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Prospectus Supplement
Filed pursuant to Section 424 (b)(3)
TEREX CORPORATION
Up to 550,000 Shares
Common Stock
The offer and sale of up to 550,000 shares of Common Stock, par value $.01 per
share, of Terex Corporation pursuant to this prospectus supplement are being
made by Terex from time to time to Irvin V. Plowdin and Jean Plowdin, as
trustee, in accordance with the terms of the Amended and Restated Stock Purchase
Agreement dated as of March 24, 1999 between Terex, Irvin V. Plowdin and Jean
Plowdin, as trustee. The Common Stock will be offered and sold at a price per
share equal to the average closing price per share of the Common Stock on the
New York Stock Exchange for the ten consecutive trading days ending on the sixth
trading day prior to the date the shares of Common Stock are issued to pursuant
to and this prospectus supplement as provided for in the Amended and Restated
Stock Purchase Agreement.
The last reported sale price of the Common Stock, par value $.01 per share,
which is listed on the New York Stock Exchange under the symbol "TEX," on March
23, 1999, was $23.313 per share.
Investing in the Common Stock involves certain risks. See "Risk Factors" on page
S-7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus Supplement or the Prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
Prospectus Supplement dated March 24, 1999
This Prospectus Supplement relates to an effective registration statement under
the Securities Act of 1933, as amended, but is not complete and may be changed.
This Prospectus Supplement is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
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TABLE OF CONTENTS
Prospectus Supplement
Page
FORWARD-LOOKING STATEMENTS............................................... S-4
THE COMPANY.............................................................. S-5
RECENT DEVELOPMENTS...................................................... S-7
RISK FACTORS............................................................. S-7
Debt of Terex.................................................... S-7
Restrictive Debt Covenants....................................... S-8
Acquisition Strategy; Integration of New
Businesses.................................................... S-8
Industry Cycles and Competition.................................. S-8
Tax Audit Issues................................................. S-8
SEC Investigation................................................ S-9
Ability to Use Net Operating Loss
Carryovers.................................................... S-9
Reliance on Key Management....................................... S-9
Foreign Currencies; International
Operations.................................................... S-10
Environmental and Related Matters................................ S-10
Restrictions on Dividends........................................ S-10
USE OF PROCEEDS.......................................................... S-11
PRICE RANGE OF COMMON STOCK AND DIVIDEND
POLICY............................................................... S-11
DESCRIPTION OF COMMON STOCK.............................................. S-12
PLAN OF DISTRIBUTION..................................................... S-12
EXPERTS................................................................ S-12
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3
Prospectus
Page
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF DOCUMENTS BY REFERENCE.................................. 2
THE COMPANY............................................................... 3
RATIOS OF EARNINGS TO FIXED CHARGES....................................... 5
USE OF PROCEEDS.......................................................... 5
DESCRIPTION OF DEBT SECURITIES............................................ 5
DESCRIPTION OF PREFERRED STOCK............................................ 21
DESCRIPTION OF COMMON STOCK............................................... 27
DESCRIPTION OF WARRANTS................................................... 28
DESCRIPTION OF RIGHTS..................................................... 28
PLAN OF DISTRIBUTION...................................................... 29
ERISA MATTERS............................................................ 30
LEGAL OPINIONS............................................................ 31
EXPERTS................................................................... 31
You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
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FORWARD-LOOKING STATEMENTS
This Prospectus Supplement, the accompanying Prospectus and the
documents incorporated by reference contain and refer to forward-looking
statements that involve risks and uncertainties. Generally, the words "may,"
"expects," "intends," "anticipates," "plans," "projects," "estimates" or similar
words are intended to identify forward-looking statements. However, the absence
of these words does not mean that the statement is not forward-looking. We have
based these forward-looking statements on our current expectations and
projections about future events. These statements are not guarantees of future
performance. It is possible that actual events and results will differ
materially as future events are difficult to predict. In addition, many of the
risks, uncertainties and assumptions about Terex are beyond our control. Some of
these risks, uncertainties and assumptions are:
- construction and mining activity are affected by interest rates, government
spending and general economic conditions;
- our ability to successfully integrate new businesses may affect our future
performance;
- changes in our key management personnel;
- our businesses are in very competitive industries and may be affected by
pricing, product and other actions taken by our competitors;
- changes in laws and regulations;
- we manufacture and sell our products in many countries and we may be
affected by changes in exchange rates between currencies, as well as
international politics;
- our ability to timely manufacture and deliver our products to customers;
- the ability of our suppliers to timely supply us with parts and components
at competitive prices;
- continued use of net operating loss carryovers;
- our ability to pay dividends may be limited by the terms of our existing
debt agreements and state law;
- we have a significant amount of debt and our debt agreements contain a
number of restrictive covenants;
- certain of our federal income tax returns are being audited by the Internal
Revenue Service;
- the Securities and Exchange Commission is investigating Terex and certain
of its present and former officers and directors; and
- we are subject to various environmental laws and regulations.
The forward-looking statements made or referred to in this Prospectus
Supplement, the accompanying Prospectus and the documents incorporated by
reference reflect our expectations and projections at the time the statement was
made. We do not undertake any obligation to update publicly any forward-looking
statement which may result from changes in events, conditions, circumstances or
expectations on which we have based any forward-looking statement.
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THE COMPANY
Terex is a global manufacturer of a broad range of construction and
mining related capital equipment. Terex strives to manufacture high quality
machines which are low cost, simple to use and easy to maintain. Terex's
principal products include telescopic mobile cranes, tower cranes, lattice boom
cranes, aerial work platforms, utility aerial devices, telescopic material
handlers, truck mounted mobile cranes, rigid and articulated off-highway trucks
and high capacity surface mining trucks, large hydraulic mining shovels and
related components and replacement parts. Terex's products are manufactured at
20 plants in the United States and Europe and are sold primarily through a
worldwide network of dealers in over 750 locations to the global construction,
infrastructure and surface mining markets.
Terex's operations began in 1983 with the purchase of Northwest
Engineering Company, Terex's original business and name. Since 1983, we have
expanded and changed Terex's business through a series of acquisitions and
dispositions. In 1988, Northwest Engineering Company merged into a subsidiary
acquired in 1986 named Terex Corporation, with Terex Corporation as the
surviving entity. As a result of the completion of the PPM Acquisition (as
defined below) in May 1995, Terex's operations were divided into three principal
segments: Material Handling, Heavy Equipment and Mobile Cranes. On November 27,
1996, Terex completed the sale of its worldwide material handling segment, which
was originally acquired in July 1992. Currently Terex operates in two business
segments: Terex Lifting and Terex Earthmoving.
Terex Lifting
Terex Lifting manufactures and sells telescopic mobile cranes
(including rough terrain, truck and all terrain mobile cranes), tower cranes,
lattice boom cranes, aerial work platforms (including scissor, articulated boom
and straight telescoping boom aerial work platforms), utility aerial devices
(including digger derricks and articulated aerial devices), telescopic material
handlers (including container stackers and rough terrain lift trucks), truck
mounted cranes (boom trucks) and related components and replacement parts.
Construction and industrial customers, as well as utility companies, are the
primary users of these products. Customers use these products to lift equipment,
material or workers to various heights. Terex believes that it is the second
largest manufacturer of rough terrain, truck and all terrain telescopic mobile
cranes in the United States and the leading manufacturer in France and Italy.
Terex Lifting is comprised of a number of divisions and subsidiaries.
Terex Lifting was established as a separate business segment as a
result of the acquisition (the "PPM Acquisition") in May 1995 of substantially
all of the shares of P.P.M. S.A. and certain of its subsidiaries, including
P.P.M. SpA, Brimont Agraire S.A., a specialized trailer manufacturer in France,
PPM Krane GmbH, a sales organization in Germany, and Baulift Baumaschinen Und
Krane Handels GmbH, a parts distributor in Germany (collectively, "PPM Europe"),
from Potain S.A., and all of the capital stock of Legris Industries, Inc., which
owned 92.4% of the capital stock of PPM Cranes, Inc. ("Terex Lifting--Conway
Operations;" PPM Europe and Terex Lifting--Conway Operations are collectively
referred to herein as "PPM") from Legris Industries, S.A. Concurrently with the
completion of the PPM Acquisition, Terex contributed the assets (subject to
liabilities) of its Koehring Cranes and Excavators and Mark Industries division
to Terex Cranes, Inc., a wholly-owned subsidiary of Terex. The former division
now operates as Koehring Cranes, Inc., a wholly-owned subsidiary of Terex
Cranes, Inc.
During 1997, Terex completed two acquisitions to augment its Terex
Lifting segment. On April 7, 1997, Terex completed the acquisition of
substantially all of the capital stock of certain of the former subsidiaries of
Simon Engineering plc (the "Simon Access Companies") for $90 million (subject to
adjustment under certain circumstances). The Simon Access Companies consist
principally of business units in the United States and Europe engaged in the
manufacture, sale and worldwide distribution of access equipment designed to
position people and materials to work at heights. The Simon Access Companies'
products include utility aerial devices, aerial work platforms and truck mounted
cranes (boom trucks) which are sold to customers in the industrial and
construction markets, as well as utility companies. Specifically, Terex acquired
100% of the outstanding common stock of (i) Simon Telelect, Inc. (now named
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Terex-Telelect, Inc.), a Delaware corporation, (ii) Simon Aerials, Inc. (now
named Terex Aerials, Inc.), a Wisconsin corporation and parent company of
Terex-RO Corporation ("Terex RO"), (iii) Sim-Tech Management Limited, a private
limited company incorporated under the laws of Hong Kong, (iv) Simon Cella,
S.r.1., a company incorporated under the laws of Italy, and (v) Simon Aerials
Limited (now named Terex Aerials Limited), a company incorporated under the laws
of Ireland; and 60% of the outstanding common stock of Simon-Tomen Engineering
Company Limited, a limited liability stock company organized under the laws of
Japan. On April 14, 1997, Terex completed the acquisition of all of the capital
stock of Baraga Products, Inc. and M&M Enterprises of Baraga, Inc. (together,
the "Square Shooter Business"), which manufacture the Square Shooter, a rough
terrain telescopic lift truck designed to lift materials to heights where they
are used in construction.
During 1998, Terex completed four additional acquisitions and has
contracted to make one additional acquisition to augment its Terex Lifting
segment. On May 4, 1998, Terex purchased all of the outstanding shares of
Holland Lift International B.V. ("Holland Lift") for a purchase price of
approximately $4.35 million. Holland Lift, which is headquartered just outside
Amsterdam, The Netherlands, manufactures and sells self-propelled scissor lifts
(commonly referred to as aerial work platforms). On August 4, 1998, Terex
purchased all of the outstanding shares of American Crane Corporation ("American
Crane") for a purchase price of $18 million. American Crane, which is based in
Wilmington, North Carolina, manufactures and sells lattice boom cranes. On
November 3, 1998, Terex purchased all of the outstanding shares of Italmacchine,
SpA ("Italmacchine"). Italmacchine, which is based near Perugia, Italy,
manufactures and sells telescopic material handlers. On November 13, 1998, Terex
purchased from Noell Service und Maschinentechnik GmbH the assets of its
division, Peiner HTS ("Peiner"). Peiner, which is based in Trier, Germany,
manufactures and sells tower cranes. On December 18, 1998, Terex purchased all
of the outstanding shares of Gru Comedil SpA ("Comedil"). Comedil, based in
Fontanafredda, Italy, manufactures and sells tower cranes.
Terex Earthmoving
Terex Earthmoving manufactures and sells articulated and rigid
off-highway trucks, high capacity surface mining trucks, large hydraulic mining
shovels, and related components and replacement parts. Construction, mining and
government customers are the primary users of these products. Customers use
hydraulic excavators to load coal, copper ore, iron ore, other mineral-bearing
materials or rocks into trucks.
Terex Earthmoving currently manufactures and sells articulated and
rigid off-highway trucks and high capacity surface mining trucks, and related
components and replacement parts. These products are used primarily by
construction, mining and government customers. On January 5, 1998, Terex also
acquired Payhauler Corp. ("Payhauler"), which manufactures and markets 30 and 50
ton all wheel drive rigid frame trucks designed to move material in more severe
operating conditions than a standard rear wheel drive rigid frame truck. On
March 31, 1998, Terex purchased all of the outstanding shares of O&K Mining GmbH
from Orenstein & Koppel AG for net aggregate consideration of approximately $168
million, subject to certain post-closing adjustments. O&K Mining is engaged in
the manufacture, sale and worldwide distribution of heavy duty hydraulic
excavators primarily used to load coal, copper ore, iron ore, other
mineral-bearing materials or rocks into trucks. These products are used by
mining equipment contractors, mining and quarrying companies and large
construction companies involved in infrastructure projects worldwide. Terex
Earthmoving is comprised of Terex Equipment Limited ("TEL"), located in
Motherwell, Scotland, Unit Rig ("Unit Rig"), located in Tulsa, Oklahoma,
Payhauler, located in Tulsa, Oklahoma, and O&K Mining, located in Dortmund,
Germany.
