-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LwvrJHrvKuD4SJiqjRivRMr1yAj/bZ3AbMZmCcAtlcrj3o2MUCTYWEQbX8fIv9YB v20hnb9G0ca4P24jgirkRw== 0001005229-99-000015.txt : 20030213 0001005229-99-000015.hdr.sgml : 20030213 19990629173911 ACCESSION NUMBER: 0001005229-99-000015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990629 DATE AS OF CHANGE: 19990701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBUS MCKINNON CORP CENTRAL INDEX KEY: 0001005229 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 160547600 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27618 FILM NUMBER: 99655857 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PKWY CITY: AMHERST STATE: NY ZIP: 14228-1197 BUSINESS PHONE: 7166895400 MAIL ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 14228-1197 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LICO INC CENTRAL INDEX KEY: 0001062619 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 431234309 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-53759-03 FILM NUMBER: 99655858 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LICO STEEL INC CENTRAL INDEX KEY: 0001062622 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-53759-04 FILM NUMBER: 99655859 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOMATIC SYSTEMS INC CENTRAL INDEX KEY: 0001062623 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 430978181 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-53759-05 FILM NUMBER: 99655860 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YALE INDUSTRIAL PRODUCTS INC CENTRAL INDEX KEY: 0001062624 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 710585582 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-53759-06 FILM NUMBER: 99655861 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 10-K 1 3/31/99 10 K FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended March 31, 1999 OR ______ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ----------------- ------------------------ Commission file number 0-27618 COLUMBUS McKINNON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 16-0547600 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 140 John James Audubon Parkway, Amherst, N.Y. 14228-1197 - --------------------------------------------- ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (716) 689-5400 Securities registered pursuant to Section 12(b) of the Act: Name of exchange on Title of Class which registered -------------- ---------------------- Common Stock, $0.01 Par Value NASDAQ National Market Securities pursuant to section 12(g) of the Act: NONE Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 31, 1999 was $274,298,068. The number of shares of common stock outstanding as of May 31, 1999 was: 14,663,697 shares. Documents Incorporated By Reference ----------------------------------- Portions of the proxy statement for the annual shareholders meeting to be held August 16, 1999 are incorporated by reference into Part III of this report . COLUMBUS McKINNON CORPORATION 1999 Annual Report on Form 10-K PART I. ------- This annual report may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the Company's periodic reports filed with the Commission. Consequently such forward looking statements should be regarded as the Company's current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Item 1. Business. - ------- --------- Overview Columbus McKinnon ("Columbus McKinnon" or the "Company"), established in 1875, is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial and consumer markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors in commercial and consumer distribution channels and, to a lesser extent, directly to manufacturers and other end-users. The Company's integrated material handling solutions businesses primarily deal with end-users. For the year ended March 31, 1999, the Company generated net sales and income from operations of approximately $735.4 million and approximately $85.1 million, respectively. The Company's Products segment includes a wide variety of electric, lever, hand and air-powered hoists; hoist trolleys; industrial crane systems, such as bridge, gantry and jib cranes; alloy, carbon steel and kiln chain; closed-die forged attachments, such as hooks, shackles, logging tools and loadbinders; industrial components, such as mechanical and electromechanical actuators, mechanical jacks and rotary unions; and below-the-hook lifters. Through innovative design and manufacturing expertise developed by the Company and through selective acquisitions, the Company has established a leading market share in many of its product lines. Columbus McKinnon believes it has more overhead hoists in use in North America than all of its competitors combined. The Company's products and customer base are highly diversified; no single product accounted for more than 1% and no individual customer accounted for more than 5% of net Products segment sales for the year ended March 31, 1999. For the year ended March 31, 1999, the Company's Products segment generated net sales and income from operations before amortization of approximately $515.7 million and approximately $80.0 million, respectively. As a result of its fiscal 1998 acquisitions of Univeyor A/S ("Univeyor") and LICO, Inc. ("LICO"), the Company has also positioned itself as a leader in the project design, management and implementation of integrated material handling systems that are designed to meet specific applications of end-users to increase productivity. These businesses have formed the foundation for the Company's two Solutions segments, Solutions - Industrial and Solutions - Automotive. The delivered products of these segments include various types of conveyor systems as well as operator-controlled manipulators and scissor lifts. For the year ended March 31, 1999, the Company's Solutions - Industrial segment generated net sales and income from operations before amortization of approximately $58.3 million and approximately $5.6 million, respectively, and the Company's Solutions - Automotive segment generated net sales and income from operations before amortization of approximately $161.4 million and approximately $14.9 million, respectively. The Company believes that the demand for its products has increased in recent years and will continue to increase in the future as a result of several favorable trends impacting a broad array of industries that have enabled the Company to expand into new product areas and markets. These trends include: Productivity Enhancement. In recent years employers have responded to competitive pressures by seeking to maximize productivity and efficiency. The Company's hoists and other lifting and positioning products allow loads to be lifted and placed quickly, precisely, with little effort, and with fewer people. In addition, the Company's conveyor systems enhance productivity within automotive assembly, general warehousing and industrial operations. Safety Regulations and Concerns. Driven by federal and state workplace safety regulations such as the Occupational Safety and Health Act ("OSHA") and the Americans with Disabilities Act, and by the general competitive need to reduce costs such as health insurance premiums and workers' compensation expenses, employers seek safer ways to lift, position and move loads. The Company's material handling products and solutions enable these tasks to be performed with reduced risk of personal injury. Workforce Diversity. The percentages of women, disabled and older persons in the work force and the tasks they perform are continuing to increase. The Company's products enable many workplace tasks to be performed safely, efficiently and with less physical stress. The Company believes that increasing diversity in the workforce will continue to increase demand for its products and solutions. Outsourcing of Material Handling Project Design and Management. More of the Company's customers and end-users are outsourcing non-core business functions to improve productivity and cost efficiency. This has created opportunities for the Company to assume the project design, management and implementation responsibilities for both workstation and facility-wide material handling systems. The Company's opportunity to capitalize on this trend has been enhanced by the recent acquisitions of Univeyor and LICO. Through the combination of the Company's expertise and technological know-how with that of Univeyor and LICO, the Company believes that it will be able to position itself as a leader in the project design, management and implementation of automated material handling systems. As a result, many of the Company's existing products may be utilized in these systems. The Company has extended its product lines and penetrated new markets in recent years through several acquisitions which have been successfully integrated into the Company. Over the past five years, the Company has made thirteen acquisitions which have (i) enhanced the Company's position as the largest North American manufacturer of overhead hoists, operator-controlled manipulators and alloy chain, (ii) enabled the Company to broaden its product 2 and service offerings and (iii) provided the Company with cross-selling opportunities into other segments of the material handling and lifting industry. As a result of internal growth and acquisitions, the Company's net sales and income from operations have increased to approximately $735.4 million and $85.1 million, respectively, for the year ended March 31, 1999 from approximately $142.3 million and $12.4 million, respectively, in fiscal 1994, representing compound annual growth rates of approximately 39% and 47%, respectively. Key Strengths The Company attributes its strong competitive position to the following key strengths: Leading Market Position. Columbus McKinnon is the largest manufacturer of hoists, alloy and high strength carbon steel chain and operator-controlled manipulators in North America. The Company has developed its leading market position over its nearly 125-year history by emphasizing technological innovation, manufacturing excellence and superior after-sale service. Preferred Provider to Major Distributors and End-Users. The Company enjoys long-standing relationships with and is a preferred provider to many of its largest distributors. Since 1990, during a period of significant consolidation among distributors of material handling equipment, the Company has benefited from this consolidation as it has maintained and enhanced its relationships with the leading distributors. For example, the Company maintains close contact with its customers and provides prompt aftermarket service to end-users of its products through a network of independent distributors staffed with Company-trained professionals at over 450 hoist parts, product, service and repair centers, and 12 chain service centers. Additionally, to ensure continuing product development and market awareness, the Company sponsors advisory boards composed of representatives of its largest distributors and aftermarket sales and service network. The Company's Automatic Systems, Inc. ("ASI") subsidiary was awarded the General Motors Corporation ("GM") 1998 Supplier of the Year award, recognition which GM made to only 184 out of its approximately 30,000 suppliers worldwide. This marked the second consecutive year that ASI was awarded this distinction. The Company believes that its ability to retain existing customers and attract new customers is attributable to its ongoing commitment to customer service and satisfaction. Diversified Products, Markets, and Customer Base. The Company believes that it offers the most extensive line of material handling products and solutions in the markets which it serves. No single product accounted for more than 1% of net Products segment sales for the year ended March 31, 1999. The Company's products are sold to over 10,000 general, specialty and service-after-sale distributors and original equipment manufacturers ("OEMs") for various applications in the general manufacturing, crane building, mining, construction, transportation, entertainment, power generation, agricultural, marine, automotive and logging markets. Additionally, the Company sells its products for consumer use to over 100 hardware, trucking and transportation, farm hardware and rental outlets. No single customer accounted for more than 5% of net Products segment sales for the year ended March 31, 1999. GM, which deals principally with the Company's Solutions - Automotive segment, accounted for approximately 13% of the Company's net sales for the year ended March 31, 1999. The Company believes that the breadth of its products, the diversity of its markets and the strength of its distribution relationships minimize its dependence on any particular product, market or customer. 3 Large Installed Product Base; Strong Brand Names. Columbus McKinnon believes it has more overhead hoists in use in North America than all of its competitors combined. In addition, the Company's brand names, including Abell-Howe, Big Orange, Budgit, Chester, CM, Coffing, Duff-Norton, Gaffey, Hammerlok, Herc-Alloy, Larco, Shaw-Box and Yale, are among the most recognized and respected in the industry. The Company believes that its strong brand name recognition, together with the Company's large installed base of products, provide it with a significant competitive advantage in selling its full product line to existing and new customers as well as providing repair and replacement parts. Experienced Management Team with Significant Ownership Interest. The Company's management team provides a depth and continuity of experience. The Company's directors and executive officers own an aggregate of approximately 22% of the Company's outstanding common stock. In addition, in April 1997 Columbus McKinnon implemented economic value added ("EVA@") as a performance measure and is using EVA@ goals to, among other things, determine incentive-based compensation for all of its employees. Business Strategy The Company's strategic objective is to further enhance its position as a leading designer, manufacturer and distributor of material handling, lifting and positioning products both domestically and internationally. The Company plans to achieve this objective through the continued implementation of the following three-pronged strategy: Enhance Existing Business. The Company continually strives to enhance its existing business through the following: o Leverage Strong Competitive Position. The Company's position as a leading provider of material handling equipment has resulted in a substantial installed base of its products. The Company's close relationships with its distributors permit it to obtain customer information and product requirements in order to respond to and anticipate future needs of end-users of the Company's products, which the Company believes allows it to maintain its market leadership position. The repair and replacement of parts and complementary products for the Company's large installed base of products represents additional revenue growth potential. The Company believes that it can expand the market and customer base for new and acquired products by introducing these products through its existing distribution channels. In addition, the Company believes it can achieve product and marketing synergies by selling its products into the markets of acquired businesses. In fiscal 1999, the Company initiated its CraneMart@ strategy to build an integrated North American network of full-service crane builders. The acquisition of Abell-Howe Crane, Inc., a regional manufacturer of jib and other overhead cranes ("Abell-Howe"), in August 1998 and merger with GL International, Inc., a full-service designer and builder of industrial overhead bridge, gantry and jib cranes ("GL"), in March 1999 were the Company's first significant steps in the implementation of CraneMart@. In furtherance of this strategy, the Company expects to form additional strategic alliances, either through full or partial equity ownership or joint ventures with independent participants, in major North American Industrial markets. The Company believes that CraneMart@ will enhance its position as a full-service 4 supplier of hoists, cranes and components and will enable it to expand its product and service offerings to meet the increasing demands of its end-user customers. o Increase Productivity and Realize Cost Savings. In addition to developing and introducing new products, the Company focuses on improving the quality and reliability of its products and increasing manufacturing efficiency. Twenty of the Company's existing manufacturing facilities and six of its distribution facilities have achieved ISO 9000 certification, and substantially all of the Company's remaining manufacturing and distribution facilities are in the process of obtaining such certification. The Company improves productivity by reducing cycle times, increasing employee involvement in production and investing in new, more efficient manufacturing processes, including computer-aided design capabilities. The Company has implemented EVA@ to analyze the utilization of its assets and productivity in order to improve all aspects of the Company's operations, and to determine incentive-based compensation for its employees. Further, the Company believes additional cost savings can be realized through the continued integration of the operations of recent acquisitions with those of the Company. For example, through its increased critical mass, the Company has been able to achieve raw material purchasing efficiencies. Increase Penetration of International Markets. The Company maintains a distributor network in approximately 50 countries and has manufacturing facilities in Canada, Mexico, Germany, Denmark, France and China. The Company intends to increase its international presence, with a primary focus on enhancing its existing presence in Europe and expanding its operations into the Pacific Rim, South America and Africa. The Company intends to accomplish this growth by strengthening its international distribution network and by making additional strategic acquisitions and alliances. The recent acquisitions of Camlok Lifting Clamps ("Camlok"), the Tigrip product line ("Tigrip"), Societe D'Exploitation des Raccords Gautier ("SERG" or "Gautier") and GL with its Canadian operation have provided the Company with additional international operating locations, and will enable the Company to market their products to the Company's customer base. The Company has increased its international net sales from approximately 14% ($20.3 million) of net sales in fiscal 1994 to approximately 26% ($191.6 million) of net sales for fiscal 1999. Pursue Selective Acquisitions. The Company intends to selectively pursue strategic acquisitions, joint ventures and alliances. Potential strategic combinations will be evaluated based on their ability to, among other things: (i) complement existing businesses and further expand product lines; (ii) strengthen the Company's leadership position in the material handling and lifting industry; (iii) provide synergistic opportunities; (iv) enhance and broaden distribution channels; (v) increase the Company's international presence; and (vi) enhance shareholder value and be EVA@ positive. Segment Information During fiscal 1999 the Company classified its operations into the following three business segments: (i) Products, which includes the design, manufacture and supply of a wide variety of electric, lever, hand and air-powered hoists; hoist trolleys; industrial crane systems; alloy, carbon steel and kiln chain; closed-die forged attachments, such as 5 hooks, shackles, logging tools and loadbinders; industrial components, such as mechanical and electromechanical actuators, mechanical jacks and rotary unions; and below-the-hook lifters for commercial and consumer markets. (ii) Solutions - Industrial, which includes the project design, fabrication and installation of integrated material handling systems for consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction and other industrial markets. Products sold by this segment include powered roller conveyors, operator-controlled manipulators and scissor lifts. (iii) Solutions - Automotive, which includes the project design, fabrication and installation of integrated material handling systems for the automotive industry. Products sold by this segment consist primarily of overhead power-and-free conveyors and electrified monorail conveyors. Financial information regarding the business segments is presented in Note 18 to the Company's audited consolidated financial statements included elsewhere herein. Products and Services Products Segment The Company's Products segment primarily designs, manufactures and distributes a broad range of material handling, lifting and positioning products for various applications in industry and for consumer use. These products are typically manufactured for stock and are sold through a variety of distributors. In fiscal 1999, net sales of the Products segment were approximately $515.7 million or approximately 70% of the Company's net sales, of which approximately $389.7 million (76%) were domestic and $126.0 million (24%) were international. The following table sets forth certain sales data for the products of the Products segment, expressed as a percentage of net sales of this segment for fiscal 1999: Hoists............................................ 56% Chain and forged attachments...................... 22 Industrial overhead cranes........................ 15 Industrial components............................. 7 -- 100% === Hoists. The Company manufactures a variety of hand-operated hoists and lever tools, air-powered hoists, electric chain hoists, and electric wire rope hoists. Load capacities for the Company's hoist product lines range from less than one ton to 100 tons. These products are sold under its Budgit, Chester, CM, Coffing, Shaw-Box, Yale and other recognized trademarks. The Company's hoists are sold for use in a variety of general industrial applications, as well as for use in the entertainment, consumer, rental, health care and other emerging product markets. The Company also supplies hoist trolleys, driven manually or by electric motors, for the industrial, consumer and OEM markets. 6 The Company also offers a line of custom-designed, below-the-hook tooling and clamps. Below-the-hook tooling and clamps are specialized lifting apparatus used in a variety of lifting activities performed in conjunction with hoist and chain applications. Chain and Forged Attachments. The Company manufactures alloy chain for various industrial applications. Federal regulations in the United States require the use of alloy chain, which the Company first developed, for overhead lifting applications because of its strength and wear characteristics. A line of the Company's alloy chain is sold under the Herc-Alloy brand name for use in overhead lifting, pulling and restraining applications. The Company also sells specialized load chain for use in hoists. Three grades and multiple sizes of carbon steel welded-link chain are sold by the Company in the industrial and consumer markets for various load securement and other non-overhead lifting applications. As a result of the acquisition of Lister Bolt & Chain, Ltd. and Lister Chain & Forge Inc. (collectively, "Lister"), the Company now also manufactures kiln chain sold primarily to the cement and lime kiln manufacturing market and anchor and buoy chain sold primarily to the United States and Canadian governments. The Company manufactures a complete line of alloy and carbon steel forged attachments, including hooks, shackles, hitch pins, master links and loadbinders. These forged attachments are used in virtually all types of chain and wire rope rigging applications in a variety of industries, including transportation, mining, railroad, construction, marine, logging, petrochemical and agriculture. The Company also manufactures carbon steel forged and stamped products, such as loadbinders, hooks, shackles and other securement devices, for sale to the industrial, consumer and logging markets through industrial distributors, hardware distributors, mass merchandiser outlets and OEMs. Industrial Overhead Cranes. The Company entered the crane manufacturing market through the August 1998 acquisition of Abell-Howe, a Chicago-based regional manufacturer of jib and overhead bridge cranes. The Company's merger with GL in March 1999 established the Company as a significant participant in the strategically important crane building and servicing markets, which are strong complements to its hoist business. Industrial Components. The Company, through the Duff-Norton division of its Yale Industrial Products, Inc. ("Yale") subsidiary, designs and manufactures industrial components such as mechanical and electromechanical actuators, mechanical jacks and rotary unions for sale domestically and abroad. Actuators are linear motion devices used in a variety of industries, including the paper, steel and aerospace industries. Mechanical jacks are heavy duty lifting devices whose uses include the repair and maintenance of railroad tracks, locomotives and industrial machinery. Rotary unions are piping devices which introduce heating or cooling liquids into the interiors of rotating drums in industrial processes in the paper, textiles, rubber, plastics, printing and machine tool industries. The December 1998 acquisition of Gautier, a French rotary union and swivel joint manufacturer, complemented Duff-Norton's product line while expanding its global reach. Solutions Segments The Solutions segments are engaged primarily in the design, fabrication and installation of integrated work station and facility-wide material handling 7 systems and in the manufacture and distribution of operator-controlled manipulators and scissor lifts. The products and services of these two segments are highly engineered and are generally built to order and sold directly to end-users for specific applications. Net sales of the Solutions - Industrial segment in fiscal 1999 were approximately $58.3 million or approximately 8% of the Company's total net sales, of which approximately $30.1 million (52%) were domestic and approximately $28.2 million (48%) were international. Net sales of the Solutions - Automotive segment in fiscal 1999 were approximately $161.4 million or approximately 22% of the Company's total net sales, of which approximately $124.0 million (77%) were domestic and approximately $37.4 million (23%) were international. The following table sets forth certain sales data for the products and services of the Solutions segments, expressed as a percentage of net sales of these segments for fiscal 1999: Integrated material handling conveyor systems..... 86% Scissor lifts..................................... 6 Manipulators...................................... 4 Other............................................. 