Notes"). The 1998 Senior Subordinated Notes and the
1999 Senior Subordinated Notes are each jointly and severally guaranteed by
certain domestic subsidiaries of Terex Corporation, including PPM.
Page 21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The Company currently operates in two industry segments: Terex Lifting and Terex
Earthmoving.
Three Months Ended June 30, 1999 Compared with the Three Months Ended June 30,
1998
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, and income from operations, by segment, for the three
months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended
June 30, Increase
---------------------------
1999 1998 (Decrease)
------------- ------------- --------------
NET SALES
<S> <C> <C> <C>
Terex Lifting.....................................$ 263.0 $ 191.2 $ 71.8
Terex Earthmoving................................. 174.6 140.8 33.8
General/Corporate/Eliminations.................... 10.5 1.5 9.0
============= ============= ==============
Total...........................................$ 448.1 $ 333.5 $ 114.6
============= ============= ==============
GROSS PROFIT
Terex Lifting.....................................$ 41.8 $ 32.5 $ 9.3
Terex Earthmoving................................. 32.7 27.8 4.9
General/Corporate/Eliminations.................... 2.2 0.3 1.9
============= ============= ==============
Total...........................................$ 76.7 $ 60.6 $ 16.1
============= ============= ==============
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting.....................................$ 13.6 $ 11.0 $ 2.6
Terex Earthmoving................................. 13.7 15.8 (2.1)
General/Corporate/Eliminations.................... 2.4 0.6 1.8
============= ============= ==============
Total...........................................$ 29.7 $ 27.4 $ 2.3
============= ============= ==============
INCOME FROM OPERATIONS
Terex Lifting.....................................$ 28.2 $ 21.5 $ 6.7
Terex Earthmoving................................. 19.0 12.0 7.0
General/Corporate/Eliminations.................... (0.2) (0.3) 0.1
============= ============= ==============
Total...........................................$ 47.0 $ 33.2 $ 13.8
============= ============= ==============
</TABLE>
Net Sales
Sales increased $114.6 million, or approximately 34%, to $448.1 million for the
three months ended June 30, 1999 over the comparable 1998 period. Internally
generated growth represented approximately $65 million of this revenue increase
while the businesses acquired by the Company in 1998 contributed approximately
$50 million.
Terex Lifting's sales were $263.0 million for the three months ended June 30,
1999, an increase of $71.8 million or 38% from $191.2 million for the three
months ended June 30, 1998. The increase in sales was driven by the impact of
businesses acquired in 1998 (approximately $40 million) and continued strong
performances within our crane, European aerial and utility aerial device
businesses. Terex Lifting's backlog was $189.6 million at June 30, 1999 and
$192.9 million at June 30, 1998. Backlog does not include any significant parts
orders which are normally filled in the period ordered. The sales mix was
approximately 9% parts for the three months ended June 30, 1999 compared to
approximately 10% parts for the comparable 1998 period, reflecting an increase
in machine sales.
Page 22
<PAGE>
Terex Earthmoving sales were $174.6 million for the three months ended June 30,
1999, an increase of $33.8 million or 24% from $140.8 million for the three
months ended June 30, 1998. The increase in sales was driven by the continuing
impact of the 160 rigid off-highway haul truck order received from Coal India, a
government agency for coal management in India, and improvements in the Terex
truck business. This increase in sales was somewhat offset by a soft hydraulic
shovel business. Backlog was $165.6 million at June 30, 1999 compared to $61.0
million at June 30, 1998. The sales mix was approximately 26% parts for the
three months ended June 30, 1999 compared to 30% for the comparable 1998 period,
reflecting an increase in machine sales from the Coal India order.
Net sales for General/Corporate in the three months ended June 30, 1999
represent sales from Amida Industries, Inc. ("Amida") of $9.3 million and
service revenues generated by Terex's parts distribution center for services
provided to a third party of $1.2 million. Amida was acquired by Terex on April
1, 1999 and produces light construction equipment consisting of light towers,
concrete products and traffic safety devices. In the comparable 1998 period,
service revenues generated by Terex's parts distribution center were $1.5
million.
Gross Profit
Gross profit for the three months ended June 30, 1999 increased $16.1 million,
or approximately 27%, to $76.7 million as a result of acquisitions and
internally generated growth in both the Terex Lifting and Terex Earthmoving
businesses.
Terex Lifting's gross profit increased $9.3 million to $41.8 million for the
three months ended June 30, 1999, compared to $32.5 million for the three months
ended June 30, 1998. The increase in gross profit was driven by the performance
of businesses acquired in 1998 and internally generated growth. Gross profit as
a percentage of sales decreased to 15.9% from 17.0% in 1998 due primarily to
sales mix and the impact of Terex's North American aerial business, which
reported a deterioration in gross profit margins during the quarter.
Terex Earthmoving's gross profit increased $4.9 million to $32.7 million for the
three months ended June 30, 1999, compared to $27.8 million for the three months
ended June 30, 1998. The increase in gross profit was due to internally
generated growth, primarily the Coal India order. The gross margin percentage
decreased to 18.7% from 19.7% in 1998 driven primarily by sales mix, as machine
sales carry a lower gross margin than part sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $29.7 million for the
three months ended June 30, 1999 from $27.4 million for the three months ended
June 30, 1998, principally reflecting the effect of the businesses acquired in
1998. However, as a percentage of sales, selling, general and administrative
expenses decreased to 6.6% for the three months ended June 30, 1999 as compared
to 8.2% for the three months ended June 30, 1998.
Terex Lifting's selling, general and administrative expenses increased to $13.6
million for the three months ended June 30, 1999 from $11.0 million for the
three months ended June 30, 1998. This increase in selling, general and
administrative expenses was principally due to businesses acquired in 1998. As a
percentage of sales, however, selling, general and administrative expenses for
the period decreased to 5.2% compared to 5.8% in 1998. Excluding businesses
acquired in 1998, selling, general and administrative expenses actually
decreased in both dollars and as a percentage of sales when compared to the
comparable period of the prior year.
Terex Earthmoving's selling, general and administrative expenses decreased to
$13.7 million for the three months ended June 30, 1999 from $15.8 million for
the comparable period in 1998, principally due to the effect of cost containment
in businesses acquired in 1998. As a percentage of sales, selling, general and
administrative expenses decreased to 7.8% for the three months ended June 30,
1999 from 11.2% for the comparable 1998 period.
Income from Operations
On a consolidated basis, the Company had operating income of $47.0 million, or
10.5% of sales, for the three months ended June 30, 1999, compared to operating
income of $33.2 million, or 10.0% of sales, for the three months ended June 30,
1998, for the reasons mentioned above.
Terex Lifting's income from operations of $28.2 million for the three months
ended June 30, 1999 increased by $6.7 million over the three months ended June
30, 1998. The increase was the result of internal growth driven by strong
performances within our crane and utility aerial businesses, continuing cost
control efforts and the impact of businesses acquired in 1998 (approximately $5
million).
Page 23
<PAGE>
Terex Earthmoving's income from operations of $19.0 million for the three months
ended June 30, 1999 increased by $7.0 million over the three months ended June
30, 1998. The increase was related to the continuing impact of the Coal India
order and continued improvements in our manufacturing and selling, general and
administrative costs.
Interest Expense
During the three months ended June 30, 1999, the Company's interest expense
increased $3.4 million to $15.6 million from $12.2 million for the comparable
1998 period. This increase was due to higher debt levels in the three months
ended June 30, 1999 versus the comparable period in 1998.
Six Months Ended June 30, 1999 Compared with Six Months Ended June 30, 1998
The table below is a comparison of net sales, gross profit, selling, general and
administrative expenses, and income from operations, by segment, for the six
months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase
---------------------------
1999 1998 (Decrease)
------------- ------------- --------------
NET SALES
<S> <C> <C> <C>
Terex Lifting.....................................$ 504.4 $ 373.7 $ 130.7
Terex Earthmoving................................. 355.3 217.4 137.9
General/Corporate/Eliminations.................... 11.7 3.0 8.7
============= ============= ==============
Total...........................................$ 871.4 $ 594.1 $ 277.3
============= ============= ==============
GROSS PROFIT
Terex Lifting.....................................$ 81.2 $ 62.6 $ 18.6
Terex Earthmoving................................. 64.4 42.2 22.2
General/Corporate/Eliminations.................... 2.0 0.6 1.4
============= ============= ==============
Total...........................................$ 147.6 $ 105.4 $ 42.2
============= ============= ==============
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Terex Lifting.....................................$ 28.5 $ 22.7 $ 5.8
Terex Earthmoving................................. 27.9 23.6 4.3
General/Corporate/Eliminations.................... 3.7 2.1 1.6
============= ============= ==============
Total...........................................$ 60.1 $ 48.4 $ 11.7
============= ============= ==============
INCOME FROM OPERATIONS
Terex Lifting.....................................$ 52.7 $ 39.9 $ 12.8
Terex Earthmoving................................. 36.5 18.6 17.9
General/Corporate/Eliminations.................... (1.7) (1.5) (0.2)
============= ============= ==============
Total...........................................$ 87.5 $ 57.0 $ 30.5
============= ============= ==============
</TABLE>
Net Sales
Sales increased $277.3 million, or approximately 47%, to $871.4 million for the
six months ended June 30, 1999 over the comparable 1998 period. Internally
generated growth represented approximately $143 million of this revenue increase
while the businesses acquired by the Company in 1998 contributed approximately
$134 million.
Terex Lifting's sales were $504.4 million for the six months ended June 30,
1999, an increase of $130.7 million or 35% from $373.7 million for the six
months ended June 30, 1998. The increase in sales was driven by the impact of
businesses acquired in 1998 (approximately $76 million), and continued strong
performances within our crane, European aerial, and utility aerial device
businesses. The sales mix was approximately 9% parts for the six months ended
June 30, 1999 compared to approximately 10% parts for the comparable 1998
period, reflecting an increase in machine sales.
Page 24
<PAGE>
Terex Earthmoving sales were $355.3 million for the six months ended June 30,
1999, an increase of $137.9 million or 63% from $217.4 million for the six ended
months June 30, 1998. The increase in sales was driven by the impact of the Coal
India order, improvements in the Terex truck business, and the businesses
acquired in 1998 (approximately $49 million). The sales mix was approximately
25% parts for the six months ended June 30, 1999 compared to 30% for the
comparable 1998 period, reflecting the impact of a significant increase in
machine sales.
Net sales for General/Corporate in the six months ended June 30, 1999 represent
sales from Amida, acquired by Terex on April 1, 1999, of $9.3 million and
service revenues generated by Terex's parts distribution center for services
provided to a third party of $2.4 million. In the comparable 1998 period,
service revenues generated by Terex's parts distribution center were $3.0
million.
Gross Profit
Gross profit for the six months ended June 30, 1999 increased $42.2 million, or
approximately 40%, to $147.6 million as a result of acquisitions and internally
generated growth in both the Terex Lifting and Terex Earthmoving businesses.
Terex Lifting's gross profit increased $18.6 million to $81.2 million for the
six months ended June 30, 1999, compared to $62.6 million for the six months
ended June 30, 1998. The increase in gross profit was driven by the performance
of businesses acquired in 1998 and internally generated growth. Gross profit as
a percentage of sales decreased to 16.1% from 16.8% in 1998 due primarily to
sales mix and the impact of Terex's North American aerial business, which
reported a deterioration in gross profit percent during the period.
Terex Earthmoving's gross profit increased $22.2 million to $64.4 million for
the six months ended June 30, 1999, compared to $42.2 million for the six months
ended June 30, 1998. The increase in gross profit was due to the performance of
businesses acquired in 1998 and internally generated growth, primarily the Coal
India order. The gross margin percentage decreased to 18.1% from 19.4% in 1998
driven primarily by a new pricing campaign within the Terex truck product line
implemented in late 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $60.1 million for the
six months ended June 30, 1999 from $48.4 million for the six months ended June
30, 1998, principally reflecting the effect of the businesses acquired in 1998.
However, as a percentage of sales, selling, general and administrative expenses
decreased to 6.9% for the six months ended June 30, 1999 as compared to 8.1% for
the six months ended June 30, 1998.
Terex Lifting's selling, general and administrative expenses increased to $28.5
million for the six months ended June 30, 1999 from $22.7 million for the six
months ended June 30, 1998. This increase in selling, general and administrative
expenses was principally due to businesses acquired in 1998. As a percentage of
sales, however, selling, general and administrative expenses for the period
decreased to 5.7% compared to 6.1% in 1998. Excluding businesses acquired in
1998, selling, general and administrative expenses actually decreased in both
dollars and as a percentage of sales when compared to the comparable period of
the prior year.
Terex Earthmoving's selling, general and administrative expenses increased to
$27.9 million for the six months ended June 30, 1999 from $23.6 million for the
comparable period in 1998. This increase was principally due to business
acquired in 1998. As a percentage of sales, selling, general and administrative
expenses decreased to 7.9% for the six months ended June 30, 1999 from 10.9% for
the comparable 1998 period. Excluding businesses acquired in 1998, selling,
general and administrative expenses actually decreased in both dollars and as a
percentage of sales when compared to the comparable 1998 period.
Income from Operations
On a consolidated basis, the Company had operating income of $87.5 million, or
10.0% of sales, for the six months ended June 30, 1999, compared to operating
income of $57.0 million, or 9.6% of sales, for the six months ended June 30,
1998, for the reasons mentioned above.
Terex Lifting's income from operations of $52.7 million for the six months ended
June 30, 1999 increased by $12.8 million over the six months ended June 30,
1998. The increase was the result of internal growth driven by strong
performances within our crane and utility aerial businesses, continuing cost
control efforts and the impact of businesses acquired in 1998 (approximately $7
million).
Page 25
<PAGE>
Terex Earthmoving's income from operations of $36.5 million for the six months
ended June 30, 1999 increased by $17.9 million over the six months ended June
30, 1998, primarily due to the impact of the Coal India order, businesses
acquired in 1998 (approximately $5 million), and continuing cost control
efforts.
Interest Expense
During the six months ended June 30, 1999, the Company's interest expense
increased $7.9 million to $28.9 million from $21.0 million for the comparable
1998 period. This increase was due to higher debt levels in the six months ended
June 30, 1999 versus the comparable period in 1998.
Extraordinary Items
The Company recorded a charge of $38.3 million in the six months ended June 30,
1998 to recognize a loss on the early extinguishment of debt in connection with
the redemption of certain senior secured notes and the refinancing of the
Company's bank credit facilities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $39.6 million was used by operating activities during the six months
ended June 30, 1999. Operating results before depreciation and amortization
provided $68.2 million, and approximately $108 million was invested in working
capital. The increase in working capital reflects the impact of the Coal India
contract and the general increase in business activity. Net cash used in
investing activities was $27.8 million during the six months ended June 30, 1999
and primarily represents the acquisition of Amida on April 1, 1999 referred to
below. Net cash provided by financing activities of $146.7 million during the
six months ended June 30, 1999 represents the net proceeds from the issuance of
3.5 million shares of common stock ($103.6 million) and the 1999 Senior
Subordinated Notes ($94.9 million), offset by the Company's repayment of
principal under a bank credit facility. Cash and cash equivalents totaled $104.7
million at June 30, 1999.
On April 1, 1999, the Company acquired Amida, a manufacturer of light
construction equipment, principally mobile light towers, concrete screeds,
motorized front dumpers and directional arrow boards, at its facility in Rock
Hill, South Carolina. Since the beginning of 1995, including the acquisition of
Amida, the Company has invested approximately $460 million to strengthen its
core businesses through eleven strategic acquisitions. The Company expects that
acquisitions and new product development will continue to be important
components of its growth strategy and is continually reviewing acquisition
opportunities. Terex will continue to pursue strategic acquisitions which
complement the Company's core operations, offer cost reduction opportunities as
well as distribution and purchasing synergies and provide product
diversification.
In keeping with the Company's acquisition strategy, the Company announced on
June 15, 1999 an offer to acquire all of the issued and to be issued share
capital of Powerscreen International plc ("Powerscreen"). Powerscreen,
headquartered in Dungannon, Northern Ireland, is a manufacturer and marketer of
screening and crushing equipment for the quarrying, construction and demolition
industries. The purchase price of GBP 181 million (approximately $294 million)
will be financed with a $325 million loan under a bank credit facility maturing
March 2006. This loan currently bears interest, at the Company's option, at a
rate of 3.00% per annum in excess of the adjusted Eurodollar rate or 2.00% in
excess of the prime rate. As of August 6, 1999, Terex owned over 80% of
Powerscreen's issued share capital and had taken management and operational
control of Powerscreen.
On July 20, 1999, the Company announced that it has signed a definitive
agreement to acquire Cedarapids, Inc. ("Cedarapids") for $170 million.
Cedarapids, headquartered in Cedar Rapids, Iowa, is a manufacturer of mobile
crushing and screening equipment, asphalt pavers and asphalt material mixing
plants. The acquisition is expected to be financed through cash on hand and
approximately $100-125 million in additional debt under a bank credit facility.
On July 28, 1999, the Company issued an additional 2 million shares of common
stock. The shares were sold in a transaction initiated by Wellington Management
Company, LLP on behalf of one of its funds. The net proceeds to the Company
totaled approximately $59 million.
Debt reduction and an improved capital structure are major focal points for the
Company. In this regard, the Company regularly reviews its alternatives to
improve its capital structure and to reduce debt service through debt
refinancings, issuance of equity, asset sales, including the sale of business
units, or any combination thereof.
Page 26
<PAGE>
The Company's businesses are working capital intensive and require funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities, as well as
financing of receivables from customers and dealers. The Company has significant
debt service requirements including semi-annual interest payments on the 1998
Senior Subordinated Notes and the 1999 Senior Subordinated Notes and monthly
interest payments on the Company's bank credit facilities. Management believes
that cash generated from operations, together with the Company's bank credit
facilities, provides the Company adequate liquidity to meet the Company's
operating and debt service requirements.
CONTINGENCIES AND UNCERTAINTIES
Internal Revenue Service
The Company's federal income tax returns for the years 1987 through 1989 are
currently being audited by the Internal Revenue Service (the "IRS"). In December
1994, the Company 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 the Company was able
to use certain net operating loss carryovers ("NOLs") to offset taxable income.
In April 1995, the Company filed an administrative appeal to the examination
report. The IRS is currently reviewing information the Company 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 the Company
would have to pay would be approximately $56 million plus penalties of
approximately $12.8 million and interest through June 30, 1999 of approximately
$120.9 million. The penalties claimed by the IRS are between 20% and 25% of the
amount of the tax deficiency assessed against the Company. Interest on the
amount of tax deficiency and penalties assessed against the Company is currently
accruing at a rate of 10% per annum. If the Company is required to pay a
significant portion of the tax deficiency claimed by the IRS, it may not have or
be able to obtain the money necessary to pay the tax deficiency and continue in
business.
The Company believes that it is able to provide adequate documentation for a
large part of the tax deductions the IRS has disallowed. In addition, the IRS
has advised the Company that it is no longer challenging the Company's right to
use the NOLs in question. As a result, the Company does not believe that the
outcome of the audit will have a material adverse effect on its financial
condition or results of operations. However, the Company may lose or have to use
some of its NOLs as a result of the audit. In addition, there is also a
possibility that the Company 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, the Company does
not have any additional reserves for amounts which might be due as a result of
the audit because the loss ranges from zero to $56 million plus interest and
penalties.
Year 2000 Issue
The Year 2000 ("Y2K") problem is the result of computer programs being
written using two digits rather than four to define the applicable year. Thus,
the year 1998 is represented by the number "98" in many legacy software
applications. Consequently, on January 1, 2000 the year will jump back to "00"
for many non-Y2K compliant applications. To systems that are non-Y2K compliant,
the time will seem to have reverted back 100 years. Accordingly, when computing
basic lengths of time, computer programs, certain building infrastructure
components (including elevators, alarm systems, telephone networks, sprinkler
systems, security access systems and certain HVAC systems) and any additional
time-sensitive software that are non-Y2K compliant may recognize a date using
"00" as the Year 1900. This could result in system failures or miscalculations
which could cause personal injury, property damage, disruption of operations,
and/or delays in payments from the Company's customers, any or all of which
could materially adversely affect the Company's business, financial condition,
liquidity or results of operations.
The Company has conducted a company-wide assessment of its computer
systems, products and operations infrastructure to identify computer hardware,
software, and process control systems that are not Y2K compliant. The Company
believes that it has identified those business-critical computer systems which
are not presently Y2K compliant, and has instituted a plan to replace, upgrade
or modify these systems by the end of 1999. However, the Company acquired eight
new companies during 1999 and 1998, all but three of which are located in
Europe. The business-critical systems of certain of the newly acquired
companies, including O&K Mining GmbH, were not Y2K compliant at the time of
acquisition. The Company has instituted a plan to replace, upgrade or modify the
systems at these acquired companies and expects to be completed by the end of
1999; however, no assurance can be given that the replacement, upgrade or
modification of the systems at these companies will be timely completed. The
total cost associated with required modifications to become Y2K compliant is not
expected to exceed $5 million, and a significant portion of these costs were
planned upgrades to the current financial and operating systems.
Page 27
<PAGE>
The Company has also initiated communications with third parties whose
computer systems' functionality could impact the Company. These communications
will facilitate coordination of Y2K solutions and will permit the Company to
determine the extent to which the Company may be vulnerable to failures of third
parties to address their own Y2K issues. To date, the Company has not identified
any significant issues with respect to third parties.