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RECENT DEVELOPMENTS
Acquisition of Amida Industries, Inc.
In February 1999, Terex agreed to acquire all of the shares of capital
stock of Amida Industries, Inc. Amida is based in Rock Hill, South Carolina and
manufactures and sells mobile light towers, concrete screeds (leveling devices),
motorized front dumpers and directional arrow boards under the Amida brand name.
We expect to complete the acquisition of Amida on or about April 1, 1999. Amida
has industry leading market shares in each of its product categories, and will
expand our product offering to the rapidly growing rental segment of the
construction business. The shares of Common Stock offered and sold by this
Prospectus Supplement are being issued in payment of a portion of the purchase
price for the shares of Amida.
Coal India Order
Terex announced in the fourth quarter of 1998 that it was awarded a
$157 million contract to supply Coal India with 160 Unit Rig Mark 30B series
mining trucks and related parts sold by our Unit Rig division. We expect to
deliver the trucks to six mines in India during 1999 and deliveries have
commenced. We also expect that this order will increase our higher margin parts
revenues each year during the next ten years. Coal India is the government
agency for coal management in India. Coal India controls 450 mines and employs
more than 650,000 people. We won this contract in an open bidding process which
included all major mining and construction equipment manufacturers worldwide.
Coal India is paying for the trucks with a portion of a World Bank loan granted
to India in 1997 and the order is fully supported by letters of credit.
RISK FACTORS
Investing in shares of Common Stock can be risky. Before you invest in
shares of our Common Stock, you should carefully consider the following factors
and other information contained or incorporated in this Prospectus Supplement or
the accompanying Prospectus.
Debt of Terex
As of December 31, 1998, Terex had total debt of approximately $631
million, which represented approximately 87% of our total capitalization. Terex
will use a portion of the funds received from this offering to repay some of our
debt.
There are several important consequences of having debt, including the
following:
- a substantial portion of our cash from operating activities will be
dedicated to payment of principal and interest on our debt;
- competitive pressures and adverse economic conditions are more likely to
have a negative effect on our business; and
- our ability to make acquisitions and to take advantage of significant
business opportunities may be negatively affected.
Terex's ability to pay the required interest and principal payments on
our debt depends on the future performance of our business. The performance of
our business is subject to general economic conditions and other financial and
business factors. Many of these factors are beyond our control. If Terex does
not have enough cash flow in the future to pay the required interest or
principal payments on our debt, we may be required to refinance all or a part of
our debt or borrow additional amounts. Terex does not know if refinancing our
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debt will be possible at that time or if we will be able to find someone who
will lend us more money.
In addition, because part of Terex's debt bears interest at floating
rates, an increase in interest rates could adversely affect our ability to make
the required interest and principal payments on our debt. Terex has entered into
agreements covering part of our floating rate debt which place a cap on the
applicable interest rates.
Restrictive Debt Covenants
Terex's existing debt agreements contain a number of significant
covenants. These covenants limit our ability to, among other things, borrow
additional money, make capital expenditures, pay dividends, dispose of assets
and acquire new businesses. These covenants also require us to meet certain
financial tests. Changes in economic or business conditions, results of
operations or other factors could cause us to default under our existing debt
agreements. If we are unable to comply with these covenants, there would be a
default under our existing debt agreements. A default, if not waived by our
lenders, could result in acceleration of Terex's debt and possibly bankruptcy.
Acquisition Strategy; Integration of New Businesses
Terex expects to continue its strategy of identifying and acquiring
businesses with complementary products and services which we believe will
enhance our operations and profitability. Terex may pay for future acquisitions
from internally generated funds, bank borrowings, public offerings, private
sales of stock or bonds, or some combination of these methods. However, we
cannot give any assurance that Terex will be able to continue to find suitable
businesses to purchase or that Terex will be able to raise the money necessary
to complete future acquisitions. In addition, we cannot guarantee that we will
be able to successfully integrate any business we purchase into our existing
business or that any acquired businesses will be profitable. The successful
integration of new businesses depends on our ability to manage these new
businesses and cut excess costs. If Terex is unable to complete the integration
of new businesses in a timely manner, it could have a materially adverse effect
on our results of operations and financial condition.
Industry Cycles and Competition
The demand for our products depends upon the general economic
conditions of the markets in which we compete. Downward economic cycles result
in reductions in sales of our products, which may reduce Terex's profits. We
have taken a number of steps to reduce our fixed costs of operations to decrease
the negative impact of these cycles.
Terex competes in a highly competitive industry. To compete
successfully, our products must excel in terms of quality, price, product line,
ease of use, safety and comfort, and we must also provide excellent customer
service. The greater financial resources of certain of our competitors may put
Terex at a competitive disadvantage.
Tax Audit Issues
Terex's federal income tax returns for the years 1987 through 1989 are
currently being audited by the Internal Revenue Service ("IRS"). In December
1994, we received an examination report from the IRS proposing a large tax
deficiency. The examination report raised many issues. Among these issues are
substantiation for certain tax deductions and whether we were able to use
certain net operating loss carryovers ("NOLs") to offset taxable income. In
April 1995, Terex filed an administrative appeal to the examination report. The
IRS is currently reviewing information we provided to it. The final outcome of
this audit is subject to the resolution of complicated legal and factual issues.
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If the IRS prevails on all the issues raised, the amount of the tax we
would have to pay would be approximately $56.0 million plus penalties of
approximately $12.8 million and interest through December 31, 1998 of
approximately $112.1 million. The penalties claimed by the IRS are between 20%
and 25% of the amount of the tax deficiency assessed against us. Interest on the
amount of tax deficiency and penalties assessed against us is currently accruing
at a rate of 10% per annum. If Terex is required to pay a significant portion of
the tax deficiency claimed by the IRS, we may not have or be able to obtain the
money necessary to pay the tax deficiency. If this were to occur, we may not be
able to continue in business.
Terex believes, however, that we are able to provide adequate
documentation for a large part of the tax deductions the IRS has disallowed. The
IRS has also advised us that they will no longer challenge our past and future
use of the NOLs questioned by the IRS. As a result, Terex does not believe that
the outcome of the audit will have a material adverse effect on our financial
condition or results of operations. However, we may lose or have to use some of
our NOLs as a result of the audit. In addition, we will have to pay some amount
of tax, penalties and interest to the IRS to resolve this matter. The final
outcome of the audit cannot be determined or estimated at this time.
Accordingly, Terex does not have any additional reserves for money which might
be due as a result of the audit because the loss ranges from zero to $56 million
plus interest and penalties.
SEC Investigation
In March 1994, the Securities and Exchange Commission began a private
investigation of Terex and certain of its present and former officers and
directors. The purpose of the investigation was to determine whether any of
these parties had violated federal securities laws. To date, this investigation
has focused primarily on the accounting treatment and the reporting (in filings
with the SEC) of various transactions which took place in the late 1980s and the
early 1990s. We are cooperating with the SEC in its investigation.
The SEC has advised us that it may bring an administrative proceeding
against Terex and certain of its present and former officers and directors. We
understand that if the SEC brings such proceedings, the SEC would seek an order
requiring Terex to cease and desist violating the federal securities laws but
would not impose monetary penalties on Terex. Such an order would be based on
claims relating to the accounting treatment and the reporting in Terex's
financial statements for the years ended December 31, 1990 and 1991, and its
Proxy Statement for the 1992 fiscal year.
It is not possible at this time for us to determine the outcome of this
investigation.
Ability to Use Net Operating Loss Carryovers
As of December 31, 1998, Terex had federal NOLs of approximately $290.5
million. Currently there is no limitation on our ability to use NOLs to reduce
future income taxes. However, if an ownership change as defined in Section 382
of the Internal Revenue Code of 1986, as amended (the "Code"), occurs with
respect to our capital stock, our ability to use NOLs would be limited to
specific annual amounts. Generally, an ownership change occurs if certain
persons or groups increase their aggregate ownership by more than 50 percentage
points of our total capital stock in any three-year period.
If an ownership change occurs, our ability to use NOLs to reduce income
taxes is limited to an annual amount based on the fair market value of Terex
immediately prior to the ownership change multiplied by the long-term tax-exempt
interest rate. The long-term tax-exempt interest rate is published monthly by
the IRS. As of the date of this Prospectus Supplement, the rate is approximately
5.02%. The 15-year period to use NOLs is not affected by the ownership change
limitations. Our use of new NOLs arising after the date of an ownership change
would not be affected.
It is impossible for Terex to ensure that an ownership change will not
occur in the future. We do not have the ability to restrict the purchase or sale
of our capital stock so as to prevent an ownership change. At any time, the
actions of one or more persons or groups under certain circumstances could by
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themselves cause an ownership change and result in a limitation on our ability
to use NOLs. However, Terex has entered into an agreement with Mr. Randolph W.
Lenz which limits his ability to purchase and sell shares of our capital stock.
Mr. Lenz is our former Chairman of the Board and an owner of approximately 8.8%
of our Common Stock after this offering. Nevertheless, Terex cannot prevent an
ownership change from occurring. In addition, we may decide in the future that
it is necessary or in our interest to take certain actions which result in an
ownership change. If an ownership change occurs, our future after-tax earnings
per share and cash flow will be reduced.
Reliance on Key Management
The success of Terex's business is dependent upon the management and
leadership skills of Ronald M. DeFeo, Chairman of the Board, President and Chief
Executive Officer. Mr. DeFeo is not bound by an employment agreement with Terex.
The loss of Mr. DeFeo could have a significant, negative impact upon Terex.
Foreign Currencies; International Operations
Terex's products are sold in over 50 countries around the world. Thus,
our revenues are generated in foreign currencies, including the British Pound
Sterling, French Franc, Deutsche Mark, Italian Lira, Dutch Gilder and Australian
Dollar, while costs incurred to generate those revenues are only partly incurred
in the same currencies. Since Terex's financial statements are denominated in
U.S. dollars, changes in currency exchange rates between the U.S. dollar and
other currencies have had, and will continue to have, an impact on Terex's
earnings. To date, this impact has not been material on the earnings of Terex.
To reduce this currency exchange risk, Terex may buy protecting or offsetting
positions (known as "hedges") in certain currencies to reduce the risk of an
adverse currency exchange movement. Terex has not engaged in any speculative or
profit motivated hedging activities. Although Terex partially hedges its
revenues and costs, currency fluctuations will impact Terex's financial
performance in the future.
Terex's international operations are also subject to a number of
potential risks. Such risks include, among others, currency exchange controls,
labor unrest, regional economic uncertainty, political instability, restrictions
on the transfer of funds into or out of a country, export duties and quotas,
domestic and foreign customs and tariffs, current and changing regulatory
environments, difficulty in obtaining distribution support and potentially
adverse tax consequences. These factors may have an adverse effect on Terex or
its international operations in the future.
Environmental and Related Matters
Terex generates hazardous and nonhazardous wastes in the normal course
of its manufacturing operations. As a result, Terex is subject to a wide range
of federal, state, local and foreign environmental laws and regulations. These
laws and regulations govern actions that may have adverse environmental effects
and also require compliance with certain practices when handling and disposing
of hazardous and nonhazardous wastes. These laws and regulations also impose
liability for the costs of, and damages resulting from, cleaning up sites, past
spills, disposals and other releases of hazardous substances.
Compliance with these laws and regulations has, and will continue to
require, Terex to make expenditures. Terex does not expect that these
expenditures will have a material adverse effect on its business or
profitability.
Restrictions on Dividends
Terex's ability to pay dividends on its Common Stock is limited under
the terms of Terex's existing debt agreements. In addition, Delaware law
generally restricts Terex from paying dividends in circumstances where the
payment would make our liabilities exceed our assets or where the payment would
make us unable to pay our debts as they become due.
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Terex does not plan on paying dividends on its Common Stock in the near
term. Instead, we intend to retain any earnings to repay indebtedness and to
fund the development and growth of our business. Any future payments of cash
dividends will depend on our financial condition, capital requirements and
earnings, as well as other factors that the Board of Directors may consider.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the sale of the
Common Stock.
PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY
Our Common Stock is listed on the New York Stock Exchange under the
symbol "TEX." The following table sets forth for the quarters indicated, the
high and low sales prices of our Common Stock as reported on the NYSE Composite
Tape.
Price Range
Low High
1997
First Quarter ended March 31, 1997........................ $9 1/2 $13 1/2
Second Quarter ended June 30, 1997........................ $13 1/8 $19 1/2
Third Quarter ended September 30, 1997.................... $18 7/8 $23 5/8
Fourth Quarter ended December 31, 1997.................... $19 7/16 $25 1/2
1998
First Quarter ended March 31, 1998....................... $20 1/8 $27 3/16
Second Quarter ended June 30, 1998....................... $27 3/16 $31 5/16
Third Quarter ended September 30, 1998................... $14 3/8 $29 9/16
Fourth Quarter ended December 31, 1998................... $14 $28 3/4
1999
First Quarter (through March 23, 1999).................... $28 1/2 $22 1/8
The last reported sale of our Common Stock on the NYSE Composite Tape on
March 23, 1999 was $23.313 per share. As of March 10, 1999, there were
approximately 664 record holders of our Common Stock.
No dividends were declared or paid in 1996, 1997 or 1998. Certain of
Terex's debt agreements contain restrictions as to the payment of cash
dividends. In addition, payment of dividends is limited by Delaware law. Terex
intends generally to retain any earnings to repay indebtedness and to fund the
development and growth of its business. Terex does not plan on paying dividends
on the Common Stock in the near term. Any future payments of cash dividends will
depend on the financial condition, capital requirements and earnings of Terex,
as well as other factors that the Board of Directors may consider.
DESCRIPTION OF COMMON STOCK
Each outstanding share of Common Stock entitles the holder to one vote,
either in person or by proxy, on all matters submitted to a vote of
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12
stockholders, including the election of directors. There is no cumulative voting
in the election of directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the directors then standing
for election. Subject to preferences which may be applicable to any outstanding
shares of preferred stock, holders of Common Stock have equal ratable rights to
any dividends that may be declared by the Board of Directors out of legally
available funds.
Holders of Common Stock have no conversion, redemption or preemptive
rights to subscribe for any securities of Terex. All outstanding shares of
Common Stock are fully paid and nonassessable. In the event of any liquidation,
dissolution or winding-up of the affairs of Terex, holders of Common Stock will
be entitled to share ratably in the assets of Terex remaining after providing
for the payment of liabilities to creditors and preferences applicable to
outstanding shares of preferred stock. The rights, preferences and privileges of
holders of Common Stock are subject to the rights of the holders of any
outstanding shares of preferred stock.
Terex's Restated Certificate of Incorporation provides that directors
of Terex shall not be personally liable to Terex or its stockholders for
monetary damages for breach of fiduciary duties as directors except to the
extent otherwise required by Delaware law. The Amended and Restated By-laws of
Terex provide for indemnification of the officers and directors of Terex to the
fullest extent permitted by Delaware law.
PLAN OF DISTRIBUTION
The offer and sale of up to 550,000 shares of Common Stock, par value
$.01 per share, of Terex pursuant to this prospectus supplement are being made
by Terex from time to time to Irvin V. Plowdin and Jean Plowdin, as trustee, in
accordance with the terms of the Amended and Restated Stock Purchase Agreement
dated as of March 24, 1999 between Terex, Irvin V. Plowdin and Jean Plowdin, as
trustee. The Common Stock will be offered and sold to you at a price per share
equal to the average closing price per share of the Common Stock on the New York
Stock Exchange for the ten consecutive trading days ending on the sixth trading
day prior to the date the shares of Common Stock are issued to pursuant to and
this prospectus supplement as provided for in the Amended and Restated Stock
Purchase Agreement.
EXPERTS
The consolidated financial statements of Terex Corporation incorporated
in the accompanying Prospectus by reference to the Annual Report on Form 10-K of
Terex Corporation for the year ended December 31, 1997 and Terex's Current
Report on Form 8-K dated July 16, 1998 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of O&K Mining GmbH as of December
31, 1997 and 1996 and for the years then ended, incorporated in the accompanying
Prospectus by reference to Terex's Amendment No. 2 to Current Report on Form
8-K/A dated March 31, 1998 have been so incorporated in reliance on the report
of C&L Treuhand-Vereinigung Deutsche Revision, Aktiengesellschaft
Wirtschaftsprufungsgesellschaft, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of PPM Cranes, Inc. for the year
ended December 31, 1997 incorporated in the accompanying Prospectus by reference
to Terex's Current Report on Form 8-K dated July 16, 1998 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
<PAGE>
PROSPECTUS
TEREX CORPORATION
$300,000,000
Debt Securities, Preferred Stock,
Common Stock, Warrants and Rights
Terex Corporation ("Terex" or the "Company") may from time to time offer and/or
issue in one or more series its (i) unsecured debt securities, which may be
either senior debt securities ("Senior Securities") or subordinated debt
securities ("Subordinated Securities," and together with Senior Securities, the
"Debt Securities"), (ii) preferred stock, par value $.01 per share ("Preferred
Stock"), (iii) common stock, par value $.01 per share ("Common Stock"), (iv)
warrants to purchase Debt Securities, Preferred Stock or Common Stock
(collectively, "Warrants"), or (v) rights to purchase Preferred Stock or Common
Stock ("Rights"), with an aggregate initial public offering price of up to
$300,000,000 on terms to be determined at the time of offering. Debt Securities,
Preferred Stock, Common Stock, Warrants and Rights (collectively, the "Offered
Securities") may be offered, separately or together, in separate series in
amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this Prospectus
is being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, ranking, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder, terms for sinking fund payments, terms for conversion into
Preferred Stock or Common Stock, certain covenants, other terms and conditions,
and the initial public offering price; (ii) in the case of Preferred Stock, the
number, specific title and stated value, any distribution, liquidation,
redemption, conversion, voting and other terms and conditions, and the initial
public offering price; (iii) in the case of Common Stock, any initial public
offering price; (iv) in the case of Warrants, the number and terms thereof, the
designation and the number of securities issuable upon their exercise, the
exercise price, the terms of the offering and sale thereof and, where
applicable, the duration and detachability thereof; and (v) in the case of
Rights, the duration, exercise price and transferability thereof.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated from
time to time by the Company, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is March 24, 1999.
<PAGE>
2
AVAILABLE INFORMATION
Terex Corporation is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at its offices at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may also be obtained by mail from the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. For further information on the operation of the public
reference rooms, please call 1-800-SEC-0330. Additionally, the Commission
maintains a Web site containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address for such Web site is http://www.sec.gov.
In addition, the Common Stock is listed on the New York Stock Exchange, Inc.
("NYSE") under the symbol "TEX" and reports, proxy statements and other
information concerning the Company may also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form S-3
(together with all amendments, exhibits, schedules, and supplements thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is hereby made to the Registration Statement, which may be inspected
and copied at the Public Reference Section of the Commission referred to above.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
made to the full text of such contract or document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission, each such
statement being qualified in all respects by such reference.
The Company furnishes stockholders with annual reports containing audited
financial statements. The Company also furnishes its holders of Common Stock
with proxy material for its annual meetings complying with the proxy
requirements of the Exchange Act.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the Commission
are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
2. The Company's Notice of Annual Meeting of Stockholders and Proxy
Statement dated April 8, 1998.
3. The Company's Current Report on Form 8-K dated March 31, 1998 and
filed on April 7, 1998.
4. The Company's Quarterly Report on Form 10-Q for the Three Months
Ended March 31, 1998, dated May 15, 1998 and filed on May 15, 1998.
5. The Company's Quarterly Report on Form 10-Q for the Six Months Ended
June 30, 1998, dated August 14, 1998 and filed on August 14, 1998.
<PAGE>
3
6. The Company's Quarterly Report on Form 10-Q for the Nine Months Ended
September 30, 1998, dated November 16, 1998 and filed on November 16,
1998.
7. The Company's Amendment No. 1 to Current Report on Form 8-K/A dated
March 31, 1998 and filed on June 11, 1998.
8. The Company's Amendment No. 2 to Current Report on Form 8-K/A dated
March 31, 1998 and filed on June 29, 1998.
9. The Company's Current Report on Form 8-K dated June 16, 1998 and
filed on July 16, 1998.
10. The Company's Current Report on Form 8-K dated March 2, 1999 and
filed on March 2, 1999.
11. The Company's Current Report on Form 8-K dated March 10, 1999 and
filed on March 11, 1999.
12. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated February 22, 1991.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of the Offering of the Offered
Securities made hereby shall be deemed to be incorporated herein by reference
and to be a part hereof on and from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
incorporated herein by reference or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any and
all documents incorporated by reference in this Prospectus (not including
exhibits to such information, unless such exhibits are specifically incorporated
by reference in such information). Such requests should be directed to Terex
Corporation, Attention: Secretary, 500 Post Road East, Westport, Connecticut
06880 (telephone (203) 222-7170).
THE COMPANY
Terex is a global manufacturer of a broad range of construction and mining
related capital equipment. The Company strives to manufacture high quality
machines which are low cost, simple to use and easy to maintain. The Company's
principal products include telescopic mobile cranes, aerial work platforms,
utility aerial devices, telescopic material handlers, truck mounted mobile
cranes, rigid and articulated off-highway trucks and high capacity surface
mining trucks, large hydraulic mining shovels and related components and
replacement parts. The Company's products are manufactured at 16 plants in the
United States and Europe and are sold primarily through a worldwide network of
dealers in over 750 locations to the global construction, infrastructure and
surface mining markets.
The Company's operations began in 1983 with the purchase of Northwest
Engineering Company, the Company's original business and name. Since 1983,
management has expanded and changed the Company's business through a series of
acquisitions and dispositions. In 1988, Northwest Engineering Company merged
into a subsidiary acquired in 1986 named Terex Corporation, with Terex
Corporation as the surviving entity. As a result of the completion of the PPM
Acquisition (as defined below) in May 1995, the Company's operations were
divided into three principal segments: Material Handling, Heavy Equipment and
Mobile Cranes. On November 27, 1996, the Company completed the sale of its
worldwide material handling segment, which was originally acquired in July 1992,
and currently the Company operates in two business segments: Terex Lifting
(formerly known as Terex Cranes) and Terex Earthmoving (formerly known as Terex
<PAGE>
4
Trucks). The principal executive offices of the Company are located at 500 Post
Road East, Westport, Connecticut 06880 and its telephone number is (203)
222-7170.
Terex Lifting (formerly known as Terex Cranes) manufactures and sells telescopic
mobile cranes (including rough terrain, truck and all terrain mobile cranes),
aerial work platforms (including scissor, articulated boom and straight
telescoping boom aerial work platforms), utility aerial devices (including
digger derricks and articulated aerial devices), telescopic material handlers
(including container stackers, scrap handlers and telescopic rough terrain boom
forklifts), truck mounted cranes (boom trucks) and related components and
replacement parts. These products are primarily used by construction and
industrial customers and utility companies. Terex Lifting is comprised of a
number of divisions and subsidiaries.
Terex Lifting was established as a separate business segment as a result of the
acquisition (the "PPM Acquisition") in May 1995 of substantially all of the
shares of P.P.M. S.A. and certain of its subsidiaries, including P.P.M. SpA,
Brimont Agraire S.A., a specialized trailer manufacturer in France, PPM Krane
GmbH, a sales organization in Germany, and Baulift Baumaschinen Und Krane
Handels GmbH, a parts distributor in Germany (collectively, "PPM Europe"), from
Potain S.A., and all of the capital stock of Legris Industries, Inc., which
owned 92.4% of the capital stock of PPM Cranes, Inc. ("Terex Lifting--Conway
Operations"; PPM Europe and Terex Lifting--Conway Operations are collectively
referred to herein as "PPM") from Legris Industries, S.A. Concurrently with the
completion of the PPM Acquisition, the Company contributed the assets (subject
to liabilities) of its Koehring Cranes and Excavators and Mark Industries
division to Terex Cranes, Inc., a wholly-owned subsidiary of the Company. The
former division now operates as Koehring Cranes, Inc., a wholly owned subsidiary
of Terex Cranes, Inc.