4 -- 100% === Integrated Material Handling Conveyor Systems. Conveyors are the most important component of a material handling system, reflecting their high functionality for transporting material throughout manufacturing and warehouse facilities. ASI, which is the sole business of the Solutions - Automotive segment, specializes in overhead conveyors, electrified monorail systems, robotic indexing systems and automatic body transfer systems. Univeyor, a component of the Solutions - Industrial segment, specializes in computer-controlled and automated powered roller conveyors for use in warehouse operations and distribution systems. Scissor Lifts. The American Lifts division of Yale manufactures hydraulic scissor lift tables and other engineered lifting products. These products enhance workplace ergonomics and are sold primarily to customers in the manufacturing, construction, general industrial and air cargo industries. Manipulators. The Company manufactures a line of sophisticated operator-controlled manipulators. These products are articulated mechanical arms with specialized end tooling designed to perform lifting, rotating, turning, tilting, reaching and positioning tasks in a manufacturing process. Utilizing various models and size configurations, the Company can offer custom-designed hydraulic, pneumatic, and electric manipulators for a wide variety of applications where the user requires multi-axial movement in a harsh or repetitive environment. Sales and Marketing The Company supports its Products segment sales through its sales forces and through independent manufacturing agents worldwide, including approximately 150 dedicated salespersons who sell hoists, chain, forged attachments, cranes, rotary unions, actuators, jacks, and related material handling accessories. Sales are further supported by over 130 Company-trained customer service correspondents and sales application engineers. The Company promotes its products by advertising in trade journals and by participating in more than 60 trade shows each year throughout the United States and abroad. Trade shows are central to promotion of the Company's products and, in certain cases, for actual sale of the Company's products, particularly to 8 hardware retailers. Shows in which the Company participates range from global events held in Hanover, Germany, Cologne, Germany and Chicago, Illinois to local "markets" and "open houses" put on by individual hardware and industrial distributors. The Company also attends specialty shows for the entertainment, rental, safety and environmental recycling markets, as well as general purpose industrial and consumer hardware shows. In fiscal 1999, the Company participated in trade shows in Canada, France, Mexico, Germany, England, Singapore, South Africa, China, Australia and Brazil, as well as in the United States. The Company's communication program encompasses advertisements in leading trade journals as well as producing and distributing high quality information catalogs. On-site distributors and end-user training programs are held worldwide to promote and reinforce the attributes of the Company's products. The Company also has a Web site on the Internet (http://www.cmworks.com). The Company supports its product distribution by running cooperative "pull-through" advertising in over 50 vertical trade magazines and directories targeted to the theatrical, international, consumer, tire shredder and crane builder markets. The Company has separate ads for chain, hoists, forged attachments, lifters, actuators, hydraulic jacks, tire shredders, hardware programs, cranes and light rail systems. Distribution and Markets Products Segment. The distribution channels for the Products segment include a variety of commercial distributors, including general distributors, specialty distributors, service-after-sale distributors and other distributors. General Distribution Channels: o Industrial distributors sell a variety of products for maintenance, repair, operation and production ("MROP") applications through their own direct sales force. o Rigging shops are distributors who are experts in the rigging, lifting, positioning and load securement areas of material handling. Most rigging shops manufacture and distribute chain, wire rope and synthetic slings and distribute off-the-shelf hoists and attachments, chain slings and other off-the-shelf products. o Crane builders design, build and install overhead crane and light-rail systems for general industry and sell a wide variety of hoists and lifting attachments. Cranes and crane components are also sold by the Company's wholly owned crane builders, Abell-Howe and GL, directly to end-users in a variety of industrial markets. Specialty Distribution Channels: o Catalog houses market a variety of MROP supplies and material handling products either exclusively through large, nationally distributed catalogs, or through a combination of catalog sales and a field sales force. The customer base of catalog houses, which traditionally included smaller industrial companies and consumers, has expanded to include large industrial accounts and integrated suppliers. 9 o Material handling specialists design and assemble systems incorporat- ing hoists, overhead rail systems, trolleys, lift tables, manipulators, air balancers, jib arms and other products. o Entertainment equipment distributors design, supply and install a variety of material handling equipment for concerts, theaters, ice shows, sports arenas, convention centers and discos. Service-After-Sale Distribution Channel: o Service-after-sale distributors include over 12 chain repair service stations and over 450 hoist parts, product, service and repair stations. This service network is designed for easy parts and service access for the Company's large installed base of hoists and related equipment in North America. Other Sales Channels: o Original equipment manufacturers supply various component parts to other industrial manufacturers as well as private branding and packaging of traditional Company products for material handling, lifting and positioning applications. o Government sales are sold directly by the Company and have expanded with the acquisition of Lister, which manufactures anchor, buoy and mooring chain for the United States and Canadian Navies and Coast Guards. Solutions Segments The products and services of the Solutions segment are sold primarily to end-users. In the sale of its integrated material handling conveyor systems, the Company generally acts as a prime contractor with turnkey responsibility for its systems, or a supplier working closely with the customer's general contractor. Sales are generated by in-house personnel, generally through engineer-to-engineer interactions. Products, such as scissor lifts and manipulators are sold by Company sales employees and specialized independent distributors. Customer Service and Training The Company maintains well-trained customer service departments for all of its Products segment sales divisions, and regularly schedules product and service training schools for all customer service representatives and field sales forces. In addition, training schools for distribution, service stations, and end-users are held on a regular basis at most of the Company's facilities, as well as in the field. The Company has more than 450 service stations worldwide that provide local and regional repair, warranty and general service work for distributors and end-users. End-user trainees attending various training schools maintained by the Company include representatives of General Motors, DuPont, 3M, GTE, Cummins Engine, General Electric and many other large industrial manufacturers. The Company also provides a variety of collateral material in video, cassette, CD-ROM, slide and literature format addressing such relevant material handling topics as the care, use and inspection of chains and hoists, and overhead lifting and positioning safety. 10 The Company also sponsors nine separate advisory boards made up of representatives of its primary distributors and service-after-sale network members who are invited to participate in discussions focused on improving products and service. These boards enable the Company and its primary distributors to exchange product and market information relevant to industry trends. Recent Acquisitions Since February 1994, the Company has acquired thirteen operations: o In March 1999, the Company merged with GL, a full-service designer and builder of industrial overhead bridge, gantry and jib cranes and related components, in exchange for shares of, and options to purchase, the Company's common stock valued at approximately $20.6. This acquisition was the Company's first major step in the implementation of its CraneMart@ strategy. o In January 1999, the Company acquired Camlok and the Tigrip product line for aggregate consideration of approximately $10.6 million. Camlok, located in the United Kingdom, manufactures plate clamps, crane weighers and related products. The German-based Tigrip produces standard and specialized plate clamps. These acquisitions positioned the Company as a market leader for lifting clamps in Europe. o In December 1998, the Company acquired SERG, a manufacturer of rotary unions and swivel joints, for approximately $2.9 million. SERG's product lines are complementary to those of the Company's Duff-Norton division and provide the Company with additional cross-selling and cross-branding opportunities. o In August 1998, the Company acquired Abell-Howe, a regional manufacturer of jib and other overhead cranes for approximately $7.0 million. This acquisition marked the Company's entry into the complementary crane building product line, creating significant cross-selling opportunities for its existing hoist products. o In March 1998, the Company acquired LICO, a designer, manufacturer and installer of custom conveyors and material handling systems primarily for the automotive industry, for approximately $155.0 million, adjusted for outstanding borrowings. This acquisition strengthened the Company's position as a leader in the project design, fabrication and installation of automated material handling systems and provided the Company with an established platform for increasing its sales to the automotive and industrial manufacturing markets. o In January 1998, the Company acquired Univeyor, which is engaged in the design and manufacture of automated material handling systems, for approximately $15.0 million plus assumed liabilities. This transaction enabled the Company, which previously had designed solutions only for individual workstations, to offer automated material handling systems, predominantly using powered roller conveyors, for the entire workplace. o In December 1996, the Company acquired Lister, a manufacturer of cement kiln, anchor and buoy chain and mining bolts, for approximately $7.0 million. This transaction complemented the Company's line of chain products and provided the Company with access to new markets, 11 particularly in the international marketplace. o In October 1996, the Company acquired the majority of the outstanding common equity of Yale Industrial Products, Inc., a manufacturer of a variety of lifting and positioning products, including hoists and scissor lifts and industrial components such as actuators, jacks and rotary unions, for approximately $270.0 million through a cash tender offer. In January 1997, the Company acquired the remaining common equity of Yale and effected a merger. This acquisition further complemented the Company's product line and also provided the Company with international operations and distribution facilities in Europe, South Africa and China. o In November 1995, the Company acquired Lift-Tech International, Inc. ("Lift-Tech"), a manufacturer and distributor of hoists and crane components, including wire rope and air-powered hoists, for approximately $63.0 million. Lift-Tech's products complemented the Company's existing hoist product lines, thereby enabling the Company to offer a broader product line to the marketplace. Between February 1994 and October 1995 the Company also acquired (i) the remaining 51% equity interest in Endor, a Mexican manufacturer of hoists, for approximately $2.0 million, (ii) certain assets of Cady Lifters, Inc., a manufacturer of "below the hook" lifters, for approximately $0.8 million, (iii) the assets of the Conco Division of McGill Industries, Inc., a manufacturer of manipulators, for approximately $0.8 million and (iv) the assets of Durbin-Durco, Inc., a manufacturer of load securement equipment and attachments, for approximately $2.4 million. Competition The markets in which the Company operates are highly competitive and the Company faces competition from a number of different manufacturers in each of its product areas and geographic markets, domestic and foreign. The Company competes in the sale of hoists with Demag, Kito-Harrington, Ingersoll-Rand and Morris Material Handling; in chain with Campbell, Peerless Chain Company and American Chain and Cable Company; in forged attachments with the Crosby Group, Chicago Hardware and Cooper; in actuators and rotary unions with Deublin and Joyce-Dayton; and in integrated material handling systems with Jervis B. Webb, Dearborn Mid-West, Allied UniKing and FATA. The principal competitive factors affecting the market for the Company's products include performance, functionality, price, brand recognition, customer service and support and product availability. Some of the Company's competitors have greater financial and other resources than the Company. Employees At March 31, 1999, the Company had approximately 4,350 employees, 3,480 in the United States, 375 in Canada, 120 in Mexico and 375 in Europe. Approximately 1,580 of the Company's employees are represented under 12 separate collective bargaining agreements which terminate at various times between September 1999 and April 2003. During the past five years, the only interruptions or curtailments of the Company's business due to labor disputes was a five-day work stoppage at a Yale plant in Charlotte, North Carolina in fiscal 1997. The Company believes that its relationship with its employees is good. In support of this relationship, the 12 Company has maintained an Employee Stock Ownership Plan since 1988 and also uses incentive-based compensation programs that are linked to the Company's profitability and increase in shareholder value. Backlog The Company's backlog of orders at March 31, 1999 was approximately $166.1 million compared to approximately $214.6 million at March 31, 1998. The Company's orders for standard products are generally shipped within one week. Orders for products that are manufactured to customers' specifications are generally shipped within four to twelve weeks. Revenues from the Company's contracts for automated systems are generally recognized within 12 to 18 months. The Company does not believe that the amount of its backlog orders is a reliable indication of its future sales. Raw Materials and Components The principal raw materials used by the Company are structural steel and processed steel bar, forging bar steel, steel rod and wire, steel pipe and tubing and tool steel which are available from multiple sources. The Company purchases these various forms of steel from a number of suppliers under long-term agreements which are negotiated on a company-wide basis to take advantage of volume discounts. Although the steel industry is cyclical and steel prices can be volatile, the Company has not been significantly impacted in recent years by increases in steel prices. The Company also purchases components such as motors, bearings and gear housings and castings. These components are generally available from several suppliers. The Company estimates that its total materials cost, including steel products and components, represented approximately 31% of net sales in fiscal 1999. The Company generally seeks to pass on materials price increases to its customers, although a lag period often exists. The Company's ability to pass on these increases is determined by competitive conditions. Environmental and Other Governmental Regulation Like many manufacturing companies, the Company is subject to various federal, state and local laws relating to the protection of the environment. To address the requirements of such laws, the Company has adopted a corporate environmental protection policy which provides that all facilities owned or leased by the Company shall, and all employees of the Company have the duty to, comply with all applicable environmental regulatory standards, and the Company has initiated an environmental auditing program for its facilities to ensure compliance with such regulatory standards. The Company has also established managerial responsibilities and internal communication channels for dealing with environmental compliance issues that may arise in the course of its business. Because of the complexity and changing nature of environmental regulatory standards, it is possible that situations will arise from time to time requiring the Company to incur expenditures in order to ensure environmental regulatory compliance. However, the Company is not aware of any environmental condition or any operation at any of its facilities, either individually or in the aggregate, which would cause expenditures that would result in a material adverse effect on the Company's results of operations, financial condition or cash flows and, accordingly, has not budgeted any material capital expenditures for environmental compliance for fiscal 2000. 13 Certain federal and state laws, sometimes referred to as Superfund laws, require certain companies to remediate sites that are contaminated by hazardous substances. These laws apply to sites owned or operated by a company, as well as certain off-site areas for which a company may be jointly and severally liable with other companies or persons. The required remedial activities are usually performed in the context of administrative or judicial enforcement proceedings brought by regulatory authorities. The Company has been involved recently in six administrative enforcement proceedings in connection with the remediation of certain facilities, one of which it owns and operates, one of which was formerly owned and operated by a subsidiary of one of the Company's subsidiaries, and four of which neither the Company nor any subsidiary of the Company has ever owned or operated but with regard to which the Company or a subsidiary of the Company has been identified as one of several potentially responsible parties ("PRPs"). The Company has cooperated with the regulatory authorities in connection with these environmental proceedings. From the perspective of the Company, with the exception of the two environmental administrative proceedings discussed below, these matters have been, and are expected to continue to be, minor matters not requiring substantial effort or expenditure on the part of the Company. The first environmental administrative proceeding is one in which the Company has been identified by the New York State Department of Environmental Conservation ("NYSDEC"), along with other companies, as a PRP at the Frontier Chemical Site in Pendleton, New York ("Pendleton Site"), a site listed on NYSDEC's Registry. From 1958 to 1977, the Pendleton Site had been operated as a commercial waste treatment and disposal facility. The Company sent waste pickling liquor generated at its facility in Tonawanda, New York to the Pendleton Site during the period from approximately 1969 to 1977, and the Company is participating with other PRPs in conducting the remediation of the Pendleton Site under a consent order with NYSDEC. As a result of a negotiated cost allocation among the participating PRPs, the Company has paid its pro rata share of the remediation costs and accrued its share of the ongoing operations and maintenance costs. As of March 31, 1999, the Company has paid approximately $1.0 million in remediation and ongoing operations and maintenance costs associated with the Pendleton Site. The participating PRPs have identified and commenced a cost recovery action against a number of other parties who sent hazardous substances to the Pendleton Site. If any of the currently nonparticipating parties identified by the participating PRPs pay their pro rata shares of the remediation costs, then the Company's share of total site remediation costs will decrease. Settlements have been reached with 45 of the 113 defendants in the cost recovery action, and additional settlements are expected in the future. However, the Company has not yet received payment in connection with such settlements. The Company also has entered into a settlement agreement with one of its insurance carriers in the amount of approximately $734,130 in connection with the Pendleton Site and has received payment in full of the settlement amount. The second environmental administrative proceeding involved Mechanical Products, Inc., a former subsidiary of Yale ("MPI"). In 1987, MPI discovered that groundwater and certain soils at and near its Jackson, Michigan plant contained certain organic chemical compounds in concentrations above those permitted by applicable law. MPI conducted an extensive investigation of the site and entered into an Administrative Order by Consent with the State of Michigan Department of Natural Resources which provides for further investigation and the development and implementation of a plan for remedial action. Since 1991, MPI has been engaged in efforts to investigate and remediate the impacted areas. On or about August 10, 1998, Yale sold MPI in a stock transaction, and the purchaser assumed the environmental liabilities associated with the administrative proceeding described in this paragraph. As of August 10, 1998, the Company had paid a total of approximately $3.4 million in remediation 14 and operations and maintenance costs required by this administrative proceeding, and since that date, as a result of the sale of MPI, the Company has not had, and does not expect to have, further expenditures in connection with same. For all of the currently known and unpaid environmental matters, the Company has accrued a total of approximately $930,000 as of March 31, 1999, which, in the opinion of the Company's management, is sufficient to deal with such matters. Further, the Company's management believes that the environmental matters known to, or anticipated by, the Company should not, individually or in the aggregate, have a material adverse effect on the Company's cash flow, results of operations or financial condition. However, there can be no assurance that potential liabilities and expenditures associated with unknown environmental matters, unanticipated events, or future compliance with environmental laws and regulations will not have a material adverse effect on the Company. The Company's operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally OSHA and regulations thereunder. The Company believes that it is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse effect on its cash flow, results of operations or financial condition. Item 2. Properties. - ------- ----------- The Company maintains its corporate headquarters in Amherst, New York. The principal properties utilized by the Company for its continuous operations consist of 56 manufacturing and distribution facilities, of which 40 are located in the United States, 5 are located in Canada, 1 is located in Mexico, 8 are located in Europe, and 2 are located in Asia. The Company also leases a number of sales offices and minor warehouses throughout North America, Europe, Asia and South AFrica. The following table summarizes the Company's headquarters and principal manufacturing and distribution facilities by business segment:
Approximate Floor Space (in square feet) Owned Leased Total Corporate Headquarters --- 52,000(1) 52,000 Products (42 facilities): United States 1,740,000 623,000 2,363,000 International 394,000 187,000 581,000 Solutions - Industrial (7 facilities): United States 323,000 - 323,000 International 85,000 20,000 105,000 Solutions - Automotive (7 facilities): United States 81,000 65,000 146,000 International - - - _______________________ (1) Approximately 26,000 square feet is sublet to an unaffiliated party through June 30, 2003. Title to the property is vested in the Town of Amherst Industrial Development Agency pursuant to an industrial revenue bond transaction. The Company has the right and obligation to purchase the property upon the expiration of the lease term for $1.00.
15 The Company believes that its properties have been adequately maintained, are in generally good condition and are suitable for the Company's business as presently conducted. The Company believes its existing facilities provide sufficient production capacity for its present needs and for its anticipated needs in the foreseeable future. The Company also believes that upon the expiration of its current leases, it either will be able to secure renewal terms or enter into leases for alternative locations at market terms. Item 3. Legal Proceedings. - ------- ------------------ From time to time, the Company is named a defendant in legal actions arising out of the normal course of business. The Company is not a party to any pending legal proceeding the resolution of which the management of the Company believes will have a material adverse effect on the Company's cash flow, results of operations or financial condition or to any other pending legal proceedings other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business. On November 18, 1996, an action entitled Milliken & Company vs. Duff-Norton Company, Inc. and Industrial Distribution Group, Inc. d/b/a Dixie Industrial Supply Company was commenced in the Superior Court of Troup County, Georgia. In its complaint in this action, the plaintiff alleges that a rotary union coupler manufactured by a subsidiary of Yale failed, causing a fire resulting in alleged damages to the plaintiff's carpet manufacturing facility and equipment in excess of $500 million. This action was settled in fiscal 1999 within the limits of the Company's insurance coverage. Item 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- Not applicable. 16 PART II Item 5. Market for the Company's Common Stock and Related Security - ------- -------------------------------------------------------------- Holder Matters. --------------- The Company's Common Stock is listed on the National Association of Securities Dealers Automated Quotation System - National Market System ("NASDAQ") under the trading symbol "CMCO". The following table sets forth, for the fiscal periods indicated, the high and low closing sale prices per share of the Company's Common Stock as reported by NASDAQ. Fiscal 1999 Fiscal 1998 ----------- ----------- High Low High Low ---- --- ---- --- 1st Quarter 30 1/2 26 1/4 19 17 2nd Quarter 28 7/16 15 1/8 26 1/4 18 5/8 3rd Quarter 19 1/4 14 3/8 26 1/2 22 1/2 4th Quarter 22 3/4 17 7/16 27 7/8 22 3/16 As of March 31, 1999, there were 162 holders of record of the Company's Common Stock. Approximately 2,000 additional shareholders hold shares of the Company's Common Stock in "street name". The Company declared total cash dividends of $.28 per share in fiscal 1999 and $.28 per share in fiscal 1998. On March 1, 1999, the Company issued 897,114 shares of its common stock (the "Merger Shares") to six investors in a private placement. The Merger Shares were issued pursuant to a pooling transaction in which a subsidiary of the Company and GL merged. As a result of such merger, all of the outstanding shares of GL were converted into the Merger Shares. The value of the Merger Shares, based upon the last reported sale price of the Company's common stock on March 1, 1999, was $17.8 million. The Merger Shares were issued in reliance on an exemption provided under Section 4(2) of the Securities Act of 1933, as amended. 17 Item 6. Selected Financial Data. - ------- ------------------------ SELECTED FINANCIAL INFORMATION The following table sets forth selected consolidated financial information of the Company for each of the five fiscal years in the period ended March 31, 1999. This information includes (i) the results of operations of Lift-Tech since its acquisition on November 1, 1995, (ii) the results of operations of Yale since its acquisition on October 17, 1996, (iii) the results of operations of Lister since its acquisition on December 19, 1996, (iv) the results of operations of Univeyor since its acquisition on January 8, 1998, (v) the results of operations of LICO since its acquisition on March 31, 1998, (vi) the results of operations of Mechanical Products through its divestiture on August 7, 1998, (vii) the results of operations of Abell-Howe since its acquisition on August 21, 1998, (viii) the results of operations of Gautier since its acquisition on December 4, 1998, (ix) the results of operations of Camlok and Tigrip since their acquisition on January 29, 1999, and (x) the results of operations of GL since its formation on April 1, 1997, including the restatement of Company data reported prior to GL's merger with the Company on March 1, 1999. This table should be read in conjunction with the "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the Consolidated Financial Statements of the Company, including the notes thereto, included elsewhere herein. Refer to the "Description of Business and Business Acquisitions" note to the Consolidated Financial Statements regarding the unaudited pro forma information presented, which reflects the fiscal 1999 and 1998 business acquisitions and divestiture, and related capital impact, as if they occurred on April 1, 1997, which is the beginning of fiscal 1998.