The failure to correct a material Y2K problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Y2K problem, resulting in part from the uncertainty
of the Year 2000 readiness of third-party suppliers and customers, the Company
is unable to determine at this time whether the consequences of Y2K failures
will have a material impact on the Company's results of operations, liquidity or
financial condition, and as such, has not yet established a contingency plan to
handle the most reasonably likely worst case scenario. The Company's Y2K project
is expected to significantly reduce the Company's level of uncertainty about the
Y2K problem, in particular, about the Y2K compliance and readiness of its
material suppliers and customers. The Company believes that, with the
implementation of new business systems and completion of its Y2K project as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
Euro
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies ("legacy
currencies") and one common currency, the euro. The euro now trades on currency
exchanges and may be used in business transactions. Beginning in January 2002,
new euro-denominated bills and coins will be issued and legacy currencies will
be withdrawn from circulation. The Company's operating subsidiaries affected by
the euro conversion are assessing the systems and business issues raised by the
euro currency conversion. These issues include, among others, (1) the need to
adapt computer and other business systems and equipment to accommodate
euro-denominated transaction and (2) the competitive impact of cross-border
price transparency, which may make it more difficult for businesses to charge
different prices for the same products on a country-by-country basis,
particularly once the euro currency is issued in 2002. The Company anticipates
that the euro conversion will not have a material adverse impact on its
financial condition or results of operations.
Other
The Company is subject to a number of contingencies and uncertainties,
including product liability claims, self-insurance obligations, tax examinations
and guarantees. Many of the exposures are unasserted or proceedings are at a
preliminary stage, and it is not presently possible to estimate the amount or
timing of any cost to the Company. However, the Company does not believe that
these contingencies and uncertainties will, in the aggregate, have a material
adverse effect on the Company. When it is probable that a loss has been incurred
and possible to make reasonable estimates of the Company's liability with
respect to such matters, a provision is recorded for the amount of such estimate
or for the minimum amount of a range of estimates when it not possible to
estimate the amount within the range that is most likely to occur.
The Company generates hazardous and nonhazardous wastes in the normal
course of its 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,
the Company to make expenditures. The Company does not expect that these
expenditures will have a material adverse effect on its business or
profitability.
Page 28
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which exist as part of its
ongoing business operations and the Company uses derivative financial
instruments, where appropriate, to manage these risks. The Company, as a matter
of policy, does not engage in trading or speculative transactions. For further
information on accounting policies related to derivative financial instruments,
refer to the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
Foreign Exchange Risk
The Company is exposed to fluctuations in foreign currency cash flows related to
third party purchases, intercompany product shipments and intercompany loans.
The Company is also exposed to fluctuations in the value of foreign currency
investments in subsidiaries and cash flows related to repatriation of these
investments. Additionally, the Company is exposed to volatility in the
translation of foreign currency earnings to U.S. Dollars. Primary exposures
include the U.S. Dollars versus functional currencies of the Company's major
markets, which include the British Pound, German Mark, French Franc and Italian
Lira. The Company assesses foreign currency risk based on transactional cash
flows and identifies naturally offsetting positions and purchases hedging
instruments to protect anticipated exposures. At June 30, 1999, the Company had
foreign currency contracts which were hedges of firm commitments totaling
approximately $300 million. The fair market value of these arrangements, which
represents the cost to settle these contracts, was a liability of approximately
$3.9 million at June 30, 1999.
Interest Rate Risk
The Company is exposed to interest rate volatility with regard to future
issuances of fixed rate debt and existing issuances of variable rate debt.
Primary exposure includes movements in the U.S. prime rate and the London
Interbank Offer Rate ("LIBOR"). The Company uses interest rate swaps to reduce
interest rate volatility. At June 30, 1999, the Company had approximately $180
million of interest rate swaps fixing interest rates between 6.1% and 8.2%. The
fair market value of these arrangements, which represents the cost to settle
these contracts, was a liability of approximately $1.6 million at June 30, 1999.
Page 29
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999, in March 1994, the Securities and Exchange Commission (the
"Commission") initiated a private investigation, which included the Company and
certain of its present and former officers and affiliates, to determine whether
violations of certain aspects of the Federal securities laws had occurred. The
inquiry of the Commission has primarily focused on the purchase accounting
treatment and reporting matters relating to various transactions which took
place in the late 1980s and early 1990s. Without admitting or denying the
Commission's findings or any wrongdoing on the part of Terex or its then
officers or directors, on April 20, 1999, Terex consented to the entry of an
administrative cease and desist order ("the Order") prohibiting future
violations of the provisions of the Federal securities laws, specifically the
periodic reporting and the recordkeeping provisions of Sections 13(a) and
13(b)(2)(A) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") and Rules 12b-20, 13a-1 and 13a-13 thereunder, and the proxy
provisions of the Exchange Act. The Order does not provide for any monetary or
other sanctions against the Company. The resolution of this matter will not
impact the Company's financial statements or results of operations, and does not
require a restatement of the Company's financial statements.
For information concerning other contingencies see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Contingencies and
Uncertainties."
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders held May 12, 1999, Terex stockholders
holding a majority of the shares of Common Stock outstanding as of the close of
business on March 29, 1999 voted to approve each of the three proposals included
in the Company's proxy statement as follows:
<TABLE>
<CAPTION>
Affirmative Negative Abstentions
----------------- ------------------ -----------------
Proposal 1: To elect six directors to hold
office for one year or until their
successors are duly elected and
qualified:
<S> <C> <C> <C>
Ronald M. DeFeo 18,680,305 111,069 ---
G. Chris Andersen 18,676,527 114,848 ---
William H. Fike 18,676,555 114,820 ---
Dr. Donald P. Jacobs 18,680,070 111,305 ---
Marvin B. Rosenberg 18,676,556 114,819 ---
David A. Sachs 18,676,556 114,819 ---
Proposal 2: To ratify the selection of
PricewaterhouseCoopers LLP as
independent accountants of the
Company for 1999:
18,763,486 13,928 13,961
Proposal 3: To approve the Terex Corporation
1999 Long-Term Incentive Plan: 13,573,314 1,758,093 84,759
</TABLE>
Item 5. Other Information
Recent Developments
For information concerning recent developments see "Note J -- Subsequent Events"
to the Condensed Consolidated Financial Statements included herein.
Page 30
<PAGE>
Forward Looking Information
Certain information in this Quarterly Report includes forward-looking statements
regarding future events or the future financial performance of the Company that
involve certain contingencies and uncertainties, including those discussed above
in the section entitled "Contingencies and Uncertainties." In addition, when
included in this Quarterly Report or in documents incorporated herein by
reference, the words "may," "expects," "intends," "anticipates," "plans,"
"projects," "estimates" and the negatives thereof and analogous or similar
expressions are intended to identify forward-looking statements. Such statements
are inherently subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those reflected in such forward-looking
statements. Such risks and uncertainties, many of which are beyond the Company's
control, include, among others: the sensitivity of construction and mining
activity to interest rates, government spending and general economic conditions;
the success of the integration of acquired businesses; the retention of key
management; foreign currency fluctuations; the ability to meet production and
delivery schedules; the ability of suppliers to provide components on a timely
basis; pricing, product initiatives and other actions taken by competitors; the
effects of changes in laws and regulations; the national and international
political climate; continued use of net operating loss carryovers; the outcome
of the Internal Revenue Service audit; compliance with environmental laws and
regulations; and other factors. Actual events or the actual future results of
the Company may differ materially from any forward-looking statement due to
these and other risks, uncertainties and significant factors. The
forward-looking statements contained herein speak only as of the date of this
Quarterly Report and the forward-looking statements contained in documents
incorporated herein by reference speak only as of the date of the respective
documents. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained or incorporated by reference in this Quarterly Report to reflect any
changes in the Company's expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is based.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits set forth on the accompanying Exhibit Index have
been filed as part of this Form 10-Q.
(b) Reports on Form 8-K. During the quarter ended June 30, 1999,
the Company filed the following Current Reports on Form 8-K:
- A report on Form 8-K dated June 15, 1999 was filed on June
17, 1999, announcing the offering to acquire all issued
share capital of Powerscreen International plc.
- A report on Form 8-K dated June 17, 1999 was filed on June
18, 1999, announcing the offering of 3.5 million shares of
common stock.
Page 31
<PAGE>
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 thereunto duly authorized.
TEREX CORPORATION
(Registrant)
Date: August 12, 1999 /s/ Joseph F. Apuzzo
--------------------
Joseph F. Apuzzo
Vice President-Corporate Finance
(Principal Financial Officer)
Date: August 12, 1999 /s/ Kevin M. O'Reilly
----------------------
Kevin M. O'Reilly
Controller
(Principal Accounting Officer)
Page 32
<PAGE>
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation of Terex Corporation (incorporated by
reference to Exhibit 3.1 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
3.2 Certificate of Elimination with respect to the Series B Preferred Stock
(incorporated by reference to Exhibit 4.3 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No. 1-10702).
3.3 Certificate of Amendment to Certificate of Incorporation of Terex
Corporation dated June 5, 1998 (incorporated by reference to Exhibit 3.3 to
the Form 10-K for the year ended December 31, 1998 of Terex Corporation,
Commission File No. 1-10702).
3.4 Amended and Restated Bylaws of Terex Corporation (incorporated by reference
to Exhibit 3.2 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
4.1 Warrant Agreement dated as of December 20, 1993 between Terex Corporation
and Mellon Securities Trust Company, as Warrant Agent (incorporated by
reference to Exhibit 4.40 to the Form S-1 Registration Statement of Terex
Corporation, Registration No. 33-52297).
4.2 Form of Series A Warrant (incorporated by reference to Exhibit 4.41 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52297).
4.3 Indenture dated as of March 31, 1998 among Terex Corporation, the
Guarantors named therein and United States Trust Company of New York, as
Trustee (incorporated by reference to Exhibit 4.6 of Amendment No. 1 to the
Form S-4 Registration Statement of Terex Corporation, Registration No.
333-53561).
4.4 First Supplemental Indenture, dated as of September 23, 1998, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998).
4.5 Second Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998).
4.6 Third Supplemental Indenture, dated as of July 29, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 31, 1998)
4.7 Indenture dated as of March 9, 1999 among Terex Corporation, the Guarantors
named therein and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.4 to the Form 10-K for the year
ended December 31, 1998 of Terex Corporation, Commission File No. 1-10702).
4.8 First Supplemental Indenture, dated as of April 1, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999).
4.9 Second Supplemental Indenture, dated as of July 30, 1999, between Terex
Corporation and United States Trust Company of New York, as Trustee (to
Indenture dated as of March 9, 1999).
10.1 Terex Corporation Incentive Stock Option Plan, as amended (incorporated by
reference to Exhibit 4.1 to the Form S-8 Registration Statement of Terex
Corporation, Registration No. 33-21483).
10.2 1994 Terex Corporation Long Term Incentive Plan (incorporated by reference
to Exhibit 10.2 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.3 Terex Corporation Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 to the Form 10-K for the year ended December 31, 1994 of
Terex Corporation, Commission File No. 1-10702).
10.4 1996 Terex Corporation Long Term Incentive Plan (incorporated by reference
to Exhibit 10.1 to Form S-8 Registration Statement of Terex Corporation,
Registration No. 333-03983).
10.5 Common Stock Appreciation Rights Agreement dated as of May 9, 1995 between
the Company and United States Trust Company of New York, as Rights Agents
(incorporated by reference to Exhibit 10.29 of the Amendment No. 1 to the
Form S-1 Registration Statement of Terex Corporation, Registration No.
33-52711).
10.6 SAR Registration Rights Agreement dated as of May 9, 1995 among the Company
and the Purchasers, as defined therein (incorporated by reference to
Exhibit 10.31 of the Amendment No. 1 to the Form S-1 Registration Statement
of Terex Corporation, Registration No. 33-52711).
10.7 Agreement dated as of November 2, 1995 between Terex Corporation, a
Delaware corporation, and Randolph W. Lenz (incorporated by reference to
Exhibit 10 to the Form 10-Q for the Three Months ended September 30, 1995,
Commission File No. 1-10702).
10.8 Service Agreement, dated as of November 27, 1996, between Terex Corporation
and CLARK Material Handling Company (incorporated by reference to Exhibit
10.2 of the Form 8-K Current Report, Commission File No. 1-10702, dated and
filed with the Commission on December 11, 1996).
10.9 Standstill Agreement, dated June 27, 1997, among Terex Corporation,
Randolph W. Lenz and the other parties named herein (incorporated by
reference to Exhibit 10.1 of Amendment No. 1 to the Form S-1 Registration
Statement of Terex Corporation, Registration No. 333-27749).
10.10Credit Agreement dated as of March 6, 1998 among Terex Corporation,
certain of its subsidiaries, the lenders named therein, Credit Suisse First
Boston, as Administrative Agent, Bank Boston N.A., as Syndication Agent and
Canadian Imperial Bank of Commerce and First Union National Bank, as
Co-Documentation Agents (incorporated by reference to Exhibit 10.13 to the
Form 10-K for the year ended December 31, 1998 of Terex Corporation,
Commission File No. 1-10702).
Page 33
<PAGE>
10.11 Guarantee Agreement dated as of March 6, 1998 of Terex Corporation and
Credit Suisse First Boston, as Collateral Agent (incorporated by
reference to Exhibit 10.14 to the Form 10-K for the year ended December
31, 1998 of Terex Corporation, Commission File No. 1-10702).
10.12 Guarantee Agreement dated as of March 6, 1998 of Terex Corporation,
each of the subsidiaries of Terex Corporation listed therein and Credit
Suisse First Boston, as Collateral Agent (incorporated by reference to
Exhibit 10.15 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.13 Security Agreement dated as of March 6, 1998 of Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein and Credit
Suisse First Boston, as Collateral Agent (incorporated by reference to
Exhibit 10.16 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.14 Pledge Agreement dated as of March 6, 1998 of Terex Corporation, each
of the subsidiaries of Terex Corporation listed therein and Credit
Suisse First Boston, as Collateral Agent (incorporated by reference to
Exhibit 10.17 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.15 Form Mortgage, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing entered into by Terex Corporation and
certain of the subsidiaries of Terex Corporation, as Mortgagor, and
Credit Suisse first Boston, as Mortgagee (incorporated by reference to
Exhibit 10.18 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.16 Share Purchase Agreement dated December 18, 1997 between O&K AG and
Terex Mining Equipment, Inc. (incorporated by reference to Exhibit
10.19 to the Form 10-K for the year ended December 31, 1998 of Terex
Corporation, Commission File No. 1-10702).
10.17 Amendment No. 1 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, Credit Suisse First Boston, as Administrative and Collateral
Agent (incorporated by reference to Exhibit 10.17 to the Form 10-K for
the year ended December 31, 1998 of Terex Corporation, Commission File
No. 1-10702).
10.18 Amendment No. 2 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, Credit Suisse First Boston, as Administrative and Collateral
Agent (incorporated by reference to Exhibit 10.18 to the Form 10-K for
the year ended December 31, 1998 of Terex Corporation, Commission File
No. 1-10702).
10.19 Amendment No 3 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, Credit Suisse First Boston, as Administrative and Collateral
Agent (incorporated by reference to Exhibit 10.19 to the Form 10-K for
the year ended December 31, 1998 of Terex Corporation, Commission File
No. 1-10702).
10.20 Amendment No. 4 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, and Credit Suisse First Boston, as Administrative and
Collateral Agent (incorporated by reference to Exhibit 10.1 to the Form
8-K Current Report, Commission File No.1-10702, dated July 27, 1999 and
filed with the Commission on August 10, 1999).
Page 34
<PAGE>
10.21 Amendment No. 5 to Credit Agreement dated as of March 6, 1998 among
Terex Corporation, certain of its subsidiaries, the lenders named
therein, and Credit Suisse First Boston, as Administrative and
Collateral Agent (incorporated by reference to Exhibit 10.2 to the Form
8-K Current Report, Commission File No. 1-10702, dated July 27, 1999
and filed with the Commission on August 10, 1999).
10.22 Tranche C Credit Agreement dated as of July 2, 1999, as amended and
restated as of July 12, 1999, among Terex Corporation, the lenders
named therein and Credit Suisse First Boston, as Administrative and
Collateral Agent (incorporated by reference to Exhibit 10.3 to the Form
8-K Current Report, Commission File No. 1-10702, dated July 27, 1999
and filed with the Commission on August 10, 1999).
10.23 Amendment No. 1 to Tranche C Credit Agreement dated as of July 2, 1999,
as amended and restated as of July 12, 1999, among Terex Corporation,
the lenders named therein and Credit Suisse First Boston, as
Administrative and Collateral Agent (incorporated by reference to
Exhibit 10.4 to the Form 8-K Current Report, Commission File No.
1-10702, dated July 27, 1999 and filed with the Commission on August
10, 1999).
10.24 Purchase Agreement dated as of March 9, 1999 among the Company and the
Initial Purchasers, as defined therein (incorporated by reference to
Exhibit 10.20 to the Form 10-K for the year ended December 31, 1998 of
Terex Corporation, Commission File No. 1-10702).
10.25 Registration Rights Agreement dated as of March 9, 1999 among the
Company and the Purchasers, as defined therein (incorporated by
reference to Exhibit 10.21 to the Form 10-K for the year ended December
31, 1998 of Terex Corporation, Commission File No. 1-10702).
10.26 Underwriting Agreement, dated as of June 17, 1999, between Terex
Corporation and Salomon Smith Barney Inc. (incorporated by reference to
Exhibit 1 of the Form 8-K Current Report, Commission File No. 1-10702,
dated and filed with the Commission on June 18, 1999).
10.27 Stock Purchase Agreement between Raytheon Engineers & Constructors
International, Inc. and Terex Corporation, dated as of July 19, 1999.
10.28 Stock Purchase Agreement between Terex Corporation and Hartford Capital
Appreciation Fund, Inc., dated July 23, 1999.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
27.1 Financial Data Schedule.
Page 35
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEREX CORPORATION
$150,000,000
8-7/8% Senior Subordinated Notes due 2008
---------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 23, 1998
--------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of September 23, 1998,
between TEREX CORPORATION, a Delaware corporation (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York corporation, as trustee (the
"Trustee").
WHEREAS, the Company, and Terex Cranes, Inc., Koehring Cranes,
Inc., PPM Cranes, Inc., Payhauler Corp., Terex-Telelect Inc., Terex Aerials,
Inc., Terex-Ro Corporation, Terex Mining Equipment, Inc., Terex Baraga Products,
Inc. and M&M Enterprises of Baraga, Inc., as guarantors (collectively, the
"Original Guarantors"), and the Trustee are parties to an Indenture, dated as of
March 31, 1998 (said Indenture, as it may heretofore or hereafter from time to
time be amended, the "Indenture") providing for the issuance of the Company's
8-7/8% Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Company has acquired all of the outstanding
capital stock of The American Crane Corporation (American");
WHEREAS, pursuant to the terms of the Indenture, American has
become a Restricted Subsidiary organized under the laws of the United States
and, as such, the Company is required to cause American to execute and deliver a
supplemental indenture and the Subsidiary Guarantee endorsed on the Notes; and
WHEREAS, the Company, the Subsidiary Guarantors and the
Trustee desire to amend the Indenture to add American as a Subsidiary Guarantor
under the Indenture.
NOW, THEREFORE, the Company, the Subsidiary Guarantors,
American and the Trustee agree as follows for the equal and ratable benefit of
the Holders of the Notes.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01. American shall hereby become a Subsidiary Guarantor under
the Indenture effective as of the date hereof, and as such shall be entitled to
all the benefits and be subject to all the obligations, of a Subsidiary
Guarantor thereunder. American agrees to be bound by all those provisions of the
Indenture binding upon a Subsidiary Guarantor.
ARTICLE 2
MISCELLANEOUS
Section 2.01. The supplement to the Indenture effected hereby shall be
binding upon all Holders of the Notes, their transferees and assigns. All Notes
issued and outstanding on the date hereof shall be deemed to incorporate by
reference or include the supplement to the Indenture effected hereby.
Section 2.02. All terms used in this First Supplemental Indenture which
are defined in the Indenture shall have the meanings specified in the Indenture,
unless the context of this First Supplemental Indenture otherwise requires.
<PAGE>
Section 2.03. This First Supplemental Indenture shall become a binding
agreement between the parties when counterparts hereof shall have been executed
and delivered by each of the parties hereto.
Section 2.04. This First Supplemental Indenture shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York, without regard to principles of conflicts of law.
Section 2.05. This First Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same amendment.
Section 2.06. The recitals contained in this First Supplemental
Indenture are made by the Company and not by the Trustee and all of the
provisions contained in the Indenture, in respect of the rights, privileges,
immunities, powers and duties of the Trustee shall be applicable in respect
thereof as fully and with like effect as if set forth herein in full.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first above written.
TEREX CORPORATION
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By_________________________
Name:
ATTEST: Title:
- ---------------------
<PAGE>
(Signature Page to First Supplemental Indenture)
SUBSIDIARY GUARANTORS:
KOEHRING CRANES, INC.
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
PPM CRANES, INC.
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-TELELECT INC.
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
TEREX AERIALS INC.
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to First Supplemental Indenture)
THE AMERICAN CRANE CORPORATION
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Vice President
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-RO CORPORATION
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX CRANES, INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
PAYHAULER CORP.
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
(Signature Page to First Supplemental Indenture)
PROGRESSIVE COMPONENTS INC.
By: /s/ Brian J. Henry
Name: Brian J. Henry
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
EXHIBIT 4.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEREX CORPORATION
$150,000,000
8-7/8% Senior Subordinated Notes due 2008
---------------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of April 1, 1999
--------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of April 1, 1999,
between TEREX CORPORATION, a Delaware corporation (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York corporation, as trustee (the
"Trustee").