During 1997, the Company completed two acquisitions to augment its Terex Lifting
segment. On April 7, 1997, the Company completed the acquisition of
substantially all of the capital stock of certain of the former subsidiaries of
Simon Engineering plc (the "Simon Access Companies") for $90 million (subject to
adjustment under certain circumstances). The Simon Access Companies consist
principally of business units in the United States and Europe engaged in the
manufacture, sale and worldwide distribution of access equipment designed to
position people and materials to work at heights. The Simon Access Companies'
products include utility aerial devices, aerial work platforms and truck mounted
cranes (boom trucks) which are sold to customers in the industrial and
construction markets, as well as utility companies. Specifically, the Company
acquired 100% of the outstanding common stock of (i) Simon Telelect, Inc. (now
named Terex Telelect, Inc.), a Delaware corporation, (ii) Simon Aerials, Inc.
(now named Terex Aerials, Inc.), a Wisconsin corporation and parent company of
Terex-RO Corporation ("Terex RO"), (iii) Sim-Tech Management Limited, a private
limited company incorporated under the laws of Hong Kong, (iv) Simon Cella,
S.r.1., a company incorporated under the laws of Italy, and (v) Simon Aerials
Limited (now named Terex Aerials Limited), a company incorporated under the laws
of Ireland; and 60% of the outstanding common stock of Simon-Tomen Engineering
Company Limited, a limited liability stock company organized under the laws of
Japan. On April 14, 1997, the Company completed the acquisition of all of the
capital stock of Baraga Products, Inc. and M&M Enterprises of Baraga, Inc.
(together, the "Square Shooter Business"), which manufacture the Square Shooter,
a rough terrain telescopic lift truck designed to lift materials to heights
where they are used in construction.
Terex Earthmoving (formerly known as Terex Trucks) manufactures and sells
articulated and rigid off-highway trucks, high capacity surface mining trucks,
large hydraulic mining shovels, and related components and replacement parts.
These products are used primarily by construction, mining and government
customers. On January 5, 1998, the Company also acquired Payhauler Corp.
("Payhauler"), which manufactures and markets 30 and 50 ton all wheel drive
rigid frame trucks designed to move material in more severe operating conditions
than a standard rear wheel drive rigid frame truck. On March 31, 1998, the
Company purchased all of the outstanding shares of O&K Mining GmbH ("O&K
Mining") from O&K Orenstein & Koppel AG for net aggregate consideration of
approximately $168 million, subject to certain post-closing adjustments. O&K
Mining is engaged in the manufacture, sale and worldwide distribution of large
hydraulic mining shovels primarily used to load coal, copper ore, iron ore,
other mineral-bearing materials or rocks into trucks. These products are used by
mining equipment contractors, mining and quarrying companies and large
construction companies involved in infrastructure projects worldwide. Terex
Earthmoving is comprised of Terex Equipment Limited ("TEL"), located in
Motherwell, Scotland, Unit Rig ("Unit Rig"), located in Tulsa, Oklahoma,
Payhauler, located in Batavia, Illinois, and O&K Mining, located in Dortmund,
Germany.
<PAGE>
5
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratios of earnings to
fixed charges for the Company for the periods indicated below:
Nine Months Ended
Year Ended December 31, September 30,
1993 1994 1995 1996 1997 1997 1998
Ratio of earnings to
fixed charges....... -- 1.1x -- -- 1.6x 1.6x 2.5x
In calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) from continuing operations before income taxes and extraordinary
items plus fixed charges. Fixed charges consist of interest expense, preferred
stock accretion, amortization of indebtedness issuance costs, and rental expense
representative of the interest factor. Earnings were insufficient to cover fixed
charges by $40 million, $32.1 million and $42.2 million during the years ended
December 31, 1993, 1995, and 1996, respectively.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the Company
intends to use any net proceeds received by it from the sale of the Offered
Securities for general corporate purposes, which may include acquisitions and
other business combinations as suitable opportunities arise, the repayment of
indebtedness outstanding at such time, the satisfaction of the Company's
obligations under its outstanding Stock Appreciation Rights and working capital.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of the
Debt Securities to which any Prospectus Supplement may relate. The particular
terms of the Debt Securities being offered and the extent to which such general
provisions may apply will be described in a Prospectus Supplement relating to
such Debt Securities.
The Senior Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Securities Indenture"), between the
Company and a trustee to be selected by the Company (the "Senior Securities
Trustee") and the Subordinated Securities are to be issued under an Indenture,
as amended or supplemented from time to time (the "Subordinated Securities
Indenture"), between the Company and a trustee to be selected by the Company
(the "Subordinated Securities Trustee"). The Senior Securities Indenture and the
Subordinated Securities Indenture are referred to herein individually as the
"Indenture" and collectively as the "Indentures," and the Senior Securities
Trustee and the Subordinated Securities Trustee are referred to herein
individually as the "Trustee" and collectively as the "Trustees." A form of the
Senior Securities Indenture and a form of the Subordinated Securities Indenture
will be filed as exhibits to the Registration Statement of which this Prospectus
is a part and will be available for inspection at the corporate trust offices of
the respective Trustees or as described above under "Available Information." The
Indentures will be subject to and governed by the Trust Indenture Act of 1939,
as amended (the "TIA"). The description of the Indentures set forth below
assumes that the Company has entered into the Indentures. The Company will
execute the applicable Indenture when and if the Company issues Debt Securities.
The statements made hereunder relating to the Indentures and the Debt Securities
to be issued thereunder are summaries of certain provisions thereof and do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indentures and such Debt Securities.
<PAGE>
6
Unless otherwise specified, all capitalized terms used but not defined herein
shall have the meanings set forth in the Indentures.
General
The Debt Securities will be direct, unsecured obligations of the Company. Senior
Securities will rank pari passu with certain other senior debt of the Company
that may be outstanding from time to time, and will rank senior to all
Subordinated Securities that may be outstanding from time to time. Subordinated
Securities will be subordinated in right of payment to the prior payment in full
of the Senior Debt of the Company, as described under "Subordination."
Each Indenture provides that the Debt Securities may be issued without limit as
to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
Each Indenture provides that there may be more than one Trustee thereunder, each
with respect to one or more series of Debt Securities. Any Trustee under either
Indenture may resign or be removed with respect to one or more series of Debt
Securities, and a successor Trustee shall be appointed by the Company, by or
pursuant to a resolution adopted by the Board of Directors of the Company, to
act with respect to such series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a Trustee of a trust under the applicable Indenture separate
and apart from the trust administered by any other Trustee thereunder, and,
except as otherwise indicated herein or therein, any action described herein or
therein to be taken by the Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Trustee under the applicable Indenture.
Reference is made to the Prospectus Supplement relating to the series of Debt
Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the classification of such Debt Securities as Senior Securities or
Subordinated Securities;
(3) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(4) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration
of acceleration of the maturity thereof, or (if applicable) the
portion of the principal amount of such Debt Securities which is
convertible into Common Stock or Preferred Stock, or the method by
which any such portion shall be determined;
(5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment
Dates on which any such interest will be payable, the Regular Record
Dates for such Interest Payment Dates, or the method by which such
dates shall be determined, the person to whom such interest shall
<PAGE>
7
be payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any) and
interest and other amounts, if any, on such Debt Securities will be
payable, such Debt Securities may be surrendered for conversion or
registration of transfer or exchange and notices or demands to or
upon the Company in respect of such Debt Securities and the
applicable Indenture may be served;
(9) the period or periods within which, the price or prices (including
premium, if any) at which and the terms and conditions upon which
such Debt Securities may be redeemed, in whole or in part, at the
option of the Company, if the Company is to have such an option;
(10) the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or
periods within which, the price or prices at which and the terms
and conditions upon which such Debt Securities will be redeemed,
repaid or purchased, in whole or in part, pursuant to such
obligation;
(11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a
composite currency or currencies, and the terms and conditions
relating thereto;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method
(which index, formula or other method may, but need not, be based
on a currency, currencies, currency unit or units or composite
currency or currencies) and the manner in which such amounts
shall be determined;
(13) whether such Debt Securities will be issued in the form of one or
more global securities and whether such global securities are to be
issuable in a temporary global form or permanent global form;
(14) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or
covenants set forth in the applicable Indenture;
(15) whether the principal of (and premium, if any) or interest or other
amounts, if any, on such Debt Securities are to be payable,
at the election of the Company or a Holder, in one or more
currencies other than that in which such Debt Securities are
denominated or stated to be payable, the period or periods
within which, and the terms and conditions upon which, such
election may be made, and the time and manner of, and identity of
the exchange rate agent with responsibility for, determining the
exchange rate between the currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency
or currencies in which such Debt Securities are to be so payable;
(16) whether such Debt Securities will be issued in certificated or
book-entry form;
(17) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other
than $1,000 and any integral multiple thereof and, if in bearer
form, the denominations thereof and the terms and conditions
relating thereto;
(18) the applicability, if any, of the defeasance and covenant
defeasance provisions of the applicable Indenture;
(19) if such Debt Securities are to be issued upon the exercise of
Warrants, the time, manner and place for such Debt Securitie
to be authenticated and delivered;
(20) the terms, if any, upon which such Debt Securities may be
convertible into Common Stock or Preferred Stock and the terms
and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price
or rate and the conversion period;
<PAGE>
8
(21) whether and under what circumstances the Company will pay any other
amounts as contemplated in the applicable Indenture on such
Debt Securities in respect of any tax, assessment or governmental
charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment;
(22) the name of the applicable Trustee and the address of its corporate
trust office; and
(23) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") or that the principal amount thereof
payable at their stated maturity may be more or less than the principal face
amount thereof at original issuance ("Indexed Securities"). Special U.S. federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities and Index Securities will be described in the applicable
Prospectus Supplement.
Except as set forth below under "Certain Covenants--Senior Securities Indenture
Limitations on Incurrence of Indebtedness," neither Indenture contains any other
provisions that would limit the ability of the Company to incur indebtedness or
that would afford holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Company or in the event of a
change of control. See "Description of Preferred Stock" and "Description of
Common Stock."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Unless otherwise described in the applicable
Prospectus Supplement, the Debt Securities of any series issued in bearer form
will be issuable in denominations of $5,000.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at an office or agency established by the Company in accordance
with the Indenture, provided that, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the Security Register or by wire transfer of funds to
such person at an account maintained within the United States.
Any interest not punctually paid or duly provided for on any Interest Payment
Date with respect to a Debt Security ("Defaulted Interest") will forthwith cease
to be payable to the Holder on the applicable Regular Record Date and may either
be paid to the person in whose name such Debt Security is registered at the
close of business on a special record date (the "Special Record Date") for the
payment of such Defaulted Interest to be fixed by the applicable Trustee, notice
whereof shall be given to the Holder of such Debt Security not less than 10 days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner, all as more completely described in the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-entry
form, the Debt Securities of any series will be exchangeable for other Debt
Securities of the same series and of a like aggregate principal amount and tenor
of different authorized denominations upon surrender of such Debt Securities at
the corporate trust office of the applicable Trustee or at an office or agency
established by the Company in accordance with the Indenture. In addition,
subject to certain limitations imposed upon Debt Securities issued in book-entry
form, the Debt Securities of any series may be surrendered for exchange or
<PAGE>
9
registration of transfer thereof at the corporate trust office of the applicable
Trustee or at an office or agency established by the Company in accordance with
the Indenture. Every Debt Security surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of transfer or
exchange of any Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. If the applicable Prospectus Supplement refers to any transfer agent
(in addition to the Trustee) initially designated by the Company with respect to
any series of Debt Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in each place of payment for such series.
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities.
Neither the Company nor any Trustee shall be required to (i) issue, register the
transfer of or exchange Debt Securities of any series during a period beginning
at the opening of business 15 days before any selection of Debt Securities of
that series to be redeemed and ending at the close of business on the day of
mailing of the relevant notice of redemption; (ii) register the transfer of or
exchange any Debt Security, or portion thereof, called for redemption, except
the unredeemed portion of any Debt Security being redeemed in part; or (iii)
issue, register the transfer of or exchange any Debt Security which has been
surrendered for repayment at the option of the Holder, except the portion, if
any, of such Debt Security not to be so repaid.
Certain Covenants
Certain Definitions
As used herein,
"Acquired Indebtedness" means Indebtedness of a person or any of its
Subsidiaries (the "Acquired person") (i) existing at the time such person
becomes a Restricted Subsidiary of the Company or at the time it merges
or consolidates with the Company or any of its Restricted Subsidiaries or
(ii) assumed in connection with the acquisition of assets from such
person.