Fiscal Years Ended March 31, ---------------------------- 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- (Dollars in thousands, except per share data) Statement of Income Data: Net sales.................................................... $172,330 $209,837 $359,424 $561,823 $735,445 Cost of products sold........................................ 124,492 149,511 251,987 401,669 542,975 Gross profit................................................. 47,838 60,326 107,437 160,154 192,470 Selling expenses............................................. 15,915 19,120 32,550 46,578 52,059 General and administrative expenses.......................... 11,449 13,941 24,636 33,361 39,850 Amortization of intangibles.................................. 600 791 5,197 10,297 15,479 Other charges................................................ 1,598 672 - --- --- Income from operations....................................... 18,276 25,802 45,054 69,918 85,082 Interest and debt expense.................................... 2,352 5,292 11,930 25,104 35,923 Interest and other income.................................... 472 1,134 1,168 1,940 1,565 Income before income taxes, minority interest and extraordinary charge....................................... 16,396 21,644 34,292 46,754 50,724 Income tax expense........................................... 5,892 8,657 15,617 22,776 23,288 Minority interest............................................ - - (323) --- --- Extraordinary charge for early debt extinguishment........... - - (3,198) (4,520) --- Net income................................................... $ 10,504 $ 12,987 $ 15,154 $ 19,458 $ 27,436 Net income per common share-diluted(a)....................... $ 1.48 $ 1.69 $ 1.15 $ 1.35 $ 1.92 Cash dividend per common share (a)........................... 0.21 0.24 0.27 0.28 0.28 Pro Forma Statement of Income Data: Net sales.................................................... $735,525 $732,143 Income from operations....................................... 81,963 84,702 Income before extraordinary charge........................... 24,354 27,355 Net income................................................... 19,834 27,355 Earnings per share -- diluted: Income before extraordinary charge........................ 1.69 1.91 Net income................................................ 1.37 1.91 18 Balance Sheet Data (at end of period): Total assets................................................. $ 97,822 $ 188,734 $ 548,245 $ 788,862 $ 766,911 Total long-term debt (including current maturities).......... 22,587 9,744 286,288 458,577 423,612 Total liabilities............................................ 56,972 51,112 398,089 617,916 578,237 Total shareholders' equity................................... 40,850 137,622 150,156 170,946 188,674 (a) Reflects a 17 to 1 stock split of the common stock effected on February 15, 1996; fiscal 1995 and 1996 per share data also impacted by the Company's initial public offering effected on February 22, 1996.
19 Item 7. Management's Discussion and Analysis of Results of Operations - ------- -------------------------------------------------------------- and Financial Condition. ------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview The Company is a broad-line designer, manufacturer, and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial, automotive and consumer markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors in commercial and consumer distribution channels, and to a lesser extent directly to manufacturers and other end-users. Commercial distribution channels include general distributors, specialty distributors, service-after-sale distributors, original equipment manufacturers ("OEMs"), and the U.S. and Canadian governments. The general distributors are comprised of industrial distributors, rigging shops and crane builders. Specialty distributors include catalog houses, material handling specialists and entertainment equipment riggers. The service-after-sale network includes repair parts distribution centers, chain service centers, and hoist repair centers. Company products are also sold to OEMs, and to the U.S. and Canadian governments. Consumer distribution channels include mass merchandisers, hardware distributors, trucking and transportation distributors, farm hardware distributors and rental outlets. The Company's integrated material handling solutions businesses primarily deal with end-users. Material handling solution sales are concentrated, domestically and internationally (primarily Europe), in the automotive industry, and consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction and other industrial markets. On March 1, 1999, GL International, Inc. ("GL") was merged with and into the Company through the issuance of new Company stock and options to purchase Company stock for all issued and outstanding stock and options of GL. The merger was accounted for as a pooling of interests and, accordingly, the 1999 and 1998 consolidated financial statements have been restated to include the accounts of GL from the date of GL's formation, April 1, 1997. This section should be read in conjunction with the consolidated financial statements of the Company included elsewhere herein. Results of Operations The following table sets forth certain income statement data for the Company, expressed as a percentage of net sales, for each of the periods presented: 20
Fiscal Years Ended March 31, ---------------------------- 1999 1998 1997 ---- ---- ---- Products Segment sales............................................................... 71.9% 93.4% 88.6% Solutions - Industrial Segment sales................................................. 7.9 7.1 7.9 Solutions - Automotive Segment sales................................................. 22.0 - - Intercompany eliminations/Other sales................................................ (1.8) (0.5) 3.5 ---- ---- --- Net sales............................................................................ 100.0 100.0 100.0 Cost of products sold................................................................ 73.8 71.5 70.1 ---- ---- ---- Gross profit......................................................................... 26.2 28.5 29.9 Selling expenses..................................................................... 7.1 8.3 9.1 General and administrative expenses.................................................. 5.4 5.9 6.9 Amortization of intangibles.......................................................... 2.1 1.9 1.4 --- --- --- Income from operations............................................................... 11.6 12.4 12.5 Interest and debt expense............................................................ 4.9 4.4 3.3 Interest and other income............................................................ 0.2 0.3 0.3 --- --- --- Income before income taxes, minority interest and extraordinary charge............... 6.9 8.3 9.5 Income tax expense................................................................... 3.2 4.0 4.3 --- --- --- Income before minority interest and extraordinary charge............................. 3.7% 4.3% 5.2% ==== ==== ====
Fiscal Years Ended March 31, 1999, 1998, and 1997 Sales growth during the periods was primarily due to the March 1999 GL merger, the March 1998 LICO acquisition, the January 1998 Univeyor acquisition, the December 1996 Lister acquisition and the October 1996 Yale acquisition, offset by the August 1998 Mechanical Products divestiture. Sales in 1999 of $735,445,000 increased $173,622,000 or 30.9% over 1998, and sales in 1998 of $561,823,000 increased $202,399,000 or 56.3% over 1997. On a pro forma basis, considering the effects of fiscal 1999 and 1998 acquisitions and divestiture, the Company experienced a 0.5% decrease in sales in fiscal 1999 compared to 1998. This comparison is impacted by the following economic factors: 1) a relatively soft industrial market, 2) the effect of the mid-1998 General Motors strike, 3) the impact of the Asian and South American economic situations, and 4) a shift in demand from small retail hardware stores to larger do-it-yourself superstores, to which the Company supplies only a small share. On a pro forma basis, considering the effects of fiscal 1998 and 1997 acquisitions, the Company experienced a 10.6% increase in sales in fiscal 1998 compared to 1997. This growth was due to strong Solutions-Automotive segment demand as well as solid demand by nearly all Products segment market channels. In addition, during these periods the Company introduced list price increases of approximately 4% in both December 1998 and 1997 affecting certain of the Company's hoist, chain and forged products sold in its domestic commercial markets. Sales in the Products, Solutions-Industrial and Solutions-Automotive segments were as follows, in thousands of dollars and with percentage changes for each segment:
Change Change Fiscal Years Ended March 31, 1999 vs 1998 1998 vs 1997 ---------------------------- ------------ ------------ 1999 1998 1997 Amount % Amount % ---- ---- ---- ------ - ------ - (In thousands, except percentages) Products................... $528,974 $524,949 $318,544 $ 4,025 0.8 $206,405 64.8 Solutions-Industrial....... 58,301 39,845 28,308 18,456 46.3 11,537 40.8 Solutions-Automotive....... 161,443 - - 161,443 - - - Eliminations/Other......... (13,273) (2,971) 12,572 (10,302) - (15,543) - Consolidated net sales........ $735,445 $561,823 $359,424 $173,622 30.9 $202,399 56.3
21 The addition of the Solutions-Automotive segment in fiscal 1999 is due to the March 1998 LICO acquisition. The 46.3% and 40.8% growth in the Solutions-Industrial segment in fiscal 1999 and 1998, respectively, is due to the January 1998 Univeyor acquisition and also a small portion of the October 1996 Yale acquisition. The 64.8% growth in the Products segment in fiscal 1998 is due to the formation of GL in April 1997, the December 1996 Lister acquisition, the October 1996 Yale acquisition and solid sales growth in nearly all market channels within this segment. The fluctuation in Eliminations/Other in each of the periods is due to the addition of intercompany sales between GL and the other businesses within the Company in fiscal 1999 and 1998, offset by the August 1998 Mechanical Products divestiture. Sales per employee increased to $169,500 in fiscal 1999 from $134,400 in fiscal 1997. The Company's gross profit margins were approximately 26.2%, 28.5% and 29.9% for 1999, 1998 and 1997, respectively. The decrease in gross profit margin in fiscal 1999 is primarily due to the LICO acquisition which formed the Solutions-Automotive segment and generally produces lower gross profit margins than the other segments. The lower profitability of this segment is offset by a lower operating capital base required to design and manufacture its products. After isolating the effect of the LICO acquisition, the 1999 gross profit margin increased by approximately 90 basis points. The decrease in gross profit margin in fiscal 1998 resulted primarily from a change in the classification of approximately $7.6 million of costs into cost of products sold which previously had been classified as general and administrative expenses. This change was made for intracorporate consistency and had a minimal effect on income from operations. In addition, the fiscal 1998 gross profit margin was also impact by the addition of GL, which also generates lower gross profit margins on a lower capital base as compared to the pre-existing Products segment businesses. After isolating the effect of the classification change and the GL merger, the 1998 gross profit margin increased by approximately 50 basis points compared to 1997. Excluding the effects of those specific items noted above, the resulting increase in gross profit margin in each of the periods resulted from the effects of the Company's cost control efforts and integration of acquisitions. Selling expenses were $52,059,000, $46,578,000 and $32,550,000 in fiscal 1999, 1998, and 1997, respectively. The 1999 expenses include the full year of LICO activity; 1998 expenses include the full year of Yale and GL activity as compared to fiscal 1997. As a percentage of consolidated net sales, selling expenses were 7.1%, 8.3% and 9.1% in fiscal 1999, 1998 and 1997, respectively. The 1999 and 1998 improvements reflect a lower level of selling expenses incurred on behalf of the LICO and GL businesses, relative to sales. General and administrative expenses were $39,850,000, $33,361,000 and $24,636,000 in fiscal 1999, 1998 and 1997, respectively. The 1999 expenses include the full year of LICO activity; 1998 expenses include the full year of Yale and GL activity as compared to fiscal 1997. As a percentage of consolidated net sales, general and administrative expenses were 5.4%, 5.9% and 6.9% in fiscal 1999, 1998 and 1997, respectively. The 1999 improvement reflects a lower level of general and administrative expenses incurred on behalf of the LICO business, relative to sales. As noted above, the improved percentage in fiscal 1998 was primarily due to a change that reclassified approximately $7.6 million of expenses previously classified as general and administrative into costs of products sold for intracorporate consistency. This 1998 improvement was offset somewhat by a higher level of general and administrative expenses incurred on behalf of the GL business, relative to sales. 22 Amortization of intangibles was $15,479,000, $10,297,000 and $5,197,000 in fiscal 1999, 1998 and 1997, respectively. Fiscal 1999 includes a full year of goodwill amortization resulting from the LICO acquisition; 1998 includes a full year of goodwill amortization resulting from the Yale acquisition; 1997 includes a partial year of Yale and a full year of goodwill amortization resulting from the Lift-Tech acquisition. Interest and debt expense was $35,923,000, $25,104,000 and $11,930,000 in fiscal 1999, 1998 and 1997, respectively. The fiscal 1999 and 1998 increases were primarily due to the financing required to complete the LICO and Yale acquisitions. As a percentage of consolidated net sales, interest and debt expense was 4.9%, 4.4% and 3.3% in fiscal 1999, 1998 and 1997, respectively. Interest and other income was $1,565,000, $1,940,000 and $1,168,000 in fiscal 1999, 1998 and 1997, respectively. The fluctuations reflect changes in the investment return on marketable securities held for settlement of a portion of the Company's general and products liability claims. Income taxes as a percentage of pre-tax accounting income were 45.9%, 48.7% and 45.5% in fiscal 1999, 1998 and 1997, respectively. The percentages reflect the effect of non-deductible goodwill amortization resulting from the business acquisitions. In fiscal 1997, the minority interest share of Yale earnings of $323,000 resulted from the fact that the Company acquired 72% of the outstanding Yale shares on a fully diluted basis in October 1996 and the remainder in January 1997. As a result of the above, income before extraordinary charges increased $3,458,000 or 14.4% in 1999 and $5,626,000 or 30.7% in 1998. This is based on income before extraordinary charges of $27,436,000, $23,978,000 and $18,352,000 or 3.7%, 4.3% and 5.2% as a percentage of consolidated net sales in fiscal 1999, 1998 and 1997, respectively. In fiscal 1998, the extraordinary charge for early debt extinguishment of $4,520,000 resulted from the non-cash write-off of unamortized deferred financing costs upon refinancing of the Company's bank debt effective March 31, 1998. The charge is net of $3,012,000 of tax benefit. In 1997, the extraordinary charge for early debt extinguishment of $3,198,000 resulted from the tender in December 1996 for 11.5% acquired Yale notes. The charge consisted of redemption premiums, costs to exercise the tender offer, and write-off of previously incurred deferred financing costs, and was net of $2,133,000 of tax benefit. Net income, therefore, increased $7,978,000 or 41.0% in 1999 and $4,304,000 or 28.4% in 1998. This is based on net income of $27,436,000, $19,458,000 and $15,154,000 in fiscal 1999, 1998 and 1997, respectively. Liquidity and Capital Resources On March 1, 1999, GL was merged with and into the Company through the issuance of 897,114 shares of newly issued Company stock and options to purchase 154,848 shares of Company stock for all issued and outstanding stock and options of GL. The fair market value of the stock and options exchanged was approximately $20.6 million. On January 29, 1999, the Company acquired all of the outstanding stock of Camlok and the net assets of the Tigrip product line for $10.6 million in cash, 23 financed by a German subsidiary revolving credit facility and term note. On December 4, 1998, the Company acquired all of the outstanding stock of Gautier for $3 million in cash, financed by the Company's revolving credit facility. During October 1998, the Company's ESOP borrowed $7,682,000 from the Company and purchased 479,900 shares of Company common stock on the open market at an average cost of $16 per share. On August 21, 1998, the Company acquired the net assets of Abell-Howe for $7 million in cash, financed by the Company's revolving credit facility. On August 7, 1998, the Company sold its Mechanical Products division for $11.5 million, consisting of $9.1 million in cash and a $2.4 million note receivable. On March 31, 1998, the Company acquired all of the outstanding stock of LICO for approximately $155 million of cash, which was financed by proceeds from the Company's revolving credit facility and a private placement of senior subordinated notes, both of which also closed effective March 31, 1998. The Company's previously existing Term Loan A, Term Loan B and revolving credit facility were repaid and retired on March 31, 1998. On January 7, 1998, the Company acquired all of the outstanding stock of Univeyor for approximately $15 million of cash plus the assumption of certain debt, financed by the Company's revolving credit facility. The 1998 Revolving Credit Facility provides availability up to $300 million, due March 31, 2003, against which $212.4 million was outstanding at March 31, 1999. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 112.5 basis points at March 31, 1999. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. To manage its exposure to interest rate fluctuations, the Company has an interest rate swap and cap. The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to $199,468,000, net of original issue discount of $532,000 and are due March 31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%, considering $1,902,000 of proceeds from rate hedging in advance of the placement. Provisions of the 8 1/2% Notes include, without limitation, restrictions of liens, indebtedness, asset sales, and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the Company, in whole or in part, at the Make-Whole Price (as defined). On or after April 1, 2003, they are redeemable at prices declining annually from 108.5% to 100% on and after April 1, 2006. In addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with the proceeds of equity offerings at a redemption price of 108.5%, subject to certain restrictions. In the event of a Change of Control (as defined), each holder of the 8 1/2% Notes may require the Company to repurchase all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes are not subject to any sinking fund requirements. The Company believes that its cash on hand, cash flows, and borrowing capacity under its revolving credit facility will be sufficient to fund its 24 ongoing operations, budgeted capital expenditures, and business acquisitions for the next twelve months. Net cash provided by operating activities increased to $57,493,000 in fiscal 1999 from $38,420,000 in 1998 and $28,886,000 in 1997. The $19,073,000 increase in net cash provided by operating activities in fiscal 1999 compared to 1998 results from increased net income of $7,978,000, increased depreciation and amortization of $7,360,000, and a decrease of changes in net working capital components, offset by the extraordinary charge for early debt extinguishment of $4,520,000 in 1998. The $9,534,000 increase in net cash provided by operating activities in fiscal 1998 compared to 1997 results from increased net income of $4,304,000, and increased depreciation and amortization of $8,611,000, offset by decreased deferred income tax expense by $4,761,000. Operating assets net of liabilities decreased by $4,412,000 in fiscal 1999 and increased by $5,509,000 and $5,905,000 in fiscal 1998 and 1997, respectively. Net cash used in investing activities was $23,943,000 in fiscal 1999 compared to $185,034,000 in 1998 and $215,851,000 in 1997. The 1999 amount includes the acquisitions of Camlok/Tigrip, Gautier, and Abell-Howe for $19,958,000, net of cash acquired; it is reduced by $8,801,000 of net proceeds from the Mechanical Products divestiture and $2,182,000 of proceeds from the sale of a portion of non-operating assets acquired with Yale in fiscal 1997. The 1998 amount includes the acquisitions of LICO, Univeyor and a GL business acquisition for $175,686,000, net of cash acquired; it is reduced by $4,575,000 of proceeds from the sale of a portion of the non-operating Yale assets. The net cash used in investing activities in fiscal 1997 includes $203,577,000 for the Yale and Lister acquisitions, net of cash acquired. Capital Expenditures In addition to keeping its current equipment and plants properly maintained, the Company is committed to replacing, enhancing, and upgrading its property, plant, and equipment to reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety, and promote ergonomically correct work stations. Consolidated capital expenditures for fiscal 1999, 1998 and 1997 were $12,992,000, $11,406,000 and $9,392,000, respectively, excluding those capital assets acquired in conjunction with business acquisitions. Inflation and Other Market Conditions The Company's costs are affected by inflation in the U.S. economy, and to a lesser extent, in foreign economies including those of Europe, Canada, Mexico, and the Pacific Rim. The Company does not believe that inflation has had a material effect on results of operations over the periods presented because of low inflation levels over the periods and because the Company has generally been able to pass on rising costs through price increases. However, in the future there can be no assurance that the Company's business will not be affected by inflation or that it will be able to pass on cost increases. Seasonality and Quarterly Results Lower than average orders and shipments during the December holiday period have a slight effect on the Company. In addition, quarterly results may be materially affected by the timing of large customer orders, by periods of high vacation concentrations, and by acquisitions and the magnitude of acquisition costs. Therefore, the operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year. 25 Year 2000 Conversions The Company's corporate-wide Year 2000 initiative is being managed by a team of internal staff and administered by the Director of Information Services. The Company has completed the assessment phase of its Year 2000 compliance project and is currently working on remediation of affected components. The Company has determined that it needs to modify certain portions of its corporate business information software so that its computer system will function properly with respect to dates in the year 2000 and beyond. Both internal and external resources have been dedicated to identifying, implementing, and testing corrective action in order to make such programs Year 2000 compliant; all such work is planned to be completed by July 1999 and is currently on schedule. To date the corporate business information software has been 100% assessed, approximately 95% has been remedially reprogrammed, and approximately 72% is now certified to be Year 2000 compliant. The Company believes that, with modifications to existing software, the Year 2000 issue will not pose significant operational problems for its computer systems. The Company has completed a corporate-wide assessment of the Year 2000 readiness of microprocessor controlled equipment such as robotics, CNC machines, and security and environmental systems. This assessment has revealed that at least 98% of all microprocessor-controlled equipment, including over 98% of all security and environmental systems, is currently compliant. Any necessary upgrades to ensure Year 2000 readiness are expected to be in place by the end of June 1999. In addition, the Company has determined that all of its manufactured products are 100% Year 2000 compliant. The Company has initiated communications with its suppliers and customers to determine the extent to which systems, products or services are vulnerable to failure should those third parties fail to remediate their own Year 2000 issues. To date the Company has received responses to over 80% of its inquiries and no Year 2000 compliance problem has been identified from these responses. While we believe that our Year 2000 compliance plan adequately addresses potential Year 2000 concerns and to date no significant Year 2000 issues have been identified with our suppliers and customers, there can be no guarantee that the systems of other companies on which our operations rely will be compliant on a timely basis and will not have an effect on our operations. The Company has conducted preliminary contingency planning and identified the critical need areas. A high level approach incorporating manual workarounds, increasing critical inventories, identifying alternate suppliers, and adjusting staffing levels has been discussed and forms the basis for the initial contingency planning. The Company believes this level of planning is appropriate at the current time, however, the planning will be further expanded if warranted by future events. The cost of the Year 2000 initiatives is not expected to be material to the Company's results of operations or financial position. The forward looking statements contained in the Year 2000 Conversions should be read in conjunction with the Company's disclosures under the heading "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995". 