WHEREAS, the Company, and Terex Cranes, Inc., Koehring Cranes,
Inc., PPM Cranes, Inc., Payhauler Corp., Terex-Telelect Inc., Terex Aerials,
Inc., Terex-Ro Corporation, Terex Mining Equipment, Inc. and The American Crane
Corporation, as guarantors (collectively, the "Original Guarantors"), and the
Trustee are parties to an Indenture, dated as of March 31, 1998 and amended by
First Supplemental Indenture dated as of September 23, 1998 (said Indenture, as
it may heretofore or hereafter from time to time be amended, the "Indenture")
providing for the issuance of the Company's 8-7/8% Senior Subordinated Notes due
2008 (the "Notes");
WHEREAS, the Company has acquired all of the outstanding
capital stock of Amida Industries, Inc. (Amida");
WHEREAS, pursuant to the terms of the Indenture, Amida has
become a Restricted Subsidiary organized under the laws of the United States
and, as such, the Company is required to cause Amida to execute and deliver a
supplemental indenture and the Subsidiary Guarantee endorsed on the Notes; and
WHEREAS, the Company, the Subsidiary Guarantors and the
Trustee desire to amend the Indenture to add Amida as a Subsidiary Guarantor
under the Indenture.
NOW, THEREFORE, the Company, the Subsidiary Guarantors, Amida
and the Trustee agree as follows for the equal and ratable benefit of the
Holders of the Notes.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01. Amida shall hereby become a Subsidiary Guarantor under
the Indenture effective as of the date hereof, and as such shall be entitled to
all the benefits and be subject to all the obligations, of a Subsidiary
Guarantor thereunder. Amida agrees to be bound by all those provisions of the
Indenture binding upon a Subsidiary Guarantor.
ARTICLE 2
MISCELLANEOUS
Section 2.01. The supplement to the Indenture effected hereby shall be
binding upon all Holders of the Notes, their transferees and assigns. All Notes
issued and outstanding on the date hereof shall be deemed to incorporate by
reference or include the supplement to the Indenture effected hereby.
Section 2.02. All terms used in this Second Supplemental Indenture
which are defined in the Indenture shall have the meanings specified in the
Indenture, unless the context of this Second Supplemental Indenture otherwise
requires.
<PAGE>
Section 2.03. This Second Supplemental Indenture shall become a binding
agreement between the parties when counterparts hereof shall have been executed
and delivered by each of the parties hereto.
Section 2.04. This Second Supplemental Indenture shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York, without regard to principles of conflicts of law.
Section 2.05. This Second Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same amendment.
Section 2.06. The recitals contained in this Second Supplemental
Indenture are made by the Company and not by the Trustee and all of the
provisions contained in the Indenture, in respect of the rights, privileges,
immunities, powers and duties of the Trustee shall be applicable in respect
thereof as fully and with like effect as if set forth herein in full.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the date first above written.
TEREX CORPORATION
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Corporate Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By_________________________
Name:
ATTEST: Title:
/s/ Eric I Cohen
- ---------------------
<PAGE>
(Signature Page to Second Supplemental Indenture)
SUBSIDIARY GUARANTORS:
KOEHRING CRANES, INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
PPM CRANES, INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-TELELECT INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
TEREX AERIALS INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to Second Supplemental Indenture)
THE AMERICAN CRANE CORPORATION
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-RO CORPORATION
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX CRANES, INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
PAYHAULER CORP.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to Second Supplemental Indenture)
PROGRESSIVE COMPONENTS INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
AMIDA INDUSTRIES, INC.
By: /s/ Joseph F. Apuzzo
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
EXHIBIT 4.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEREX CORPORATION
$150,000,000
8-7/8% Senior Subordinated Notes due 2008
---------------------------------
THIRD SUPPLEMENTAL INDENTURE
Dated as of July 29, 1999
--------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE, dated as of July 29, 1999,
between TEREX CORPORATION, a Delaware corporation (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as trustee
(the "Trustee").
WHEREAS, the Company, and Terex Cranes, Inc., Koehring Cranes,
Inc., PPM Cranes, Inc., Payhauler Corp., Terex-Telelect Inc., Progressive
Components, Inc., Terex Aerials, Inc., Terex-Ro Corporation, Terex Mining
Equipment, Inc., O & K Orenstein & Koppel, Inc., The American Crane Corporation
and Amida Industries, Inc., as guarantors (collectively, the "Subsidiary
Guarantors"), and the Trustee are parties to an Indenture dated as of March 31,
1998, as amended by First Supplemental Indenture dated as of September 23, 1998
and as further amended by Second Supplemental Indenture dated as of April 1,
1999 (said Indenture, as it may heretofore or hereafter from time to time be
amended, the "Indenture") providing for the issuance of the Company's 8-7/8%
Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Company desires to advance the Maturity Date of
the Notes from April 1, 2008 to March 25, 2008;
WHEREAS, the change would provide an additional benefit to,
and does not adversely affect the rights of, Holders as provided for in Section
9.01(5); and
WHEREAS, the Company, the Subsidiary Guarantors and the
Trustee desire to enter into this Third Supplemental Indenture.
NOW, THEREFORE, the Company, the Subsidiary Guarantors and the
Trustee agree as follows for the equal and ratable benefit of the Holders of the
Notes.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01. The maturity date for the Notes shall be March 25, 2008,
and the definition of Maturity Date set forth in Section 1.01 of the Indenture
shall amended to read as follows: "Maturity Date means March 25, 2008."
Notwithstanding the foregoing, in the event that any of the Notes remain
outstanding until March 25, 2008, the Company will pay interest to the Holders
of such outstanding Notes (but only with respect to such Notes which remain
unpaid until March 25, 2008) on March 25, 2008 as if such Notes were outstanding
through March 31, 2008. In the event of any redemption of Notes prior to March
25, 2008 in accordance with ARTICLE THREE of the Indenture, interest will accrue
on such Notes as may be so redeemed, only through their respective Redemption
Dates as provided for in Section 3.03 of the Indenture. The form of Notes shall
be amended to reflect the foregoing.
ARTICLE 2
MISCELLANEOUS
Section 2.01. The supplement to the Indenture effected hereby shall be
binding upon all Holders of the Notes, their transferees and assigns. All Notes
issued and outstanding on the date hereof shall be deemed to incorporate by
reference or include the supplement to the Indenture effected hereby.
<PAGE>
Section 2.02. All terms used in this Third Supplemental Indenture which
are defined in the Indenture shall have the meanings specified in the Indenture,
unless the context of this Third Supplemental Indenture otherwise requires.
Section 2.03. This Third Supplemental Indenture shall become a binding
agreement between the parties when counterparts hereof shall have been executed
and delivered by each of the parties hereto.
Section 2.04. This Third Supplemental Indenture shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York, without regard to principles of conflicts of law.
Section 2.05. This Third Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same amendment.
Section 2.06. The recitals contained in this Third Supplemental
Indenture are made by the Company and not by the Trustee and all of the
provisions contained in the Indenture, in respect of the rights, privileges,
immunities, powers and duties of the Trustee shall be applicable in respect
thereof as fully and with like effect as if set forth herein in full.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed as of the date first above written.
TEREX CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Corporate Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:_________________________
Name:
ATTEST: Title:
- ---------------------
<PAGE>
(Signature Page to Third Supplemental Indenture)
SUBSIDIARY GUARANTORS:
KOEHRING CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
PPM CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-TELELECT INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
TEREX AERIALS INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to Third Supplemental Indenture)
THE AMERICAN CRANE CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-RO CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
PAYHAULER CORP.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to Third Supplemental Indenture)
PROGRESSIVE COMPONENTS INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
AMIDA INDUSTRIES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX MINING EQUIPMENT, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
O & K ORENSTEIN & KOPPEL, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
EXHIBIT 4.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEREX CORPORATION
$100,000,000
8-7/8% Senior Subordinated Notes due 2008
---------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of April 1, 1999
--------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of April 1, 1999,
between TEREX CORPORATION, a Delaware corporation (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York corporation, as trustee (the
"Trustee").
WHEREAS, the Company, and Terex Cranes, Inc., Koehring Cranes,
Inc., PPM Cranes, Inc., Payhauler Corp., Terex-Telelect Inc., Terex Aerials,
Inc., Terex-Ro Corporation, Terex Mining Equipment, Inc. and The American Crane
Corporation, as guarantors (collectively, the "Original Guarantors"), and the
Trustee are parties to an Indenture, dated as of March 9, 1999 (said Indenture,
as it may heretofore or hereafter from time to time be amended, the "Indenture")
providing for the issuance of the Company's 8-7/8% Senior Subordinated Notes due
2008 (the "Notes");
WHEREAS, the Company has acquired all of the outstanding
capital stock of Amida Industries, Inc. (Amida");
WHEREAS, pursuant to the terms of the Indenture, Amida has
become a Restricted Subsidiary organized under the laws of the United States
and, as such, the Company is required to cause Amida to execute and deliver a
supplemental indenture and the Subsidiary Guarantee endorsed on the Notes; and
WHEREAS, the Company, the Subsidiary Guarantors and the
Trustee desire to amend the Indenture to add Amida as a Subsidiary Guarantor
under the Indenture.
NOW, THEREFORE, the Company, the Subsidiary Guarantors, Amida
and the Trustee agree as follows for the equal and ratable benefit of the
Holders of the Notes.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01. Amida shall hereby become a Subsidiary Guarantor under
the Indenture effective as of the date hereof, and as such shall be entitled to
all the benefits and be subject to all the obligations, of a Subsidiary
Guarantor thereunder. Amida agrees to be bound by all those provisions of the
Indenture binding upon a Subsidiary Guarantor.
ARTICLE 2
MISCELLANEOUS
Section 2.01. The supplement to the Indenture effected hereby shall be
binding upon all Holders of the Notes, their transferees and assigns. All Notes
issued and outstanding on the date hereof shall be deemed to incorporate by
reference or include the supplement to the Indenture effected hereby.
Section 2.02. All terms used in this First Supplemental Indenture which
are defined in the Indenture shall have the meanings specified in the Indenture,
unless the context of this First Supplemental Indenture otherwise requires.
<PAGE>
Section 2.03. This First Supplemental Indenture shall become a binding
agreement between the parties when counterparts hereof shall have been executed
and delivered by each of the parties hereto.
Section 2.04. This First Supplemental Indenture shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York, without regard to principles of conflicts of law.
Section 2.05. This First Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same amendment.
Section 2.06. The recitals contained in this First Supplemental
Indenture are made by the Company and not by the Trustee and all of the
provisions contained in the Indenture, in respect of the rights, privileges,
immunities, powers and duties of the Trustee shall be applicable in respect
thereof as fully and with like effect as if set forth herein in full.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first above written.
TEREX CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Corporate Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By_________________________
Name:
ATTEST: Title:
- ---------------------
<PAGE>
(Signature Page to First Supplemental Indenture)
SUBSIDIARY GUARANTORS:
KOEHRING CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
PPM CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-TELELECT INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President- Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
TEREX AERIALS INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President- Finance
/s/ Eric I Cohen
- ---------------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to First Supplemental Indenture)
THE AMERICAN CRANE CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-RO CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
PAYHAULER CORP.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to First Supplemental Indenture)
AMIDA INDUSTRIES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
PROGRESSIVE COMPONENTS INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
EXHIBIT 4.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEREX CORPORATION
$100,000,000
8-7/8% Senior Subordinated Notes due 2008
---------------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of July 30, 1999
--------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of July 30, 1999,
between TEREX CORPORATION, a Delaware corporation (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as trustee
(the "Trustee").
WHEREAS, the Company, and Terex Cranes, Inc., Koehring Cranes,
Inc., PPM Cranes, Inc., Payhauler Corp., Terex-Telelect Inc., Progressive
Components, Inc., Terex Aerials, Inc., Terex-Ro Corporation, Terex Mining
Equipment, Inc., O & K Orenstein & Koppel, Inc., The American Crane Corporation
and Amida Industries, Inc., as guarantors (collectively, the "Subsidiary
Guarantors"), and the Trustee are parties to an Indenture dated as of March 9,
1999, as amended by First Supplemental Indenture dated as of April 1, 1999 (said
Indenture, as it may heretofore or hereafter from time to time be amended, the
"Indenture") providing for the issuance of the Company's 8-7/8% Senior
Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Company desires to correct a defect or
inconsistency which does not adversely affect the rights of any Holder in any
material respect as provided for in Section 9.01(1) of the Indenture; and
WHEREAS, the Company, the Subsidiary Guarantors and the
Trustee desire to enter into this Second Supplemental Indenture.
NOW, THEREFORE, the Company, the Subsidiary Guarantors and the
Trustee agree as follows for the equal and ratable benefit of the Holders of the
Notes.
ARTICLE 1
AMENDMENT TO THE INDENTURE
Section 1.01. The proviso contained in Section 2.15(2) shall be deleted
in its entirety and replaced with the following: "provided, however, that no
Additional Notes may be issued at a price which would cause such Additional
Notes to have "original issue discount" (within the meaning of Section 1273 of
the Code) materially different from that attributed to the Notes issued on March
9, 1999."
ARTICLE 2
MISCELLANEOUS
Section 2.01. The supplement to the Indenture effected hereby shall be
binding upon all Holders of the Notes, their transferees and assigns. All Notes
issued and outstanding on the date hereof shall be deemed to incorporate by
reference or include the supplement to the Indenture effected hereby.
Section 2.02. All terms used in this Second Supplemental Indenture
which are defined in the Indenture shall have the meanings specified in the
Indenture, unless the context of this Second Supplemental Indenture otherwise
requires.
Section 2.03. This Second Supplemental Indenture shall become a binding
agreement between the parties when counterparts hereof shall have been executed
and delivered by each of the parties hereto.
<PAGE>
Section 2.04. This Second Supplemental Indenture shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York, without regard to principles of conflicts of law.
Section 2.05. This Second Supplemental Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same amendment.
Section 2.06. The recitals contained in this Second Supplemental
Indenture are made by the Company and not by the Trustee and all of the
provisions contained in the Indenture, in respect of the rights, privileges,
immunities, powers and duties of the Trustee shall be applicable in respect
thereof as fully and with like effect as if set forth herein in full.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the date first above written.
TEREX CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Corporate Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By_________________________
Name:
ATTEST: Title:
- ---------------------
<PAGE>
(Signature Page to Second Supplemental Indenture)
SUBSIDIARY GUARANTORS:
KOEHRING CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
PPM CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-TELELECT INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- --------------------
Eric I Cohen, Secretary
TEREX AERIALS INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to Second Supplemental Indenture)
THE AMERICAN CRANE CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ----------------------
Eric I Cohen, Secretary
TEREX-RO CORPORATION
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX CRANES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
PAYHAULER CORP.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President and Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
(Signature Page to Second Supplemental Indenture)
PROGRESSIVE COMPONENTS INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Vice President-Finance
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
AMIDA INDUSTRIES, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
TEREX MINING EQUIPMENT, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
O & K ORENSTEIN & KOPPEL, INC.
By: /s/ Joseph F. Apuzzo
--------------------
Name: Joseph F. Apuzzo
ATTEST: Title: Treasurer
/s/ Eric I Cohen
- ---------------------
Eric I Cohen, Secretary
<PAGE>
EXHIBIT 10.27
STOCK PURCHASE AGREEMENT
BETWEEN
RAYTHEON ENGINEERS & CONSTRUCTORS
INTERNATIONAL, INC.
AND
TEREX CORPORATION
DATED AS OF JULY 19, 1999
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
ARTICLE 1 Purchase and Sale.................................................1
ARTICLE 2 Purchase Price....................................................2
2.1. Purchase Price................................................2
2.2. Purchase Price Adjustments....................................2
ARTICLE 3 Closing...........................................................4
3.1. Time and Place................................................4
3.2. Transactions at Closing.......................................4
ARTICLE 4 Representations and Warranties of Seller..........................5
4.1. Incorporation; Authority......................................5
4.2. Foreign Qualifications........................................5
4.3. Rights to Sell Cedarapids Shares; Approvals;
Binding Effect.............................................5
4.4. No Defaults...................................................5
4.5. Subsidiaries..................................................6
4.6. Capitalization................................................7
4.7. Title to Stock, Liens, etc....................................7
4.8. Consents.....................................................7
4.9. Financial Statements..........................................7
4.10. Absence of Certain Changes....................................8
4.11. Litigation, Etc...............................................10
4.12. Title to and Sufficiency of Assets............................10
4.13. Intellectual Property.........................................11
4.14. Tangible Assets...............................................12
4.15. Real Estate Matters...........................................12
4.16. No Undisclosed Liabilities....................................13
4.17. Employees.....................................................14
4.18. Labor Relations...............................................14
4.19. Contracts.....................................................15
4.20. Pensions and Benefits.........................................16
4.21. Compliance with Laws, Etc.....................................18
4.22. Environmental Matters........................................18
4.23. Indebtedness..................................................19
4.24. Insurance.....................................................19
4.25. Bank Accounts, Signing Authority,
Powers of Attorney..........................................20
4.26. Minute Books..................................................20
4.27. Brokers.......................................................20
<PAGE>
ii
4.28. Affiliates' Relationships to the Cedarapids Companies.........20
4.29. Conflicts of Interest.........................................20
4.30. Products Liability............................................21
4.31. Year 2000 Compliance..........................................21
4.32. Misleading Statements.........................................21
Article 5 Representations and Warranties of the Buyer.......................21
5.1. Organization and Standing of the Buyer........................22
5.2. Corporate Approval; Binding Effect............................22
5.3. Non-Contravention.............................................22
5.4. Consents, Etc.................................................22
5.5. Brokers.......................................................22
5.6. Due Diligence Review..........................................22
5.7. Purchase Entirely for Own Account.............................23
Article 6 Certain Regulatory Approvals......................................23
6.1. Hart-Scott-Rodino Act.........................................23
Article 7 Conduct of Business Pending Closing...............................23
7.1. Full Access...................................................23
7.2. Carry on in Regular Course; Certain Contracts.................24
7.3. No General Increases..........................................24
7.4. Sale of Capital Assets........................................24
7.5. Insurance.....................................................24
7.6. Preservation of Organization..................................24
7.7. Advice of Change..............................................25
7.8. No Shopping...................................................25
7.9. Maintenance of Assets and Supplier Relationships..............25
7.10. No Amendment of Organizational Documents......................25
7.11. Incurrence of Liabilities; Factoring of Receivables;
Auction of Assets........................................25
7.12. Declaration of Dividends......................................25
Article 8 Conditions Precedent to Buyer's Obligations.......................26
8.1. Representations and Warranties................................26
8.2. Compliance with Agreement.....................................26
8.3. No Litigation.................................................26
8.4. HSR Act.......................................................26
8.5. Tax Agreement.................................................26
8.6. Mutual Release................................................27
8.7. Receivables Facility..........................................27
8.8. No Prohibition................................................27
8.9 FIRPTA.........................................................27
8.10 Delivery of Financial Statements...............................27
8.11. Resignation of Officers and Directors.........................27
8.12. Certain Encumbrances..........................................27
<PAGE>
iii
8.13. Books and Records.............................................27
Article 9 Conditions Precedent to Seller's Obligations......................28
9.1. Representations and Warranties................................28
9.2. Compliance with Agreement.....................................28
9.3. No Litigation.................................................28
9.4. HSR Act.......................................................28
9.5. Tax Agreement.................................................28
9.6. Receivables Facility..........................................29
Article 10 Employees and Employee Benefits..................................29
10.1. Employees....................................................29
10.2. Benefit Plans................................................29
10.3. Defined Contribution Plan....................................31
10.4. Pension Plans; Transfer of Master Trust Assets...............31
10.5. Stock Options................................................32
10.6 Retention Agreements..........................................32
Article 11 Certain Covenants................................................33
11.1. Access to Books and Records..................................33
11.2. Use of Names.................................................34
11.3. Non-Competition..............................................34
11.4. Internet Protocol............................................35
11.5. General Transitional Assistance..............................36
11.6. CMI Litigation...............................................36
11.7. Further Assurances...........................................36
11.8. Receivables Sale Agreement...................................37
Article 12 Indemnity........................................................38
12.1. Indemnification by the Seller................................38
12.2. Indemnification by the Buyer.................................39
12.3. Indemnification Procedures...................................39
12.4. Scope of Indemnity...........................................40
12.5. Waiver of Statutory Claims...................................40
Article 13 Tax Matters......................................................41
Article 14 Termination......................................................41
Article 15 Confidentiality..................................................41
Article 16 Definitions......................................................42
<PAGE>
iv
Article 17 General..........................................................45
17.1. Survival of Representations and Warranties...................45
17.2. Expenses.....................................................46
17.3. Assigns......................................................46
17.4. Entire Agreement, Etc........................................46
17.5. Waiver of Certain Damages....................................46
17.6. Construction.................................................46
17.7. Governing Law................................................47
17.8. Notices......................................................47
17.9. Counterparts.................................................47
17.10. Section Headings.............................................47
17.11. Public Statements or Releases................................48
17.12. No Third Party Beneficiaries.................................48
17.13. Disclosure in Schedules......................................48
17.14. Waiver of Jury Trial.........................................48
<PAGE>
v
Exhibits:
Exhibit A Disaffiliation Tax Sharing Agreement
Exhibit B Mutual Release
Exhibit C Receivables Termination Agreement
Schedules:
Schedule 2.2(b) Model Balance Sheet
Schedule 4.4 No Defaults
Schedule 4.5 Subsidiaries
Schedule 4.8 Consents
Schedule 4.9(a) December Balance Sheet
Schedule 4.9(b) GAAP Exceptions
Schedule 4.9(c) Interim Balance Sheet and Income Statement
Schedule 4.9(d) GAAP Exceptions
Schedule 4.10 Certain Changes
Schedule 4.11 Litigation, Etc.
Schedule 4.12(a) Title to Assets
Schedule 4.12(b) Sufficiency of Assets
Schedule 4.13(a) Patents, Trademarks and Service Marks
Schedule 4.13(b) License and Other Agreements
Schedule 4.13(c) Infringement Claims
Schedule 4.13(d) Unauthorized Use Claims
Schedule 4.14(a) Tangible Assets
Schedule 4.14(b) Material Defects, Etc.