"Asset Disposition" means any sale, lease, transfer, conveyance or other
disposition (or series of related sales, leases, transfers or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger or consolidation (each referred to for
the purposes of this definition as a "disposition"), of (i) any shares of
capital stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held by a
person other than the Company or a Restricted Subsidiary), (ii) all or
substantially all the assets of any division or line of business of the
Company or any Restricted Subsidiary or (iii) any other assets of the
Company or any Restricted Subsidiary outside of the ordinary course of
business of the Company or such Restricted Subsidiary (other than, in the
case of (i), (ii) and (iii) above, a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to
a Wholly Owned Subsidiary; provided, however, that each of (a) the
consummation of any sale or series of related sales of assets or
properties of the Company and the Restricted Subsidiaries by the Company
and any Restricted Subsidiaries having an aggregate fair market value of
less than $1 million in any fiscal year and (b) the discounting of
accounts receivable or the sale of inventory, in each case in the
ordinary course of business, shall not be deemed an Asset Disposition.
"Bank Indebtedness" means (i) the Indebtedness outstanding or arising
under any credit facility, (ii) all obligations and other amounts owing
to the holders of such Indebtedness or any agent or representative
thereof outstanding or arising under any credit facility (including, but
not limited to, interest (including interest accruing on or after the
filing of any petition in bankruptcy, reorganization or similar
proceeding relating to the Company or any Restricted Subsidiary, whether
or not a claim for such interest is allowed in such proceeding), fees,
charges, indemnities, expense reimbursement obligations and other claims
under any credit facility), and (iii) all Hedging Obligations arising in
connection therewith with any party to any credit facility.
<PAGE>
10
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the
face of a balance sheet of such person prepared in accordance with GAAP;
the amount of such obligation shall be the capitalized amount thereof,
determined in accordance with GAAP; and the Stated Maturity thereof shall
be the date of the last payment of rent or any other amount due under
such capital lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Cash Flow" for any period means the Consolidated Net Income for such
period, plus the following (but without duplication) to the extent
deducted in calculating such Consolidated Net Income for such period: (i)
income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense and amortization expense, provided that consolidated
depreciation and amortization expense of a Subsidiary that is not a
Wholly Owned Subsidiary shall only be added to the extent of the equity
interest of the Company in such Subsidiary and (iv) all other non-cash
charges (other than any recurring non-cash charges to the extent such
charges represent an accrual of or reserve for cash expenditures in any
future period). Notwithstanding clause (iv) above, there shall be
deducted from Cash Flow in any period any cash expended in such period
that funds a non-recurring, non-cash charge accrued or reserved in a
prior period which was added back to Cash Flow pursuant to clause (iv) in
such prior period.
"Consolidated Cash Flow Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of Cash Flow for the period
of the most recent four consecutive fiscal quarters for which financial
statements are available to (ii) Consolidated Interest Expense for such
four fiscal quarters; provided, however, that (1) if the Company or any
Restricted Subsidiary has issued any Indebtedness since the beginning of
such period that remains outstanding or if the transaction giving rise to
the need to calculate the Consolidated Cash Flow Coverage Ratio is an
issuance of Indebtedness, or both, Cash Flow and Consolidated Interest
Expense for such period shall be calculated after giving effect on a pro
forma basis to such Indebtedness as if such Indebtedness had been issued
on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such new Indebtedness as if such discharge had occurred
on the first day of such period, (2) if since the beginning of such
period the Company or any Restricted Subsidiary shall have made any Asset
Disposition, the Cash Flow for such period shall be reduced by an amount
equal to the Cash Flow (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or
increased by an amount equal to the Cash Flow (if negative), directly
attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated
Interest Expense directly attributable to any Indebtedness of the Company
or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Dispositions for such period
(or, if the capital stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to
the Indebtedness of such Restricted Subsidiary to the extent the Company
and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period
the Company or any Restricted Subsidiary (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any person which
becomes a Restricted Subsidiary) or an acquisition of assets (including
capital stock of a Subsidiary), including any acquisition of assets
occurring in connection with a transaction causing a calculation to be
made hereunder, Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto
(including the issuance of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and (4) if since
the beginning of such period any person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made
any Asset Disposition or any Investment that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or
a Restricted Subsidiary during such period, Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro
forma effect thereto as if such Asset Disposition or Investment occurred
on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the
amount of income or earnings relating thereto, and the amount of
Consolidated Interest Expense associated with any Indebtedness issued in
connection therewith, the pro forma calculations shall be determined in
good faith by a responsible financial or accounting Officer of the
Company. If any Indebtedness bears a floating rate of interest and is
<PAGE>
11
being given pro forma effect, the interest of such Indebtedness shall be
calculated as if the average interest rate for the period up to the date
of determination had been the applicable rate for the entire period
(taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months). For purposes of this definition,
whenever pro forma effect is to be given to any Indebtedness Incurred
pursuant to a revolving credit facility the amount outstanding under such
Indebtedness shall be equal to the average of the amount outstanding
during the period commencing on the first day of the first of the four
most recent fiscal quarters for which financial statements are available
and ending on the date of determination.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus,
to the extent not included in such interest expense but Incurred by the
Company or its Restricted Subsidiaries, (i) interest expense attributable
to capital leases, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) original issue discount and non-cash interest payments or
accruals, (v) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (vi) net
costs under Hedging Obligations (including amortization of fees), (vii)
dividends in respect of all Disqualified Stock held by persons other than
the Company, a Subsidiary Guarantor or a Wholly Owned Subsidiary, (viii)
interest Incurred in connection with investments in discontinued
operations, (ix) the interest portion of any deferred payment obligations
constituting Indebtedness, and (x) the cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are
used by such plan or trust to pay interest or fees to any person (other
than the Company) in connection with Indebtedness Incurred by such plan or
trust. For purposes of this definition, interest expense attributable to
any Indebtedness represented by the guarantee (other than (a) Guarantees
permitted by the terms of clauses (b)(x) and (xi), respectively, of the
covenants described under "--Certain Covenants--Limitation on
Indebtedness" and "--Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries" and (b) Guarantees by the Company of Indebtedness
of a consolidated Restricted Subsidiary or by a consolidated Restricted
Subsidiary of the Company or another consolidated Restricted Subsidiary)
by such person or a Subsidiary of such person of an obligation of another
person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Currency Agreement Obligations" means the obligations of any person under
a foreign exchange contract, currency swap agreement or other similar
agreement or arrangement to protect such person against fluctuations in
currency values.
"Disqualified Stock" means, with respect to any person, any capital stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise prior to the 91st day after the stated maturity of
the Debt Securities, (ii) is convertible or exchangeable for Indebtedness
or Disqualified Stock prior to the 91st day after the stated maturity of
the Debt Securities or (iii) is redeemable at the option of the holder
thereof, in whole or in part on or prior to the 91st day after the stated
maturity of the Debt Securities.
"Floor Plan Guarantees" means guarantees (including but not limited to
repurchase or remarketing obligations) by the Company or a Restricted
Subsidiary Incurred in the ordinary course of business consistent with
past practice of Indebtedness Incurred by a franchise dealer, or other
purchaser or lessor, for the purchase of inventory manufactured or sold by
the Company or a Restricted Subsidiary, the proceeds of which Indebtedness
is used solely to pay the purchase price of such inventory to such
franchise dealer and any related reasonable fees and expenses (including
financing fees), provided, however, that (1) to the extent commercially
practicable, the Indebtedness so guaranteed is secured by a perfected
first priority lien on such inventory in favor of the holder of such
Indebtedness and (2) if the Company or such Restricted Subsidiary is
required to make payment with respect to such guarantee, the Company or
such Restricted Subsidiary will have the right to receive either (q) title
to such inventory, (r) a valid assignment of a perfected first priority
lien in such inventory or (s) the net proceeds of any resale of such
inventory.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those
set forth in the opinions and pronouncements of the Accounting Principles
<PAGE>
12
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board
or in such other statements by such other entity as approved by a
significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing in any manner any Indebtedness or
other obligation of any person and any obligation, direct or indirect,
contingent or otherwise, of such person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation of such person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in
any other manner the obligee of such Indebtedness or other obligation of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements of negotiable instruments for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any person means the obligations of such person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or
other similar agreement or arrangement designed to protect such person
against changes in interest rates or foreign exchange rates.
"Indebtedness" of any person means, without duplication, and whethe or
not contingent,
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such person is responsible or liable;
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such
person and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit
transaction;
(v) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock
(measured at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends);
(vi) to the extent not otherwise included in this definition, all Hedging
Obligations;
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee (other than in each case by reason of activities described in
the proviso to the definition of "Guarantee"); and
(viii) all obligations of the type referred to in clauses (i) through
(vii) of other persons secured by any lien on any property or asset of
such person (whether or not such obligation is assumed by such person),
the amount of such obligation being deemed to be the lesser of the value
of such property or assets or the amount of the obligation so secured.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were purchased on any date on which Indebtedness
<PAGE>
13
shall be required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such
Disqualified Stock, such fair market value to be determined in good faith
by the Board of Directors. For purposes hereof, the amount of any
Indebtedness issued with original issue discount shall be the original
purchase price plus accrued interest, provided, however, that such
accretion shall not be deemed an incurrence of Indebtedness.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted Subsidiary
against fluctuations in interest rates.
"Investment" in any person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that
are recorded as accounts receivable or deposits on the balance sheet of
the person making the advance or loan, in each case in accordance with
GAAP) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or
acquisition of capital stock , Indebtedness or other similar instruments
issued by such person and shall include the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary. For purposes of the definition
of "Unrestricted Subsidiary," the definition of "Restricted Payment" and
the covenant described under "-- Certain Covenants--Limitation on
Restricted Payments," (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Company
at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to
continue to have a permanent investment in an Unrestricted Subsidiary in
an amount (if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of
such redesignation, and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined in good faith by the
Board of Directors. Notwithstanding the foregoing, in no event shall any
issuance of capital stock (other than Preferred Stock or Disqualified
Stock, or capital stock exchangeable, exercisable or convertible for any
of the foregoing) of the Company in exchange for capital stock , property
or assets of another person constitute an Investment by the Company in
such person.
"Restricted Subsidiary" means any Subsidiary of the Company that is not
an Unrestricted Subsidiary.
"Senior Debt" means with respect to the Company or any Subsidiary
Guarantor (x) Bank Indebtedness and (y) any other Indebtedness that, by
the terms of the instrument creating or evidencing such Indebtedness, is
expressly made senior in right of payment to the Notes or the applicable
Guarantee, other than (1) any obligation of such person to any subsidiary
of such person or to any officer, director or employee of such person or
any such subsidiary, (2) any liability of such person for federal, state,
local or other taxes owed or owing by such person, (3) any accounts
payable or other liability of such person to trade creditors arising in
the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness, Guarantee
or obligation of such person which is, expressly by its terms, subordinate
or junior in any respect to any other Indebtedness, Guarantee or
obligation of such person, (5) that portion of any Indebtedness of such
person which at the time of issuance is issued in violation of the
Indenture, (6) Indebtedness of such person represented by Disqualified
Stock or (7) Capital Lease Obligations.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meanings of Rule 1-02
under Regulation S-X promulgated by the Commission.
"Subsidiary" means (a) any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests
(including partnership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries or (iii) one or more Subsidiaries or (b) any limited
<PAGE>
14
partnership of which the Company or any Subsidiary is a general partner,
or (c) any other person (other than a corporation or limited partnership)
in which the Company, or one or more other Subsidiaries or the Company and
one or more other Subsidiaries, directly or indirectly, has more than 50%
of the outstanding partnership or similar interests or has the power, by
contract or otherwise, to direct or cause the direction of the policies,
management and affairs thereof. Unless the context other wise requires,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Subsidiary Guarantor" means any Subsidiary of the Company that Guarantees
the Company's obligations with respect to the Debt Securities.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than
a Subsidiary Guarantor) designated as such pursuant to and in compliance
with the covenant described under "Limitation on Designations of
Unrestricted Subsidiaries." Any such designation may be revoked by a
resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Voting Stock" of a person means capital stock of such person of the class
or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such person (irrespective of
whether or not at the time stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means (i) a Restricted Subsidiary all the
capital stock of which (other than directors' qualifying shares and shares
held by other persons to the extent such Shares are required by applicable
law to be held by a person other than the Company or a Restricted
Subsidiary) is owned by the Company or one or more Wholly Owned
Subsidiaries and (ii) each of Terex Cranes, Inc., P.P.M. Cranes, Inc.,
P.P.M. S.A., and any future wholly owned subsidiaries of any of the
foregoing, in each case so long as the Company or one or more Wholly Owned
Subsidiaries maintains a percentage ownership interest in such entity
equal to or greater than such ownership interest (on a fully diluted
basis) on the later of (a) the applicable Indenture or (b) the date such
entity is incorporated or acquired by the Company or one or more Wholly
Owned Subsidiaries.