26 Effects of New Accounting Pronouncements The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," in June of 1998 which is effective for fiscal 2001. Statement No. 133 establishes accounting and reporting standards for hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The intended use of the derivative and its designation as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge) (2) a hedge of the exposure to variable cash flows of a forecasted transaction (a cash flow hedge), or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation (a foreign currency hedge), will determine when the gains and losses on the derivatives are reported in earnings and when they are to be reported as a component of other comprehensive income. The impact of compliance with this Statement has not yet been determined by the Company. In March of 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The Company adopted the provisions of the SOP in its financial statements for the year ended March 31, 1999. The SOP requires the capitalization of certain costs incurred in connection with developing or obtaining software for internal use. The impact of the SOP was not material to the Company. In April of 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up Activities," which requires costs related to start-up activities be expensed as incurred. The Company adopted the provisions of the SOP in its financial statements for the year ended March 31, 1999. The adoption of SOP 98-5 had no effect on the Company's reported earnings. 27 Item 7A. Quantitive and Qualitative Disclosures About Market Risk - -------- -------------------------------------------------------- Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. The Company is exposed to various market risks, including commodity prices for raw materials, foreign currency exchange rates, and primarily changes in interest rates. The Company has entered into financial instrument transactions which attempt to manage and reduce the impact of changes in interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company's primary commodity risk is related to changes in the price of steel. The Company controls this risk through negotiating purchase contracts on a consolidated basis and by attempting to build changes in raw material costs into the selling prices of its products. The Company does not enter into financial instrument transactions related to raw material costs. Approximately 17% of the Company's operations consist of manufacturing plants and sales offices in foreign jurisdictions. The Company manufactures its products in the United States, Canada, Germany, Denmark, the United Kingdom, Mexico, France and China and sells its products and solutions in over 50 countries annually. The Company's results of operations could be affected by such factors as changes in foreign currency rates or weak economic conditions in foreign markets. The Company's operating results are exposed to fluctuations between the US dollar and the Canadian dollar, European currencies, the Mexican peso and the Chinese renminbi. For example, when the US dollar strengthens against the Canadian dollar, the value of sales and net income denominated in Canadian dollars decreases when translated into US dollars for inclusion in the Company's consolidated results. The Company also is exposed to foreign currency fluctuations in relation to purchases denominated in foreign currencies. The Company's foreign currency risk is mitigated since the majority of foreign operations' sales and the related expense transactions are denominated in the same currency. In addition, the majority of export sale transactions are denominated in US dollars. Accordingly, the Company currently does not invest in derivative instruments such as foreign exchange contracts to hedge foreign currency transactions. The Company controls risk related to changes in interest rates through structuring its debt instruments with a combination of fixed and variable interest rates and by periodically entering into financial instrument transactions. At March 31, 1999, approximately 49% of the Company's outstanding debt has fixed interest rates. At that date, the Company has approximately $217.2 million of variable rate non-current debt and has an interest rate swap with a notional amount of $3.5 million maturing in July 2000 based on LIBOR at 5.9025%, plus the applicable margin based on the Company's leverage ratio. Under this agreement, the Company makes or receives payments equal to the difference between fixed and variable interest rate payments on the notional amount. In addition, the Company also has a LIBOR-based interest rate cap on $49.5 million of debt, maturing in December 1999 at 10%. A 1% fluctuation in interest rates would change future interest expense on the $213.7 million of debt that is not covered by the swap agreement by approximately $2.1 million. 28 Item 8. Financial Statements and Supplementary Data. - ------- -------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Columbus McKinnon Corporation Audited Consolidated Financial Statements as of March 31, 1999: Report of Independent Auditors................................. F-2 Consolidated Balance Sheets.................................... F-4 Consolidated Statements of Income.............................. F-5 Consolidated Statements of Shareholders' Equity................ F-6 Consolidated Statements of Cash Flows.......................... F-7 Notes to Consolidated Financial Statements..................... F-8 F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors Columbus McKinnon Corporation We have audited the accompanying consolidated balance sheets of Columbus McKinnon Corporation as of March 31, 1999 and 1998, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 1999. Our audits also include the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. The consolidated financial statements give retroactive effect to the merger of Columbus McKinnon Corporation and GL International, Inc., which has been accounted for as a pooling of interests as described in Note 1 to the consolidated financial statements. We did not audit the balance sheet of GL International, Inc. as of March 31, 1998, or the related statements of income and cash flows for the year then ended, which statements reflect total assets of $27,921,000 as of March 31, 1998, and total revenues of $59,860,000 for the year ended March 31, 1998. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for GL International, Inc. for 1998, is solely based on the report of such other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbus McKinnon Corporation at March 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Buffalo, New York May 17, 1999 F-2 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of GL International, Inc.: We have audited the consolidated balance sheet of GL International, Inc. and subsidiaries as of March 31, 1998, and the related consolidated statements of income and cash flows for the year then ended (none of which are presented herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GL International, Inc. and subsidiaries at March 31, 1998, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Tulsa, Oklahoma August 24, 1998 F-3
COLUMBUS McKINNON CORPORATION CONSOLIDATED BALANCE SHEETS March 31, --------- 1999 1998 ---- ---- (In thousands) ASSETS Current assets: Cash and cash equivalents ............................................. $ 6,867 $ 22,861 Trade accounts receivable, less allowance for doubtful accounts ($2,271 and $2,511 respectively) ............................................ 136,988 124,637 Unbilled revenues ..................................................... 9,821 19,634 Inventories ........................................................... 115,979 115,126 Net assets held for sale .............................................. 8,214 10,396 Prepaid expenses ...................................................... 8,160 10,407 ----- ------ Total current assets ....................................................... 286,029 303,061 Net property, plant, and equipment ......................................... 90,004 87,662 Goodwill and other intangibles, net ........................................ 357,727 368,946 Marketable securities ...................................................... 19,355 16,665 Deferred taxes on income ................................................... 5,627 7,045 Other assets ............................................................... 8,169 5,483 ----- ----- Total assets ............................................................... $ 766,911 $ 788,862 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks ................................................ $ 4,590 $ 5,184 Trade accounts payable ................................................ 54,651 58,639 Excess billings ....................................................... 5,058 4,653 Accrued liabilities ................................................... 54,331 44,405 Current portion of long-term debt ..................................... 1,926 2,180 ----- ----- Total current liabilities .................................................. 120,556 115,061 Senior debt, less current portion .......................................... 222,165 256,929 Subordinated debt .......................................................... 199,521 199,468 Other non-current liabilities .............................................. 35,995 46,458 ------ ------ Total liabilities .......................................................... 578,237 617,916 ======= ======= Shareholders' equity: Class A voting common stock; 50,000,000 shares authorized; 14,663,697 . and 14,652,972 shares issued ........................................ 146 146 Additional paid-in capital ............................................ 102,313 100,425 Retained earnings ..................................................... 100,455 76,744 ESOP debt guarantee; 708,382 and 325,092 shares ....................... (9,865) (3,203) Unearned restricted stock; 152,775 and 134,550 shares ................. (1,009) (538) Accumulated other comprehensive loss .................................. (3,366) (2,628) Total shareholders' equity ................................................. 188,674 170,946 ------- ------- Total liabilities and shareholders' equity ................................. $ 766,911 $ 788,862 ========= =========
See accompanying notes. F-4
COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF INCOME Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands, except per share data) Net sales .............................................. $ 735,445 $ 561,823 $ 359,424 Cost of products sold .................................. 542,975 401,669 251,987 ------- ------- ------- Gross profit ........................................... 192,470 160,154 107,437 Selling expenses ....................................... 52,059 46,578 32,550 General and administrative expenses .................... 39,850 33,361 24,636 Amortization of intangibles ............................ 15,479 10,297 5,197 ------ ------ ----- 107,388 90,236 62,383 ------- ------ ------ Income from operations ................................. 85,082 69,918 45,054 Interest and debt expense .............................. 35,923 25,104 11,930 Interest and other income .............................. 1,565 1,940 1,168 ----- ----- ----- Income before income taxes, minority interest and extraordinary charge ................................ 50,724 46,754 34,292 Income tax expense ..................................... 23,288 22,776 15,617 ------ ------ ------ Income before minority interest and extraordinary charge 27,436 23,978 18,675 Minority interest ...................................... - - (323) ------ ------ ------ Income before extraordinary charge ..................... 27,436 23,978 18,352 Extraordinary charge for early debt extinguishment ..... - (4,520) (3,198) ------ ------ ------ Net income ............................................. $ 27,436 $ 19,458 $ 15,154 ========= ========= ========= Earnings per share data, basic: Income before extraordinary charge for debt extinguishment .......................... $ 1.94 $ 1.69 $ 1.39 Extraordinary charge for debt extinguishment ...... - (0.32) (0.24) -------- -------- -------- Net income ........................................ $ 1.94 $ 1.37 $ 1.15 ======== ======== ======== Earnings per share data, diluted: Income before extraordinary charge for debt extinguishment .......................... $ 1.92 $ 1.66 $ 1.39 Extraordinary charge for debt extinguishment ...... - (0.31) (0.24) -------- -------- -------- Net income ........................................ $ 1.92 $ 1.35 $ 1.15 ======== ======== ========
See accompanying notes. F-5
COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except share and per share data) Common Addi- Accumulated Stock tional ESOP Unearned Other Total ($.01 Paid-in Retained Debt Restricted Comprehensive Shareholders' par value) Capital Earnings Guarantee Stock Income (Loss) Equity ---------- ------- -------- --------- ----- ------------- ------ Balance at March 31, 1996.......... $ 137 $ 94,283 $ 49,386 $ (5,238) $ (836) $ (110) $ 137,622 Comprehensive income: Net income 1997.................... - - 15,154 - - - 15,154 Change in foreign currency translation adjustment........... - - - - - (1,309) (1,309) Net unrealized gain on investments. - - - - - 318 318 Change in minimum pension liability adjustment............. - - - - - (111) (111) ----- Total comprehensive income......... - - - - - - 14,052 Earned 105,601 ESOP shares......... - 665 - 1,037 - - 1,702 Restricted common stock granted, 19,800 shares; net of 3,111 - 289 - - (280) - 9 shares canceled.................... Earned portion of restricted stock. - 17 - - 295 - 312 Common dividends declared $0.27 per share.................. - - (3,541) - - - (3,541) --- ------ ------ ----- --- ----- ------- Balance at March 31, 1997.......... 137 95,254 60,999 (4,201) (821) (1,212) 150,156 Issued 897,114 common shares....... 9 3,881 - - - 3,890 Comprehensive income: Net income 1998.................... - - 19,458 - - - 19,458 Change in foreign currency translation adjustment........... - - - - - (1,527) (1,527) Net unrealized gain on investments. - - - - - 558 558 Change in minimum pension liability adjustment............. - - - - - (447) (447) ----- Total comprehensive income......... - - - - - - 18,042 Earned 101,416 ESOP shares......... - 1,270 - 998 - - 2,268 Earned portion of restricted stock. - 20 - - 283 - 303 Common dividends declared $0.28 per share.................. - - (3,713) - - - (3,713) --- ------- ------ ----- --- ----- ------- Balance at March 31, 1998.......... $ 146 $ 100,425 $ 76,744 $ (3,203) $ (538) $ (2,628) $ 170,946 Comprehensive income: Net income 1999.................... - - 27,436 - - - 27,436 Change in foreign currency translation adjustment........... - - - - - (1,399) (1,399) Net unrealized gain on investments. - - - - - 714 714 Change in minimum pension liability adjustment............. - - - - - (53) (53) ---- Total comprehensive income........ - - - - - - 26,698 Earned 96,610 ESOP shares.......... - 1,108 - 1,020 - - 2,128 Repurchase of 479,900 common shares by ESOP.......................... - - - (7,682) - - (7,682) Restricted common stock granted, 19,500 - 780 - - (759) - 21 shares; net of 1,275 shares canceled........................... Earned portion of restricted stock. - - - - 288 - 288 Common dividends declared $0.28 per share.................. - - (3,725) - - - (3,725) --- ------- ------- ----- ----- ----- ------- Balance at March 31, 1999.......... $ 146 $ 102,313 $ 100,455 $ (9,865) $ (1,009) $ (3,366) $ 188,674 ===== ========= ========= ======== ======== ======== =========
See accompanying notes. F-6
COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Operating activities: Net income........................................................................ $27,436 $ 19,458 $15,154 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary charge for early debt extinguishment........................... - 4,520 3,198 Minority interest............................................................ - - 323 Depreciation and amortization................................................ 27,256 19,896 11,285 Deferred income taxes........................................................ (2,235) 55 4,816 Other........................................................................ 624 - 15 Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable and unbilled revenues......................... 37 (8,224) (3,320) Inventories............................................................. (865) (5,454) (2,177) Prepaid expenses........................................................ 1,952 4,008 (1,721) Other assets............................................................ (96) 2,135 (949) Trade accounts payable and excess billings.............................. (5,940) (646) (586) Accrued and non-current liabilities..................................... 9,324 2,672 2,848 Net cash provided by operating activities......................................... 57,493 38,420 28,886 Investing activities: Purchase of marketable securities, net............................................ (1,976) (2,517) (2,098) Capital expenditures.............................................................. (12,992) (11,406) (9,392) Proceeds from sale of business.................................................... 8,801 - - Purchase of businesses, net of cash acquired...................................... (19,958) (175,686) (203,577) Net assets held for sale.......................................................... 2,182 4,575 (784) Net cash used in investing activities............................................. (23,943) (185,034) (215,851) Financing activities: Proceeds from issuance of common stock, net....................................... - 1,914 - Net (payments) borrowings under revolving line-of-credit agreements............... (28,194) 159,101 75,293 Repayment of debt................................................................. (8,179) (198,251) (78,528) Proceeds from issuance of long-term debt, net..................................... - 203,357 206,000 Deferred financing costs incurred................................................. (1,272) (1,313) (10,000) Dividends paid ................................................................... (3,725) (3,713) (4,390) Repurchase of stock by ESOP....................................................... (7,682) - - Change in ESOP debt guarantee..................................................... 1,020 998 (1,596) Net cash (used in) provided by financing activities............................... (48,032) 162,093 186,779 Effect of exchange rate changes on cash........................................... (1,512) (1,525) (1,078) Net change in cash and cash equivalents........................................... (15,994) 13,954 (1,264) Cash and cash equivalents at beginning of year.................................... 22,861 8,907 10,171 Cash and cash equivalents at end of year.......................................... $6,867 $ 22,861 $ 8,907 Supplementary cash flows data: Interest paid................................................................ $27,595 $ 26,553 $ 8,683 Income taxes paid............................................................ $22,829 $ 15,040 $ 14,993
See accompanying notes. F-7 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business and Business Acquisitions Columbus McKinnon Corporation (the Company) is a leading broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial, automotive, and consumer markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors in commercial and consumer distribution channels. The Company's integrated material handling solutions businesses primarily deal with end users, both domestically and internationally (primarily Europe) in the automotive and industrial markets. During fiscal 1999, approximately 74% of sales were to customers in the United States. On March 1, 1999, GL International, Inc. ("GL"), was merged with and into the Company through the issuance of 897,114 shares of newly issued Company stock and options to purchase 154,848 shares of Company stock for all issued and outstanding stock and options of GL. GL is a full-service designer and builder of industrial overhead bridge and jib cranes and related components. The merger was accounted for as a pooling of interests and, accordingly, the 1999 and 1998 consolidated financial statements have been restated to include the accounts of GL from the date of GL's formation, April 1, 1997. The fair market value of the stock and options exchanged was approximately $20.6 million. In connection with the merger, the Company incurred $560,000 of merger related costs which were charged to operations during the year ended March 31, 1999. Net sales and net income of the separate companies for the periods preceding the merger were as follows:
Nine Months Ended Year Ended December 27,1998 March 31, 1998 ----------------- -------------- (In thousands) Net sales: Columbus McKinnon, as reported............. $ 510,865 $ 510,731 GL International, Inc...................... 51,558 59,860 Intercompany eliminations.................. (5,455) (8,768) ------- ------- Combined................................... $ 556,968 $ 561,823 ======= ======= Net income: Columbus McKinnon, as reported............. $ 16,865 $ 18,901 GL International, Inc...................... 1,736 1,140 Intercompany eliminations.................. 142 (583) ------ ------ Combined................................... $ 18,743 $ 19,458 ====== ======
On January 29, 1999, the Company acquired all of the outstanding stock of Camlok Lifting Clamps Limited ("Camlok") and the net assets of the Tigrip product line ("Tigrip") from Schmidt-Krantz & Co. GmbH for $10.6 million in cash. The acquisition was accounted for as a purchase and was financed through cash, a revolving credit facility, and a $4 million term note. Camlok manufactures plate clamps, crane weighers and related products and is based in Chester, England, while the Tigrip line of standard and specialized plate clamps is produced in Germany. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Camlok and Tigrip activity since their January 29, 1999 acquisition by the Company. F-8 1. Description of Business and Business Acquisitions (continued) On December 4, 1998, the Company acquired all of the outstanding stock of Societe D'Exploitation des Raccords Gautier ("Gautier"), a French-based manufacturer of industrial components. The total cost of the acquisition, which was accounted for as a purchase, was approximately $3 million in cash, consisting of $2.4 million financed by proceeds from the Company's revolving debt facility and the assumption of certain debt. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Gautier activity since its December 4, 1998 acquisition by the Company. On August 21, 1998 the Company acquired the net assets of Abell-Howe Crane division ("Abell-Howe") of Abell-Howe Company, a regional manufacturer of jib, gantry, and bridge cranes. The total cost of the acquisition, which was accounted for as a purchase, was approximately $7 million of cash, which was financed by proceeds from the Company's revolving debt facility. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Abell-Howe activity since its August 21, 1998 acquisition by the Company. On August 7, 1998 the Company sold its Mechanical Products division, a producer of circuit controls and protection devices, for $11.5 million, consisting of $9.1 million in cash and a $2.4 million note receivable, to Mechanical Products' senior management team. The selling price approximated the net book value of the division. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Mechanical Products activity through its August 7, 1998 sale by the Company. On March 31, 1998, the Company acquired all of the outstanding stock of LICO, Inc. ("LICO"), a leading designer, manufacturer and installer of custom conveyor and automated material handling systems primarily for the automotive industry. The total cost of the acquisition, which was accounted for as a purchase, was approximately $155 million of cash, which was financed by proceeds from the Company's revolving credit facility and a private placement of senior subordinated notes, both of which also closed effective March 31, 1998. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1998 do not include any LICO activity. On January 7, 1998, the Company acquired all of the outstanding stock of Univeyor A/S ("Univeyor"), a Denmark-based designer, manufacturer and distributor of automated material handling systems for the industrial market, and has accounted for the acquisition as a purchase. The cost of the acquisition was approximately $15 million of cash plus certain debt, financed by the Company's revolving debt facility. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1998 include Univeyor activity since its January 7, 1998 acquisition by the Company. On October 17, 1996, through a tender offer, the Company acquired approximately 72% of the outstanding stock (on a diluted basis) of Spreckels Industries, Inc., now known as Yale Industrial Products, Inc. ("Yale"), a manufacturer of a wide range of industrial products, including hoists, scissor lift tables, mechanical jacks, rotating joints, actuators and circuit protection devices. On January 3, 1997 the Company acquired the remaining outstanding shares, effected a merger, and accounted for the acquisition as a purchase. F-9 1. Description of Business and Business Acquisitions (continued) The total cost of the acquisition was approximately $270 million, consisting of $200 million of cash and $70 million of acquired Yale debt. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1997 include Yale activity since its October 17, 1996 acquisition by the Company. The minority interest share of Yale's earnings since acquisition through January 3, 1997 has been appropriately segregated from consolidated net income for the year ended March 31, 1997. Included with the Yale acquired assets were real estate properties and equipment retained from Yale's April 19, 1996 sale of two of its subsidiaries in unrelated businesses. Certain assets were sold during fiscal 1998 and 1999 and the remaining assets held for sale are expected to be sold in fiscal 2000. They have been recorded at their estimated realizable values net of disposal costs, separately reflected on the consolidated balance sheet and amounting to $8,214,000 and $10,396,000 as of March 31, 1999 and 1998, respectively. On December 19, 1996, the Company acquired all of the outstanding stock of Lister Bolt & Chain Ltd. and of Lister Chain & Forge, Inc. (together known as "Lister"), a chain and forgings manufacturer, and has accounted for the acquisition as a purchase. The total cost of the acquisition was approximately $7 million of cash, which was financed by the Company's revolving debt facility. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1997 include Lister activity since its December 19, 1996 acquisition by the Company. The following table presents pro forma summary information, which is not covered by the report of independent auditors, for the years ended March 31, 1999 and 1998, as if the Abell-Howe, LICO, and Univeyor acquisitions and related borrowings and also the private placement of senior subordinated notes and the sale of Mechanical Products, had occurred as of April 1, 1997 which is the beginning of fiscal 1998. The pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined enterprise:
Year Ended March 31, -------------------- 1999 1998 ---- ---- (In thousands, except per share data) Pro forma: Net sales..................................................................... $732,143 $735,525 Income from operations........................................................ 84,702 81,963 Income before extraordinary charge............................................ 27,355 24,354 Net income.................................................................... 27,355 19,834 Earnings per share, basic: Income before extraordinary charge........................................ $ 1.93 $ 1.71 Extraordinary charge...................................................... - (0.32) ------ ------ Net income................................................................ $ 1.93 $ 1.39 ====== ====== Earnings per share, diluted: Income before extraordinary charge........................................ $ 1.91 $ 1.69 Extraordinary charge...................................................... - (0.32) ------ ------ Net income............................................................... $ 1.91 $ 1.37 ====== ======
F-10 2. Accounting Principles and Practices Consolidation These consolidated financial statements include the accounts of the Company and its domestic and foreign subsidiaries; all significant intercompany accounts and transactions have been eliminated. Foreign Currency Translations The Company translates foreign currency financial statements as described in Financial Accounting Standards (FAS) No. 52. Under this method, all items of income and expense are translated at average exchange rates for the year. All assets and liabilities are translated at the year-end exchange rate. Gains or losses on translations are recorded in accumulated other comprehensive income (loss) in the shareholders' equity section of the balance sheet. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses. Actual results could differ from those estimates. Revenue Recognition and Concentration of Credit Risk Sales are recorded when products are shipped to a customer, except as described below. The Company performs ongoing credit evaluations of its customers' financial condition, but generally does not require collateral to support customer receivables. The credit risk is controlled through credit approvals, limits and monitoring procedures. The Company established an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors. LICO and Univeyor recognize contract revenues under the percentage of completion method, measured by comparing direct costs incurred to total estimated direct costs. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined. In the event that a loss is anticipated on an uncompleted contract, a provision for the estimated loss is made at the time it is determined. Billings on contracts may precede or lag revenues earned, and such differences are reported in the balance sheet as current liabilities (excess billings) and current assets (unbilled revenues), respectively. As of March 31, 1999, approximately $26 million ($26 million in 1998) of trade accounts receivable was concentrated in the automotive industry, including retainages amounting to $9,061,000 ($7,870,000 in 1998). The accounts receivable included $22,007,000 ($13,840,000 in 1998) due from General Motors Corporation. This one customer accounted for $96,663,000 or 13% of consolidated net sales and is included within the Solutions - Automotive segment for the year ended March 31, 1999. F-11 2. Accounting Principles and Practices (continued) Concentrations of Labor Approximately 36% of the Company's employees are represented by twelve separate domestic and Canadian collective bargaining agreements which terminate at various times between September 26, 1999 and April 30, 2003. Approximately 3% of the labor force is covered by collective bargaining agreements that will expire within one year. In addition, the Company hires union production workers for field installation under its material handling systems contracts. Cash and Cash Equivalents The Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less. Inventories Inventories are valued at the lower of cost or market. Costs of approximately 49% of inventories at March 31, 1999 and 1998 have been determined using the LIFO (last-in, first-out) method. Costs of other inventories have been determined using the FIFO (first-in, first-out) or average cost method. FIFO cost approximates replacement cost. Property, Plant, and Equipment Property, plant, and equipment are stated at cost and depreciated principally using the straight-line method over their respective estimated useful lives (buildings and building equipment-15 to 40 years; machinery and equipment-3 to 18 years). When depreciable assets are retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operating results. Goodwill It is the Company's policy to account for goodwill and other intangible assets at the lower of amortized cost or fair value based on discounted cash flows, if indicators of impairment exist. As a result of the Yale, Lister, Univeyor, LICO, Abell-Howe, Gautier, Camlok and Tigrip acquisitions, the Company recorded approximately $200 million, $2 million, $9 million, $123 million, $3 million, $1 million, and $6 million of goodwill, respectively, which is being amortized on a straight-line basis over twenty five years. As a result of the sale of Mechanical Products, the Company reduced goodwill by approximately $8 million. At March 31, 1999 and 1998 accumulated amortization was $29,864,000 and $14,979,000, respectively. F-12 2. Accounting Principles and Practices (continued) Marketable Securities All of the Company's investments, which consist of equity securities and corporate and governmental obligations, have been classified as available-for-sale securities and are therefore recorded at their fair values with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) within shareholders' equity. Estimated fair value is based on published trading values at the balance sheet dates. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The cost of securities sold is based on the specific identification method. Interest and dividend income are included in interest and other income on the consolidated statements of income. The marketable securities are carried as long-term assets since they are retained for the settlement of a portion of the Company's general liability and products liability insurance claims filed through CM Insurance Company, Inc., a wholly owned captive insurance subsidiary. Fair Value of Financial Instruments The fair value of interest rate swap and cap agreements is the amount that the Company would receive or pay to terminate the agreements, based on quoted market prices and considering current interest rates and remaining maturities. Research and Development Research and development costs as defined in FAS No. 2, for the years ended March 31, 1999, 1998 and 1997 were $1,663,000, $1,497,000 and $1,283,000, respectively. 3. Unbilled Revenues and Excess Billings
March 31, --------- 1999 1998 ---- ---- (In thousands) Costs incurred on uncompleted contracts............................................ $ 255,706 $ 194,359 Estimated earnings................................................................. 54,013 38,255 ------- ------- Revenues earned to date............................................................ 309,719 232,614 Less billings to date.............................................................. 304,956 217,633 ------- ------- $ 4,763 $ 14,981 ======= ======== The net amounts above are included in the consolidated balance sheets under the following captions: March 31, --------- 1999 1998 ---- ---- (In thousands) Unbilled revenues.................................................................. $9,821 $ 19,634 Excess billings.................................................................... (5,058) (4,653) ------- --------- $4,763 $ 14,981 ======= ========= F-13 4. Inventories Inventories consisted of the following: March 31, --------- 1999 1998 ---- ---- (In thousands) At cost-FIFO basis: Raw materials................................................................... $ 54,648 $57,103 Work-in-process................................................................. 21,663 24,696 Finished goods.................................................................. 45,042 37,089 ------ ------ 121,353 118,888 LIFO cost less than FIFO cost........................................................ (5,374) (3,762) ------- ------- Net inventories...................................................................... $115,979 $115,126 ======== ========
5. Marketable Securities Marketable securities are retained for the settlement of a portion of the Company's general liability and products liability insurance claims filed through CM Insurance Company, Inc. (see Notes 2 and 13). The following is a summary of available-for-sale securities at March 31, 1999:
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value (In thousands) Government securities................................. $ 7,668 $ 203 $ 1 $ 7,870 U. S. corporate securities............................ 700 31 - 731 ----- ----- --- ----- Total debt securities............................ 8,368 234 1 8,601 Equity securities..................................... 7,134 3,710 90 10,754 ----- ----- --- ------ $15,502 $ 3,944 $ 91 $19,355 ======= ======= ==== ======= The following is a summary of available-for-sale securities at March 31, 1998: Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value (In thousands) Government securities................................. $ 10,180 $ 285 $ 13 $ 10,452 U. S. corporate securities............................ 1,107 36 1 1,142 ------ ----- --- ------ Total debt securities............................ 11,287 321 14 11,594 Equity securities..................................... 2,847 2,247 23 5,071 ------ ----- --- ------ $14,134 $ 2,568 $ 37 $16,665 ======= ======= ==== =======
F-14 5. Marketable Securities (continued) The amortized cost and estimated fair value of debt and equity securities at March 31, 1999, by contractual maturity, are shown below:
Estimated Fair Cost Value ---- ----- (In thousands) Due in one year or less.................................................... $ 4,688 $ 4,688 Due after one year through three years..................................... 100 107 Due after three years...................................................... 3,580 3,806 ----- ----- 8,368 8,601 Equity securities.......................................................... 7,134 10,754 ----- ------ $15,502 $19,355 ======= ======= Net unrealized gains included in the balance sheet amounted to $3,853,000 and $2,531,000 at March 31, 1999 and 1998, respectively. The amounts, net of related income taxes of $1,541,000 and $933,000 at March 31, 1999 and 1998, respectively, are reflected as a component of accumulated other comprehensive income (loss) within shareholders' equity. 6. Property, Plant, and Equipment Consolidated property, plant, and equipment of the Company consisted of the following: March 31, --------- 1999 1998 ---- ---- (In thousands) Land and land improvements......................................................... $ 4,592 $ 4,980 Buildings.......................................................................... 31,880 29,570 Machinery, equipment, and leasehold improvements................................... 92,991 81,418 Construction in progress........................................................... 2,589 3,162 ------ ------ 132,052 119,130 Less accumulated depreciation...................................................... 42,048 31,468 ----- ------ Net property, plant, and equipment................................................. $ 90,004 $87,662 ======== ======= 7. Accrued Liabilities and Other Non-current Liabilities Consolidated accrued liabilities of the Company included the following: March 31, --------- 1999 1998 ---- ---- (In thousands) Accrued payroll..................................................................... $12,233 $17,228 Accrued pension cost................................................................ 4,508 5,195 Interest payable.................................................................... 10,394 499 Income taxes payable................................................................ 10,133 5,546 Other accrued liabilities........................................................... 17,063 15,937 ------ ------ $54,331 $44,405 ======= ======= F-15 7. Accrued Liabilities and Other Non-current Liabilities (continued) Consolidated other non-current liabilities of the Company included the following: March 31, --------- 1999 1998 ---- ---- (In thousands) Accumulated postretirement benefit obligation....................................... $15,379 $17,154 Accrued general and product liability costs......................................... 11,416 11,688 Other non-current liabilities....................................................... 9,200 17,616 ----- ------ $35,995 $46,458 ======= =======
8. Long-Term Debt Consolidated long-term debt payable to banks (except as noted) of the Company consisted of the following:
March 31, --------- 1999 1998 ---- ---- (In thousands) Revolving Credit Facility with availability up to $300 million,due March 31, 2003 with interest payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 112.5 basis points at March 31, 1999 (6.09% and 6.85% at March 31, 1999 and 1998)............................. $212,400 $ 240,000 Revolving credit facilities, term note, subordinated term loan, and mortgage note payable repaid and retired March 1999............................... - 10,265 Industrial Development Revenue Bonds payable annually at $625,000 through 1999, $620,000 thereafter through 2001, $315,000 in 2002, and $52,000 in 2003 in quarterly sinking fund installments plus interest payable at varying effective rates (3.58% and 3.98% at March 31, 1999 and 1998).......................................................... 1,608 2,232 Term loan of foreign subsidiary payable in two installments of $1,639,000 and $2,186,000, due on December 30, 2000 and December 30, 2001, respectively; interest payable monthly at 4.255%............................................................................ 3,825 - Employee Stock Ownership Plan term loans payable in quarterly installments of $148,000 through January 2002 and $1,099,000 in April 2002 plus interest payable at a Eurodollar rate based on LIBOR plus a spread determined by the Company's leverage ratio (6.62% and 7.34% at March 31, 1999 and 1998)................................. 3,173 3,765 Other senior debt................................................................... 3,085 2,847 ----- ----- Total senior debt................................................................... 224,091 259,109 8 1/2% Senior Subordinated Notes due March 31, 2008 with interest payable in semi-annual installments at 8.45% effective rate, recorded net of unamortized discount of $479,000 ($532,000 at March 31, 1998)............................................................................. 199,521 199,468 ------- ------- Total............................................................................... 423,612 458,577 Less current portion................................................................ 1,926 2,180 ----- ----- $421,686 $456,397 ======== ========
F-16 8. Long-Term Debt (continued) On March 31, 1998, the Company entered into a new revolving credit facility ("1998 Revolving Credit Facility") with a group of financial institutions. Concurrently, the Company issued $200 million of 8 1/2% Senior Subordinated Notes ("the 1/2% Notes") due March 31, 2008. Proceeds from both the bank refinancing and the note offering were used to finance the acquisition of LICO, and to repay the outstanding balances and retire the Company's then existing Term Loan A, Term Loan B and revolving credit facility. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. The corresponding credit agreement places certain debt covenant restrictions on the Company including, but not limited to, maximum annual cash dividends of $10 million. Upon refinancing its bank debt in 1998, the Company wrote off unamortized financing costs of $7,532,000 and recorded an extraordinary charge of $4,520,000, which is net of $3,012,000 of tax. To manage its exposure to interest rate fluctuations, the Company has an interest rate swap with a notional amount of $3.5 million from January 2, 1999 through July 2, 2000, based on LIBOR at 5.9025%. In order to comply with its credit agreements, the Company also has a LIBOR-based interest rate cap on $49.5 million of debt through December 16, 1999 at 10%. Net payments or receipts under the swap and cap agreements are recorded as adjustments to interest expense. The carrying amount of the Company's debt instruments approximates the fair values. The Industrial Development Revenue Bonds are held by institutional investors and are guaranteed by a bank letter of credit (IDRB letter of credit), which is collateralized by the assets also securing the 1998 Revolving Credit Facility. The Employee Stock Ownership Plan term loans (ESOP loans) are guaranteed by the Company and are collateralized by an equivalent number of shares of Company common stock. The ESOP loans are not further collateralized. Provisions of the 8 1/2% Notes include, without limitation, restrictions of liens, indebtedness, asset sales, and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2% Notes agreement). On or after April 1, 2003, they are redeemable at prices declining annually to 100% on and after April 1, 2006. In addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with the proceeds of equity offerings at a redemption price of 108.5%, subject to certain restrictions. In the event of a Change of Control (as defined in the indenture for such notes), each holder of the 8 1/2% Notes may require the Company to repurchase all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes are guaranteed by certain existing and future domestic subsidiaries and are not subject to any sinking fund requirements. The principal payments scheduled to be made as of March 31, 1999 on the above debt, for the next five annual periods subsequent thereto, are as follows (in thousands): 2000................................... $ 1,926 2001................................... 3,213 2002................................... 3,422 2003................................... 213,870 2004................................... 295 F-17 8. Long-Term Debt (continued) In December 1996, the Company tendered to purchase the outstanding Yale Senior Secured Notes at a premium and redeemed $69,480,000 of the $70,000,000 face value which was outstanding. The Company recorded an extraordinary charge of $5,331,000 ($3,198,000 net of taxes), consisting of redemption premiums, costs to exercise the tender offer, and write-off of deferred financing costs related to early retirement of debt. The debt extinguishment was funded by the Company's revolving credit facility. The remaining $520,000 was redeemed during fiscal 1999. As of March 31, 1999, the Company had letters of credit outstanding of $3.6 million, including those issued as security for the IDRBs as referred to above. 9. Retirement Plans The Company provides defined benefit pension plans to certain employees. The following provides a reconciliation of benefit obligations, plan assets, and funded status of plans:
March 31, --------- 1999 1998 ---- ---- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year........................................ $ 69,680 $62,093 Benefit obligation of sold businesses.......................................... (9,590) - Service cost................................................................... 3,151 3,244 Interest cost.................................................................. 4,489 4,787 Effect of amendments........................................................... - (522) Actuarial loss................................................................. 5,866 3,476 Benefits paid.................................................................. (2,975) (3,398) ------ ------ Benefit obligation at end of year............................................. $ 70,621 $ 69,680 ======== ======== Change in plan assets: Fair value of plan assets at beginning of year................................. 69,203 54,844 Assets of sold plans........................................................... (10,348) - Actual return on plan assets................................................... 7,015 13,706 Employer contribution.......................................................... 3,381 4,051 Benefits paid.................................................................. (2,975) (3,398) ------ ------ Fair value of plan assets at end of year....................................... $66,276 $69,203 ======= ======= Funded Status ................................................................. $ (4,345) $ (477) Unrecognized transition obligation............................................. (85) (113) Unrecognized actuarial loss (gain)............................................. 1,661 (3,037) Unrecognized prior service cost................................................ 1,610 855 ----- --- Net amount recognized.......................................................... $ (1,159) $ (2,772) ========= ========= F-18 9. Retirement Plans (continued) Amounts recognized in the consolidated balance sheets are as follows: Intangible asset............................................................... $ 1,172 $ 776 Accrued liabilities............................................................ (4,066) (5,195) Deferred tax effect of equity charge........................................... 694 659 Accumulated other comprehensive income......................................... 1,041 988 Net amount recognized.......................................................... $(1,159) $(2,772)
Net periodic pension cost included the following components:
Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Service costs-benefits earned during the period............................ $3,151 $3,244 $2,354 Interest cost on projected benefit obligation.............................. 4,489 4,787 2,744 Expected return on plan assets............................................. (5,124) (6,670) (2,966) Net amortization........................................................... 167 1,951 475 --- ----- --- Net periodic pension cost.................................................. $2,683 $3,312 $2,607 ====== ====== ======