Schedule 4.15 Real Estate Matters
Schedule 4.16(a) Undisclosed Liabilities
Schedule 4.16(b) Guarantees
Schedule 4.17 Employees
Schedule 4.18 Labor Relations
Schedule 4.19 Contracts
Schedule 4.20(a) ERISA Plans
Schedule 4.20(b) Compliance with ERISA
Schedule 4.20(f) Retiree Benefits
Schedule 4.21 Compliance with Law
Schedule 4.22 Environmental Matters
Schedule 4.23 Indebtedness
Schedule 4.24 Insurance
Schedule 4.25 Bank Accounts, Signing Authority, Powers of Attorney
Schedule 4.28 Agreements with Affiliates
Schedule 4.29(a) Conflicts of Interest
Schedule 4.29(b) Arrangements with Directors and Officers
Schedule 4.30 Product Liability Litigation
Schedule 7.2 Carry on in Regular Course; Certain Contracts
<PAGE>
VI
Schedule 7.5 Insurance
Schedule 8.12 Certain Encumbrances
Schedule 10.6(a) Retention Agreements
Schedule 10.6(b) Key Employees and Retention Bonuses
Schedule 11.5(a) General Transitional Assistance
Schedule 11.5(b) Substitute Software
Schedule 11.6 CMI Litigation
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of the
19th day of July, 1999, by and between RAYTHEON ENGINEERS & CONSTRUCTORS
INTERNATIONAL, INC., a Delaware corporation (the "Seller"), and TEREX
CORPORATION, a Delaware corporation (the "Buyer").
The Seller is the owner of all of the issued and outstanding capital
stock of Cedarapids, Inc., an Iowa corporation ("Cedarapids"). Cedarapids and
its Subsidiaries (the "Cedarapids Subsidiaries" and, together with Cedarapids,
the "Cedarapids Companies") are in the business of designing, manufacturing and
marketing equipment and repair parts used in road building and related
construction activities (the "Cedarapids Business"). The Buyer wishes to
acquire, and the Seller wishes to divest, the Cedarapids Business. Accordingly,
the Buyer and Seller wish to enter into this Agreement in order to provide for
the purchase and sale of all the outstanding capital stock of Cedarapids.
In connection with the negotiation and preparation of this Agreement,
the Seller and the Cedarapids Companies have prepared, and the Buyer has
reviewed, a set of disclosure schedules, dated the date hereof and delivered
separately as one or more volumes (the "Disclosure Schedule", with any reference
in this Agreement to a Schedule being a reference to the Disclosure Schedule).
Certain defined terms used in this Agreement have the meanings given
them in Article 16.
In consideration of the mutual agreements and covenants herein
contained, the parties hereto agree as follows:
Article 1
Purchase And Sale
Subject to the terms and conditions set forth in this Agreement, at the
Closing referred to in Article 3 hereof, the Seller shall sell, assign, transfer
and deliver to the Buyer, and the Buyer shall purchase, acquire and take
assignment and delivery of, all of the issued and outstanding capital stock of
Cedarapids (the "Cedarapids Shares").
<PAGE>
Article 2
Purchase Price
2.1. Purchase Price. At the Closing, the Buyer shall pay $170,000,000 to
the Seller, as the aggregate purchase price for the Cedarapids Shares (the
"Initial Purchase Price"), by wire transfer of same day funds to an account
designated by the Seller in writing to the Buyer at least two (2) business days
prior to Closing. The Initial Purchase Price is subject to adjustment as
provided in Section 2.2.
2.2 Purchase Price Adjustments.
(a) Within sixty (60) days after the Closing Date, the Seller
shall prepare and deliver to the Buyer an unaudited consolidated
balance sheet of the Cedarapids Companies as of the close of business
on the Closing Date (the "Closing Balance Sheet"). The Closing Balance
Sheet shall be prepared (i) in accordance with GAAP (as defined in
Article 16), except as may otherwise be provided in clauses (iii), (iv)
and (v) below, (ii) to the extent that such basis would be in
accordance with GAAP, applied on a basis consistent with the December
Balance Sheet (as defined in Section 4.9), after giving effect to the
adjustments of the type described in the footnotes to the December
Balance Sheet, (iii) whether or not in accordance with GAAP, containing
an accrual in the amount of $721,000 to reflect a portion of the
obligations under the Retention Agreements (as defined in Section 10.6)
that will be the responsibility of Cedarapids and the Buyer pursuant to
Section 10.6, (iv) whether or not in accordance with GAAP, containing
an accrual in the amount of $2,000,000 for the litigation pending
against the Cedarapids Companies and listed on Schedule 4.11 (the
"Scheduled Litigation"), and (v) containing no accrual for the 12th
Avenue Tank Liability (as defined in Section 12.1). The procedures
required to prepare the Closing Balance Sheet pursuant to clauses
(i)-(v) of the preceding sentence are referred to collectively as the
"Closing Balance Sheet Procedures". The Buyer agrees to cause each
Cedarapids Company to give the Seller reasonable access to its books
and records and reasonable cooperation from its personnel in order to
permit the Seller to prepare the Closing Balance Sheet.
(b) When the Seller delivers the Closing Balance Sheet, the
Seller shall also deliver a certificate (i) certifying that the Closing
Balance Sheet was prepared in accordance with the Closing Balance Sheet
Procedures, and (ii) containing the Seller's calculations, based on the
Closing Balance Sheet and calculated in a manner consistent with the
Closing Balance Sheet Procedures (the "Seller's Proposed
Calculations"), of the Net Assets as of the close of business on the
Closing Date. As used in this Agreement "Net Assets" means the
difference of (x) the total assets of the Cedarapids Companies less (y)
<PAGE>
the total liabilities of the Cedarapids Companies, excluding any
liabilities for which the Seller has agreed to be responsible pursuant
to this Agreement or one of the other agreements referred to in Section
3.2, fixing for purposes of the Closing Balance Sheet the accrual for
the Retention Agreements at $721,000, notwithstanding that the amount
to be paid by the Buyer and Cedarapids pursuant to Section 10.6 may be
greater, fixing the accrual for the Scheduled Litigation at $2,000,000
and providing no accrual for the 12th Avenue Tank Liability. Attached
hereto as Schedule 2.2(b) under the heading "Adjusted" is a preliminary
statement of Net Assets as of December 31, 1998, based upon the
December Balance Sheet and calculated in accordance with the Closing
Balance Sheet Procedures, but excluding the Closing Balance Sheet
Procedures set forth in clauses (iii)-(v) of paragraph (a) above (the
"Model Balance Sheet").
(c) Within forty-five (45) days after receipt of the Closing
Balance Sheet and the accompanying certificate, the Buyer shall notify
the Seller of its agreement or disagreement with the Closing Balance
Sheet and the accuracy of any of the Seller's Proposed Calculations;
provided, that the Buyer may only dispute the Closing Balance Sheet and
the Seller's Proposed Calculations to the extent that the Buyer (i)
believes in good faith that the figures reflected therein are not
mathematically accurate based on use of the Closing Balance Sheet
Procedures, and (ii) believes in good faith that the Closing Balance
Sheet and/or the Seller's Proposed Calculations were prepared in a way
that does not comply with the Closing Balance Sheet Procedures. If the
Buyer disputes any such aspect of the Closing Balance Sheet or the
amount of any of the Seller's Proposed Calculations, then the Buyer
shall have the right to direct its independent accountants, at the
Buyer's expense, to review and test the Closing Balance Sheet. The
Buyer's accountants shall complete their review and test within
forty-five (45) days after the date the Buyer disputes the Seller's
Proposed Calculations. If the Buyer and its independent accountants,
after such review and test, still disagree with the Seller's Proposed
Calculations, and the Seller does not accept the Buyer's proposed
alternative calculations (the "Buyer's Proposed Calculations"), then
the Seller and the Buyer shall select a nationally recognized
independent accounting firm, other than PricewaterhouseCoopers LLP (the
"Independent Accounting Firm"), to resolve the remaining items in
dispute between the Buyer and the Seller (the "Remaining Disputed
Items") by conducting its own review and test of the Closing Balance
Sheet and thereafter selecting either the Buyer's Proposed Calculation
of the Remaining Disputed Items or the Seller's Proposed Calculation of
the Remaining Disputed Items or an amount in between the two. If the
Remaining Disputed Items are submitted to the Independent Accounting
Firm as provided above, the Independent Accounting Firm shall be
instructed (i) that the scope of its review shall be limited solely to
the Remaining Disputed Items, (ii) that it shall accept the Closing
Balance Sheet and the Seller's Proposed Calculations except to the
extent that (A) the figures reflected therein are not mathematically
accurate based on use of the Closing Balance Sheet Procedures, or (B)
they were prepared in a way that does not comply with the Closing
<PAGE>
Balance Sheet Procedures, and (iii) that it is to use every reasonable
effort to complete such assignment and deliver copies of such opinion
and, if required, a revised Closing Balance Sheet to the Buyer and the
Seller within thirty (30) days following the date such Remaining
Disputed Items are referred to it. The Buyer and the Seller agree that
they shall be bound by the determination of the Remaining Disputed
Items by the Independent Accounting Firm. The fees and expenses of the
Independent Accounting Firm shall be paid equally by the Buyer and the
Seller.
(d) Upon the determination pursuant to paragraph (c) of this
Section 2.2 of the definitive Closing Balance Sheet and the Net Assets,
the Initial Purchase Price shall be either (i) increased by the amount,
if any, by which the amount of Net Assets are greater than $112,528,000
or (ii) decreased by the amount, if any, by which the amount of Net
Assets are less than $112,328,000 (the "Adjustment") or (iii) not
adjusted if the Net Assets are between $112,528,000 and $112,328,000.
If the Initial Purchase Price is increased, the Buyer shall pay such
amount to the Seller, and if the Initial Purchase Price is decreased,
the Seller shall pay such amount to the Buyer. Any such payment shall
be made in cash or same day funds within ten (10) days after the
determination of the Adjustment pursuant to paragraph (c). Any such
payment shall bear interest at a rate equal to the "Prime Rate" as set
forth from time to time in The Wall Street Journal "Money Rates" column
from the Closing Date to the date preceding payment. The Initial
Purchase Price, as adjusted pursuant to this Section 2.2, is referred
to in this Agreement as the "Purchase Price."
Article 3
Closing
3.1 Time and Place. Subject to Articles 8 and 9 hereof, the closing of the
transfer and delivery of all documents and instruments necessary to consummate
the transactions contemplated by this Agreement (the "Closing") shall be held at
the offices of Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts, on
the later of (i) the second (2nd) business day following completion of the
regulatory approval referred to in Section 6.1 or (ii) September 2, 1999, or at
such other time or such other place as the Buyer and the Seller may agree. The
date on which the Closing is actually held hereunder is sometimes referred to
herein as the "Closing Date". The Closing will be deemed to be effective for
purposes of this Agreement as of the close of business on the Closing Date.
3.2 Transactions at Closing. At the Closing:
(a) The Seller shall deliver to the Buyer, free and clear of any and
all Encumbrances (as defined in Article 16) other than restrictions on
transfer arising under federal or state securities laws, certificates
representing the Cedarapids Shares, duly endorsed in blank or with duly
executed stock powers in favor of the Buyer attached.
<PAGE>
(b) The Buyer shall deliver the Initial Purchase Price by wire
transfer to the Seller.
(c) Raytheon Company, a Delaware corporation ("Raytheon"), and the
Buyer shall each duly execute and deliver the Tax Agreement (as defined in
Article 8 hereof).
(d) The Seller and the Cedarapids Companies shall deliver the Mutual
Release (as defined in Article 8 hereof).
Article 4
Representations And Warranties Of Seller
The Seller represents and warrants to the Buyer as follows:
4.1 Incorporation; Authority. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
Cedarapids is a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa; the Seller has all requisite
corporate power and authority to enter into this Agreement, the Mutual Release
and the Tax Agreement and the transactions contemplated hereby and thereby, and
perform its obligations hereunder and thereunder; and Cedarapids has all
requisite corporate power and authority to carry on the Cedarapids Business as
now conducted by it. Complete and accurate copies of the charter and by-laws of
Cedarapids have previously been delivered to the Buyer for review.
4.2 Foreign Qualifications. Cedarapids is qualified to do business as a
foreign corporation in each state where the nature of the properties owned or
leased by it or its operations requires such a qualification except where the
failure to so qualify individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect (as defined in Article 16).
4.3 Rights to Sell Cedarapids Shares; Approvals; Binding Effect. The Seller
has all requisite corporate power and authority to enter into this Agreement, to
perform all of its agreements and obligations hereunder in accordance with its
terms, and to sell and transfer to the Buyer all of the Cedarapids Shares. This
Agreement has been duly executed and delivered by the Seller and constitutes the
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms.
4.4 No Defaults. Except as set forth on Schedule 4.4, the execution,
delivery, performance and compliance by the Seller with the terms hereof, and
the consummation of all the transactions contemplated hereby, will not either
currently, or after notice or lapse of time or both:
<PAGE>
(a) result in a violation of any provision of the charter,
by-laws or other organizational documents of the Seller or any
Cedarapids Company; or
(b) result in a violation by the Seller or any Cedarapids Company
of any statute, regulation, order, law or ordinance applicable to the
Seller or such Cedarapids Company, other than any violation which
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect; or
(c) result in a violation by the Seller or any Cedarapids Company
of any judgment, order or decree of any court or judicial or
quasi-judicial tribunal applicable to the Seller or such Cedarapids
Company, other than any violation which individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect; or
(d) result in a violation or default by the Seller or any
Cedarapids Company of any contract or agreement to which the Seller or
such Cedarapids Company is a party, other than any violation or
default which individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
4.5 Subsidiaries. Except as set forth on Schedule 4.5, Cedarapids does not
have any Subsidiaries (as defined in Article 16) and does not own or hold, of
record and/or beneficially, any shares of any class of the capital stock of any
corporation or any legal and/or beneficial interests in any partnerships,
limited liability companies, business trusts or joint ventures or in any
unincorporated trade or business enterprises. Each Cedarapids Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is qualified to do business as a
foreign corporation in each state where the nature of the properties owned or
leased by it or its operations requires such a qualification except where the
failure to so qualify individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect, and has all requisite corporate
power and authority to carry on the Cedarapids Business as now conducted by it.
All of the outstanding shares of the capital stock of each Cedarapids Subsidiary
are validly issued and outstanding, fully paid and nonassessable. There are no
outstanding options, warrants or other rights to subscribe for or purchase any
securities of any Cedarapids Subsidiary. There are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of any Cedarapids Subsidiary, or subscriptions, warrants, options,
calls, rights or other arrangements or commitments obligating any Cedarapids
Subsidiary to issue or dispose of any of its equity securities or any ownership
interest therein. Cedarapids (either directly or through its ownership of
another Cedarapids Subsidiary, as set forth in Schedule 4.5) has record and
beneficial ownership of all of the issued and outstanding capital stock of the
Cedarapids Subsidiaries free and clear of any and all Encumbrances other than
any restrictions on transfers arising under federal or state securities laws.
True and complete copies of the charter and by-laws of each Cedarapids
Subsidiary have previously been delivered to the Buyer for review.
<PAGE>
4.6. Capitalization. The authorized capital stock of Cedarapids consists of
1,200,000 shares of Common Stock, par value $25.00 per share, 786,614 shares of
which are issued and outstanding on the date hereof. All of such shares are
validly issued and outstanding, fully paid and nonassessable. There are no
outstanding options, warrants or other rights to subscribe for or purchase any
securities of Cedarapids. There are outstanding no securities convertible into,
exchangeable for, or carrying the right to acquire, equity securities of
Cedarapids, or subscriptions, warrants, options, calls, rights or other
arrangements or commitments obligating Cedarapids to issue or dispose of any of
its equity securities or any ownership interest therein.
4.7. Title to Stock, Liens, Etc. The Seller has, and as of the consummation
of the Closing the Buyer will have, record and beneficial ownership of the
Cedarapids Shares, free and clear of any and all Encumbrances other than any
restrictions on transfers arising under federal or state securities laws. At the
Closing, the sale and delivery of the Cedarapids Shares to the Buyer pursuant to
this Agreement will vest in the Buyer good and valid title to the Cedarapids
Shares, free and clear of any and all Encumbrances (other than restrictions on
transfers arising under federal or state securities laws and any Encumbrances
created or suffered to exist by the Buyer).
4.8. Consents. Except as set forth on Schedule 4.8 or in Section 6.1, no
consent, approval or authorization of, or registration, qualification or filing
with, any governmental agency or authority or any other third party is required
by the Seller or any Cedarapids Company for the execution and delivery of this
Agreement by the Seller or for the performance or consummation by the Seller of
the transactions contemplated hereby.
4.9. Financial Statements.
(a) The Seller has furnished to the Buyer, and attached as
Schedule 4.9(a) under the headings "Unadjusted" are, copies of the
unaudited consolidated balance sheet of Cedarapids as of December 31,
1998 (the "December Balance Sheet"), and the unaudited consolidated
income statement of Cedarapids for the year then ended (the "1998
Income Statement"). Except for the adjustments set forth on Schedule
4.9(a) under the headings "Adjustments" and "Other Adjustments" and as
noted on Schedule 4.9(b), each of such financial statements has been
prepared in accordance with GAAP (as defined in Article 16), the
December Balance Sheet fairly presents in all material respects the
consolidated financial condition of Cedarapids as of December 31, 1998,
and the 1998 Income Statement fairly presents in all material respects
the consolidated results of operations of Cedarapids for the period
covered thereby.
(b) The Seller has furnished to the Buyer, and attached as
Schedule 4.9(c) under the headings "Unadjusted" are, copies of the
unaudited consolidated balance sheet of Cedarapids as of March 31, 1999
(the "Interim Balance Sheet") and the unaudited consolidated income
statement of Cedarapids for the three-month period then ended (the
"Interim Income Statement"). Except for the adjustments set forth on
Schedule 4.9(c) under the headings "Adjustments" and as set forth on
Schedule 4.9(d), each of such financial statements has been prepared in
accordance with GAAP and fairly presents in all material respects the
consolidated financial condition and results of operations,
respectively, of Cedarapids as of the date and for the period covered
thereby.
4.10. Absence of Certain Changes. Except as set forth on Schedule 4.10,
from December 31, 1998 to the date of this Agreement the Cedarapids Companies
have operated only in the ordinary course and there has not been:
(a) any change in the financial condition, results of
operations, assets, liabilities or business of any Cedarapids Company
other than changes arising in the ordinary course of business, none of
which, individually or in the aggregate, either has had a Material
Adverse Effect or, to the knowledge of the Seller, could reasonably be
expected to have a Material Adverse Effect, but excluding any changes
relating to: (i) the economy in general; or (ii) the industry of the
Cedarapids Business in general that are not specifically related to the
Cedarapids Companies;
(b) any acquisition or disposition by any Cedarapids Company
outside the ordinary course of business of any asset or property used
by such Cedarapids Company;
(c) any damage, destruction or casualty loss to any asset of
any Cedarapids Company, whether or not covered by insurance, either (i)
in excess of $200,000 or (ii) which has had or could reasonably be
expected to have a Material Adverse Effect;
(d) any increase in (or commitment to increase) the
compensation, pension or other benefits payable or to become payable to
any of the officers or employees of any Cedarapids Company or any bonus
payments or arrangements made to or with any of them, other than (i)
increases amounting to less than $25,000 individually and $900,000 in
the aggregate and effected on a basis consistent with the past practice
of such Cedarapids Company and (ii) any increase required under the
terms of any of the benefit plans listed on Schedule 4.20(a) hereto;
<PAGE>
(e) except with respect to the Seller and its Affiliates and
except for compromises of accounts receivable in the ordinary course of
business consistent with past practice, any voluntary forgiveness or
cancellation of any debt or claim of any Cedarapids Company in excess
of $10,000 or any voluntary waiver of any right of value in excess of
$10,000, none of which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect;
(f) the imposition of any Encumbrance on any of the assets of
any Cedarapids Company except for Permitted Encumbrances (as defined in
Article 16);
(g) any lapse, termination or expiration of any contract or
agreement, including any joint venture agreement, teaming agreement,
distribution agreement, supply agreement, license agreement, or
personal property lease, to which any Cedarapids Company had been a
party, the lapse, termination or expiration of which individually or in
the aggregate could reasonably be expected to have a Material Adverse
Effect;
(h) any intercompany transactions with the Seller or any
Affiliate of the Seller (other than another Cedarapids Company), except
(i) in the ordinary course of business consistent with past practice or
(ii) involving consideration or transfers of not more than $25,000
individually and not more than $50,000 in the aggregate;
(i) any obligation or liability incurred or discharged or any
other transaction entered into, except for any obligation or liability
incurred or discharged or transaction entered into in the ordinary
course of business, consistent with past practice, none of which,
individually or in the aggregate, has had a Material Adverse Effect and
none of which, individually or in the aggregate, any of Cedarapids'
Senior Management (as defined in Article 16) actually believes as of
the date of this Agreement is more likely than not to have a Material
Adverse Effect;
(j) any commitment or transaction entered into (including,
without limitation, any borrowing or capital expenditure) other than in
the ordinary course of business consistent with past practice, none of
which, individually or in the aggregate, has had a Material Adverse
Effect and none of which, individually or in the aggregate, any of
Cedarapids' Senior Management actually believes as of the date of this
Agreement is more likely than not to have a Material Adverse Effect;
(k) any Indebtedness incurred, assumed or guaranteed in
excess of $200,000 in the aggregate;
(l) any contract entered into, amended or terminated, or any
material rights waived thereunder, except in the ordinary course of
business consistent with past practice, none of which, individually or
in the aggregate, has had a Material Adverse Effect and none of which,
individually or in the aggregate, any of Cedarapids' Senior Management
actually believes as of the date of this Agreement is more likely than
not to have a Material Adverse Effect;
<PAGE>
(m) any grant of credit to any customer or distributor on
terms or in amounts materially more favorable than those that have been
extended to such customer or distributor in the past, except in the
ordinary course of business, consistent with past practice, none of
which, individually or in the aggregate, has had a Material Adverse
Effect and none of which, individually or in the aggregate, any of
Cedarapids' Senior Management actually believes as of the date of this
Agreement is more likely than not to have a Material Adverse Effect; or
(n) any amendment to the articles or certificates of
incorporation or by-laws of any Cedarapids Company.