Senior Securities Indenture Limitations on Incurrence of Indebtedness. The
Company will not, and will not permit any Subsidiary to, incur any Indebtedness
if the Consolidated Cash Flow Coverage Ratio at the date on which such
additional Indebtedness is to be incurred shall have been less than 2.0 to 1.0.
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company will not be required to preserve
any right or franchise if it determines that the preservation thereof is no
longer desirable in the conduct of its business and that the loss thereof is not
disadvantageous in any material respect to the holders of the Debt Securities.
Maintenance of Properties. The Company will cause all of its properties used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Company and its Subsidiaries shall not be prevented
from selling or otherwise disposing for value its properties in the ordinary
course of business.
Insurance. The Company will, and will cause each of its Subsidiaries to, keep
all of its insurable properties adequately insured against loss or damage with
financially sound and reputable insurance companies.
Payment of Taxes and Other Claims. The Company will pay or discharge or cause to
be paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon it or any Subsidiary
or upon the income, profits or property of the Company or any Subsidiary, and
(ii) all lawful claims for labor, materials and supplies which, if unpaid, might
<PAGE>
15
by law become a lien upon the property of the Company or any Subsidiary, unless
such lien would not have a material adverse effect upon such property; provided,
however, that the Company will not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings or for which the Company has set apart and maintains an adequate
reserve.
Provision of Financial Information. Whether or not the Company is subject to
Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 or 15(d) (the "Financial
Statements"), or which the Company would have been so required if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company is or
would have been so required to file such documents if the Company is or were so
subject. The Company will also in any event (x) within 15 days of each Required
Filing Date (i) transmit by mail to all holders of Debt Securities, as their
names and addresses appear in the Security Register, without cost to such
holders, copies of the annual reports and quarterly reports which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act, or which the Company would have been so required if the Company
were subject to such Sections and (ii) file with the Trustees copies of annual
reports, quarterly reports and other documents which the Company is required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, or
which the Company would have been so required if the Company were subject to
such Sections, and (y) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder.
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or substantially
all of its assets to, or merge with or into, any other entity, provided that (a)
either the Company shall be the continuing entity, or the successor entity (if
other than the Company) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets shall expressly
assume payment of the principal of (and premium, if any) and interest (and any
other amounts) on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
the Indentures; (b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or any
Subsidiary as a result thereof as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default under the
Indentures, and no event which, after notice or the lapse of time, or both,
would become such an Event of Default, shall have occurred and be continuing;
and (c) an officer's certificate and legal opinion covering such conditions
shall be delivered to the Trustees.
Events of Default, Notice and Waiver
Each Indenture will provide that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or other amounts on any
Debt Security of such series; (b) default in the payment of the principal of (or
premium, if any, on) any Debt Security of such series when due; (c) default in
making any sinking fund payment as required for any Debt Security of such
series; (d) default in the performance of any other covenant of the Company
contained in the applicable Indenture (other than a covenant added to such
Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series) continued for 60 days after written notice as
provided in such Indenture; (e) default in the payment of an aggregate principal
amount exceeding $10,000,000 of any evidence of indebtedness for borrowed money
of the Company or any mortgage, indenture or other instrument under which such
indebtedness is issued or by which such indebtedness is secured, such default
having occurred after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled; (f) certain events of bankruptcy, insolvency or reorganization, or
<PAGE>
16
court appointment of a receiver, liquidator or trustee of the Company, any
Significant Subsidiary or the property of the Company or any Significant
Subsidiary or all or substantially all of either of its property; and (g) any
other Event of Default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" means each significant subsidiary
(as defined in Regulation S-X promulgated under the Securities Act) of the
Company.
If an Event of Default under either Indenture with respect to Debt Securities of
any series at the time outstanding occurs and is continuing, then in every such
case the Trustee or the holders of not less than 25% in principal amount of the
outstanding Debt Securities of that series may declare the principal amount (or,
if the Debt Securities of that series are Original Issue Discount Securities or
Indexed Securities, such portion of the principal amount as may be specified in
the terms thereof) of the outstanding Debt Securities of that series to be due
and payable immediately by written notice thereof to the Company (and to the
applicable Trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the applicable Trustee, the holders of not less
than a majority in principal amount of Debt Securities then outstanding of such
series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (a) the Company shall have deposited with the applicable Trustee
all required payments of the principal of (and premium, if any) and interest,
and any other amounts, on the Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be),
plus certain fees, expenses, disbursements and advances of the Trustee and (b)
all Events of Default, other than the non-payment of accelerated principal (or
specified portion thereof and the premium, if any, or interest), with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
the applicable Indenture, as the case may be) have been cured or waived as
provided in the applicable Indenture. Each Indenture also provides that the
holders of not less than a majority in principal amount of the outstanding Debt
Securities of any series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (x) in the payment
of the principal of (premium, if any) or interest or other amounts on any Debt
Security of such series or (y) in respect of a covenant or provision contained
in the applicable Indenture that cannot be modified or amended without the
consent of the Holder of each outstanding Debt Security affected thereby.
Each Trustee is required to give notice to the holders of Debt Securities within
90 days of a default under the applicable Indenture; provided, however, that the
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest payable on or any other amounts
with respect to any Debt Security of such series or in the payment of any
sinking fund installment in respect of any Debt Security of such series) if the
Responsible Officers of the Trustee consider such withholding to be in the
interest of such holders.
Each Indenture provides that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the applicable
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee thereunder for 60 days, to act after it has received a written request
to institute proceedings in respect of an Event of Default from the holders of
not less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of reasonable indemnity. This provision will not
prevent, however, any holder of Debt Securities from instituting suit for the
enforcement of payment of the principal of (and premium, if any) and interest
on, and other amounts payable with respect to, such Debt Securities at the
respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, each Trustee is under no obligation to exercise any of its rights or
powers under the applicable Indenture at the request or direction of any holders
of any series of Debt Securities then outstanding under such Indenture, unless
such holders shall have offered to the Trustee reasonable security or indemnity.
The holders of not less than a majority in principal amount of the applicable
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred
upon the Trustee. However, the Trustee may refuse to follow any direction which
is in conflict with any law or the applicable Indenture, which may involve the
Trustee in personal liability or which may be unduly prejudicial to the holders
of Debt Securities of such series not joining therein.
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17
Within 120 days after the close of each fiscal year, the Company must deliver to
each Trustee a certificate, signed by two officers, one of whom must be the
principal financial officer or principal accounting officer, stating whether or
not such officers have knowledge of any default under the applicable Indenture
and, if so, specifying each such default and the nature and status thereof.
Modification of the Indentures
Except as described below, modifications and amendments of each Indenture may be
made with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture which are
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, (a) change the Stated Maturity of the principal
of, or any installment of interest or other amounts payable on (or premium, if
any) any such Debt Security; (b) reduce the principal amount of, or the rate or
amount of interest on, or any premium payable on redemption of, or change any
obligation of the Company to pay any other amounts set forth in the Indenture
relating to, or reduce any other amounts payable with respect to, any such Debt
Security, or reduce the amount of principal of an Original Issue Discount
Security or premium, if any, that would be due and payable upon declaration of
acceleration of the maturity thereof or would be payable in bankruptcy, or
adversely affect any right of repayment of the Holder of any such Debt Security;
(c) change the place of payment, or the coin or currency, for payment of
principal of (and premium, if any), or interest on, or any other amounts payable
with respect to, any such Debt Security; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt Security;
(e) reduce the percentage of outstanding Debt Securities of any series necessary
to modify or amend the applicable Indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in such Indenture; or (f) modify any
of the foregoing provisions or any of the provisions relating to the waiver of
certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions may
not be modified or waived without the consent of the Holder of such Debt
Security.
The holders of not less than a majority in principal amount of outstanding Debt
Securities issued under either Indenture have the right to waive compliance by
the Company with certain covenants in the applicable Indenture.
Modifications and amendments of each Indenture may be made by the Company and
the applicable Trustee without the consent of any Holder of Debt Securities
issued thereunder for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under the applicable
Indenture; (ii) to add to the covenants of the Company for the benefit of the
holders of all or any series of Debt Securities or to surrender any right or
power conferred upon the Company in the applicable Indenture; (iii) to add
Events of Default for the benefit of the holders of all or any series of Debt
Securities; (iv) to add or change any provisions of the applicable Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
in bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided that such action shall not adversely affect the
interests of the holders of the Debt Securities of any series in any material
respect; (v) to change or eliminate any provision of the applicable Indenture,
provided that any such change or elimination shall become effective only when
there are no Debt Securities outstanding of any series issued thereunder created
prior thereto which are entitled to the benefit of such provision; (vi) to
secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series, including the provisions and procedures, if
applicable, for the conversion of such Debt Securities into Preferred Stock or
Common Stock; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the applicable
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in the applicable Indenture, provided that such action will not
adversely affect the interests of holders of Debt Securities of any series in
any material respect; (x) to close the applicable Indenture with respect to the
authentication and delivery of additional series of Debt Securities or to
qualify or maintain qualification of, the applicable Indenture under the TIA; or
(xi) to supplement any of the provisions of the applicable Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of such Debt Securities, provided that such action will not adversely affect the
interests of the holders of the Debt Securities of any series in any material
respect.
<PAGE>
18
Each Indenture provides that, in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding will be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a currency other than U.S. dollars that shall
be deemed outstanding will be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an Indexed Security that will be deemed
outstanding will be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the applicable Indenture, and (iv) Debt Securities owned by
the Company or any other obligor upon the Debt Securities or any Affiliate of
the Company or of such other obligor will be disregarded.
Each Indenture contains provisions for convening meetings of the holders of Debt
Securities of a series. A meeting may be called at any time by the applicable
Trustee, and also, upon request, by the Company, pursuant to a resolution
adopted by the Board of Directors of the Company, or the holders of at least 10%
in principal amount of the outstanding Debt Securities of such series, in any
such case upon notice given as provided in the applicable Indenture. Except for
any consent that must be given by the Holder of each Debt Security affected by
certain modifications and amendments of the applicable Indenture, any resolution
presented at a meeting or adjourned meeting duly reconvened at which a quorum is
present may be adopted by the affirmative vote of the holders of a majority in
principal amount of the outstanding Debt Securities of that series; provided,
however, that, except as referred to above, any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the holders of a specified
percentage, which is less than a majority, in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of such specified percentage in principal amount of the outstanding
Debt Securities of that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
the applicable Indenture will be binding on all holders of Debt Securities of
that series. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the outstanding Debt Securities of a series; provided,
however, that, if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal amount of the outstanding Debt Securities of a series,
the persons holding or representing such specified percentage in principal
amount of the outstanding Debt Securities of such series will constitute a
quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the applicable Indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all outstanding Debt
Securities affected thereby, or of the holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting and (ii) the principal amount of the outstanding Debt Securities of such
series that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
applicable Indenture.
Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to holders of any series of Debt
Securities that have not already been delivered to the Trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the applicable Trustee, in trust, funds in such currency or
<PAGE>
19
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium, if
any) and interest and other amounts payable to the date of such deposit (if such
Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be.
Each Indenture provides that, under certain circumstances, the Company may elect
to (a) defease and be discharged from any and all obligations with respect to
such Debt Securities (except for the obligation to pay other amounts, if any,
upon the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on such Debt Securities and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") and/or (b) be released from its obligations with respect
to such Debt Securities under the applicable Indenture (being the restrictions
described under "Certain Covenants") or, under certain circumstances, its
obligations with respect to any other covenant, and any omission to comply with
such obligations will not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are payable at Stated
Maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the applicable Trustee an Opinion of Counsel (as specified in the
applicable Indenture) to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service (the "IRS") or a
change in applicable United States federal income tax law occurring after the
date of the Indenture.
"Government Obligations" means securities which are (i) direct obligations of
the United States of America or the government which issued the currency (if
other than U.S. dollars) in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the currency (if other than U.S. dollars) in which the Debt Securities of such
series are payable, the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the option
of the issuer thereof, and will also include a depository receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
the Government Obligation evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if, after the
Company has deposited funds and/or Government Obligations to effect defeasance
or covenant defeasance with respect to Debt Securities of any series, (a) the
Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
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20
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency (other than U.S. dollars,
the ECU or other currency unit), both by the government of the country which
issued such currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community, (ii)
the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a currency other than
U.S. dollars that ceases to be used by its government of issuance will be made
in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than the Event of Default described in
clause (d) under "Events of Default, Notice and Waiver" under certain
circumstances or described in clause (g) under "Events of Default, Notice and
Waiver" under certain circumstances, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their Stated Maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are convertible
into Preferred Stock or Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include whether such
Debt Securities are convertible into Preferred Stock or Common Stock, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities.