The aggregate accumulated benefit obligation and aggregate fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $9,932,000 and $7,293,000, respectively as of March 31, 1999 and $11,311,000 and $9,090,000, respectively as of March 31, 1998. The unrecognized transition obligation is being amortized on a straight-line basis over 20 years. Unrecognized gains and losses are amortized on a straight-line basis over the average remaining service period of active participants. The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation of all of the defined benefit plans was 7% and 7 1/2% as of March 31, 1999 and 1998, respectively. Future average compensation increases are assumed to be 4.0% and 4.3% per year as of March 31, 1999 and 1998, respectively. The weighted-average expected long-term rate of return on plan assets used in determining the expected return on plan assets included in net periodic pension cost was 8 7/8% for the each of the years ended March 31, 1999, 1998 and 1997. Plan assets consist of equities, corporate and government securities, and fixed income annuity contracts. The Company's funding policy with respect to the defined benefit pension plans is to contribute annually at least the minimum amount required by the Employee Retirement Income Security Act of 1974 (ERISA). The Company also sponsors defined contribution plans covering substantially all domestic employees. Participants may elect to contribute basic contributions. Effective April 1, 1998, these plans provide for employer contributions based primarily on employee participation. The Company recorded a charge for such contributions of approximately $1,410,000 during 1999. F-19 10. Employee Stock Ownership Plan (ESOP) The AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" requires that compensation expense for ESOP shares be measured based on the fair value of those shares when committed to be released to employees, rather than based on their original cost. Also, dividends on those ESOP shares that have not been allocated or committed to be released to ESOP participants are not reflected as a reduction of retained earnings. Rather, since those dividends are used for debt service, a charge to compensation expense is recorded. Furthermore, ESOP shares that have not been allocated or committed to be released are not considered outstanding for purposes of calculating earnings per share. The obligation of the ESOP to repay borrowings incurred previously to purchase shares of the Company's common stock is guaranteed by the Company; the unpaid balance of such borrowings, therefore, has been reflected in the accompanying consolidated balance sheet as a liability. An amount equivalent to the cost of the collateralized common stock and representing deferred employee benefits has been recorded as a deduction from shareholders' equity. Substantially all of the Company's domestic non-union employees, excluding LICO, Abell-Howe and GL employees, are participants in the ESOP. Contributions to the plan result from the release of collateralized shares as debt service payments are made. Compensation expense amounting to $2,128,000, $2,268,000 and $1,704,000 in fiscal 1999, 1998 and 1997, respectively, is recorded based on the guarantee release of the ESOP shares at their fair market value. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings and are applied toward debt service. During fiscal 1999, the ESOP borrowed $7,682,000 from the Company and purchased 479,900 shares on the open market at an average cost of $16 per share. At March 31, 1999 and 1998, 886,684 and 855,337 of ESOP shares, respectively, were allocated or available to be allocated to participants' accounts. At March 31, 1999 and 1998, 708,382 and 325,092 of ESOP shares were pledged as collateral to guarantee the ESOP term loans. The fair market value of unearned ESOP shares at March 31, 1999 amounted to $14,256,000. 11. Postretirement Benefit Obligation The Company sponsors defined benefit postretirement health care plans that provide medical and life insurance coverage to Yale domestic retirees and their dependents. Prior to the acquisition of Yale, the Company did not sponsor any postretirement benefit plans. The Company pays the majority of the medical costs for Yale retirees and their spouses who are under age 65. For retirees and dependents of retirees who retired prior to January 1, 1989, and are age 65 or over, the Company contributes 100% toward the American Association of Retired Persons ("AARP") premium frozen at the 1992 level. For retirees and dependents of retirees who retired after January 1, 1989, the Company contributes $35 per month toward the AARP premium. The life insurance plan is noncontributory. F-20 11. Postretirement Benefit Obligation (continued) The Company's postretirement health benefit plans are not funded. In accordance with FAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits," the following sets forth a reconciliation of benefit obligations and the funded status of the plan:
March 31, --------- 1999 1998 ---- ---- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year....................................... $ 16,509 $17,057 Service cost.................................................................. 257 348 Interest cost................................................................. 1,061 1,203 Effect of amendments.......................................................... (4,035) - Actuarial loss (gain)......................................................... 1,713 (645) Benefits paid................................................................. (1,475) (1,454) Curtailment effect............................................................ (1,618) - ----- -- Benefit obligation at end of year............................................ $ 12,412 $16,509 ======== ======= Funded Status ................................................................ $(12,412) $(16,509) Unrecognized actuarial loss (gain)............................................ 1,068 (645) Unrecognized prior service gain............................................... (4,035) - ----- -- Net amount recognized in other non-current liabilities........................ $(15,379) $(17,154) ======== ========
Net periodic postretirement benefit cost included the following components since the October 17, 1996 Yale acquisition:
Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Service cost-benefits attributed to service during the period........... $ 257 $ 348 $187 Interest cost........................................................... 1,061 1,203 609 ----- ----- --- Net periodic postretirement benefit cost........................... $1,318 $1,551 $796 ====== ====== ====
For measurement purposes, a 6.5% annual rate of increase in the per capita cost of postretirement medical benefits was assumed at the beginning of the period; the rate was assumed to decrease 0.5% per year to 5.5% by 2001. The discount rate used in determining the accumulated postretirement benefit obligation was 7% and 7 1/2% as of March 31, 1999 and 1998, respectively. Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One Percentage One Percentage Point Increase Point Decrease (In thousands) Effect on total of service and interest cost components......... $ 86 $ (79) Effect on postretirement obligation............................. 600 (541)
F-21 12. Earnings per Share and Stock Plans Earnings per Share In 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128). FAS No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the FAS No. 128 requirements. The following table sets forth the computation of basic and diluted earnings per share before extraordinary charge for debt extinguishment:
Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Numerator for basic and diluted earnings per share: Income before extraordinary charge..................................... $27,436 $23,978 $18,352 ======= ======= ======= Denominators: Weighted-average common stock outstanding-denominator for basic EPS........................................................ 14,137 14,221 13,210 Effect of dilutive employee stock options.............................. 157 206 5 --- --- -- Adjusted weighted-average common stock outstanding and assumed conversions-denominator for diluted EPS...................... 14,294 14,427 13,215 ====== ====== ======
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note 10). Stock Plans The Company maintains two stock option plans, a Non-Qualified Stock Option Plan ("Non-Qualified Plan") and an Incentive Stock Option Plan ("Incentive Plan"). Under the Non-Qualified Plan, options may be granted to officers and other key employees of the Company as well as to non-employee directors and advisors. The Company has not granted any options under the Non-Qualified Plan and accordingly, at March 31, 1999, 250,000 shares were reserved for grant under that plan. Options granted under the Incentive Plan become exercisable over a four-year period at the rate of 25% per year commencing one year from the date of grant at an exercise price of not less than 100% of the fair market value of the common stock on the date of grant. Any option granted under this plan may be exercised not earlier than one year and not later than ten years from the date such option is granted. F-22 12. Earnings per Share and Stock Plans (continued) A summary of Incentive Plan option transactions during each of the three fiscal years in the period ended March 31, 1999 is as follows:
Year Ended March 31, -------------------- Number of Shares 1999 1998 1997 ---------------- --------------------------------- Outstanding at beginning of year 200,000 200,000 - Granted 31,000 - 200,000 Canceled (32,500) - - Exercised - - - ---------------------------------- Outstanding at end of year 198,500 200,000 200,000 ================================== Exercisable at end of year 92,500 50,000 - Available for grant at end of year 1,051,500 1,050,000 1,050,000 Price range of options outstanding $15.50-$29.00 $15.50 $15.50
In conjunction with the March 1, 1999 merger of GL International, Inc. (see Note 1), outstanding GL options which were originally issued in fiscal years 1999 and 1998 became fully vested and were converted into options to acquire 154,848 Company shares at prices of $4.34 to $17.36. Those options expire approximately three years after the date of their original issuance, ranging from September 30, 1999 through June 5, 2001. The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FAS No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the grant date, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by FAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. F-23 12. Earnings per Share and Stock Plans (continued) For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The fair value for issued options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions and yielding the following pro forma results:
Year Ended March 31, -------------------- 1999 1998 1997 --------------------------------------- (In thousands, except for assumptions and earnings per share data) Assumptions: Risk-free interest rate 5.5% 5.5% 5.5% Dividend yield - Incentive Plan 0.97% - 1.80% Dividend yield - GL conversions 1.33% 1.33% - Volatility factor 0.200 0.245 0.245 Expected life - Incentive Plan 4 years - 4 years Expected life - GL conversions 1 year 3 years --- Pro forma results: Net income $ 26,314 $ 18,946 $ 15,127 Earnings per share, basic 1.86 1.33 1.15 Earnings per share, diluted 1.84 1.31 1.14
The Company maintains a Restricted Stock Plan, under which the Company has reserved 60,700 shares at March 31, 1999. The Company charges unearned compensation, a component of shareholders' equity, for the market value of shares, as they're issued. It is then ratably amortized over the restricted period. Grantees who remain continuously employed with the Company become vested in their shares five years after the date of the grant. 13. Loss Contingencies General and Product Liability - $10,392,000 of the accrued general and product liability costs which are included in other non-current liabilities at March 31, 1999 ($9,688,000 at March 31, 1998) are the actuarial present value of estimated reserves based on an amount determined from loss reports and individual cases filed with the Company and an amount, based on past experience, for losses incurred but not reported. The accrual in these consolidated financial statements was determined by applying a discount factor based on interest rates customarily used in the insurance industry, between 6.76% and 8.12%, to the undiscounted reserves of $13,897,000 and $12,685,000 at March 31, 1999 and 1998, respectively. This liability is funded by investments in marketable securities (see Notes 2 and 5). Prior to its acquisition by the Company, Yale was self-insured for product liability claims up to a maximum of $500,000 per occurrence and maintained product liability insurance with a $100 million cap per occurrence. The Company was advised that a customer alleged that one of Yale's products was the cause of a fire which occurred in January 1995 at a manufacturing facility, resulting in losses in excess of Yale's policy limits. A formal complaint was filed seeking damages in excess of $500 million. This claim was settled during fiscal 1999 within the Company's policy limits. F-24 14. Income Taxes The following is a reconciliation of the difference between the effective tax rate and the statutory federal tax rate:
Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Computed statutory provision.............................................. $17,753 $16,363 $12,002 State income taxes net of federal benefit................................. 1,767 1,945 1,700 Nondeductible goodwill amortization....................................... 4,540 2,870 1,961 Foreign taxes greater than statutory provision............................ 790 949 301 Other..................................................................... (1,562) 649 (347) ----- --- --- Actual tax provision...................................................... $23,288 $22,776 $15,617 ======= ======= ======= The provision for income tax expense consisted of the following: Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Current income tax expense: Federal taxes........................................................ $18,775 $15,800 $8,399 State taxes.......................................................... 2,770 3,081 1,124 Foreign.............................................................. 3,978 3,840 1,278 Deferred income tax (benefit) expense: Domestic............................................................. (2,298) (238) 4,736 Foreign.............................................................. 63 293 80 -- --- -- $23,288 $22,776 $15,617 ======= ======= =======
The Company applies the liability method of accounting for income taxes as required by FAS Statement No. 109, "Accounting for Income Taxes." The gross composition of the net current deferred tax asset, included in prepaid expenses within the consolidated balance sheet, is as follows:
March 31, --------- 1999 1998 ---- ---- (In thousands) Inventory........................................................................... $ (5,366) $ (5,357) Accrued vacation and incentive costs................................................ 1,596 1,724 Other............................................................................... 5,945 4,463 ----- ----- Net current deferred tax asset................................................. $ 2,175 $ 830 ======= ===== The gross composition of the net non-current deferred tax asset is as follows: March 31, --------- 1999 1998 ---- ---- (In thousands) Insurance reserves.................................................................. $10,718 $11,087 Property, plant, and equipment...................................................... (7,438) (8,109) Other............................................................................... 2,347 4,067 ----- ----- Net non-current deferred tax asset............................................. $ 5,627 $ 7,045 ======= =======
F-25 14. Income Taxes (continued) Income before income taxes, minority interest and extraordinary charge includes foreign subsidiary income of $9,288,000, $9,097,000, and $3,650,000 for the years ended March 31, 1999, 1998, and 1997 respectively. United States income taxes have not been provided on unremitted earnings of the Company's foreign subsidiaries as such earnings are considered to be permanently reinvested. 15. Rental Expense and Lease Commitments Rental expense for the years ended March 31, 1999, 1998 and 1997 was $6,672,000, $4,478,000 and $2,805,000, respectively. The following amounts represent future minimum payment commitments as of March 31, 1999 under non-cancelable operating leases extending beyond one year (in thousands):
Vehicles and Year Ended March 31, Real Property Equipment Total -------------------- ------------- --------- ----- 2000........................................................... $ 1,984 $ 1,940 $3,924 2001........................................................... 1,705 1,476 3,181 2002........................................................... 1,538 752 2,290 2003........................................................... 1,478 252 1,730 2004........................................................... 1,466 118 1,584
F-26 16. Summary Financial Information The summary financial information of the parent, domestic subsidiaries (guarantors) and foreign subsidiaries (nonguarantors) of the 8 1/2% senior subordinated notes follows: As of and for the year ended March 31, 1999:
Domestic Foreign -------- ------- Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) As of March 31, 1999: Current assets: Cash..................................... $ 3,109 $ 408 $ 3,350 $ - $ 6,867 Trade accounts receivable and unbilled revenues............................... 55,479 66,556 24,774 - 146,809 Inventories.............................. 47,792 41,707 27,488 (1,008) 115,979 Other current assets..................... 3,168 10,645 2,561 --- 16,374 ----- ------ ----- ----- ------ Total current assets.................. 109,548 119,316 58,173 (1,008) 286,029 Net property, plant, and equipment............ 36,649 33,058 20,297 - 90,004 Goodwill and other intangibles, net........... 42,993 260,406 54,328 - 357,727 Intercompany balances......................... 205,830 (368,479) (66,710) 229,359 - Other non-current assets...................... 220,453 162,153 (833) (348,622) 33,151 ------- ------- ------ ------- ------ Total assets.......................... $615,473 $ 206,454 $ 65,255 $(120,271) $ 766,911 ======== ========= ======== ========= ========= Current liabilities........................... $ 41,010 $ 54,336 $ 25,846 $ (636) $ 120,556 Long-term debt, less current portion.......... 415,096 --- 6,590 - 421,686 Other non-current liabilities................. 11,311 21,849 2,835 - 35,995 ------ ------ ----- --- ------ Total liabilities..................... 467,417 76,185 35,271 (636) 578,237 Shareholders' equity.......................... 148,056 130,269 29,984 (119,635) 188,674 ------- ------- ------ ------- ------- Total liabilities and shareholders' equity........................... $615,473 $ 206,454 $ 65,255 $(120,271) $ 766,911 ======== ========= ======== ========= ========= For the Year Ended March 31, 1999: Net sales..................................... $265,284 $ 368,716 $ 122,300 $ (20,855) $ 735,445 Cost of products sold......................... 184,781 291,446 87,744 (20,996) 542,975 ------- ------- ------ ------ ------- Gross profit.................................. 80,503 77,270 34,556 141 192,470 Selling, general and administrative expenses. 35,147 34,436 22,326 - 91,909 Amortization of intangibles................... 1,961 11,349 2,169 - 15,479 ----- ------ ----- --- ------ 37,108 45,785 24,495 - 107,388 ------ ------ ------ --- ------- Income from operations........................ 43,395 31,485 10,061 141 85,082 Interest and debt expense..................... 34,349 947 627 - 35,923 Interest and other income..................... 1,531 249 (215) - 1,565 ----- --- --- --- ----- Income before income taxes and extraordinary charge..................... 10,577 30,787 9,219 141 50,724 Income tax expense............................ 4,521 14,709 4,006 52 23,288 ----- ------ ----- -- ------ Income before extraordinary charge............ 6,056 16,078 5,213 89 27,436 Extraordinary charge for early debt extinguishment.......................... - - - - - --- --- --- -- --- Net income.................................... $ 6,056 $ 16,078 $ 5,213 $ 89 $ 27,436 ======= ======== ======= ==== ======== F-27 16. Summary Financial Information (continued) Domestic Foreign -------- ------- Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) For the Year Ended March 31, 1999: Operating activities: Cash provided by (used in) operating activities................................. $ 36,147 $ 10,776 $ 9,878 $ 692 $ 57,493 Investing activities: Purchase of marketable securities, net........ (1,976) - - - (1,976) Capital expenditures.......................... (8,414) (2,809) (1,769) - (12,992) Proceeds from sale of business................ 9,390 (589) - - 8,801 Purchase of businesses, net of cash acquired. (9,597) (1,313) (8,861) (187) (19,958) Net assets held for sale...................... - 2,182 - - 2,182 --- ----- --- --- ----- Net cash (used in) provided by investing activities................................. (10,597) (2,529) (10,630) (187) (23,943) Financing activities: Proceeds from issuance of common stock........ - - 1,449 (1,449) - Net (payments) borrowings under revolving line-of-credit agreements.................. (27,600) (1,340) 746 - (28,194) Repayment of debt............................. (1,216) (8,365) 1,402 - (8,179) Dividends paid................................ (3,725) 1,078 (2,071) 993 (3,725) Other......................................... (7,934) - - - (7,934) ----- --- --- --- ----- Net cash provided by (used in) financing activities................................. (40,475) (8,627) 1,526 (456) (48,032) Effect of exchange rate changes on cash....... (1) - (1,462) (49) (1,512) - --- ----- -- ----- Net change in cash and cash equivalents....... (14,926) (380) (688) - (15,994) Cash and cash equivalents at beginning of year....................................... 18,035 788 4,038 - 22,861 ------ --- ----- --- ------ Cash and cash equivalents at end of year...... $ 3,109 $ 408 $ 3,350 $ - $ 6,867 ======= ===== ======= === ======= As of and for the year ended March 31, 1998: Domestic Foreign -------- ------- Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) As of March 31, 1998: Current assets: Cash..................................... $ 18,035 $ 788 $ 4,038 $ --- $ 22,861 Trade accounts receivable and unbilled revenues............................... 41,651 79,245 24,744 (1,369) 144,271 Inventories.............................. 47,201 44,314 24,712 (1,101) 115,126 Other current assets..................... 5,050 12,919 2,834 --- 20,803 ----- ------ ----- ----- ------ Total current assets.................. 111,937 137,266 56,328 (2,470) 303,061 Net property, plant, and equipment............ 32,159 35,517 19,986 --- 87,662 Goodwill and other intangibles, net........... 43,404 276,210 49,332 --- 368,946 Intercompany balances......................... 237,011 (400,737) (65,997) 229,723 - Other non-current assets...................... 214,997 165,698 494 (351,996) 29,193 ------- ------ --- ------- ------ Total assets.......................... $639,508 $ 213,954 $ 60,143 $(124,743) $ 788,862 ======== ========= ======== ========= ========= Current liabilities........................... $ 35,854 $ 54,748 $ 25,933 $(1,474) $ 115,061 Long-term debt, less current portion.......... 444,225 9,098 3,074 --- 456,397 Other non-current liabilities................. 10,576 31,065 4,817 --- 46,458 ------ ------ ----- ----- ------ Total liabilities..................... 490,655 94,911 33,824 (1,474) 617,916 Shareholders' equity.......................... 148,853 119,043 26,319 (123,269) 170,946 ------- ------- ------ ------- ------- Total liabilities and shareholders' equity........................... $639,508 $ 213,954 $ 60,143 $(124,743) $ 788,862 ======== ========= ======== ========= ========= F-28 16. Summary Financial Information (continued) Domestic Foreign -------- ------- Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) For the Year Ended March 31, 1998: Net sales .................................... $269,675 $ 212,269 $ 101,279 $ (21,400) $ 561,823 Cost of products sold......................... 192,684 156,749 72,688 (20,452) 401,669 ------- ------- ------ ------ ------- Gross profit.................................. 76,991 55,520 28,591 (948) 160,154 Selling, general and administrative expenses. 36,804 26,122 17,013 --- 79,939 Amortization of intangibles................... 1,892 6,475 1,930 --- 10,297 ----- ----- ----- ----- ------ 38,696 32,597 18,943 - 90,236 ------ ------ ------ --- ------ Income from operations........................ 38,295 22,923 9,648 (948) 69,918 Interest and debt expense..................... 24,125 594 385 --- 25,104 Interest and other income..................... 1,764 7 169 --- 1,940 ----- - --- ----- ----- Income before income taxes and extraordinary charge................... 15,934 22,336 9,432 (948) 46,754 Income tax expense............................ 7,326 11,529 4,286 365 22,776 ----- ------ ----- --- ------ Income before extraordinary charge............ 8,608 10,807 5,146 (583) 23,978 Extraordinary charge for early debt extinguishment............................. (4,520) - - --- (4,520) ----- --- --- ----- ----- Net income.................................... $ 4,088 $ 10,807 $ 5,146 $ (583) $ 19,458 ======= ======== ======= ====== ======== For the Year Ended March 31, 1998: Operating activities: Cash provided by (used in) operating activities................................. $ 40,272 $ (5,864) $ 3,361 $ 651 $ 38,420 Investing activities: Purchase of marketable securities, net........ (2,517) - - - (2,517) Capital expenditures.......................... (6,518) (3,044) (1,844) - (11,406) Purchase of businesses, net of cash acquired. (170,277) (5,918) 509 --- (175,686) Net assets held for sale...................... - 4,575 - --- 4,575 ------- ----- --- ----- ----- Net cash (used in) provided by investing activities................................. (179,312) (4,387) (1,335) - (185,034) Financing activities: Proceeds from issuance of stock............... - 1,914 - - 1,914 Net (payments) borrowings under revolving line-of-credit agreements.................. 157,058 2,551 (508) - 159,101 Repayment of debt............................. (196,353) (955) (943) - (198,251) Proceeds from issuance of long-term debt, - net........................................ 196,120 7,237 - --- 203,357 Dividends paid................................ (3,713) - - --- (3,713) Other......................................... (275) (219) 740 (561) (315) --- --- --- --- --- Net cash provided by (used in) financing activities................................. 152,837 10,528 (711) (561) 162,093 Effect of exchange rate changes on cash....... - - (1,435) (90) (1,525) --- --- ----- -- ----- Net change in cash and cash equivalents....... 13,797 277 (120) - 13,954 Cash and cash equivalents at beginning of year....................................... 4,238 511 4,158 --- 8,907 ----- --- ----- ----- ----- Cash and cash equivalents at end of year...... $ 18,035 $ 788 $ 4,038 $ - $ 22,861 ======== ===== ======= === ========