4.11. Litigation, Etc. No proceeding, arbitration, action or suit is
pending or, to the knowledge of the Seller, threatened in writing against any
Cedarapids Company, except as set forth on Schedule 4.11 hereto and except for
any such proceeding, arbitration, action, or suit that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on Schedule 4.11, no Cedarapids Company has received any
written notice from any Governmental Entity (as defined in Article 16) of any
pending or threatened governmental investigation relating to such Cedarapids
Company which, if concluded with a determination adverse to such Cedarapids
Company, individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 4.11, none of the
Cedarapids Companies is subject to any outstanding orders, rulings, judgments or
decrees of any court or governmental authority, except for any such outstanding
orders, rulings, judgments or decrees that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
4.12. Title to and Sufficiency of Assets.
(a) Except as set forth in Schedule 4.12(a), each Cedarapids
Company has good and marketable title to all of its properties and
assets owned or purported to be owned by it, including, without
limitation, all those reflected in the December Balance Sheet (except
for properties or assets sold or otherwise disposed of in the ordinary
course of business since the date of the December Balance Sheet), all
free and clear of all Encumbrances except for Permitted Encumbrances.
(b) Except as set forth on Schedule 4.12(b), the tangible
assets owned or leased by the Cedarapids Companies, when utilized by a
labor force substantially similar to that utilized by the Cedarapids
Companies for the Cedarapids Business as of the date of this Agreement,
and taken together with the services to be provided by the Seller
pursuant to Section 11.5, are sufficient to conduct the Cedarapids
Business after the Closing Date in the same manner in all material
respects as such business is conducted immediately prior to the Closing
Date.
<PAGE>
4.13. Intellectual Property.
(a) Schedule 4.13(a) sets forth a true and complete list as of
the date of this Agreement of all patents and registered trademarks and
service marks owned by the Cedarapids Companies. However, the parties
acknowledge the possibility of inadvertent error or omission with
respect to the items listed in Schedule 4.13(a) which are not
individually or in the aggregate material and, upon discovery of any
such immaterial error or omission, the parties agree to amend said
Schedule to correct the error or omission. Promptly after the execution
and delivery of this Agreement, a list of patent applications will be
provided to the Buyer pursuant to Section 7.1 below. Such list will be
subject to the same conditions with respect to inadvertent error or
omission as set forth above.
(b) Except for agreements or licenses related to commercially
available software, the agreements listed in Schedule 4.13(b)
constitute a true and complete listing as of the date of this Agreement
of all agreements whereby the Cedarapids Companies have been licensed
or otherwise granted rights in or to any intellectual property rights
owned by a third party which are used in or are material to the
operation of the Cedarapids Companies; provided, however, the parties
acknowledge the possibility of inadvertent error or omission with
respect to the agreements listed in said Schedule 4.13(b) which are not
individually or in the aggregate material and, upon discovery of any
such immaterial error or omission, the parties agree to amend said
Schedule to correct the error or omission.
(c) To Seller's knowledge, neither Seller nor any of the
Cedarapids Companies have received any claims alleging that the conduct
of the Cedarapids Business infringes any third party intellectual
property rights except for such claims identified in Schedule 4.13(c)
and except for any such claims that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
(d) To the Seller's knowledge, the Cedarapids Companies are
not making unauthorized use of any confidential information or trade
secrets of any Person, except for any unauthorized use that
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect. To the Seller's knowledge, except as
set forth on Schedule 4.13(d) and except for any such claims that
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect, neither the Seller nor any of the
Cedarapids Companies have received any claim alleging any such
unauthorized use by any of the Cedarapids Companies of any confidential
information or trade secrets of any third party.
<PAGE>
(e) Except as disclosed on Schedule 4.13(c), no patent or
trademark rights owned by the Cedarapids Companies is subject to any
outstanding order, judgment, decree, stipulation restricting the use
thereof by the Cedarapids Companies or restricting the licensing
thereof by the Cedarapids Companies to any Person, except for any of
the foregoing that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
(f) Seller has obtained the necessary right from Raytheon to
authorize the Cedarapids Companies to continue the use of the Raytheon
name solely for the purposes and in the manner set forth below in
Section 11.2.
4.14. Tangible Assets. Attached as Schedule 4.14(a) is a true and
complete copy of Cedarapids' fixed asset listing (sorted by year entered into
service) as of December 31, 1998. This listing includes all tangible personal
property owned by the Cedarapids Companies as of such date, other than any
tangible personal property with a net book value at such date under $1,000.
Except as set forth on Schedule 4.14(b) and except for any repairs required in
the ordinary course of business, all material tangible assets owned or utilized
by the Cedarapids Companies are in working condition and repair (except for
ordinary wear and tear), free from any material defects, and have been
maintained consistent in all material respects with the standards generally
followed in the industry.
4.15. Real Estate Matters.
(a) Schedule 4.15 sets forth a true and complete list of all
the real property owned or leased by the Cedarapids Companies as of the
date of this Agreement (the "Real Property").
(b) All material improvements located on the Real Property
(the "Improvements") were constructed and installed in compliance in
all material respects with then applicable laws, statutes, ordinances
and codes affecting the Real Property at the time of construction.
Except as set forth on Schedule 4.15 there are no material structural
or latent defects in any of the Improvements known to Seller. Except as
set forth on Schedule 4.15, the heating, electrical, plumbing, and
other building equipment on the Real Property are in working order
sufficient in all material respects for the operation of the Cedarapids
Business consistent with current practice.
(c) Except as set forth on Schedule 4.15, no Cedarapids
Company has received any written notice from an insurance company which
has issued a policy or has been requested to issue a policy with
respect to any portion of the Improvements located on the Real Property
or any board of fire underwriters or any other body exercising similar
<PAGE>
functions requesting the performance of any repair, alterations or
other work which has not been complied with in all material respects,
except for any of the foregoing that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
(d) Except as described on Schedule 4.11 or Schedule 4.15,
there is no existing, pending or, to the Seller's knowledge, threatened
litigation or condemnation or sale in lieu thereof, with respect to any
portion of the Real Property and relating to or arising out of the
ownership of the Real Property, by any federal, state, county or
municipal department, commission, board, bureau or agency or other
governmental instrumentality, except for any of the foregoing that
individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule 4.15,
there is no proceeding pending for the reduction or increase of the
assessed valuation or taxes or other impositions or assessments payable
in respect of any portion of the Real Property, except for any such
proceeding that, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. No Cedarapids Company
has received any written notice of a proposed increase in the assessed
valuation of any portion of the Real Property or any special
assessment, except for any such increase or special assessment that,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. No public improvements have been
commenced and to the Seller's knowledge none are planned which in
either case may result in special assessments against or otherwise
adversely affecting any of the Real Property, except for any such
public improvements that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. The Seller
has no knowledge of any (i) order from a Governmental Entity requiring
repair, alteration or correction of any existing condition affecting
any Real Property or the systems or improvements thereat or (ii)
condition or defect which could reasonably be expected to give rise to
an order of the sort referred to in clause (i) above, except for any of
the foregoing that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
(e) No Person has any right or option to acquire the Real
Property or any portion thereof.
(f) The Seller has no knowledge of any fact or condition
existing which is reasonably likely to result in the termination or
reduction in any respect of the current access from the Real Property
to existing highways and roads, except for any of the foregoing that,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
<PAGE>
4.16. No Undisclosed Liabilities. No Cedarapids Company has any
liability or obligation (absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected on a consolidated balance sheet of Cedarapids
prepared as of the date of this Agreement or disclosed in the notes thereto,
except liabilities set forth in the December Balance Sheet or the notes thereto,
except as set forth on Schedule 4.16(a) and except for liabilities incurred
after the date of the December Balance Sheet in the ordinary course of business
which are not material to the Cedarapids Companies taken as a whole and any
liabilities incurred after the date of this Agreement in accordance with Article
7. Schedule 4.16(b) is a true and complete listing as of the date of this
Agreement of all guarantees of obligations of any third parties other than the
Cedarapids Companies and suretyship arrangements (other than liabilities arising
from the endorsement of checks in the ordinary course of business) affecting any
of the Cedarapids Companies identifying the particular Cedarapids Company which
has the liability, the estimated amount of liability and the beneficiary.
4.17. Employees. Schedule 4.17 sets forth a true and complete list as
of the date of this Agreement of (a) all directors of the Cedarapids Companies,
(b) all officers of the Cedarapids Companies, (c) all consultants and
independent contractors retained by any Cedarapids Company currently or during
the last eighteen (18) months and (d) all employees of the Cedarapids Companies,
including each such officer's or employee's job title, remuneration currently
and during 1998 and duration of employment. Except as disclosed in Schedule
4.17, no Cedarapids Company is a party to any written or oral employment,
consulting service, severance or termination agreement.
4.18. Labor Relations. Except as set forth on Schedule 4.18, there is
no charge pending or, to the knowledge of the Seller, threatened against any
Cedarapids Company alleging, with respect to any employee or employees of any
Cedarapids Company, any violation of any statute or regulation relating to
employment and employment practices, or any violation of any collective
bargaining agreement, any unlawful discrimination in employment practices or any
unfair labor practices before any court, agency, or other judicial or arbitral
body, except for any such violations that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. As of the date of
this Agreement, there is no labor strike, dispute, slow-down or work stoppage
actually pending or, to the Seller's knowledge, threatened against any
Cedarapids Company. Except as set forth on Schedule 4.18, no employees of any
Cedarapids Company are covered by any collective bargaining agreement, and no
collective bargaining agreement or other labor union agreement or agreement with
organized labor for employees of any Cedarapids Company is currently being
negotiated or pending negotiation. Except as set forth on Schedule 4.18 hereto,
there has been no concerted work stoppage with respect to the Cedarapids
Business during the last three years. Except as set forth on Schedule 4.18,
there is no complaint against any Cedarapids Company issued by or pending before
the National Labor Relations Board, except for any such complaint that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
<PAGE>
4.19. Contracts. Except for contracts, commitments, plans, agreements and
licenses listed on Schedules 4.13, 4.15, 4.19 or Schedule 4.20(a) (collectively,
"Commitments"), as of the date of this Agreement no Cedarapids Company is a
party to or otherwise bound by:
(a) any contract or purchase order to sell or lease equipment
or provide services to any customer (i) providing for payments in
excess of $100,000 or (ii) having a term greater than one calendar
year;
(b) except for any contract or agreement that will be
terminated prior to the Closing, any contract or agreement with any
director, officer or employee of such Cedarapids Company (i) providing
for total annual compensation in excess of $50,000 or (ii) having a
term greater than one calendar year;
(c) any contract for the lease or sublease as lessee, lessor,
sublessee or sublessor of real or personal property of such Cedarapids
Company, or any license of computer software, requiring payments in
excess of $25,000 per year;
(d) except for purchase orders issued in the ordinary course
of business, any contract requiring payments by a Cedarapids Company in
excess of $25,000 for the purchase or sale of any personal property;
(e) any contract or agreement containing non-competition
covenants limiting the freedom of such Cedarapids Company to operate
the Cedarapids Business or any other business;
(f) any contract with any distributor or any independent
representative of the Cedarapids Companies;
(g) except for the endorsement of checks in the ordinary
course of business, any contract or agreement for guaranty, indemnity
or suretyship with respect to Indebtedness (as defined in Article 16)
of a third party in excess of $25,000 or any guaranty by a Cedarapids
Company of any performance obligations of a third party;
(h) any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups;
(i) any loan agreement, promissory note, letter of credit or
other evidence of Indebtedness as a signatory, guarantor or otherwise;
(j) any contract with any Governmental Entity; or
(k) any agreement requiring any Cedarapids Company to assign
any interest in any trade secret or proprietary information or any
agreement pursuant to which a Cedarapids Company has granted to a third
party a license to use any intellectual property.
<PAGE>
Except as set forth on Schedule 4.19, the execution, delivery and performance of
this Agreement by the Seller will not conflict with, or result in the breach of,
termination of, give rise to any lien or constitute a default under, or require
the consent of any other party to, any of the Commitments, except for any of the
foregoing that would not individually or in the aggregate have a Material
Adverse Effect. Except as set forth on Schedule 4.19, the Seller has delivered
or made available to the Buyer for review complete and accurate copies of each
of the agreements evidencing the Commitments, in each case as amended to date.
No Cedarapids Company nor, to the knowledge of the Seller, any other
party to any contract, agreement, lease or instrument listed on Schedule 4.19
(collectively, the "Contracts") is in default in complying with any provisions
thereof, except for any such defaults that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. To the
Seller's knowledge, there is no pending written claim or request for equitable
adjustment under any Government Contract (as defined in Article 16), except for
any such claims or requests that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. Except where the same
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, no Cedarapids Company has received any written notice
of the intention of any party to terminate any Contract, whether as a
termination for convenience or for default of the applicable Cedarapids Company
thereunder.
4.20. Pensions and Benefits.
(a) Except as set forth on Schedule 4.20(a) hereto, as of the
date of this Agreement, neither the Seller nor any Cedarapids Company
maintains or has any obligation to make contributions to or for the
benefit of any officers, employees or consultants of the Cedarapids
Business, any employee benefit plan (an "ERISA Plan") within the
meaning of Section 3(3) of the United States Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any other retirement,
profit sharing, stock option, stock bonus or other benefit program (a
"Non-ERISA Plan"). Except as noted on Schedule 4.20(a), the Seller has
heretofore delivered or made available to the Buyer true and complete
copies of each ERISA Plan and Non-ERISA Plan (and all agreements
relating to the administration thereof) and, with respect to any ERISA
Plan, the most recently completed annual report (with any required
attachments), the most recent IRS determination letter, and any other
advisory opinions or rulings applicable to such Plan.
<PAGE>
(b) Except as set forth on Schedule 4.20(b), (i) all of the
ERISA Plans and Non-ERISA Plans have been maintained and operated in
all material respects in accordance with all federal, state and local
laws applicable to such plans, and the terms and conditions of the
respective plan documents, (ii) each ERISA Plan intended to qualify
under Section 401(a) of the Code (as defined in Article 16) has been
determined to so qualify by the Internal Revenue Service, (iii) there
is no pending legal action, proceeding or investigation, other than
routine claims for benefits, concerning any ERISA Plan or Non-ERISA
Plan, (iv) no ERISA Plan or Non-ERISA Plan subject to the requirements
of Section 302 of ERISA or Section 412 has an outstanding accumulated
funding deficiency under Section 302 of ERISA or Section 412 of the
Code or has been granted an extension of amortization periods which
remains in effect, (v) as to any ERISA Plan subject to the provisions
of Title IV of ERISA, there has not occurred any reportable event under
Section 4043 of ERISA, or other event or condition, which presents a
risk of termination of such Plan by the Pension Benefit Guaranty
Corporation ("PBGC"), (vi) there have been no prohibited transactions
(within the meaning of Section 406 of ERISA or Section 4975 of the
Code) for which no exemption exists under Section 408 of ERISA or
Section 4975 of the Code and for which there is any material liability
or civil penalty assessed pursuant to Section 502(i) of ERISA or
material taxes imposed by Section 4975 of the Code, and (vii) with the
exception of the Cedarapids, Inc. Pension Plan for Employees in a
Collective Bargaining Unit and the Cedarapids, Inc. Retirement Income
Plan (collectively, the "Pension Plans"), none of the ERISA Plans and
Non-ERISA Plans are subject to the "minimum funding standards" of
Section 412 of the Code or the provisions of Title IV of ERISA.
(c) None of the Seller and the Cedarapids Companies has
incurred any liability to the PBGC which remains outstanding (other
than required insurance premiums in respect of on-going plans).
(d) No ERISA Plan or Non-ERISA Plan is a "multiemployer
plan" within the meaning of Section 3 of ERISA.
(e) With respect to any ERISA Plans or Non-ERISA Plans which
are "group health plans" under Section 4980B of the Code and Section
607(i) of ERISA and related regulations (relating to the benefit
continuation rights imposed by the Consolidated Omnibus Budget
Reconciliation Act of 1986 ("COBRA"), as amended), there has been
timely compliance in all material respects with all requirements
imposed by COBRA, as and when applicable to such plans, so that the
Seller and the Cedarapids Companies have no (or will not incur any)
material loss, assessment, penalty, loss of federal income tax
deduction or other sanction arising out of or in respect of any failure
to comply with any COBRA benefit continuation requirement, which is
capable of being assessed or asserted directly or indirectly against
the Seller or the Cedarapids Companies or other member of their
corporate control group, with respect to any such plan.
<PAGE>
(f) Except as described in Schedule 4.20(f), neither the ERISA
Plans nor the Non-ERISA Plans provide for any benefits to or on behalf
of persons who have retired or may in the future retire from employment
with any Cedarapids Company, or their dependents and beneficiaries.
(g) No liabilities of the Cedarapids Companies will result
with respect to the ERISA Plans or the Non-ERISA Plans solely as a
result of the transactions contemplated in this Agreement.
4.21. Compliance with Laws, Etc. Except as set forth on Schedule 4.21
hereto, each Cedarapids Company is in compliance in all material respects with
all laws, statutes, governmental regulations and all judicial or administrative
tribunal orders, judgments, writs and injunctions applicable to it. Except as
set forth on Schedule 4.21, the Cedarapids Companies have all governmental
permits, licenses and authorizations necessary for the conduct of their
businesses as presently conducted, except for any of the foregoing which,
individually or in the aggregate, if not obtained would not cause a material
disruption of the Cedarapids Business or could not reasonably be expected to
have a Material Adverse Effect.
4.22. Environmental Matters.
(a) Except as referenced on Schedule 4.22:
(i) Each Cedarapids Company is in compliance with all
applicable Environmental Laws.
(ii) Each Cedarapids Company has all licenses, permits,
concessions, orders, authorizations, approvals or registrations
from, of or with any Governmental Entity required under
Environmental Laws for the operation of the Cedarapids Business
as presently conducted (the "Environmental Permits"), each
Cedarapids Company is in compliance with the Environmental
Permits and there are no proceedings pending or, to the knowledge
of the Seller, threatened, nor are any investigations pending or
threatened, with respect to the Environmental Permits.
(iii) No written notice, notification, demand, request for
information, citation, summons, complaint or order has been
received by any Cedarapids Company or, to the knowledge of the
Seller, is pending or threatened by any Person against, any part
of the Cedarapids Business nor has any material penalty been
assessed against any part of the Cedarapids Business with respect
to any alleged violation of any Environmental Law or liability
thereunder, other than where such notice, notification, demand,
request for information, citation, summons, complaint or order
has been fully resolved, or where resolution, individually or in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
<PAGE>
(iv) No Hazardous Substance has been discharged, generated,
treated, manufactured, handled, stored, transported, emitted,
released or is present at any property now or previously owned,
leased or operated by any part of the Cedarapids Business in
violation of any Environmental Law, which circumstance,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
(v) As of the date of this Agreement, none of the Real
Property has been placed or, to the Seller's knowledge, is
proposed to be placed, on the National Priorities List ("NPL"),
the Comprehensive Environmental Response Compensation and
Liability System ("CERCLIS") or, to the Seller's knowledge, any
state or foreign equivalents of such lists.
(vi) None of the Real Property has above or underground
storage tanks which are in violation of any Environmental Laws,
nor has there been any release of Hazardous Substances from any
such tanks.
(b) Included as part of Schedule 4.22 is a list of
environmental investigations and reports conducted on behalf of the
Seller with respect to certain real property currently or formerly
owned or leased by the Cedarapids Companies. Complete copies of the
related reports prepared by the Seller's environmental consultants have
been provided or made available (as indicated on Schedule 4.22) to the
Buyer to review as part of its due diligence investigation.
4.23. Indebtedness. Except for Indebtedness (as defined in Article 16)
reflected in the December Balance Sheet and as set forth in Schedule 4.23, the
Cedarapids Companies have no Indebtedness outstanding at the date hereof. The
Cedarapids Companies are not in default (and no event has occurred which with
notice or the lapse of time, or both, would constitute a default) with respect
to any outstanding Indebtedness or any instrument relating thereto and except as
set forth in Schedule 4.23 no such Indebtedness or any instrument or agreement
relating thereto purports to limit the operation of the business of the
Cedarapids Companies. Complete and correct copies of all instruments (including
all amendments, supplements, waivers and consents) relating to any Indebtedness
of the Cedarapids Companies have been furnished to Buyer.
4.24. Insurance. Schedule 4.24 sets forth a true and complete list of
all insurance policies (including without limitation policies providing theft,
fire, liability (including products liability) workers' compensation, life,
property and casualty, directors' and officers', benefits or coverage for any
<PAGE>
Plan described in Section 4.20(a), and bond and surety arrangements) currently
in effect for any Cedarapids Company and specifies the insurer, the amount of
coverage, type of insurance and the expiration date. All such insurance is in
full force and effect, and as of the date of this Agreement no notice of
cancellation or termination, or reduction of coverage or intention to cancel,
terminate or reduce coverage, has been received with respect to any policy for
such insurance. Except as set forth on Schedule 4.24, the insurance coverage
provided by such policies of insurance will not terminate or lapse by reason of
the transactions contemplated by this Agreement and, following the Closing, the
Cedarapids Companies will continue to be covered under such policies for events
occurring prior to the Closing. Except as set forth on Schedule 4.24 and except
for any deductible amounts or self-insured retentions, no such policy provides
for or is subject to any currently enforceable retroactive rate or premium
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events arising prior to the date hereof.