Global Securities
The Debt Securities of a series may be issued in whole or in part in the form of
one or more fully registered global securities (the "Global Securities") that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the applicable Prospectus Supplement relating to such series.
Global Securities are expected to be deposited with The Depository Trust
Company, as Depositary. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee of such
Depositary to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable Prospectus
Supplement, the Company anticipates that the following provisions will apply to
depositary arrangements.
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21
Upon the issuance of a Global Security, the Depositary for such Global Security
or its nominee will credit on its book-entry registration and transfer system
the respective principal amounts of the individual Debt Securities represented
by such Global Security to the accounts of persons that have accounts with such
Depositary ("participants"). Such accounts shall be designated by the
underwriters, dealers or agents with respect to such Debt Securities or by the
Company if such Debt Securities are offered and sold directly by the Company.
Ownership of beneficial interests in a Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the applicable Depositary or its nominee (with respect to beneficial interests
of participants) and records of participants (with respect to beneficial
interests of persons who hold through participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, pledge or transfer beneficial interest in a Global Security.
So long as the Depositary for a Global Security or its nominee is the registered
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the applicable
Indenture. Except as provided below or in the applicable Prospectus Supplement,
owners of a beneficial interest in a Global Security will not be entitled to
have any of the individual Debt Securities of the series represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the applicable Indenture.
Payments of principal of, any premium on, and any interest on, or any other
amounts payable with respect to, individual Debt Securities represented by a
Global Security registered in the name of a Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the registered
owner of the Global Security representing such Debt Securities. None of the
Company, the Trustees, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for a series of Debt Securities or its
nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt Securities,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security for such Debt Securities as shown on the records of such
Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such participants.
If a Depositary for a series of Debt Securities is at any time unwilling, unable
or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may, at any time and in its
sole discretion, subject to any limitations described in the applicable
Prospectus Supplement relating to such Debt Securities, determine not to have
any Debt Securities of such series represented by one or more Global Securities
and, in such event, will issue individual Debt Securities of such series in
exchange for the Global Security or Securities representing such series of Debt
Securities. Individual Debt Securities of such series so issued will be issued
in denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof.
Subordination
Upon any distribution to creditors of the Company in a liquidation, dissolution
or reorganization, the payment of the principal of and interest on the
Subordinated Securities will be subordinated to the extent provided in the
Subordinated Securities Indenture in right of payment to the prior payment in
full of all Senior Debt, but the obligation of the Company to make payment of
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22
the principal and interest on the Subordinated Securities will not otherwise be
affected. No payment of principal or interest may be made on the Subordinated
Securities at any time if a default on Senior Debt exists that permits the
holders of such Senior Debt to accelerate its maturity and the default is the
subject of judicial proceedings or the Company receives notice of the default.
After all Senior Debt is paid in full and until the Subordinated Securities are
paid in full, holders will be subrogated to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt. By reason of such subordination, in the event of a distribution of
assets upon insolvency, certain general creditors of the Company may recover
more, ratably, than holders of the Subordinated Securities.
There will be no restrictions in the Subordinated Securities Indenture upon the
creation of additional Senior Debt. However, the Senior Securities Indenture
will contain limitations on incurrence of indebtedness by the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter.
DESCRIPTION OF PREFERRED STOCK
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), authorizes the Company to issue up to
50,000,000 shares of preferred stock of the Company. The Board of Directors of
the Company is granted the power to authorize the issuance of one or more series
of preferred stock. As of the date hereof, there are not shares of preferred
stock of the Company issued and outstanding.
The following description of the Preferred Stock which may be offered pursuant
to a Prospectus Supplement sets forth certain general terms and provisions of
the Preferred Stock to which any Prospectus Supplement may relate. The
particular terms of the Preferred Stock being offered and the extent to which
such general provisions may or may not apply will be described in a Prospectus
Supplement relating to such Preferred Stock. The statements below describing the
Preferred Stock are in all respects subject to and qualified in their entirety
by reference to the applicable provisions of the Certificate of Incorporation
and the Company's Bylaws, as in effect.
General
Subject to limitations prescribed by Delaware law and the Certificate of
Incorporation, the Board of Directors of the Company is authorized to fix the
number of shares constituting each series of Preferred Stock and the
designations and powers, preferences and the relative participating, optional or
other special rights and qualifications, limitations or restrictions thereof,
including such provisions as may be desired concerning voting, redemption,
distributions, dissolution or the distribution of assets, conversion or
exchange, and such other subjects or matters as may be fixed by resolution of
the Board of Directors of the Company or a duly authorized committee thereof.
The Preferred Stock will, when issued, be fully paid and nonassessable and will
have no preemptive rights. The Register and Transfer Agent for any Preferred
Stock will be set forth in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the Preferred Stock
offered thereby for specific terms, including:
(1) the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock being offered, the
liquidation preference per share and the offering price of such
Preferred Stock;
(3) the distribution rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Stock;
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23
(4) the date from which distributions on such Preferred Stock shall
accumulate, if applicable;
(5) the procedures for any auction and remarketing, if any, for
such Preferred Stock;
(6) the provision for a sinking fund, if any, for such Preferred
Stock;
(7) the provisions for redemption, if applicable, of such Preferred
Stock;
(8) any listing of such Preferred Stock on any securities exchange;
(9) the terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into Common Stock, including
the conversion price (or manner of calculation thereof);
(10) a discussion of federal income tax considerations applicable
to such Preferred Stock;
(11) the relative ranking and preferences of such Preferred Stock
as to distribution rights (including whether any liquidation
preference as to the Preferred Stock will be treated as a liability
for purposes of determining the availability of assets of the
Company for distributions to holders of Stock remaining junior to
the Preferred Stock as to distribution rights) and rights upon
liquidation, dissolution or winding up of the affairs of the
Company;
(12) any limitations on issuance of any series of preferred stock
ranking senior to or on a parity with such series of Preferred
Stock as to distribution rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and
(13) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
Rank
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock will, with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock, and to all equity securities ranking junior
to such Preferred Stock with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, as the case may be; (ii)
on a parity with all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, as the case may be; and
(iii) junior to all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank senior to the Preferred
Stock with respect to distribution rights and/or rights upon liquidation,
dissolution or winding up of the Company, as the case may be. As used in the
Certificate of Incorporation, for these purposes, the term "equity securities"
does not include convertible debt securities.
Distributions
Holders of Preferred Stock shall be entitled to receive, when, as and if
authorized by the Board of Directors of the Company, out of assets of the
Company legally available for payment, cash distributions at such rates (or
method of calculation thereof) and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such distribution shall be payable to
holders of record as they appear on the share transfer books of the Company on
such record dates as shall be fixed by the Board of Directors of the Company.
Distributions on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Distributions, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to authorize a distribution payable on a distribution payment date
on any series of the Preferred Stock for which distributions are noncumulative,
then the holders of such series of the Preferred Stock will have no right to
receive a distribution in respect of the distribution period ending on such
distribution payment date, and the Company will have no obligation to pay the
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24
distribution accrued for such period, whether or not distributions on such
series are authorized for payment on any future distribution payment date.
If any shares of Preferred Stock of any series are outstanding, no full
distributions shall be authorized or paid or set apart for payment on the
preferred stock of the Company of any other series ranking, as to distributions,
on a parity with or junior to the Preferred Stock of such series for any period
unless (i) if such series of Preferred Stock has a cumulative distribution, full
cumulative distributions have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof set apart for such
payment on the Preferred Stock of such series for all past distribution periods
and the then current distribution period or (ii) if such series of Preferred
Stock does not have a cumulative distribution, full distributions for the then
current distribution period have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set apart for
such payment on the Preferred Stock of such series. When distributions are not
paid in full (or a sum sufficient for such full payment is not so set apart)
upon the Preferred Stock of any series and the shares of any other series of
preferred stock ranking on a parity as to distributions with the Preferred Stock
of such series, all distributions authorized upon the Preferred Stock of such
series and any other series of Preferred Stock ranking on a parity as to
distributions with such Preferred Stock shall be authorized pro rata so that the
amount of distributions authorized per share on the Preferred Stock of such
series and such other series of preferred stock shall in all cases bear to each
other the same ratio that accrued and unpaid distributions per share on the
Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid distributions for prior distribution periods if such shares of
Preferred Stock do not have a cumulative distribution) and such other series of
preferred shares bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or payments on
Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Stock has a cumulative distribution, full cumulative
distributions on the Preferred Stock of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof set apart for payment for all past distribution periods and
the then current distribution period and (ii) if such series of Preferred Stock
does not have a cumulative distribution, full distributions on the Preferred
Stock of such series have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for the then current distribution period, no distributions (other than in Common
Stock or other shares of capital stock ranking junior to the Preferred Stock of
such series as to distributions and upon liquidation, dissolution or winding up
of the affairs of the Company) shall be authorized or paid or set aside for
payment or other distribution upon the Common Stock or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to distributions or upon liquidation, dissolution or
winding up of the affairs of the Company, nor shall any Common Stock or any
other shares of capital stock of the Company ranking junior to or on a parity
with the Preferred Stock of such series as to distributions or upon liquidation,
dissolution or winding up of the affairs of the Company be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of capital stock )
by the Company (except by conversion into or exchange for other shares of
capital stock of the Company ranking junior to the Preferred Stock of such
series as to distributions and upon liquidation, dissolution or winding up of
the affairs of the Company).
Any distribution payment made on a series of Preferred Stock shall first be
credited against the earliest accrued but unpaid distribution due with respect
to shares of such series which remains payable.
Redemption
If so provided in the applicable Prospectus Supplement, the Preferred Stock of
any series will be subject to mandatory redemption or redemption at the option
of the Company, as a whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid distributions thereon
<PAGE>
25
(which shall not, if such Preferred Stock does not have a cumulative
distribution, include any accumulation in respect of unpaid distributions for
prior distribution periods) to the date of redemption. The redemption price may
be payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is payable
only from the net proceeds of the issuance of shares of capital stock of the
Company, the terms of such Preferred Stock may provide that, if no such shares
of capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
shares of the applicable shares of capital stock of the Company pursuant to
conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock has
a cumulative distribution, full cumulative distributions on all shares of such
series have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof set apart for payment for all past
distribution periods and the then current distribution period and (ii) if such
series of Preferred Stock does not have a cumulative distribution, full
distributions on all shares of such series have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment thereof
set apart for payment for the then current distribution period, no shares of
such series of Preferred Stock shall be redeemed unless all outstanding
Preferred Stock of such series are simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Preferred Stock of such series, and, unless
(i) if such series of Preferred Stock has a cumulative distribution, full
cumulative distributions on all outstanding shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof set apart for payment for all past distribution periods and
the then current distribution period and (ii) if such series of Preferred Stock
does not have a cumulative distribution, full distributions on all shares of
such series have been or contemporaneously are authorized and paid or authorized
and a sum sufficient for the payment thereof set apart for payment for the then
current distribution period, the Company shall not purchase or otherwise acquire
directly or indirectly any Preferred Stock of such series (except by conversion
into or exchange for shares of capital stock of the Company ranking junior to
the Preferred Stock of such series as to distributions and upon liquidation).
If fewer than all of the outstanding Preferred Stock of any series are to be
redeemed, the number of shares to be redeemed will be determined by the Company
and such shares may be redeemed pro rata from the holders of record of such
shares in proportion to the number of such shares held by such holders (with
adjustments to avoid redemption of fractional shares) or any other equitable
method determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60 days
before the redemption date to each holder of record of Preferred Stock of any
series to be redeemed at the address shown on the stock transfer books of the
Company. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that distributions on
the shares to be redeemed will cease to accrue on such redemption date; and (vi)
the date upon which the holder's conversion rights, if any, as to such shares
shall terminate. If fewer than all the Preferred Stock of any series are to be
redeemed, the notice mailed to each such holder thereof shall also specify the
number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been properly given and if the
funds necessary for such redemption have been irrevocably set aside by the
Company in trust for the benefit of the holders of any Preferred Stock so called
for redemption, then from and after the redemption date distributions will cease
to accrue on such Preferred Stock, such Preferred Stock shall no longer be
deemed outstanding and all rights of the holders of such shares will terminate,
except the right to receive the redemption price. Any moneys so deposited which
remain unclaimed by the holders of such Preferred Stock at the end of two years
after the redemption date will be returned by the applicable bank or trust
company to the Company.