4.25. Bank Accounts, Signing Authority, Powers of Attorney. Except as
set forth in Schedule 4.25, no Cedarapids Company has an account or a safe
deposit box in any bank and no person has any power, whether singly or jointly,
to sign any checks on behalf of such Cedarapids Company, to withdraw any money
or other property from any bank, brokerage or other account of such Cedarapids
Company or to act under any power of attorney granted by such Cedarapids Company
at any time for any purpose. Schedule 4.25 also sets forth the names of all
persons authorized to borrow money or sign notes on behalf of each Cedarapids
Company.
4.26. Minute Books. The minute books of each Cedarapids Company made
available to the Buyer for inspection accurately record therein, in all material
respects, all actions taken by such Cedarapids Company's Board of Directors and
stockholders prior to the date of this Agreement.
4.27. Brokers. Except for Salomon Smith Barney, whose fees and expenses
will be paid by the Seller, no finder, broker, agent or other intermediary has
worked for or on behalf of the Seller in connection with the negotiation or
consummation of the transactions contemplated hereby.
4.28. Affiliates' Relationships to the Cedarapids Companies. Except as
set forth in Schedule 4.28, the Cedarapids Companies do not have any outstanding
contract, agreement or other arrangement with the Seller or any of its
Affiliates (other than another Cedarapids Company) which will continue after the
Closing.
4.29. Conflicts of Interest.
(a) No officer or director of the Seller or any Cedarapids
Company has, or to the knowledge of the Seller claims to have, (i) any
interest in the property, real or personal, tangible or intangible,
including, without limitation, intangibles, licenses, inventions,
technology, processes, designs, computer programs, know-how and
formulae used in the business of any Cedarapids Company, or (ii) any
contract or commitment with the Seller or any Cedarapids Company,
except as set forth in Schedule 4.29(a).
<PAGE>
(b) Except as set forth on Schedule 4.29(b), to the knowledge
of the Seller, no officer or director of the Seller or any Cedarapids
Company has any ownership or stock interest in any other enterprise,
firm, corporation, trust or any other entity which is engaged in any
line or lines of business which are the same as, or competitive with,
the line or lines of business of any Cedarapids Company. For purposes
of this representation, ownership of not more than 10% of the voting
stock of any publicly held company whose stock is listed on any
recognized securities exchange or traded over the counter shall be
disregarded.
4.30. Products Liability. Schedule 4.30 contains a list, as of July 16,
1999, of all pending product liability litigation against any of the Cedarapids
Companies and, to the knowledge of the Seller, all pending product liability
claims received in writing by any Cedarapids Company since June 1, 1998. To the
Seller's knowledge, no punitive damages have been assessed against the
Cedarapids Companies in any product liability litigation during the five year
period prior to the date of this Agreement.
4.31. Year 2000 Compliance. The Cedarapids Companies have adopted and
implemented a commercially reasonable plan to investigate and correct any year
2000 problems associated with (i) the use and operation of the Cedarapids
Companies' computer systems; and (ii) the products manufactured and distributed
through the use and operation of the computer systems. Seller, however, does not
represent and warrant that this plan will find and correct all year 2000
problems which may arise in connection with the use and operation of the
Cedarapids Companies' computer systems or the products manufactured in
conjunction with the use and operation of the Cedarapids Companies' computer
systems.
4.32. Misleading Statements. To the knowledge of the Seller, no
representation or warranty by the Seller contained in this Agreement, and no
statement contained in the Disclosure Schedule, contains any untrue statement of
a material fact or, as of the date of this Agreement, omits to state a fact
necessary to make any representation or warranty of the Seller or any statement
contained in the Disclosure Schedule not misleading in any material respect;
provided that to the extent any representation or warranty of the Seller in this
Agreement only addresses matters as of a particular date or period, this Section
4.32 shall only be construed as of the same date or period.
Article 5
Representations and Warranties of the Buyer
The Buyer represents and warrants to the Seller as follows:
<PAGE>
5.1. Organization and Standing of the Buyer. The Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. The Buyer has all required corporate power and authority to
enter into this Agreement and the Tax Agreement, to perform all of its
agreements and obligations hereunder and thereunder in accordance herewith and
therewith and to purchase the Cedarapids Shares.
5.2. Corporate Approval; Binding Effect. The Buyer has obtained all
necessary authorizations and approvals from its Board of Directors and
shareholders required for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Buyer and constitutes, and the Tax Agreement
upon execution and delivery by the Buyer will constitute, the legal, valid and
binding obligation of the Buyer enforceable against the Buyer in accordance
herewith and therewith, except as such validity, binding effect or enforcement
may be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally or by equitable principles relating to the availability of
remedies.
5.3. Non-Contravention. The execution, delivery and performance by the
Buyer of this Agreement and the Tax Agreement will not result in any violation
of or be in conflict with its Certificate of Incorporation or By-Laws, or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to it, or be in conflict with or constitute a default
under any of the foregoing, other than any violation or default which could not
reasonably be expected to have a Material Adverse Effect.
5.4. Consents, Etc. Except for the approvals referred to in Section
6.1, no consent, approval or authorization of or registration, designation,
declaration or filing with any Governmental Entity, federal or other, or any
third party on the part of the Buyer is required in connection with the purchase
of the Cedarapids Shares pursuant to this Agreement or the consummation of any
other transaction contemplated hereby.
5.5. Brokers. No finder, broker, agent or other intermediary has
worked for or on behalf of the Buyer in connection with the negotiation or
consummation of the transactions contemplated hereby.
5.6. Due Diligence Review. The Buyer acknowledges that it has conducted
to its satisfaction its own due diligence investigation with respect to the
Cedarapids Companies. The Buyer acknowledges and agrees that, except for the
representations and warranties of the Seller contained in Article 4 hereof, the
Seller makes no representation or warranty. The Buyer further acknowledges and
agrees that upon consummation of the transactions contemplated hereby, the Buyer
will not have any further recourse against the Seller with respect to the
Cedarapids Shares or Cedarapids Business except for claims for indemnification
made pursuant to Article 12 hereof and claims made pursuant to the Tax
Agreement. No investigation by the Buyer or on the Buyer's behalf heretofore or
hereafter conducted shall affect the representations, warranties or covenants of
the Seller set forth in this Agreement.
<PAGE>
5.7. Purchase Entirely for Own Account. The Cedarapids Shares to be
acquired by the Buyer will be acquired for investment for the Buyer's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof and the Buyer has no present intention of
selling, granting any participation in, or otherwise distributing the same in
violation of federal or state securities laws.
Article 6
Certain Regulatory Approvals
6.1. Hart-Scott-Rodino Act. As promptly as practicable, and in any
event within five (5) business days following the execution and delivery of this
Agreement by the parties, the Seller and the Buyer shall each prepare and file
any required notification and report form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), in connection with the
transactions contemplated hereby; the Seller and the Buyer shall request early
termination of the waiting period thereunder; and the Seller and the Buyer shall
respond with reasonable diligence and dispatch to any request for additional
information made in response to such filings.
Article 7
Conduct Of Business Pending Closing
The Seller covenants and agrees that, from and after the date of this
Agreement and until the Closing, except as otherwise specifically consented to
or approved by the Buyer in writing, it shall comply and shall cause the
Cedarapids Companies to comply with the following covenants:
7.1. Full Access. Each Cedarapids Company shall afford to the Buyer and
its authorized representatives such access during normal business hours to all
properties, books, records, contracts and documents of such Cedarapids Company
as the Buyer shall reasonably request in connection with its review of the
Cedarapids Business, and each Cedarapids Company shall furnish or cause to be
furnished to the Buyer and its authorized representatives all such information
with respect to the Cedarapids Business as the Buyer may reasonably request.
This access will include access as reasonably requested by the Buyer to past (to
the extent available) and present insurance policies for the Cedarapids Business
and the independent actuaries for the Cedarapids Companies and any title
searches for the Real Property. To the extent any of the foregoing information
is in the possession of the Seller or its other Affiliates, the Seller will
provide access on the same basis as described above. Any such investigation
shall be on reasonable prior notice and shall be carried out in such a manner as
to minimize any disruption of the Cedarapids Business or business operations of
the Seller or any of its other Affiliates. Any disclosure whatsoever during such
investigation by the Buyer shall not constitute an enlargement of, modification
or update of or additions to the representations or warranties of the Seller
beyond those specifically set forth in this Agreement.
<PAGE>
7.2. Carry on in Regular Course; Certain Contracts. Except as may be
otherwise contemplated by this Agreement or required by any of the documents
listed in any Schedule to this Agreement and except as set forth on Schedule
7.2, the Seller shall cause the Cedarapids Companies to carry on the Cedarapids
Business in the ordinary course substantially in the same manner as heretofore.
In addition, the Cedarapids Companies will not, without the prior written
consent of the Buyer, enter into any contract or agreement which, if in
existence on the date of this Agreement, would have been required to be
disclosed on Schedule 4.19, other than pursuant to the requirements of Section
4.19(a) or Section 4.19(f). In addition, the Cedarapids Companies will not enter
into any lease, nor any service, maintenance or management agreement with
respect to all or any portion of the Real Property, except as contemplated by
this Agreement.
7.3. No General Increases. Except for any increase required under the
terms of any employment agreement or benefit plan referred to in Section 4.20,
no Cedarapids Company shall (i) grant any general or uniform increase in the
rates of pay of employees of such Cedarapids Company, except for increases in
salary or wages in the ordinary course operation of the Cedarapids Business
consistent with past practice, or (ii) grant any general, uniform or individual
increase in the benefits under any bonus or pension plan or other contract or
commitment for the benefit of any employee of such Cedarapids Company, or to
increase the compensation payable or to become payable to officers, key salaried
employees or representatives of such Cedarapids Company, or (iii) increase any
bonus, insurance, pension or other benefit plan, payment or arrangement made to,
for or with any such officers, key salaried employees or representatives.
7.4. Sale of Capital Assets. Except as may be otherwise contemplated by
this Agreement, no Cedarapids Company shall sell or otherwise dispose of any of
its capital assets with an aggregate gross sales price in excess of $50,000.
7.5. Insurance. Except as set forth on Schedule 7.5, each Cedarapids
Company shall maintain insurance coverage comparable to the insurance coverage
currently in effect.
7.6. Preservation of Organization. Except as may be otherwise
contemplated by this Agreement, each Cedarapids Company shall use commercially
reasonable efforts under the applicable circumstances to keep its organization
and material business relationships intact in all material respects.
<PAGE>
7.7. Advice of Change. The Seller shall advise the Buyer in writing,
promptly after becoming aware thereof, of any material adverse change in the
condition, operations or assets of the Cedarapids Business.
7.8. No Shopping. Prior to any termination of this Agreement pursuant
to Article 14 hereof, the Seller shall not solicit, discuss or enter into any
agreement with respect to the sale of any Cedarapids Shares or any portion of
the Cedarapids Business, except for sales of inventory in the ordinary course of
business, or any merger or other business combination of any Cedarapids Company,
to or with any Person other than the Buyer.
7.9. Maintenance of Assets and Supplier Relationships. The Seller shall
cause the Cedarapids Companies to (i) maintain their properties, machinery and
equipment in sufficient operating condition and repair to enable them to operate
their businesses in all material respects in the manner in which the businesses
are currently operated and (ii) use their reasonable efforts to preserve their
relationship with their material suppliers, customers, licensors and licensees
and others having material business dealings with the Cedarapids Companies.
7.10. No Amendment of Organizational Documents. The Seller shall not
amend the charter or by-laws of any Cedarapids Company, except as required by
law.
7.11. Incurrence of Liabilities; Factoring of Receivables; Auction of
Assets. The Seller shall not permit any Cedarapids Company to encumber or grant
any security interest in any of the assets of any Cedarapids Company, or incur
any liabilities (including, without limitation, liabilities with respect to
capital leases or guarantees thereof), except for Permitted Encumbrances and for
liabilities incurred, including the creation of purchase money security
interests, in the ordinary course of business which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
The Seller shall not permit any of the Cedarapids Companies to (i) discount or
factor receivables, except consistent with past practice at levels not in excess
of historical levels, or (ii) auction or sell assets below customary prices
offered to the Cedarapids Companies' or its distributors or representatives.
7.12. Declaration of Dividends. The Seller shall not permit any of the
Cedarapids Companies to declare, set aside or pay any dividends or other
distributions in respect of its capital stock or redeem, purchase or otherwise
acquire any of its capital stock; provided, however, the foregoing shall not be
deemed to prohibit the payment of intercompany account balances of the Seller
and the Cedarapids Companies in the ordinary course of business consistent with
past practice or the reduction to zero of any intercompany account balance as of
the Closing Date.
<PAGE>
Article 8
Conditions Precedent To Buyer's Obligations
The obligation of the Buyer to consummate the Closing is subject to the
satisfaction prior to or at the Closing of each of the following conditions (to
the extent noncompliance is not waived in writing by the Buyer):
8.1. Representations and Warranties. The representations and warranties
made by the Seller in this Agreement shall have been correct in all material
respects when made and shall be correct in all material respects at and as of
the Closing with the same effect as though made on or as of the Closing (in each
case without giving duplicative effect to any materiality qualification
contained in such representation or warranty), except to the extent that such
representations and warranties are no longer correct due to the consummation
prior to the Closing of transactions not prohibited hereby. The Buyer shall have
received a certificate of the Seller, dated the Closing Date and signed by an
authorized officer of the Seller, certifying as to the accuracy of the
representations and warranties of the Seller contained herein as of the Closing
Date. The Buyer's acceptance of this certificate shall not constitute a waiver
by the Buyer of any of its rights under this Agreement.
8.2. Compliance with Agreement. The Seller shall have performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing (in
each case without giving duplicative effect to any materiality qualification
contained in such obligation). The Buyer shall have received a certificate of
the Seller, dated the Closing Date and signed by an authorized officer of the
Seller, certifying as to the performance of all agreements and covenants of the
Seller contained herein as of the Closing Date. The Buyer's acceptance of this
Seller's certificate shall not constitute a waiver by the Buyer of any of its
rights under this Agreement.
8.3. No Litigation. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending before any court or administrative body in which it
will be or is sought to restrain or prohibit or obtain damages or other relief
in connection with this Agreement or the consummation of the transactions
contemplated hereby.
8.4. HSR Act. Any applicable waiting period under the HSR Act,
including any extension thereof, shall have expired, or shall have been earlier
terminated.
8.5. Tax Agreement. Raytheon shall have entered into the Disaffiliation
Tax Sharing Agreement substantially in the form of Exhibit A attached hereto
(the "Tax Agreement"), and the Tax Agreement shall be in full force and effect.
<PAGE>
8.6. Mutual Release. The Seller and the Cedarapids Companies shall have
entered into a Mutual Release substantially in the form of Exhibit B attached
hereto (the "Mutual Release"), and the Mutual Release shall be in full force and
effect.
8.7. Receivables Facility. Either the Buyer and Cedarapids shall have
entered into the Substitute Receivables Facility (as defined in Section 11.8) or
Raytheon, RE&C Receivables Corporation ("RE&C Receivables") and Cedarapids shall
have entered into the Receivables Termination Agreement (as defined in Section
11.8) and Raytheon, RE&C Receivables and Cedarapids shall have received any
required consents from Canadian Imperial Bank of Commerce ("CIBC") and Asset
Securitization Cooperative Corporation ("ASCC").
8.8. No Prohibition. No statute, rule or regulation or injunction or
order of any court or administrative agency of competent jurisdiction shall be
in effect as of the Closing which prohibits the Buyer from consummating the
transactions contemplated hereby.
8.9. FIRPTA. The Seller shall have delivered to the Buyer a valid
certification of non-foreign status pursuant to Section 1445(b)(2) of the Code
and Treasury Regulation Section 1.1445-2(b)(2). Such certification shall conform
to the model certification provided in Treasury Regulation Section
1.1445-2(b)(2)(iii)(B), or shall be in form and substance otherwise satisfactory
to the Buyer.
8.10. Delivery of Financial Statements. The Seller shall have delivered
to the Buyer promptly after becoming available audited consolidated financial
statements for the Cedarapids Companies as of December 31, 1998, 1997 and 1996
and for the three (3) years ended on such dates, including the audit opinion
thereon of PricewaterhouseCoopers LLP (the "Audited Financials"). The Seller
shall have also delivered to the Buyer promptly after becoming available
unaudited consolidated financial statements of the Cedarapids Companies as of
June 30, 1999 and for the six (6) months ended on such date, which will include
a SAS 71 review report thereon of PricewaterhouseCoopers LLP.
8.11. Resignation of Officers and Directors. The Buyer shall have
received the resignations, effective as of the Closing, of (i) as a director,
each director of each of the Cedarapids Companies and (ii) as an officer, those
officers of the Cedarapids Companies that are set forth in a written notice
provided by the Buyer to the Seller at least two (2) weeks before the Closing.
8.12. Certain Encumbrances. With respect to the Encumbrances described
on Schedule 8.12, the Seller shall have either discharged such Encumbrances or
entered into other arrangements, reasonably satisfactory to the Buyer, for their
discharge promptly after the Closing, as indicated on Schedule 8.12.
8.13. Books and Records. The Seller shall have delivered to the Buyer,
to the extent not already in the possession of the Cedarapids Companies, the
minute books and stock records of the Cedarapids Companies, and to the extent
available originals of all agreements to which the Cedarapids Companies are
parties and identified in any Schedule hereto.
<PAGE>
Article 9
Conditions Precedent To Seller's Obligations
The obligation of the Seller to consummate the Closing is subject to the
satisfaction at or prior to the Closing of each of the following conditions (to
the extent noncompliance is not waived in writing by the Seller):
9.1. Representations and Warranties. The representations and warranties
made by the Buyer in this Agreement shall have been correct in all material
respects when made and shall be correct in all material respects at and as of
the Closing (in each case without giving duplicative effect to any materiality
qualification contained in such representation or warranty). The Seller shall
have received a certificate of the Buyer, dated the Closing Date and signed by
an authorized officer of the Buyer, certifying as to the accuracy of the
representations and warranties of the Buyer contained herein as of the Closing
Date. The Seller's acceptance of this certificate shall not constitute a waiver
by the Seller of any of its rights under this Agreement.
9.2. Compliance with Agreement. The Buyer shall have performed and complied
in all material respects with all of its obligations under this Agreement to be
performed or complied with by it prior to or at the Closing (in each case
without giving duplicative effect to any materiality qualification contained in
such obligation). The Seller shall have received a certificate of the Buyer,
dated the Closing Date and signed by an authorized officer of the Buyer,
certifying as to the performance of all agreements and covenants of the Buyer
contained herein as of the Closing Date. The Seller's acceptance of this Buyer's
certificate shall not constitute a waiver by the Seller of any of its rights
under this Agreement.
9.3. No Litigation. No restraining order or injunction shall prevent the
transactions contemplated by this Agreement and no action, suit or proceeding
shall be pending before any court or administrative body in which it will be or
is sought to restrain or prohibit or obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
9.4. HSR Act. Any applicable waiting period under the HSR Act, including
any extension thereof, shall have expired, or shall have been earlier
terminated.
9.5. Tax Agreement. The Buyer shall have entered into the Tax Agreement,
and the Tax Agreement shall be in full force and effect.
<PAGE>
9.6. Receivables Facility. Either the Buyer and Cedarapids shall have
entered into the Substitute Receivables Facility or Cedarapids and the Buyer
shall have entered into the Receivables Termination Agreement, and Raytheon and
RE&C Receivables shall have received any required consents from CIBC and ASCC.
Article 10
Employees and Employee Benefits
10.1. Employees. The Buyer agrees that, for a period of 60 days after the
Closing Date, it will not cause any of the employees of the Cedarapids Companies
(including employees on leave, disability or workers compensation) (the "Assumed
Employees") to suffer "employment loss" for purposes of the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. ss.ss.2101-2109, and related
regulations (the "WARN Act") if such employment loss could create any liability
for the Seller, unless either (i) the Buyer delivers notices under the WARN Act
in such a manner and at such a time that the Seller bears no liability with
respect thereto or (ii) the Buyer indemnifies and holds harmless the Seller for
any liability which may be created as a result thereof.
10.2. Benefit Plans.
(a) Except as expressly provided otherwise in this Agreement
or this Article 10, the Buyer shall cause the Cedarapids Companies to
retain exclusive liability and responsibility for any and all benefits
due and payable to or in respect of Assumed Employees and retired
employees, terminated employees with nonforfeitable rights to benefits
and beneficiaries under any ERISA Plan or Non-ERISA Plan in accordance
with the terms of such plans and applicable law.
(b) On and after the Closing Date, the Buyer shall cause the
Cedarapids Companies to continue to provide benefits to employees in
units represented for collective bargaining purposes ("Represented
Employees") in compliance with the applicable collective bargaining
agreement and the requirements of the National Labor Relations Act (the
"NLRA"), except that the Represented Employees shall be given the
opportunity to participate in the Terex Corporation and Affiliates
401(k) Retirement Plan instead of the Seller's defined contribution
plan qualified under Section 4.01(a) of the Code (the "Seller's Defined
Contribution Plan"). Any changes in the benefits for Represented
Employees will be made only after notice to and consultation with the
recognized collective bargaining representative, as and to the extent
required by the NLRA and any other applicable labor law.
(c) Commencing as of the Closing Date and for a period of one
(1) year thereafter (the "Benefits Maintenance Period"), with respect
<PAGE>
to the Assumed Employees, other than Represented Employees, and
dependents and beneficiaries thereof, the Buyer shall provide or cause
the Cedarapids Companies to provide compensation substantially
comparable to that in effect on the Closing Date, and benefits (i) as
described in the Buyer's Benefits Summary (Rev. 1/1/99) or
substantially comparable in the aggregate thereto and (ii) as described
in the balance of this Article 10. During the Benefit Maintenance
Period, the Buyer shall offer Assumed Employees with 25 or more years
of service as of the Closing Date who are not Represented Employees
five (5) weeks of paid vacation and, as to all Assumed Employees who
are not Represented Employees, continued accruals under the Cedarapids,
Inc. Retirement Plan as in effect on the Closing Date. During the
Benefits Maintenance Period, the Buyer shall maintain severance,
reduction-in-force and pay-in-lieu-of-notice benefits for the Assumed
Employees, other than Represented Employees, no less favorable than the
severance, reduction-in-force and pay-in-lieu-of-notice benefits
provided to such Assumed Employees by the Cedarapids Companies
immediately prior to the Closing Date and disclosed on Schedule
4.20(a).
(d) Assumed Employees shall receive credit for all service
prior to the Closing Date recognized under the ERISA Plans and
Non-ERISA Plans for all purposes for which such service is recognized
under the Buyer's employee benefit plans of the same type, provided,
that, in the event the Buyer shall establish a new employee benefit
plan, Assumed Employees shall not receive credit under such plan for
service for periods prior to the earliest date such service is
recognized for similarly situated employees of the Buyer and its
Subsidiaries.
(e) Through the Benefits Maintenance Period, the Buyer shall
cause the Cedarapids Companies to continue to make available their
medical insurance coverages to (i) those persons (and their eligible
dependents) who qualified for such coverages as retirees as of the
Closing Date and (ii) to those Assumed Employees (and their eligible
dependents) who qualify for such coverages as retirees during the
Benefits Maintenance Period under the standards for qualification as of
the Closing Date. In the event that consistent with the requirements of
Section 10.2(c) the Cedarapids Companies should discontinue at any time
in the Benefit Maintenance Period the health and dental coverages they
had maintained as of the Closing Date (the "Existing Medical
Coverages"), all Assumed Employees and former employees, and their
respective eligible dependents, who immediately prior to such
discontinuation were covered as participants or beneficiaries under the
Existing Medical Coverages shall immediately become eligible for such
medical and dental coverages as are provided by Buyer or its
Subsidiaries under the applicable plans identified in the Buyer's
Benefits Summary (Rev. 1/1/99) and under the terms and conditions
applicable to similarly situated employees of the Buyer and its
Subsidiaries; provided, however, that no pre-existing condition
exclusion shall apply except as to conditions for which coverage would
have been excluded under the Existing Medical Coverages had they
continued in force and credit shall be given against any otherwise
applicable deductible, co-payment or out-of-pocket maximum for any
otherwise qualifying expense incurred in the portion of the relevant
fiscal period preceding the discontinuation of the Existing Medical
Coverages.
<PAGE>
10.3. Defined Contribution Plan. The Cedarapids Companies shall cease
to participate in and maintain the Seller's Defined Contribution Plan, and the
active participation thereunder of the Assumed Employees and their otherwise
eligible dependents and beneficiaries shall end, effective as of the Closing
Date. Instead, as of the Closing Date each of the Assumed Employees shall become
eligible to participate in the Terex Corporation and Affiliates 401(k)
Retirement Plan. The Seller will retain all liability and responsibility for the
Seller's Defined Contribution Plan, including but not limited to the disposition
of interests thereunder, with respect to those employees (or their
beneficiaries) of the Cedarapids Companies who, as of the Closing Date, are
participants in the Seller's Defined Contribution Plan. The Seller agrees that
it will cause the accounts in the Seller's Defined Contribution Plan of all such
participants to be fully vested as of the Closing Date. Following the Closing
Date the Assumed Employees shall be permitted to elect to take distributions
(subject to applicable law) of their accounts thereunder and, if such Assumed
Employees so elect, to roll them over, directly or otherwise, in accordance with
applicable law and regulations, to an individual retirement account or to one or
more defined contribution retirement plans qualified under Section 401(a) of the
Code (the "Buyer Defined Contribution Plans") and maintained by Buyer or one of
its Subsidiaries, the Seller shall reasonably cooperate in good faith in
effecting such distributions and rollovers, and the Buyer Defined Contribution
Plans shall accept such rollovers (including to the extent practicable any plan
loans).
10.4. Pension Plans; Transfer of Master Trust Assets.
(a) All of the assets of each of the Pension Plans are held in
the Raytheon Master Pension Trust (the "Master Trust"). Within ninety
(90) days after the Closing Date, Buyer shall or shall cause the
Cedarapids Companies to establish and identify to Seller one or more
trusts (the "Successor Trusts") to form a part of the Pension Plans and
the trustee or trustees thereof. Promptly thereafter (but in no event
longer than sixty (60) days), Seller shall cause the trustee of the
Master Trust to transfer to the trustee or trustees of the Successor
Trusts the respective interests of the Pension Plans in the Master
Trust.
(b) The amount so transferred shall be adjusted for all
income, gain or loss creditable to or chargeable against the interests
of the Pension Plans in the Master Trust through a date selected by the
trustee of the Master Trust, which date is not more than ten (10)
business days prior to the date of transfer, and for all expenses,
including benefit distributions, chargeable against the interests of
the Pension Plans in the Master Trust through the date of transfer. All
determinations of charges and credits shall be made by the trustee of
the Master Trust in good faith and in accordance with the terms of the
Master Trust and consistent with past practices. Unless the trustee of
the Master Trust shall agree otherwise at the request of the Buyer, the
Master Trust shall not make any distributions of benefits from the
interests of the Pension Plans subsequent to the Closing Date except to
the extent of distributions properly elected and begun prior to the
Closing Date.
<PAGE>
(c) If the trustee of the Master Trust reasonably determines
that any expense chargeable against the interests of the Pension Plans
has been incurred by the date of transfer for which payment has not
then been made, such trustee may reserve against the amount otherwise
to be transferred, and continue to hold under the Master Trust, such
reasonable estimate of such expense as it deems appropriate. Any
balance reserved, to the extent not required to pay any liabilities of
the Pension Plans under the Master Trust shall be remitted to the
Successor Trusts not later than one (1) year following the date of
transfer. Failure of the trustee of the Master Trust to reserve
sufficient amounts to pay all expenses, including benefit
distributions, chargeable against the interests of the Pension Plans
shall not relieve the Pension Plans of liability for such items.
(d) At the Seller's election, any amount to be transferred
shall be transferred in cash or in marketable securities (valued at
market value) selected in the discretion of the trustee of the Master
Trust with the reasonable approval of the Buyer, provided that in
selecting any securities the trustee shall not materially advantage or
disadvantage the Pension Plans relative to other holders of interests
in the Master Trust.
10.5. Stock Options. Seller shall retain responsibility for satisfying
any outstanding obligations of Seller or any of its Affiliates under any
outstanding stock option issued to any of the Assumed Employees, in accordance
with the respective terms of such options.
10.6. Retention Agreements.
(a) The Seller has entered into letter agreements in the form
of Schedule 10.6(a) ("Retention Agreements") with the employees of the
Cedarapids Companies listed on Schedule 10.6(b) (the "Key Employees").
Schedule 10.6(b) also lists the total "Retention Bonus" payable to each
Key Employee pursuant to the applicable Retention Agreement.
(b) Except as set forth below in paragraph (c), with respect
to "Portion 1" and "Portion 2" of the Retention Bonus payable to any
Key Employee pursuant to the applicable Retention Agreement, the Buyer
agrees to pay or cause the applicable Cedarapids Company to pay such
portion of the Retention Bonus as and when due in accordance with the
terms of the applicable Retention Agreement.
<PAGE>
(c) The Seller or Raytheon will remain responsible for
"Portion 1" and "Portion 2" of the Retention Bonus payable to Joseph
Mazza pursuant to Joseph Mazza's Retention Agreement, and shall pay the
same when due in accordance with such Retention Agreement.
Article 11
Certain Covenants
11.1. Access to Books and Records.
(a) (i) The Buyer agrees to cooperate with and to
cause the Cedarapids Companies to make available to the Seller
and its other Subsidiaries such documents, books, records or
information relating to the Cedarapids Business as the Seller
or its other Subsidiaries may reasonably require after the
Closing.
(ii) The Buyer agrees to cause the Cedarapids
Companies to preserve and protect all books, records, files
and data referred to in clause (i) above for a period of two
(2) years after the Closing Date.
(iii) The Buyer agrees to cause the Cedarapids
Companies to not destroy any files or records which are
subject to this paragraph (a) (A) for the period described in
clause (ii) of this paragraph (a), and (B) thereafter, without
giving at least thirty (30) days' notice to the Seller. Upon
receipt of such notice, the Seller may (x) cause to be
delivered to it or its Subsidiaries the files or records
intended to be destroyed, at the Seller's expense, or (z)
notify the Buyer that the Seller will pay the cost of storing
and maintaining such files or records (including any necessary
costs of moving such files or records to a location under
control of the Seller).
(b) (i) The Seller agrees to make available to the
Buyer and Cedarapids such documents, books, records or
information relating to the Cedarapids Business as the Buyer
or Cedarapids may reasonably require after the Closing.
(ii) The Seller agrees to preserve and protect all
books, records, files and data referred to in clause (i) above
for a period of two (2) years after the Closing Date.
(iii) The Seller agrees not to destroy any files or
records which are subject to this paragraph (b) (A) for the
<PAGE>
period described in clause (ii) of this paragraph (b), and (B)
thereafter, without giving at least thirty (30) days' notice
to the Buyer. Upon receipt of such notice, the Buyer may (x)
cause to be delivered to it or its Subsidiaries the files or
records intended to be destroyed, at the Buyer's expense, or
(z) notify the Seller that the Buyer will pay the cost of
storing and maintaining such files or records (including any
necessary costs of moving such files or records to a location
under control of the Buyer).
11.2. Use of Names.
(a) The Buyer agrees that immediately after the Closing Date
it will cause the Cedarapids Companies to cease using any references to
the Seller or Raytheon or any of their respective Affiliates, including
any such use in connection with the use of existing supplies of labels,
signs, letterhead and other printed materials, except that the Buyer
may use up existing stocks of catalogs and other promotional materials
so long as they are stickered to the extent reasonably possible so as
to indicate that the Cedarapids Companies are no longer affiliated with
the Seller or Raytheon or any of their Affiliates.
(b) The Buyer agrees that except as provided in paragraph (a)
above, any implied license the Cedarapids Companies may have been
granted with respect to the use of the Raytheon name is hereby
terminated effective as of the Closing and that Raytheon is an intended
third-party beneficiary of such termination.
11.3. Non-Competition.
(a) The Seller agrees that for a period of five (5) years
after the Closing Date (the "Restricted Period"), the Seller will not,
and the Seller will not permit any Subsidiary to, engage directly or
indirectly in competition with the Cedarapids Companies, whether
individually or as a consultant, partner, owner or stockholder owning
more than five percent (5%) of a corporation, in the business of
designing, manufacturing or marketing equipment and repair parts
currently manufactured by any Cedarapids Company or used in screening
or crushing rock or road building (the "Restricted Business").
Notwithstanding the foregoing, nothing herein shall prohibit the Seller
or any Subsidiary from:
(i) owning, directly or indirectly, less than five
percent (5%) of any class of securities listed on a national
securities exchange or traded publicly in the over-the-counter
market;
(ii) directly or indirectly acquiring a business
which engages in the Restricted Business if such business is
25% or less (measured by net revenues for the most recent
fiscal year) of a larger business so acquired by the Seller or
such Subsidiary and the net revenues of that portion of the
business so acquired that is engaged in the Restricted
Business (measured for the most recent fiscal year) is less
than $50,000,000;
<PAGE>
(iii) acquiring a business which engages in the
Restricted Business if such business is more than 25%
(measured by net revenues for the most recent fiscal year) of
a larger business so acquired by the Seller or such Subsidiary
or less than 25% (measured by net revenues for the most recent
fiscal year) of a larger business so acquired by the Seller or
such Subsidiary but the portion of the business so acquired
that is engaged in the Restricted Business (measured for the
most recent fiscal year) is more than $50,000,000, provided
that the Seller or such Subsidiary places such competitive
business for sale promptly after its acquisition and uses
reasonable commercial efforts to complete such sale within the
Restricted Period; or
(iv) selling products or services that do not
themselves constitute a Restricted Business and are not
uniquely and inherently related to the Restricted Business to
any Person engaged in a Restricted Business.
(b) In addition to the foregoing, at no time after the Closing
will the Seller or any Subsidiary represent to any Person that the
Seller still owns or operates the Cedarapids Business or is the
successor in interest of or otherwise operating the Cedarapids
Business.
(c) It is recognized by the parties hereto that damages for
breaches of covenants of the nature contained in this Section 11.3 are
difficult if not impossible precisely to prove; therefore, it is agreed
that this agreement not to compete shall be enforceable by mandatory
injunction, in addition to any other remedy available to the Buyer
under this Agreement or at law or equity. If any of the restrictions
contained in this Section 11.3 shall be deemed to be unenforceable by
reason of the extent, duration or geographical scope or other
provisions hereof, then the parties hereto contemplate that the court
shall reduce such extent, duration, geographical scope or other
provision hereof and enforce this Section 11.3 in its reduced form for
all purposes in the manner contemplated hereby.
11.4. Internet Protocol.
(a) The Seller and the Buyer will cooperate and work
diligently so that, as of the Closing Date or as soon thereafter as is
practicable: (i) all references to the Cedarapids Companies and the
Cedarapids Business are removed from any internet pages operated by the
Seller or Raytheon or their other Subsidiaries, except to the extent
included in historical financial statements and other references to
<PAGE>
periods prior to the Closing, subject to the provisions of Section
11.3(b) hereof, (ii) use of domain names related solely to the
Cedarapids Companies and the Cedarapids Business (including without
limitation www.Cedarapids.com) (the "Domain Names") will not lead to
any internet pages operated by the Seller, Raytheon or their
Subsidiaries but will instead, if desired by the Buyer, lead to
internet pages operated by the Buyer, Cedarapids or their Subsidiaries
or Affiliates; and (iii) the Buyer is transferred all right, title and
interest (if any) of the Seller, Raytheon and their Subsidiaries to the
Domain Names.
(b) To the extent the Cedarapids Companies utilize any
internet protocol address space allocated to the Seller or Raytheon or
their other Subsidiaries, such internet protocol address space shall
remain the property of the Seller or Raytheon or such other Subsidiary
as applicable, and no rights or license are granted to the Buyer with
respect thereto.
11.5. General Transitional Assistance. The Seller agrees to provide
general transition assistance to Cedarapids after the Closing in the areas
described on Schedule 11.5(a). The Seller will not be required to provide any
assistance to the extent not permitted by applicable law or the Seller's other
contractual arrangements. Any such transitional assistance will be at the
request of Cedarapids. The Buyer will cause Cedarapids to reimburse the Seller
for any out-of-pocket costs and an allocable portion of wages or salaries and
related costs and overhead of any Seller employees providing this assistance;
provided, that, so long as the level of any particular service requested does
not exceed the level of support previously provided to the Cedarapids Business
by the Seller or its Affiliates, then the costs and expenses charged will not
exceed the costs and expenses (or corporate allocation) charged in the past to
the Cedarapids Companies for such service. Unless it otherwise agrees and except
as noted on Schedule 11.5(a), the Seller will not be required to provide this
assistance after 180 days after Closing. With respect to the software listed on
Schedule 11.5(b) the Buyer agrees that it will either provide substitute
software for the Cedarapids Companies on the Closing Date or cause the
Cedarapids Companies to completely terminate any use of such software, as
necessary to ensure that the terms of the related license agreements are not
breached.
11.6. CMI Litigation. With respect to the litigation with CMI
Corporation under the case name CMI Corporation v. Cedarapids, Inc., Standard
Havens, Inc. and Standard Havens Products, Inc. pending in the United States
District Court for the Western District of Oklahoma and Cedarapids, Inc. v. CMI
Corporation pending in the United States District Court for the Northern
District of Iowa, Cedar Rapids Division (collectively, the "CMI Litigation"),
the Buyer and the Seller agree that they will pursue the CMI Litigation pursuant
to the procedures set forth in Schedule 11.6.
11.7. Further Assurances. At any time or from time to time after the
Closing, the Seller shall, at the request of the Buyer and at the Buyer's
expense, (i) execute and deliver any further instruments or documents and take
all such further action as the Buyer may reasonably request in order to
<PAGE>
effectuate the consummation of the transactions contemplated hereby and (ii)
cooperate with the Buyer in order to afford the Buyer the benefit of all
insurance policies covering the Cedarapids Companies for periods prior to the
Closing Date, subject to any deductible amounts, loss retention and other terms
of the applicable policies. The Buyer will reimburse the Seller or its other
Affiliates (including Raytheon) for any reasonable out-of-pocket costs incurred
in providing the foregoing.
11.8. Receivables Sale Agreement.
(a) Cedarapids and RE&C Receivables are parties to a
receivables sale agreement pursuant to which Cedarapids sells
receivables to RE&C Receivables, which in turn sells these receivables
to ASCC, an affiliate of CIBC, pursuant to another receivables sale
agreement. These existing receivables sale facilities are referred to
collectively as the "Existing Facilities". The Buyer agrees to use
commercially reasonable efforts to cause CIBC to enter into a
substitute receivables facility directly between the Buyer and/or
Cedarapids, on the one hand, and ASCC and CIBC, on the other hand,
which supersedes the Existing Receivables Facilities insofar as they
relate to Cedarapids (the "Substitute Receivables Facility"). The
Seller agrees to cooperate fully with the Buyer in connection with the
foregoing. The parties intend that the Substitute Receivables Facility
will include both receivables sold into the Existing Facilities and
receivables generated after the Closing Date and Raytheon and RE&C
Receivables will have no further obligation to CIBC and ASCC with
respect to any receivable of Cedarapids.
(b) In the event that the Seller and the Buyer are unable to
implement the Substitute Receivables Facility on terms reasonably
satisfactory to both of them prior to the Closing, including the
treatment of the excess receivables sold into the Existing Receivables
as a reserve, then RE&C Receivables, the Buyer, the Seller and
Cedarapids will enter into a Receivables Termination Agreement
substantially in the form of Exhibit C hereto, with any changes
required to obtain CIBC's and ASCC's consent (in such form the
"Receivables Termination Agreement") and will use commercially
reasonable efforts to obtain the consent of CIBC and ASCC. In the event
that the parties enter into the Receivables Termination Agreement at or
prior to the Closing, after the Closing they will continue to use
commercially reasonable efforts to substitute the Substitute
Receivables Facility as described above.
<PAGE>
Article 12
Indemnity
12.1. Indemnification by the Seller.
(a) The Seller agrees to indemnify and hold the Buyer and the
Cedarapids Companies (and their directors, officers and employees)
harmless from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses (including without limitation the
reasonable fees and disbursements of counsel), net of insurance
proceeds and tax benefits received (collectively, "Losses"), arising
out of:
(i) any breach by the Seller of any representation or
warranty made by the Seller in this Agreement;
(ii) any breach by the Seller of any covenant, obligation or
undertaking made by the Seller in this Agreement;
(iii) the Release of any Hazardous Substance at, onto or
from any real property formerly owned, leased or operated by any
Cedarapids Companies, but specifically excluding any of the Real
Property (the "Former Real Property"), or the violation of any
Environmental Law at any of the Former Real Property;
(iv) the litigation identified on Schedule 4.11 as Meade v.
Cedarapids, Inc.; or
(v) the two abandoned fuel tanks located at Cedarapids' 12th
Avenue facility in Cedarapids, Iowa, as described in greater
detail in Schedule 4.22, but excluding the first $100,000 in
Losses incurred after the Closing Date (the "12th Avenue Tank
Liability").
(b) Except as provided below, no action or claim for Losses
pursuant to Section 12.1(a)(i) above may be brought or made unless such
action or claim (a "Claim") has been specified in reasonable detail in
a written notice from the Buyer to the Seller on or before December 31,
2000 in the case of all representations and warranties of the Seller
other than those arising under Sections 4.3, 4.5, 4.6 or 4.22, and the
second anniversary of the Closing Date in the case of the Seller's
representations and warranties in Section 4.22, in each case, except to
the extent a written notice asserting a claim for breach of any such
representation or warranty, describing the nature of the breach in
reasonable detail, shall have been given prior to such date to the
Seller, in which case such representation and warranty shall survive,
<PAGE>
to the extent of such claim only, until such claim is resolved, whether
or not the amount of the damages or expenses resulting from such breach
has been finally determined at the time the notice is given.
Indemnification with respect to the representations and warranties
contained in Sections 4.3, 4.5 and 4.6 (and in the Seller's certificate
delivered pursuant to Sections 8.1 and 8.2 insofar as they pertain to
Sections 4.3, 4.5 and 4.6) shall survive the Closing until the
expiration of the applicable statute of limitations (as extended by the
application of any tolling principles).
(c) The Buyer shall not be entitled to indemnification under
Section 12.1(a)(i) above or Section 12.1(a)(v) above (i) for any Claim
under Section 12.1(a)(i) if the aggregate Losses incurred with respect
to such Claim do not exceed $25,000 (a "Minor Claim") and (ii) except
to the extent that the cumulative amount of Losses arising from Claims
asserted under Section 12.1(a)(i), including Losses arising from Minor
Claims, together with the cumulative amount of Losses arising from any
claims for indemnification under Section 12.1(a)(v), exceeds
$2,000,000, and then only to the extent of such excess. In addition, in
no event shall the aggregate liability of the Seller for Losses under
Section 12.1(a)(i) and Section 12.1(a)(v) exceed twenty percent (20%)
of the Purchase Price (as finally adjusted pursuant to Section 2.2).
12.2. Indemnification by the Buyer. The Buyer agrees to indemnify and
hold the Seller (and its directors, officers and employees) harmless from and
with respect to any and all Losses arising out of (a) any breach by the Buyer of
any representation or warranty, covenant, obligation or undertaking made by the
Buyer in this Agreement, or (b) the operation of the Cedarapids Business after
the Closing Date.