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26
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, then, before any distribution or payment shall be made
to the holders of any Common Stock or any other class or series of shares of
capital stock of the Company ranking junior to any series of Preferred Stock in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company, the holders of such series of Preferred Stock shall be entitled to
receive, after payment or provision for payment of the Company's indebtedness
and other liabilities, out of assets of the Company legally available for
distribution to shareholders, liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all distributions accrued and unpaid
thereon (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such Preferred Stock do not have
a cumulative distribution). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of such series of
Preferred Stock will have no right or claim to any of the remaining assets of
the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Company are insufficient to pay the amount of the liquidating distributions on
all such outstanding Preferred Stock and the corresponding amounts payable on
all shares of other classes or series of shares of capital stock of the Company
ranking on a parity with such series of Preferred Stock in the distribution of
assets upon liquidation, dissolution or winding up, then the holders of such
series of Preferred Stock and all other such classes or series of shares of
capital stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If the liquidating distributions shall have been made in full to all holders of
a series of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of shares of
capital stock ranking junior to such series of Preferred Stock upon liquidation,
dissolution or winding up, according to their respective rights and preferences
and in each case according to their respective number of shares. For purposes of
this section, a distribution of assets in any dissolution, winding up or
liquidation will not include (i) any consolidation or merger of the Company with
or into any other corporation, (ii) any dissolution, liquidation, winding up, or
reorganization of the Company immediately followed by organization of another
entity to which such assets are distributed or (iii) a sale or other disposition
of all or substantially all of the Company's assets to another entity; provided
that, in each case, effective provision is made in the charter of the resulting
and surviving entity or otherwise for the recognition, preservation and
protection of the rights of the holders of Preferred Stock.
Voting Rights
Holders of any series of Preferred Stock will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of a majority of the shares of each
series of Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting (such series voting separately as a class),
(i) authorize, create or issue, or increase the authorized or issued amount of,
any class or series of shares of capital stock ranking prior to such series of
Preferred Stock with respect to payment of distributions or the distribution of
assets upon liquidation, dissolution or winding up, or reclassify any authorized
shares of capital stock of the Company into any such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Certificate of Incorporation, including the applicable Certificate of
Designation for such series of Preferred Stock, whether by merger, consolidation
or otherwise, so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, that any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or any increase in the amount of authorized shares of such series or any
other series of Preferred Stock, in each case ranking on a parity with or junior
to the Preferred Stock of such series with respect to payment of distributions
or the distribution of assets upon liquidation, dissolution or winding up, shall
not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
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27
The foregoing voting provisions will not apply if, at or prior to the time when
the act with respect to which such vote would otherwise be required shall be
affected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
Whenever distributions on any Preferred Stock shall be in arrears for six or
more consecutive quarterly periods, the holders of such Preferred Stock (voting
together as a class with all other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional directors of the Company until, (i) if such
series of Preferred Stock has a cumulative distribution, all distributions
accumulated on such Preferred Stock for the past distribution periods and the
then current distribution period shall have been fully paid or authorized and a
sum sufficient for the payment thereof set aside for payment or (ii) if such
series of Preferred Stock does not have a cumulative distribution, four
consecutive quarterly distributions shall have been fully paid or authorized and
a sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Directors of the Company will be increased by two directors.
Conversion Rights
The terms and conditions, if any, upon which any series of Preferred Stock are
convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the Preferred Stock are convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of the Preferred
Stock or the Company, the events requiring an adjustment of the conversion price
and provisions affecting conversion in the event of the redemption of such
Preferred Stock.
DESCRIPTION OF COMMON STOCK
General
The Company's Certificate of Incorporation authorizes the Company to issue up to
150,000,000 shares of Common Stock of the Company. As of June 30, 1998, the
Company had outstanding 20,768,208 shares of Common Stock. The following
description of the Common Stock sets forth certain general terms and provisions
of the Common Stock to which any Prospectus Supplement may relate, including a
Prospectus Supplement providing that Common Stock will be issuable upon
conversion of Debt Securities or Preferred Stock or upon the exercise of
Warrants or Rights. The statements below describing the Common Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Certificate of Incorporation and the Company's
Bylaws.
Holders of Common Stock will be entitled to receive distributions when, as and
if authorized and declared by the Board of Directors of the Company, out of
funds legally available therefor. Upon any liquidation, dissolution or winding
up of the Company, holders of Common Stock will be entitled to share equally and
ratably in any assets available for distribution to them, after payment or
provision for payment of the indebtedness and other liabilities of the Company
and the preferential amounts owing with respect to any outstanding Preferred
Stock. The Common Stock will possess ordinary voting rights for the election of
directors and in respect of other corporate matters, each share entitling the
holder thereof to one vote. Holders of Common Stock will not have cumulative
voting rights in the election of directors, which means that holders of more
than 50% of all of the outstanding shares of Common Stock voting for the
election of directors can elect all of the directors if they choose to do so and
the holders of the remaining shares cannot elect any directors. Approval of the
following matters requires the affirmative vote of the holders of a majority of
all outstanding shares of Common Stock: certain amendments to the Certificate of
Incorporation, termination of the Company, removal of a director, certain
mergers, reorganizations or consolidations of the Company or the sale,
conveyance, exchange or other disposition of all or substantially all of the
Company's property. Holders of Common Stock will not have preemptive rights,
which means they have no right to acquire any additional shares of Common Stock
that may be issued by the Company at a subsequent date. The Common Stock will,
when issued, be fully paid and nonassessable.
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The Restated Certificate of Incorporation provides that directors of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duties as a director except to the extent
otherwise required by Delaware Law. The Restated By-Laws of the Company provide
for indemnification of the officers and directors of the Company to the fullest
extent permitted by Delaware Law.
The Registrar and Transfer Agent for the Company's Common Stock is American
Stock Transfer Company.
Delaware Anti-Takeover Statute
The Company is a Delaware corporation and is subject to Section 203 of the
General Corporation Law of Delaware ("Delaware Law"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owing 15% or
more of the Company's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with the Company for three years
following the date that person becomes an interested stockholder unless (a)
before that person became an interested stockholder, the Company's Board of
Directors approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination, (b) upon completion
of the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85% of the
Company's voting stock outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the Company and by
employee stock plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer), or (c) following the transaction in which that person
became an interested stockholder, the business combination is approved by the
Company's Board of Directors and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the outstanding
Company voting stock not owned by the interested stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the Company's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors who were directors before any person
became an interested stockholder in the previous three years or who were
recommended for election or elected to succeed such directors by a majority of
such directors then in office.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Debt Securities, Preferred
Stock or Common Stock. Warrants may be issued independently or together with any
Offered Securities and may be attached to or separate from such securities. Each
series of Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant agent
("Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants and
the applicable Warrant Agreement will be set forth in the applicable Prospectus
Supplement.
The applicable Prospectus Supplement will describe the following terms, where
applicable, of the Warrants in respect of which this Prospectus is being
delivered: (1) the title of such Warrants; (2) the aggregate number of such
Warrants; (3) the price or prices at which such Warrants will be issued; (4) the
currencies in which the price of such Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the securities purchasable
upon exercise of such Warrants; (6) the designation and terms of the Offered
Securities with which such Warrants are issued and the number of such Warrants
issued with each such security; (7) the currency or currencies, including
composite currencies, in which the principal of or any premium or interest on
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29
the securities purchasable upon exercise of such Warrants will be payable; (8)
if applicable, the date on and after which such Warrants and the related
securities will be separately transferable; (9) the price at which and currency
or currencies, including composite currencies, in which the securities
purchasable upon exercise of such Warrants may be purchased; (10) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (11) the minimum or maximum amount of such Warrants
which may be exercised at any one time; (12) information with respect to
book-entry procedures, if any; (13) a discussion of certain Federal income tax
considerations; and (14) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF RIGHTS
The Company may issue Rights to its stockholders for the purchase of shares of
Preferred Stock or Common Stock. Each series of Rights will be issued under a
separate rights agreement (a "Rights Agreement") to be entered into between the
Company and a bank or trust company, as Rights agent, all as set forth in the
Prospectus Supplement relating to the particular issue of Rights. The Rights
agent will act solely as an agent of the Company in connection with the
certificates relating to the Rights and will not assume any obligation or
relationship of agency or trust for or with any holders of Rights certificates
or beneficial owners of Rights. The Rights Agreement and the Rights certificates
relating to each series of Rights will be filed with the Commission and
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part at or prior to the time of the issuance of such series
of Rights.
The applicable Prospectus Supplement will describe the terms of the Rights to be
issued, including the following where applicable: (i) the date for determining
the stockholders entitled to the Rights distribution; (ii) the aggregate number
of shares of Preferred Stock or Common Stock purchasable upon exercise of such
Rights and the exercise price; (iii) the aggregate number of Rights being
issued; (iv) the date, if any, on and after which such Rights may be
transferable separately; (v) the date on which the right to exercise such Rights
shall commence and the date on which such right shall expire; (vi) any special
Federal income tax consequences; and (vii) any other terms of such Rights,
including terms, procedures and limitations relating to the distribution,
exchange and exercise of such Rights.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents, or may issue Offered Securities to satisfy
obligations of the Company, or upon the exchange, conversion or exercise of
other securities of the Company, or through a combination of any such methods of
sale. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Company also may offer and sell
the Offered Securities in exchange for one or more of its then outstanding
issues of indebtedness or convertible debt securities. The Company also may,
from time to time, authorize underwriters acting as the Company's agents to
offer and sell the Offered Securities upon the terms and conditions as are set
forth in the applicable Prospectus Supplement. In connection with the sale of
Offered Securities, underwriters may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of Offered Securities for whom they may
act as agent. Underwriters may sell Offered Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
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30
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act. In the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Unless otherwise specified in the applicable Prospectus Supplement, each series
of Offered Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the New York Stock Exchange. Any
shares of Common Stock sold pursuant to a Prospectus Supplement will be listed
on the NYSE, subject to official notice of issuance. The Company may elect to
list the Offered Securities on an exchange, but is not obligated to do so. It is
possible that one or more underwriters may make a market in the Offered
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Offered Securities.
If so indicated in a Prospectus Supplement, the Company will authorize agents,
underwriters or dealers to solicit offers by certain institutional investors to
purchase Offered Securities of the series to which such Prospectus Supplement
relates providing for payment and delivery on a future date specified in such
Prospectus Supplement. There may be limitations on the minimum amount which may
be purchased by any such institutional investor or on the portion of the
aggregate principal amount of the particular Offered Securities which may be
sold pursuant to such arrangements. Institutional investors to which such offers
may be made, when authorized, include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and such other institutions as may be approved by the Company. The
obligations of any such purchasers pursuant to such delayed delivery and payment
arrangements will not be subject to any conditions except that (i) the purchase
by an institution of the particular Offered Securities shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject, and (ii) if the particular Offered
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of such Offered Securities or number of
Warrants less the principal amount or number thereof, as the case may be,
covered by such arrangements. Underwriters will not have any responsibility in
respect of the validity of such arrangements or the performance of the Company
or such institutional investors thereunder.
Certain of the underwriters and their affiliates may be customers of, engage in
transactions with and perform services for the Company and its subsidiaries in
the ordinary course of business.
In order to comply with the securities laws of certain states, if applicable,
the Offered Securities offered hereby will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states Offered Securities may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
ERISA MATTERS
The Company may be considered a "party in interest" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Code with respect to
certain employee benefit plans. Certain transactions between an employee benefit
plan and a party in interest or disqualified person may result in "prohibited
transactions" within the meaning of ERISA and the Code, unless such transactions
are effected pursuant to an applicable exemption. Any employee benefit plan or
other entity subject to such provisions of ERISA or the Code proposing to invest
in the Offered Securities should consult with its legal counsel.
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LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Robinson Silverman
Pearce Aronsohn & Berman LLP, New York, New York.
EXPERTS
The consolidated financial statements of Terex Corporation incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1997 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statement of O&K Mining GmbH as of December 31, 1997
and 1996 and for the years then ended, incorporated in this Prospectus by
reference to the Company's Amendment No. 2 to Current Report on Form 8-K/A dated
March 31, 1998 have been so incorporated in reliance on the report of C&L
Treuhand-Vereinigung Deutsche Revision, Aktiengesellschaft
Wirtschaftsprufungsgesellschaft, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