12.3. Indemnification Procedures.
(a) In the event that any party hereto (an "Indemnified
Party") desires to make a claim against another party hereto (the
"Indemnifying Party", which term shall include all Indemnifying Parties
if there be more than one) in connection with any action, suit,
proceeding or demand at any time instituted against or made upon it for
which it may seek indemnification hereunder (a "Third-Party Claim"),
the Indemnified Party shall promptly notify the Indemnifying Party of
such Third-Party Claim and of its claims of indemnification with
respect thereto; provided, however, that the failure to provide such
notice shall not release the Indemnifying Party from any obligation
under this Article 12 except to the extent such Indemnifying Party is
materially prejudiced by such failure. Upon receipt of such notice from
the Indemnified Party, the Indemnifying Party shall be entitled to
participate in the defense of such Third-Party Claim, and assume the
defense of such Third-Party Claim, and in the case of such an
assumption the Indemnifying Party shall have the authority to
negotiate, compromise and settle such Third-Party Claim; provided, that
<PAGE>
(i) the Indemnifying Party shall not be entitled to settle any such
Third-Party Claim without the consent of the Indemnified Party unless
as part of such settlement the Indemnified Party is released from all
liability with respect to such Third-Party Claim and (ii) the
Indemnified Party shall cooperate with the Indemnifying Party in
connection with the defense of such Third Party Claim, and provide all
information possessed by the Indemnified Party relevant to the defense
or settlement of such Third Party Claim.
(b) The Indemnified Party shall retain the right to employ its
own counsel and to participate in the defense of any Third-Party Claim,
the defense of which has been assumed by an Indemnifying Party pursuant
hereto, but the claimant shall bear and shall be solely responsible for
its own costs and expenses in connection with such participation.
(c) With respect to any remediation or containment required in
connection with the 12th Avenue Tank Liability or any matter subject to
an indemnification claim pursuant to Section 12.1(a)(i) arising out of
Section 4.22, at the request of the Seller the Buyer will update the
Seller as to the scope and status of any such remediation and
containment, so as to permit the Seller to confirm that the Buyer or
Cedarapids is not effecting a remediation or containment beyond what is
required under all applicable Environmental Laws and is otherwise
incurring costs only as reasonably required.
12.4 Scope of Indemnity. Except as provided in Article 13, each of the
Seller and the Buyer acknowledges that, except for equitable relief, including
specific performance, its sole and exclusive remedy with respect to any and all
claims relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions of this Article 12 and the provisions of the Tax
Agreement.
12.5 Waiver of Statutory Claims. The Buyer hereby waives and releases
the Seller from any and all Losses, known or unknown, it may have under CERCLA
(as defined in Article 16) or any other statutes or regulations relating to
environmental matters now or hereafter in effect or any other statutes or
regulations if the assertion of a right under such statute or regulation would
circumvent the intended effect of Section 12.4. The Seller hereby waives and
releases the Buyer from any and all Losses, known or unknown, it may have under
CERCLA or any other statutes or regulations relating to environmental matters
now or hereafter in effect or any other statutes or regulations if the assertion
of a right under such statute or regulation would circumvent the intended effect
of Section 12.4. The foregoing waivers and releases in this Section 12.5 are not
intended to enlarge or diminish the parties' indemnification obligations under
Sections 12.1 and 12.2.
<PAGE>
Article 13
Tax Matters
Notwithstanding the provisions of Article 12, the provisions of the Tax
Agreement (and not Article 12) shall govern the allocation of responsibility
between Raytheon and the Buyer for Taxes of the Cedarapids Companies.
Article 14
Termination
This Agreement may be terminated by either the Buyer or the Seller in
writing, without liability to the terminating party on account of such
termination (provided the terminating party is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred on or before
October 29, 1999. This Agreement may also be terminated by either the Buyer or
the Seller if there has been a material breach by the other party of any
representation, warranty, covenant or agreement set forth in this Agreement and
such breach is not cured in all material respects within ten (10) business days
after written notice of such breach has been delivered by the non-breaching
party. This Agreement may also be terminated at any time prior to the Closing by
mutual written consent of the Seller and the Buyer. In the event of the
termination of this Agreement by the Seller or the Buyer, as herein provided,
written notice thereof shall be given to the other party and this Agreement
shall terminate without any further action of the parties hereto. If this
Agreement is terminated as provided herein: (i) each party will redeliver all
documents, work papers and other material of the other party or parties relating
to the transactions contemplated hereby including such memoranda, notes, lists,
records or other documents compiled or derived from such material, whether so
obtained before or after the execution hereof, to the party furnishing the same;
(ii) all information received by any party hereto with respect to the business
of the other parties or their affiliated companies shall remain subject to the
terms of the Confidentiality Agreement (as defined in Article 15); and (iii) no
party shall have any liability or further obligation to any other party to this
Agreement except as provided by this Article 14, and except that any termination
of this Agreement pursuant to the first or second sentence of this Article 14
shall not relieve a defaulting or breaching party from any liability to the
other party hereto. In addition, the provisions of Article 15 and Article 17
shall survive any termination of this Agreement.
Article 15
Confidentiality
Any and all information disclosed by the Seller or the Cedarapids Companies
to the Buyer as a result of the negotiations leading to the execution of this
<PAGE>
Agreement, or in furtherance thereof, which information was not already known to
the Buyer shall be subject to the Confidentiality Agreement, dated as of March
22, 1999, between the Buyer and Salomon Smith Barney, on behalf of Raytheon (the
"Confidentiality Agreement"), all of the provisions of which are incorporated
into this Article 15 by this reference. Notwithstanding the foregoing, the
Confidentiality Agreement shall terminate upon the Closing.
Article 16
Definitions
As used herein the following terms not otherwise defined have the
following respective meanings:
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. As used in this definition the term "control" (including the terms
"controlled by" and "under common control with") means, with respect to the
relationship between or among two or more Persons, the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Encumbrance" means all liens, security interests, pledges, charges,
mortgages, conditional sales agreements, title retention agreements and other
encumbrances.
"Environmental Law" means any applicable Federal, state, local or
foreign law, treaty, judicial decision, regulation, rule, judgment, decree,
order, injunction, permit, agreement or governmental restriction, relating to
the environment or to any Hazardous Substance, each as in effect on or prior to
the Closing Date, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA") (42 U.S.C. ss.9601
et seq.) and as amended by the Superfund Amendment and Reauthorization Act
("SARA"), the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. ss.6901
et seq.), the Federal Water Pollution Control Act ("CWA") (33 U.S.C. ss.1251 et
seq.), the Hazardous Materials Transportation Act ("HMTA") (49 U.S.C. ss.1801 et
seq.); the Federal Clean Air Act ("CAA") (42 U.S.C. ss.7401 et seq.), the Toxic
Substances Control Act ("TSCA") (15 U.S.C. ss.2601 et seq.); and all analogous
state laws.
<PAGE>
"GAAP" means United States generally accepted accounting principles
which are consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the applicable
fiscal year.
"Government Contract" means (i) any contract, agreement, lease or
instrument between any Cedarapids Company and any Governmental Entity and (ii)
any contract, agreement, lease or instrument entered into by any Cedarapids
Company as subcontractor (at any tier) in connection with a contract between
another Person and any Governmental Entity.
"Governmental Entity" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, Federal, state, local, transnational or foreign.
"Hazardous Substance" means each and every element, compound, chemical
mixture, contaminant, pollutant material, waste or other substance which is
defined, determined or identified as hazardous, flammable, harmful, corrosive or
toxic under any Environmental Law or the Release of which is prohibited or
restricted under any Environmental Law. Without limiting the generality of the
foregoing, the term shall mean and include: "hazardous substances" as defined in
CERCLA or SARA, each as amended, and regulations promulgated thereunder;
"hazardous waste" as defined in RCRA, as amended, and regulations promulgated
thereunder; "hazardous materials" as defined in HMTA, as amended, and
regulations promulgated thereunder; and "chemical substance or mixture" as
defined in TSCA, as amended, and regulations promulgated thereunder.
"Indebtedness" as applied to any Person, means all indebtedness of such
Person to any other Person for borrowed money, whether current or funded, or
secured or unsecured and all such Indebtedness of any other Person which is
directly or indirectly guaranteed by such Person or which such Person has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise assured against loss, but not including the endorsement
of checks and similar instruments.
"Knowledge of the Seller" or "to the Seller's knowledge" or "known to
Seller" means and is limited to the actual knowledge of one or more of the
following persons:
Name Title/Position
Joseph Mazza President - Cedarapids
Robert Fiola Vice President - Cedarapids
John Irvine Vice President - Cedarapids
Robert Legacy Vice President - Cedarapids
<PAGE>
Robert Lloyd Vice President - Cedarapids
Jeff Elliott Vice President - Cedarapids
Mark Hunt Director - Cedarapids
Paul Schulz Vice President - Cedarapids
George Mack Human Resources Manager -
Cedarapids
Paul Bailey Director, New Business Planning -
Raytheon Company
Molly Brown Environmental Attorney- Raytheon
Company
Deborah Verga Intellectual Property Attorney -
Raytheon Company
Ron Sullivan Manager of Benefits Planning -
Raytheon Company
"Material Adverse Effect" means any material adverse effect on the
operations, assets or financial condition of the -------- ------- ------
Cedarapids Companies or the Cedarapids Business, in each case taken as a whole.
"Permitted Encumbrances" means Encumbrances that (i) arise out of Taxes not
in default and payable without penalty or interest or the validity of which is
being contested in good faith by appropriate proceedings and for which
sufficient reserves are established on the books of Cedarapids, (ii) are
mechanics', carriers', workers', repairmen's, or other similar liens that do
not, individually and in the aggregate, have a Material Adverse Effect, (iii) in
connection with any agreement or instrument, relate to restrictions on transfer
embodied in the terms of such agreement or instrument, (iv) represent the rights
of customers, suppliers and subcontractors in the ordinary course of business
under contracts or under general principles of commercial law, (v) are listed in
Schedule 4.12 (other than those noted on Schedule 4.12 as being discharged prior
to Closing) or (vi) in the case of any of the Real Property, do not materially
adversely effect the value of the Real Property and do not restrict in any
material respect the Cedarapids Companies from operating the Cedarapids Business
as presently conducted at such Real Property.
"Person" means any corporation, association, partnership, limited liability
company, organization, business, individual, government or political subdivision
thereof or governmental agency.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing, escaping, leaching, dumping,
discarding, burying, abandoning, or disposing into the environment.
<PAGE>
"Senior Management" means Joseph Mazza, Robert Fiola, John Irvine, Robert
Legacy, Robert Lloyd, Jeff Elliott, Mark Hunt, Paul Schulz and George Mack.
"Subsidiary" With respect to any Person, any corporation a majority (by
number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person, if
the holders of the shares of such class or classes (a) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof, even
though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Tax" Any federal, state, provincial, local, or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee, or other tax or levy, of
any kind whatsoever, including any interest, penalties, or additions to tax in
respect of the foregoing, but excluding maintenance fees, annuities, or the like
which are payable in connection with the maintenance of intellectual property
rights.
Article 17
General
17.1 Survival of Representations and Warranties. Each of the
representations and warranties of the parties hereto contained in this Agreement
shall survive the Closing, and shall expire on December 31, 2000 in the case of
all representations and warranties of the Seller other than those arising under
Sections 4.3, 4.5, 4.6 or 4.22, and the second anniversary of the Closing Date
in the case of the Seller's representations and warranties in Section 4.22,
except to the extent a written notice asserting a claim for breach of any such
representation or warranty, describing the nature of the breach in reasonable
detail, shall have been given prior to such date to the party which made such
representation or warranty, in which case such representation and warranty shall
survive, to the extent of such claim only, until such claim is resolved, whether
or not the amount of the damages or expenses resulting from such breach has been
finally determined at the time the notice is given. The representations and
warranties contained in Sections 4.3, 4.5 and 4.6 (and in the Seller's
certificate delivered pursuant to Sections 8.1 and 8.2 insofar as they pertain
to Sections 4.3, 4.5 and 4.6) and the representations and warranties of the
Buyer (and in the Buyer's certificate delivered pursuant to Sections 9.1 and 9.2
insofar as they pertain to such representations and warranties) shall survive
the Closing until the expiration of the applicable statute of limitations (as
extended by the application of any tolling principles). The covenants and
<PAGE>
agreements contained herein to be performed or complied with at or after the
Closing, including, without limitation, the indemnification obligations
contained in Article 12 and the Tax Agreement, shall survive the Closing until
the expiration of the applicable statute of limitations (without regard to the
application of any tolling principles), but subject in the case of Article 12 to
the time limitations set forth in Section 12.1(b).
17.2. Expenses. Each party shall pay its own expenses and costs incidental
to the preparation of this Agreement and to the consummation of the transactions
contemplated hereby.
17.3. Assigns. This Agreement and the agreements attached as Exhibits
hereto may not be assigned in whole or in part by either party hereto without
the prior written consent of the other party, except that the Buyer may, at its
election, assign this Agreement and the agreements attached as Exhibits hereto
to (i) any direct or indirect wholly owned Subsidiary of the Buyer or (ii) its
lenders in connection with the financing for the transactions contemplated by
this Agreement, so long as such assignee shall execute a counterpart of this
Agreement agreeing to be bound by the provisions hereof as "Buyer", and agreeing
to be jointly and severally liable with the assignor and any other assignee for
all of the obligations of the assignor hereunder. The Buyer will remain jointly
and severally liable with any such assignee. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
17.4. Entire Agreement, Etc. This Agreement (including the Schedules and
Exhibits and the Confidentiality Agreement) contains the entire understanding of
the parties, supersedes all prior agreements and understandings relating to the
subject matter hereof and shall not be amended except by a written instrument
hereafter signed by each of the parties hereto. EXCEPT AS SET FORTH IN ARTICLE
4, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SALE OF
THE CEDARAPIDS SHARES OR THE CEDARAPIDS BUSINESS.
17.5. Waiver of Certain Damages. EACH OF THE SELLER AND THE BUYER TO THE
FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY
HAVE TO INCIDENTAL, CONSEQUENTIAL OR SPECIAL (INCLUDING PUNITIVE OR MULTIPLE)
DAMAGES BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS OR ACTIONS OF ANY OF THEM RELATING THERETO.
17.6. Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
<PAGE>
17.7. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws (excluding any choice-of-law rules
that would require the application of the laws of another jurisdiction) of the
State of New York.
17.8. Notices. All notices, requests, payments, instructions or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested, postage
prepaid, or sent by written telecommunication, as follows:
If to the Seller, to:
c/o Raytheon Company
141 Spring Street
Lexington, MA 02421
Attention: General Counsel
with a copy sent contemporaneously to:
John R. Utzschneider, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Facsimile: (617) 951-8736
If to the Buyer, to:
Terex Corporation
500 Post Road East
Westport, CT 06880
Attention: General Counsel
Facsimile: (203) 227-1647
17.9. Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
17.10. Section Headings. All enumerated subdivisions of this Agreement are
herein referred to as "section" or "subsection." The headings of sections or
subsections are for reference only and shall not limit or control the meaning
thereof.
<PAGE>
17.11. Public Statements or Releases. The parties hereto each agree that no
party to this Agreement shall make, issue or release any public announcement,
statement or acknowledgment of the existence of, or reveal the status of, this
Agreement or the transactions provided for herein, without first obtaining the
consent of the other party hereto, which consent shall not be unreasonably
withheld. Nothing contained in this Section 17.11 shall prevent any party from
making such public announcements as such party may consider necessary or
desirable in order to satisfy such party's legal obligations (including under
any applicable securities laws), provided that such disclosing party shall to
the extent practicable give prior notice to the other party of the contents of,
and requirement for, such disclosure.
17.12. No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any Person, other than the parties hereto and
other than as set forth in Section 11.2, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
17.13. Disclosure in Schedules. The Disclosure Schedule is hereby
incorporated into this Agreement and made a part hereof. For purposes of this
Agreement, with respect to any matter that is clearly disclosed in any portion
of the Disclosure Schedule in such a way as to make its relevance to the
information called for by another Section of this Agreement readily apparent,
such matter shall be deemed to have been included in the Disclosure Schedule in
response to such other Section, notwithstanding the omission of any appropriate
cross-reference thereto.
17.14. Waiver of Jury Trial. EACH PARTY HERETO WAIVES ITS RIGHTS TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY AGREEMENT, CONTRACT OR OTHER DOCUMENT OR
INSTRUMENT EXECUTED IN CONNECTION HEREWITH, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as an instrument under seal as of the day and year first above
written.
RAYTHEON ENGINEERS & CONSTRUCTORS INTERNATIONAL, INC.
By:
Name:
Title:
TEREX CORPORATION
By:
Name:
Title:
EXHIBIT 10.28
STOCK PURCHASE AGREEMENT
July 23, 1999
Hartford Capital Appreciation Fund, Inc.
c/o Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Dear Sirs:
Terex Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell 2,000,000 shares ("Offered Securities") of its Common
Stock, par value $.01 per share. The Company hereby agrees with Hartford Capital
Appreciation Fund, Inc.
("Investor") as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Investor 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. 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") 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) under the Act, including all material incorporated
by reference in such basic prospectus and Prospectus Supplement, is hereinafter
referred to as the "Prospectus".
(ii) 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").
<PAGE>
(iii) 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.
(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 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.
(v) 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 of its
properties, or any agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the properties of the Company is
subject, or the charter or by-laws of the Company, except in each such case, for
such breaches, violations and defaults as could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(vi) This Agreement has been duly authorized, executed and delivered by the
Company, and this Agreement constitutes the valid and legally binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
2. Representations and Warranties of the Investor. The Investor
represents and warrants to, and agrees with, the Company that:
(i) The Investor has been duly formed and organized, and is an existing
limited liability partnership in good standing under the laws of the
Commonwealth of Massachusetts.
(ii) The execution and delivery by the Investor of, and the performance by
the Investor 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
Investor or any of its properties, or any agreement or instrument to which the
Investor is a party or by which the Investor is bound or to which any of the
properties of the Investor is subject, or the organizational documents of the
Investor, except in each such case, for such breaches, violations and defaults
as could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
<PAGE>
(iii) This Agreement has been duly authorized, executed and delivered by
the Investor, and this Agreement constitutes the valid and legally binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, the Company
agrees to sell to the Investor, and the Investor agrees to purchase the Offered
Securities from the Company, at an aggregate purchase price of $59,137,500.00
(or $29.56875 per share).
The Company will deliver the Offered Securities to the Investor,
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 9:00 A.M., New York time, on July 28,
1999, or at such other time not later than seven full business days thereafter
as the Investor and the Company determine. The certificates for the Offered
Securities to be so delivered will be in definitive form, in such denominations
and registered in such names as the Investor requests.
4. Listing of Shares. The Company agrees to list the Offered Securities
on the New York Stock Exchange.
5. Notices. All communications hereunder will be in writing and, if
sent to the Investor, will be mailed, delivered or telegraphed and confirmed to
the Investor, at Wellington Management, LLP, 75 State Street, Boston,
Massachusetts 02109, Attention: Lisa Yee, 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.
6. 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 no other person will have any
right or obligation hereunder.
7. 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.
8. 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.
<PAGE>
If the foregoing is in accordance with the Investor'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
Investor in accordance with its terms.
Very truly yours,
TEREX CORPORATION
By:
Name:
Title:
The foregoing Stock Purchase Agreement is hereby confirmed and accepted
as of the date first above written.
HARTFORD CAPITAL APPRECIATION FUND, INC.
By: Wellington Management Company, LLP,
its Investment Advisor
By:____________________________
Peter L. Curry
Vice President
EXHIBIT 12.1
TEREX CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(amounts in millions)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1999 1998 1999 1998
------------ ----------- ------------- ----------
Earnings
Income (loss) before taxes and minority
<S> <C> <C> <C> <C>
interest................................ $ 31.1 $ 21.0 $ 57.9 $ 35.6
Adjustments:
Minority interest in losses of
consolidated subsidiaries............. --- --- --- ---
Undistributed (income) loss of less
than 50% owned investments............ --- --- --- ---
Distributions from less than 50% owned
investments........................... --- --- --- ---
Fixed charges........................... 17.2 13.5 31.9 23.3
---------- --------- ---------- -----------
Earnings.................................. 48.3 34.5 89.8 58.9
---------- --------- ---------- -----------
Combined fixed charges, including
preferred accretion
Interest expense, including debt discount
amortization............................ 15.6 12.2 28.9 21.0
Accretion of redeemable convertible
preferred stock........................ --- --- --- ---
Amortization/writeoff of debt issuance
costs................................... 0.5 0.5 1.1 1.0
Portion of rental expense representative
of interest factor (assumed to be 33%)..
1.1 0.8 1.9 1.3
---------- --------- ---------- -----------
Fixed charges............................. $ 17.2 $ 13.5 $ 31.9 $ 23.3
---------- --------- ---------- -----------
Ratio of earnings to combined fixed charges.
2.8x 2.6x 2.8x 2.5x
========== ========= ========== ===========
Amount of earnings deficiency for coverage
of combined fixed charges................
$ --- $ --- $ --- $ ---
========== ========= ========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 104,700
<SECURITIES> 0
<RECEIVABLES> 378,500
<ALLOWANCES> 5,100
<INVENTORY> 482,300
<CURRENT-ASSETS> 990,400
<PP&E> 148,200
<DEPRECIATION> 50,700
<TOTAL-ASSETS> 1,390,400
<CURRENT-LIABILITIES> 470,100
<BONDS> 639,500
0
0
<COMMON> 200
<OTHER-SE> 241,300
<TOTAL-LIABILITY-AND-EQUITY> 1,390,400
<SALES> 871,400
<TOTAL-REVENUES> 871,400
<CGS> 723,800
<TOTAL-COSTS> 723,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,900
<INCOME-PRETAX> 57,900
<INCOME-TAX> 1,500
<INCOME-CONTINUING> 56,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,400
<EPS-BASIC> 2.65
<EPS-DILUTED> 2.45
</TABLE>