F-29 17. Effects of New Accounting Pronouncements The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," in June of 1998 which is effective for fiscal 2001. Statement No. 133 establishes accounting and reporting standards for hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The intended use of the derivative and its designation as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge) (2) a hedge of the exposure to variable cash flows of a forecasted transaction (a cash flow hedge), or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation (a foreign currency hedge), will determine when the gains and losses on the derivatives are reported in earnings and when they are to be reported as a component of other comprehensive income. The impact of compliance with this Statement has not yet been determined by the Company. In March of 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The Company adopted the provisions of the SOP in its financial statements for the year ended March 31, 1999. The SOP requires the capitalization of certain costs incurred in connection with developing or obtaining software for internal use. The impact of the SOP was not material to the Company. In April of 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up Activities," which requires costs related to start-up activities be expensed as incurred. The Company adopted the provisions of the SOP in its financial statements for the year ended March 31, 1999. The adoption of SOP 98-5 had no effect on the Company's reported earnings. 18. Business Segment Information In June of 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" was issued effective for fiscal years ending after December 15, 1998. The Company has adopted the statement for the year ended March 31, 1999. As a result of how the Company manages the business, its reportable segments are strategic business units that offer products with different characteristics. The most defining characteristic is the extent of customized engineering required on a per-order basis. In addition, the segments serve different customer bases through differing methods of distribution. The Company has three reportable segments: material handling products, integrated material handling solutions - industrial, and integrated material handling solutions - automotive. The Company's material handling products segment sells hoists, chains, attachments, and other material handling products principally to third party distributors in commercial and consumer distribution channels. The material handling solutions segments sell engineered material handling systems such as conveyors, manipulators, and lift tables primarily to end-users in the consumer products manufacturing, warehousing, and general manufacturing industries or the automotive segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales are not significant. The Company evaluates performance based on operating earnings of the respective business units prior to the effects of amortization. F-30 18. Business Segment Information (continued)
Segment information as of and for the years ended March 31, 1999, 1998, and 1997, is as follows: Year Ended March 31, 1999 ------------------------- Solutions - Solutions - Eliminations/ Products Industrial Automotive Other Total -------- ---------- ---------- ----- ----- (In thousands) Sales to external customers.............. $528,974 $ 58,301 $ 161,443 $ (13,273) $735,445 Operating income before amortization. 81,165 5,592 14,925 (1,121) 100,561 Depreciation and amortization............ 18,237 3,045 5,652 322 27,256 Total assets............................. 517,774 68,520 180,617 --- 766,911 Capital expenditures..................... 11,201 1,468 321 2 12,992 Year Ended March 31, 1998 ------------------------- Solutions - Solutions - Eliminations/ Products Industrial Automotive Other Total -------- ---------- ---------- ----- ----- (In thousands) Sales to external customers.............. $524,949 $ 39,845 $ --- $(2,971) $561,823 Operating income before amortization. 76,188 3,992 --- 35 80,215 Depreciation and amortization............ 17,094 1,957 --- 845 19,896 Total assets............................. 515,772 71,499 183,609 17,982 788,862 Capital expenditures..................... 10,580 712 --- 114 11,406 Year Ended March 31, 1997 ------------------------- Solutions - Solutions - Eliminations/ Products Industrial Automotive Other Total -------- ---------- ---------- ----- ----- (In thousands) Sales to external customers.............. $318,544 $ 28,308 $ --- $12,572 $359,424 Operating income before amortization. 45,169 3,513 --- 1,569 50,251 Depreciation and amortization............ 10,571 506 --- 208 11,285 Total assets............................. 485,350 43,744 --- 19,151 548,245 Capital expenditures..................... 8,851 541 --- --- 9,392
The following provides a reconciliation of operating income before amortization to consolidated income before income tax, minority interest, and extraordinary charge: Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Operating income before amortization............................... $100,561 $80,215 $50,251 Amortization of intangibles........................................ 15,479 10,297 5,197 Interest and debt expense.......................................... 35,923 25,104 11,930 Interest and other income.......................................... (1,565) (1,940) (1,168) ----- ----- ----- Income before income taxes, minority interest and extraordinary charge.......................................... $50,724 $46,754 $34,292 ======= ======= =======
F-31 18. Business Segment Information (continued)
Financial information relating to the Company's operations by geographic area is as follows: Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Net sales: United States...................................................... $613,179 $462,120 $313,705 Europe............................................................. 65,000 39,208 14,146 Canada............................................................. 51,653 55,367 27,951 Other.............................................................. 5,613 5,128 3,622 ----- ----- ----- Total.............................................................. $735,445 $561,823 $359,424 ======== ======== ======== Year Ended March 31, -------------------- 1999 1998 1997 ---- ---- ---- (In thousands) Identifiable and total assets: United States...................................................... $634,720 $662,371 $457,501 Europe............................................................. 100,317 90,036 61,696 Canada............................................................. 28,265 32,258 26,191 Other.............................................................. 3,609 4,197 2,857 ----- ----- ----- Total.............................................................. $766,911 $788,862 $548,245 ======== ======== ========
19. Selected Quarterly Financial Data (Unaudited)
In accordance with the pooling of interests method of accounting, the following selected quarterly financial data has been restated to include the accounts of GL from the date of GL's formation, April 1, 1997. (In thousands, except per share data) Three Months Ended Year Ended ------------------ ---------- June 28, September 27, December 27, March 31, March 31, 1998 1998 1998 1999 1999 ---- ---- ---- ---- Net sales................................ $184,616 $ 185,357 $ 186,995 $178,477 $735,445 Gross profit............................. 47,313 47,042 47,396 50,719 192,470 Income from operations................... 21,223 20,578 21,402 21,879 85,082 Income before extraordinary charge....... 6,375 5,923 6,445 8,693 27,436 Net income............................... 6,375 5,923 6,445 8,693 27,436 Income per share before extraordinary charge................................ 0.44 0.41 0.46 0.62 1.92 Net income per share..................... 0.44 0.41 0.46 0.62 1.92 Three Months Ended Year Ended ------------------ ---------- June 29, September 28, December 28, March 31, March 31, 1997 1997 1997 1998 1998 ---- ---- ---- ---- ---- Net sales................................ $136,858 $ 136,060 $ 137,329 $151,576 $561,823 Gross profit............................. 38,273 39,008 38,634 44,239 160,154 Income from operations................... 15,663 17,312 16,112 20,831 69,918 Income before extraordinary charge 4,579 5,850 5,619 7,930 23,978 Net income............................... 4,579 5,850 5,619 3,410(a) 19,458(a) Income per share before extraordinary charge................................ 0.32 0.41 0.39 0.55 1.66 Net income per share..................... 0.32 0.41 0.39 0.24(a) 1.35(a) F-32 19. Selected Quarterly Financial Data (Unaudited) (continued) Three Months Ended Year Ended ------------------ ---------- June 30, September 29, December 29, March 31, March 31, 1996 1996 1996 1997 1997 ---- ---- ---- ---- ---- Net sales................................ $ 65,735 $ 64,426 $ 103,393 $125,870 $359,424 Gross profit............................. 20,017 19,184 30,104 38,132 107,437 Income from operations................... 8,681 8,910 11,240 16,223 45,054 Income before extraordinary charge 5,032 5,211 3,219 4,890 18,352 Net income............................... 5,032 5,211 118(b) 4,793(b) 15,154(b) Income per share before extraordinary charge................................ 0.38 0.39 0.24 0.37 1.39 Net income per share..................... 0.38 0.39 0.01(b) 0.36(b) 1.15(b) ________ (a) Includes extraordinary charges for early debt extinguishment amounting to $4,520,000 in the quarter ended March 31, 1998, net of the tax effect. (b) Includes extraordinary charges for early debt extinguishment amounting to $3,101,000 and $97,000 in the quarters ended December 29, 1996 and March 31, 1997, respectively, net of the tax effect.
20. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as follows: March 31, --------- 1999 1998 ---- ---- (In thousands) Net unrealized investment gains - net of tax....................................... $ 2,312 $ 1,598 Minimum pension liability adjustment - net of tax.................................. (1,041) (988) Foreign currency translation adjustment............................................ (4,637) (3,238) ----- ----- Accumulated other comprehensive loss............................................... $ (3,366) $ (2,628) ======== ========
The net tax liability associated with items included in comprehensive income (loss) was $847,000 and $406,000 for 1999 and 1998, respectively. F-33
COLUMBUS McKINNON CORPORATION SCHEDULE II-Valuation and qualifying accounts March 31, 1999, 1998 and 1997 Dollars in thousands Additions --------- Balance at Charged to Charged Balance at Beginning Costs and to Other End of Description of Period Expenses Accounts Deductions Period ----------- --------- -------- -------- ---------- ------ Year ended March 31, 1999 Deducted from asset accounts: Allowance for doubtful accounts $ 2,511 $ 743 $ (27)(5) $ 956(1) $ 2,271 Slow-moving and obsolete inventory 4,684 1,884 (592)(5) 1,681(2) 4,295 Reserve against non-current receivable 600 - - 600(6) - --- --- --- --- --- Total $ 7,795 $2,627 $ (619) $ 3,237 $ 6,566 ======= ====== ====== ======= ======= Reserves on balance sheet: Accrued general and product liability costs $ 11,688 $3,265 $- $3,537(3) $11,416 ======== ====== === ====== ======= Year ended March 31, 1998: Deducted from asset accounts: Allowance for doubtful accounts $ 1,884 $1,677 $ 470(4) $1,520(1) $ 2,511 Slow-moving and obsolete inventory 3,356 1,115 854(4) 641(2) 4,684 Reserve against non-current receivable 600 - - - 600 --- --- --- --- --- Total $ 5,840 $2,792 $ 1,324 $ 2,161 $ 7,795 ======= ====== ======= ======= ======= Reserves on balance sheet: Accrued general and product liability costs $ 11,973 $1,522 $- $1,807(3) $11,688 ======== ====== === ====== ======= Year ended March 31, 1997: Deducted from asset accounts: Allowance for doubtful accounts $ 917 $ 905 $ 1,189(4) $ 1,127(1) $ 1,884 Slow-moving and obsolete inventory 2,467 325 1,770(4) 1,206(2) 3,356 Reserve against non-current receivable 600 - - - 600 --- --- --- --- --- Total $ 3,984 $1,230 $ 2,959 $2,333 $ 5,840 ======= ====== ======= ====== ======= Reserves on balance sheet: Accrued general and product liability costs $ 7,110 $1,775 $ 3,806(4) $ 718(3) $11,973 ======= ====== ======= ===== ======= ________ (1) Uncollectible accounts written off, net of recoveries (2) Obsolete inventory disposals (3) Insurance claims and expenses paid (4) Reserves at date of acquisition of subsidiaries (5) Reserves at date of disposal of subsidiary (6) Receivable deemed to be collectible in its entirety
F-34 Item 9. Changes in and Disagreements with Accountants on Accounting - ------- -------------------------------------------------------------- and Financial Disclosures ------------------------- None. PART III Item 10. Directors and Executive Officers of the Registrant. - -------- --------------------------------------------------- The information regarding Directors and Executive Officers of the Registrant will be included in a Proxy Statement to be filed with the Commission prior to July 29, 1999. Item 11. Executive Compensation - -------- ---------------------- The information regarding Executive Compensation will be included in a Proxy Statement to be filed with the Commission prior to July 29, 1999. Item 12. Security Ownership of Certain Beneficial Owners and Management - -------- -------------------------------------------------------------- The information regarding Security Ownership of Certain Beneficial Owners and Management will be included in a Proxy Statement to be filed with the Commission prior to July 29, 1999. Item 13. Certain Relationships and Related Transactions - -------- ---------------------------------------------- The information regarding Certain Relationships and Related Transactions will be included in a Proxy Statement to be filed with the Commission prior to July 29, 1999. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form - -------- ------------------------------------------------------------ 8-K. ---- (a)(1) Financial Statements: --------------------- The following consolidated financial statements of Columbus McKinnon Corporation are included in Item 8: Reference Page No. --------- -------- Report of Independent Auditors - Ernst & Young LLP F-2 Report of Independent Auditors - Deloitte & Touche LLP F-3 Consolidated balance sheets - March 31, 1999 and 1998 F-4 29 Consolidated statements of income - Years ended March 31, 1999, 1998 and 1997 F-5 Consolidated statements of shareholders' equity - Years ended March 31, 1999, 1998 and 1997 F-6 Consolidated statements of cash flows - Years ended March 31, 1999, 1998 and 1997 F-7 Notes to consolidated financial statements F-8 - F-33 (a)(2) Financial Statement Schedule: Page No. ----------------------------- -------- Report of Independent Auditors F-2 Schedule II - Valuation and qualifying accounts F-34 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (a)(3) Exhibits: --------- Exhibit Number - ------ 2.1 Agreement and Plan of Merger dated August 24, 1996 among Columbus McKinnon Corporation, L Acquisition Corporation and Spreckels Industries, Inc. (known as Yale International, Inc.) (incorporated by reference to Exhibit (c)(1) to the Company's Tender Offer Statement on Schedule 14D-1 dated August 30, 1996). 2.2 Offer to Purchase by L Acquisition Corporation dated August 30, 1997, as revised (incorporated by reference to Exhibit (a)(1) to the Company's Tender Offer Statement on Schedule 14D-1 dated August 30, 1997, as amended by Amendment No. 1 dated September 18, 1996, Amendment No. 2 dated September 27, 1996, Amendment No. 3 dated October 4, 1996, Amendment No. 4 dated October 9, 1996 Amendment No. 5 dated October 13, 1996 and Amendment No. 6 dated October 17, 1996). 3.1 Restated Certificate of Incorporation of the Registrant (incorporat- ed by reference to Exhibit 3.1 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 3.2 Amended By-Laws of the Registrant (incorporated by reference to Exhibit 3 the Company's Current Report on Form 8-K dated May 17, 1999). 4.1 Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 30 4.2 First Amendment and Restatement of Rights Agreement, dated as of October 1, 1998, between Columbus McKinnon Corporation and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated October 29, 1998). 4.3 Indenture among Columbus McKinnon Corporation, the guarantors named on the signature pages thereto and State Street Bank and Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated April 9, 1998). 4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc., Mechanical Products, Inc., Minitec Corporation and State Street Bank and Trust Company, N.A., as trustee, dated March 31, 1998 (incorporated by reference to Exhibit 4.3 to the Company's Current Report on form 8-K dated April 9, 1998). 4.5 A/B Registration Rights Agreement among Columbus McKinnon Corporation, the guarantors named on the signature pages thereto and Bear, Stearns & Co., Inc. and Goldman, Sachs & Co., as initial purchasers (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated April 9, 1998). #4.6 Second Supplemental Indenture among Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc. LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products Inc. and State Street Bank and Trust Company, N.A., as trustee, dated as of February 12, 1999. #4.7 Third Supplemental Indenture among G.L. International, Inc., Gaffey, Inc., Handling Systems and Conveyors, Inc., Larco Material Handling Inc., Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc. and State Street Bank and Trust Company, N.A., as trustee, dated as of March 1, 1999. 10.1 Amended and Restated Term Loan Agreement by and among Fleet Bank of New York, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr., as Trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement, dated March 31, 1993 (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 10.2 Amendment No. 1 to Amended and Restated Term Loan Agreement, dated March 31, 1993, by and among Fleet Bank of New York, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. as trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement, dated October 27, 1994 (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 31 10.3 Amendment No. 2 to Amended and Restated Term Loan Agreement by and among Fleet Bank, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement, dated November 2, 1995 (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). #10.4 Amendment No. 3 to Amended and Restated Term Loan Agreement by and among Fleet Bank, Columbus McKinnon Corporation and Karen L. Howard, Timothy R. Harvey, and Robert L. Montgomery, Jr. as trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement. 10.5 Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated October 27, 1994 (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). #10.6 Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated August 5, 1996. #10.7 First Amendment to Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated October 16, 1996. #10.8 Second Amendment to Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated March 31, 1998. #10.9 Third Amendment to Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated November 30, 1998. 10.10 Agreement by and among Columbus McKinnon Corporation Employee Stock Ownerhsip Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated November 2, 1995 (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 10.11 Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank, and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated April 9, 1998). 10.12 First Amendment, dated as of September 23, 1998, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 27, 1998). 32 #10.13 Second Amendment, dated as of February 12, 1999, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as Borrower, the banks, financial institutions and other institutional leaders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. 10.14 Series Lease, dated as of November 1, 1993, between Town of Amherst Industrial Development Agency as Lessor and Columbus McKinnon Corporation as Lessee (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.15 Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.16 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated March 2, 1995 (incorporated by reference to Exhibit 10.24 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.17 Amendment No. 2 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated October 17, 1995 (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). *10.18 Amendment No. 3 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated March 27, 1996 (incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). *10.19 Amendment No. 4 of the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated September 30, 1996 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996). *10.20 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated August 28, 1997 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). *10.21 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated June 24, 1998 (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). *10.22 Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement, dated April 1, 1987 (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 33 *10.23 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement (formerly known as the Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement) effective November 1, 1988 (incorporated by reference to Exhibit 10.26 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.24 Columbus McKinnon Corporation Management EVA@ Incentive Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 28, 1998). #*10.25 Amendment and Restatement of Columbus McKinnon Corporation 1995 Incentive Stock Option Plan. *10.26 Columbus McKinnon Corporation Restricted Stock Plan (incorporated by reference to Exhibit 10.28 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). #*10.27 Amendment and Restatement of Columbus McKinnon Corporation Non- Qualified Stock Option Plan. *10.28 Columbus McKinnon Corporation Thrift [401(k) Plan] 1989 Restatement Effective January 1, 1998 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 27, 1998). #*10.29 Amendment No.1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift 401(K) Plan, dated December 10, 1998. *10.30 Columbus McKinnon Corporation Thrift [401(k)] Plan Trust Agreement Restatement Effective August 9, 1994 (incorporated by reference to Exhibit 10.32 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.31 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Restatement Effective April 1, 1998 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 27, 1998). #*10.32 Amendment No.1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated December 10, 1998. #*10.33 Amendment No.2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated May 26, 1999. *10.34 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust Agreement effective as of April 1, 1987 (incorporated by reference to Exhibit 10.34 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 34 #*10.35 Form of change in Control Agreement as entered into between Columbus McKinnon Corporation and each of Timothy T. Tevens, Robert L. Montgomery, Jr., Ned T. Librock, Karen L. Howard, Lois H. Demler, Timothy R. Harvey, John Hansen, Neal Wixson and Joe Owen. 10.36 Stock Purchase Agreement, dated as of March 11, 1998, among Columbus McKinnon Corporation and the shareholders of LICO, Inc. identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 9, 1998). #10.37 Agreement and Plan of Merger, dated as of February 16, 1999, by and among Columbus McKinnon Corporation, GL Delaware, Inc. and Larco Industrial Services, Ltd. #10.38 Columbus McKinnon Corporation - GL International Inc. 1997 Stock Option Plan. #10.39 Columbus McKinnon Corporation - Larco Industrial Services, Ltd. 1997 Stock Option Plan. #21.1 Subsidiaries of the Registrant. #23.1 Consent of Ernst & Young LLP. #23.2 Consent of Deloitte & Touche LLP. #27.1 Financial Data Schedule. #99.1 Form 11-K Columbus McKinnon Corporation Employee Stock Ownership Plan Annual Report for the year ended March 31, 1999. * Indicates a management contract or compensation plan or arrangement. # Filed herewith (b) Reports on Form 8-K: During the fourth quarter of fiscal 1999, the Company did not file any Current Reports on Form 8-K. 35 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Buffalo, State of New York on June 29, 1999. COLUMBUS McKINNON CORPORATION By: /s/ Timothy T. Tevens ---------------------- Timothy T. Tevens President and Chief Executive Officer Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Signature Title Date --------- ----- ---- /s/ Timothy T. Tevens President, Chief Executive Officer June 29, 1999 - --------------------- Timothy T. Tevens and Director (Principal Executive Officer) /s/ Robert L. Montgomery, Jr. Executive Vice President, Chief June 29, 1999 - ----------------------------- Robert L. Montgomery, Jr. Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) /s/ Herbert P. Ladds, Jr. Chairman of the Board of Directors June 29, 1999 - ------------------------- Herbert P. Ladds, Jr. /s/ Edward W. Duffy Director June 29, 1999 - ------------------- Edward W. Duffy /s/ Randolph A. Marks Director June 29, 1999 - --------------------- Randolph A. Marks /s/ L. David Black Director June 29, 1999 - ------------------ L. David Black /s/ Carlos Pascual Director June 29, 1999 - ------------------ Carlos Pascual /s/ Richard H. Fleming Director June 29, 1999 - ---------------------- Richard H. Fleming 36 EX-4.6 2 2ND SUPPLEMENTAL INDENTURE TO SENIOR SUB. NOTES SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of February 12, 1999, among ABELL-HOWE CRANE, INC., a Delaware corporation (a "Guaranteeing Subsidiary""), subsidiaries of Columbus McKinnon Corporation (or its permitted successor), a New York corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, N.A., as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 31, 1998 providing for the issuance of an aggregate principal amount of up to $300.0 million of 8 1/2% Senior Subordinated Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein ( a "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) The Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of these Subsidiary Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. (i) Notwithstanding the foregoing, in the event that the Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Guaranteeing Subsidiary under this Second Supplemental Indenture and its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. SUBORDINATION. Payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Subsidiary Guarantee is subordinated to the prior payment in full of Senior Debt on the terms provided in the Indenture. 4. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees that the Subsidiary Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 5. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 6. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation, Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 7. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: February 12, 1999 ABELL-HOWE CRANE, INC.. By: /s/ Robert L. Montgomery, Jr. ----------------------------- Name: Robert L. Montgomery, Jr. ----------------------------- Title: Treasurer ----------------------------- LICO, INC. By: /s/ Robert L. Montgomery, Jr. ----------------------------- Name: Robert L. Montgomery, Jr. ----------------------------- Title: Treasurer ----------------------------- AUTOMATIC SYSTEMS, INC. By: /s/ Robert L. Montgomery, Jr. ----------------------------- Name: Robert L. Montgomery, Jr. ----------------------------- Title: Treasurer ----------------------------- LICO STEEL, INC. By: /s/ Robert L. Montgomery, Jr. ----------------------------- Name: Robert L. Montgomery, Jr. ----------------------------- Title: Treasurer ----------------------------- COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- Name: Robert L. Montgomery, Jr. ----------------------------- Title: Executive Vice President ----------------------------- YALE INDUSTRIAL PRODUCTS, INC. By: /s/ Robert L. Montgomery, Jr. ----------------------------- Name: Robert L. Montgomery, Jr. ----------------------------- Title: Treasurer ----------------------------- STATE STREET BANK AND TRUST COMPANY, N.A. as Trustee By: /s/ James E. Murphy ----------------------------- Name: James E. Murphy ----------------------------- Title: Vice President ----------------------------- EX-4.7 3 3RD SUPPLEMENTAL INDENTURE TO SENIOR SUB. NOTES THIRD SUPPLEMENTAL INDENTURE THIRD SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of March 1, 1999, among G.L. INTERNATIONAL INC., a Delaware corporation, GAFFEY, INC., an Oklahoma corporation, HANDLING SYSTEMS AND CONVEYORS, INC., a Delaware corporation and LARCO MATERIAL HANDLING INC., an Ohio corporation (each a "Guaranteeing Subsidiary" and together the "Guaranteeing Subsidiaries"), subsidiaries of Columbus McKinnon Corporation (or its permitted successor), a New York corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, N.A., as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 31, 1998 providing for the issuance of an aggregate principal amount of up to $300.0 million of 8 1/2% Senior Subordinated Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (each a "Subsidiary Guarantee" and together the "Subsidiary Guarantees"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiaries hereby agree as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) These Subsidiary Guarantees shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, these Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiaries shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of these Subsidiary Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of these Subsidiary Guarantees. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantees. (i) Notwithstanding the foregoing, in the event that these Subsidiary Guarantees would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Guaranteeing Subsidiaries under this Third Supplemental Indenture and their Subsidiary Guarantees shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. SUBORDINATION. Payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Subsidiary Guarantees is subordinated to the prior payment in full of Senior Debt on the terms provided in the Indenture. 4. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 5. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiaries, and each of them, may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 6. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation, Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 7. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of each of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: March 1, 1999 G.L. INTERNATIONAL INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Vice President and Treasurer GAFFEY, INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Vice President and Treasurer HANDLING SYSTEMS AND CONVEYORS, INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Vice President and Treasurer LARCO MATERIAL HANDLING INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Vice President and Treasurer ABELL-HOWE CRANE, INC.. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Vice President and Treasurer LICO, INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Treasurer AUTOMATIC SYSTEMS, INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Treasurer LICO STEEL, INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Treasurer COLUMBUS McKINNON CORPORATION By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Executive Vice President YALE INDUSTRIAL PRODUCTS, INC. By: /s/ R. L. Montgomery ------------------------------ Name: R. L. Montgomery Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY, N.A. as Trustee By: /s/ James E. Murphy ------------------------------ Name: James E. Murphy ------------------------------ Title: Vice President ------------------------------ EX-10.4 4 3RD AMENDMENT TO FLEET ESOP TRUST AGREEMENT THIRD AMENDMENT TO AMENDED AND RESTATED TERM LOAN AGREEMENT AMONG FLEET NATIONAL BANK (AS SUCCESSOR BY MERGER TO FLEET BANK), COLUMBUS MCKINNON CORPORATION, AS GUARANTOR, AND KAREN L. HOWARD, TIMOTHY R. HARVEY AND ROBERT L. MONTGOMERY, AS TRUSTEES UNDER THE COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT This Third Amendment to Amended and Restated Term Loan Agreement, dated as of November __, 1998 (this "Third Amendment"), is entered into by and among FLEET NATIONAL BANK (AS SUCCESSOR BY MERGER TO FLEET BANK), a bank having its principal office at 10 Fountain Plaza, Buffalo, New York 14202 ("Bank"), COLUMBUS MCKINNON CORPORATION, a New York corporation having its principal office at 140 Audubon Parkway, Amherst, New York 14228 ("Guarantor"), and Karen L. Howard, Timothy R. Harvey and Robert L. Montgomery, as Trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement (the "Trust Agreement"), effective on April 1, 1987 and amended as of November 1, 1988 (collectively, "Trustees"). W I T N E S S E T H: WHEREAS: A. Bank, Guarantor and Trustees are parties to that certain Amended and Restated Term Loan Agreement dated August 5, 1996, as amended by the First Amendment thereto, dated as of October 16, 1996, and the Second Amendment thereto, dated as of March 31, 1998 (as so amended and as hereafter amended, restated or otherwise modified, the "Restated Agreement"); B. Bank, Guarantor and Trustees wish to amend the Restated Agreement to extend the maturity of the ESOP Loan and make certain other changes, as and to the extent set forth in this Third Amendment and subject to the terms and conditions stated herein; it being understood that no additional money is being advanced in connection with this Third Amendment and that the note which evidences the ESOP Loan is being replaced by the ESOP Note (as hereinafter defined). NOW THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Except to the extent otherwise specified herein, capitalized terms used in this Third Amendment shall have the same meanings ascribed to them in the Restated Agreement. 2. AMENDMENTS. This Third Amendment shall be deemed to be an amendment to the Restated Agreement and shall not be construed in any way as a replacement or substitution therefor. All of the terms and conditions of, and terms defined in, this Third Amendment are hereby incorporated by reference into the Restated Agreement as if such terms and provisions were set forth in full therein. 2.1 Section 1.1 of the Restated Agreement is hereby amended by deleting the existing definition of "ESOP Note" in its entirety and replacing it with the following, in the appropriate alphabetical order: "`ESOP NOTE' means the Replacement ESOP Term Note, dated of even date herewith, by Trustees to Bank (a copy of which is attached to this Third Amendment as Exhibit A) and all replacements, substitutions, modifications, extensions, renewals, consolidations and refinancings thereof."; 2.2 Section 1.1 of the Restated Agreement is further amended by deleting from the definition of the term "Trustees" the words "Ivan E. Shawvan,"; 2.3 Section 5.1 of the Restated Agreement is hereby amended by deleting the text of existing Section 5.1 in its entirety and replacing it with the following: "ENCUMBRANCES. Except for (i) the pledge of shares in favor of Bank pursuant to the Stock Pledge Security Agreement, (ii) the pledge of shares in favor of Marine pursuant to that certain pledge agreement dated October 27, 1994, executed and delivered by Guarantor to Marine, as amended through the date hereof and (iii) the pledge of shares in favor of Guarantor to secure loans made by Guarantor to the Trustees for the purpose of enabling the Trustees, on behalf of the Plan, to purchase such pledged shares (to the extent and only to the extent that such loans by Guarantor to the Trustees, on behalf of the Plan, and such pledge of shares are permitted under Section 5.02(f) and Section 5.02(r) of the Credit Agreement), the Trustees shall not mortgage, pledge or otherwise encumber or suffer to be encumbered any of their assets." 3. REPRESENTATIONS AND WARRANTIES OF TRUSTEES AND GUARANTOR. 3.1 Trustees and Guarantor have full power, authority and legal right to enter into this Third Amendment, and to take all action required of them under this Third Amendment. Trustees hereby represent and warrant that the execution, delivery and performance by Trustees of this Third Amendment has been duly authorized by all necessary action, if any, and that this Third Amendment is a legal, valid and binding obligation of Trustees enforceable against Trustees in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally or to general principles of equity. 3.2 Trustees and Guarantor each hereby represent and warrant that the execution, delivery and performance of this Third Amendment by Trustees and Guarantor, respectively, does not, and will not, contravene or conflict with any provision of (i) law or (ii) any judgment, decree or order, and does not, and will not, contravene or conflict with, or cause any lien to arise under, any provision of the Trust Agreement or any other agreement, instrument or other document binding upon or otherwise affecting Trustees, Guarantor, any property subject to the Trust Agreement or Plan, or any property of Guarantor. 3.3 All of the representations and warranties contained in the Restated Agreement, including, without limitation, those contained in Section 3 thereof, and each other agreement and document executed in connection therewith are true and correct on and as of the date hereof as though made on the date hereof, and no Event of Default exists under the Restated Agreement or will exist after or be triggered by the execution and delivery of this Third Amendment or any of the other agreements and documents contemplated hereby. In addition, Trustees hereby represent, warrant and affirm that the Financing Documents and each of the other agreements and documents executed in connection with or relating to the Restated Agreement remain in full force and effect. 4. CONDITIONS PRECEDENT TO AMENDMENTS. The effectiveness of this Third Amendment shall be subject to the fulfillment (to the satisfaction of Bank) of the following conditions precedent: 4.1 AMENDMENT DOCUMENTATION. Trustees shall have delivered to Bank all of the following, each duly executed, if required, and dated the date hereof, and each in form and substance satisfactory to Bank: (a) AMENDMENT. Trustees, Bank and Guarantor shall have executed and delivered this Third Amendment. (b) ESOP NOTE. Bank shall have received the ESOP Note, duly executed and delivered by Trustees and payable to the order of Bank. (c) OTHER. Such other documents and such other actions as Bank may reasonably request. 4.2 NO DEFAULT. As of the closing date of this Third Amendment, no Event of Default shall have occurred or be continuing under the Restated Agreement. 4.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in Section 3 hereof shall be true and correct on the closing date of this Third Amendment. 4.4 LEGAL MATTERS. All legal matters incident hereto shall be satisfactory to counsel to Bank. 5. MISCELLANEOUS 5.1 Except as specifically amended by this Third Amendment, the Restated Agreement and each other agreement and document executed in connection therewith shall remain in full force and effect and is hereby ratified and confirmed. 5.2 The execution, delivery and effect of this Third Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition or to any amendment or modification of any term or condition of the Restated Agreement or any other agreement or document executed in connection therewith, except, upon the effectiveness of this Third Amendment, as specifically amended hereby, or (ii) prejudice any right, power or remedy which Bank now has or may have in the future under or in connection with the Restated Agreement or any other agreement or document executed in connection therewith. Upon the effectiveness of this Third Amendment, each reference in the Restated Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Restated Agreement as amended hereby, and each reference in any other agreement or document executed in connection with the Restated Agreement to the Restated Agreement or any word or words of similar import shall be and mean a reference to the Restated Agreement as amended hereby. 5.3 COUNTERPARTS. This Third Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. 5.4 COSTS AND EXPENSES. Guarantor and Trustees jointly and severally shall reimburse Bank promptly for all reasonable costs and expenses, including reasonable counsel fees, incurred by Bank in connection with this Third Amendment, any indebtedness created or evidenced hereunder and, in the case of Guarantor, any other Obligations; and for costs and expenses, including reasonable counsel fees, of Bank incident to the enforcement of any provision of this Third Amendment, the ESOP Note, any other Financing Documents and, in the case of Guarantor, any other Obligations. 5.5 GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 5.6 HEADINGS. Section headings in this Third Amendment are included herein for convenience of reference only and shall not constitute a part of this Third Amendment for any other purpose. IN WITNESS WHEREOF, this Third Amendment to Amended and Restated Term Loan Agreement has been duly executed as of the date first written above. FLEET NATIONAL BANK (AS SUCCESSOR BY MERGER TO FLEET BANK) By: /s/ John G. Tierney --------------------------- Title: Vice President ------------------------ COLUMBUS MCKINNON CORPORATION By: /s/ R. L. Montgomery --------------------------- Title: Executive Vice President ------------------------ /s/ Karen L. Howard -------------------------- KAREN L. HOWARD, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement /s/ Timothy R. Harvey -------------------------- TIMOTHY R. HARVEY, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement /s/ Robert L. Montgomery -------------------------- ROBERT L. MONTGOMERY, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement EX-10.6 5 AMENDED AND RESTATED ESOP LOAN AGREEMENT - MARINE AMENDED AND RESTATED LOAN AGREEMENT - Among - COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST COLUMBUS MCKINNON CORPORATION - and - MARINE MIDLAND BANK DATED: August 5, 1996 TABLE OF CONTENTS PAGE ---- ARTICLE I Definitions.......................................... 1 --------- 1.1 Definitions....................................... 1 1.2 Accounting Terms.................................. 3 ARTICLE II The Credit........................................... 3 ---------- 2.1 The Credit. . . . . . . . . . . . . . . . . . . . 3 2.2 The Note. . . . . . . . . . . . . . . . . . . . . 3 2.3 Interest. . . . . . . . . . . . . . . . . . . . . 4 2.4 Prepayment. . . . . . . . . . . . . . . . . . . . 5 2.5 Use of Proceeds . . . . . . . . . . . . . . . . . 6 2.6 Special Provisions Governing LIBOR Loans. . . . . 6 2.7 Taxes.............................................. 6 ARTICLE III Representations and Warranties...................... 7 ----------- 3.1 Authority.......................................... 7 3.2 Valid and Binding Obligation....................... 7 3.3 No Pending Litigation.............................. 7 3.4 No Consent or Filing............................... 7 3.5 Compliance With Laws and Regulations............... 7 3.6 Guarantor's Obligations. . . . . . . . . . . ...... 8 3.7 Federal Regulations................................ 8 3.8 Credit Agreement . . . . . . . . . . . . . . . . .. 8 ARTICLE IV Affirmative Covenants................................ 8 ---------- 4.1 Payments........................................... 8 4.2 Future Financial Statements........................ 8 4.3 Books and Records.................................. 8 4.4 Compliance with Law................................ 9 4.5 Use of Proceeds.................................... 9 4.6 Taxes.............................................. 9 4.7 ESOP............................................... 9 4.8 Reports and Notices................................ 9 4.9 Information........................................ 9 4.10 Amendments......................................... 9 4.11 Notice............................................ 10 4.12 Other Acts........................................ 10 4.13 Credit Agreement Affirmative Covenants . . . . . . 10 - i - ARTICLE V Negative Covenants................................... 10 --------- 5.1 Borrowed Money.................................... 10 5.2 Encumbrances...................................... 10 5.3 Maintain Existence................................ 11 5.4 Credit Agreement Negative Covenants. . . . . . . . 11 ARTICLE VI Default............................................. 11 ---------- 6.1 Events of Default................................. 11 6.2 Effects of an Event of Default.................... 12 ARTICLE VII Expenses........................................... 13 ----------- ARTICLE VIII Miscellaneous..................................... 13 ------------ 8.1 Amendments and Waivers............................ 13 8.2 Delays and Omissions.............................. 13 8.3 Successors and Assigns............................ 13 8.4 Notices........................................... 14 8.5 Governing Law..................................... 14 8.6 Counterparts...................................... 14 8.7 Titles............................................ 15 8.8 Inconsistent Provisions........................... 15 8.9 Course of Dealing................................. 15 8.10 Collateral Release................................ 15 8.11 The Trustee....................................... 15 8.12 Non-Recourse...................................... 16 8.13 JURY TRIAL WAIVER................................. 16 8.14 CONSENT TO JURISDICTION........................... 16 - ii - AMENDED AND RESTATED LOAN AGREEMENT dated August 5, 1996 made by and between COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, a trust which was created under the laws of the State of New York ("Borrower"), COLUMBUS MCKINNON CORPORATION, a corporation organized under the laws of the State of New York ("Guarantor") and MARINE MIDLAND BANK, a banking corporation organized under the laws of the State of New York ("Bank"). WITNESSETH WHEREAS, Bank, Guarantor and Borrower are parties to a Loan Agreement dated October 27, 1994 ("Original Agreement"); and WHEREAS, Fleet Bank, Bank, Fleet Bank as Administra- tive Agent and Guarantor have entered into a Credit Agreement dated of even date herewith ("Credit Agreement"); and WHEREAS, Bank, Guarantor and Borrower wish to amend and restate the Original Agreement in its entirety to incorporate certain covenants and pricing provisions of the Credit Agreement; it being understood that the no additional money is being advanced in connection with this Agreement and that the Note (as defined hereinafter) is not being replaced and remains an obligation of the Borrower. NOW THEREFORE the parties agree as follows: ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, unless otherwise specified, the following terms shall have the following respective meanings: "Business Day" - shall have the meaning set forth in the Credit Agreement. "Credit" - collectively, "Credit" as defined in Section 2.1 of this Agreement. "Credit Agreement" - the Credit Agreement between Fleet Bank, Bank, Fleet Bank as Administrative Agent and Guarantor dated August 5, 1996, as amended from time to time. "Domestic Subsidiary" - any Subsidiary organized under the laws of the United States or any state or territory thereof. "ESOP" - the Columbus McKinnon Corporation Employee Stock Ownership Plan dated April 1, 1987, as amended and restated as of November 1, 1988, as amended and restated as of October 27, 1994. - 2 - "Eurodollar Loan" - "LIBOR Loan" as defined hereinafter. "Guaranty" - Guaranty by Guarantor to Bank dated October 27, 1994 guaranteeing the payment of any and all indebtedness and liabilities, whether now existing or hereafter incurred of the Borrower to the Bank, as the same may be amended or supplemented from time to time. "Interest Period" - with respect to any LIBOR Loan, the period commencing on the date such loan is made and ending, as the Borrower may select, pursuant to Section 2.3(a) and (b) hereof, or the numerically corresponding day in the first, second, third or sixth calendar month thereafter, except that each such Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) no Interest Period may extend beyond matur- ity; and (b) if an Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next Business Day, unless such Business Day would fall in the next calendar month in which event such Interest Period shall end on the immediately preceding Business Day. "Leverage Ratio" - shall have the meaning set forth in the Credit Agreement. "LIBOR Interest Rate" - shall have the meaning set forth in the Credit Agreement. "LIBOR Loan" - a portion of the Credit for which the interest rate is calculated based on the LIBOR Interest Rate. "London Interbank Offered Rate" - shall have the meaning set forth in the Credit Agreement. "Note" - as used in all Articles of this Agreement, except Article II, collectively, all notes evidencing any indebtedness created under this Agreement. "Plan Year" - Plan Year, as defined in Section 8.10 of this Agreement. - 3 - "Pledge Agreement" - Pledge Agreement dated October 27, 1994 executed and delivered by Borrower to Bank, pursuant to which Borrower pledged to the Bank all shares of stock of the Guarantor owned or controlled directly or indirectly by the Borrower and acquired with the proceeds of the Credit by delivering the certificates of stock and endorsing such certificates or appropriate stock powers to the Bank, as the same may be amended or supplemented from time to time. "Prime Rate" - the rate of interest publicly announced by the Bank from time to time as its prime rate and is a base rate for calculating interest on certain loans. The Prime Rate may or may not be the most favorable rate charged by the Bank to its customers. "Prime Rate Loan" - a portion of the Credit for which the interest rate is calculated based on the Prime Rate. "Subsidiary" - shall have the meaning set forth in the Credit Agreement. "Tangible Net Worth" - shall have the meaning set forth in the Credit Agreement. "Trust Agreement" - the Columbus McKinnon Corporation Leveraged Employee Stock Ownership Trust Agreement effective as of April 1, 1987 (formerly known as the Columbus McKinnon Corporation Personal Retirement Account Trust Agreement), by and between the Guarantor and the persons named as trustees therein, as amended from time to time "Trustees" - each or all of Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. in their capacity as trustees for the Borrower. 1.2 ACCOUNTING TERMS. All accounting terms not otherwise defined herein have the meaning assigned to them in accordance with generally accepted accounting principles. ARTICLE II. THE CREDIT 2.1 THE CREDIT. The Bank agreed to lend to the Borrower and the Borrower agreed to borrow from the Bank the sum of TWO MILLION DOLLARS ($2,000,000.00) ("Credit"). 2.2 THE NOTE. The Credit is evidenced by a term note made by Borrower to Bank dated October 27, 1994 ("Note"), payable in accordance with the terms and conditions set forth therein. The Note is also subject to mandatory prepayment as set forth in Section 2.4(c) of this Agreement. - 4 - 2.3 INTEREST. (a) NOTICE. The Credit shall bear interest on the date hereof at the Prime Rate unless the Borrower has given the Bank notice at least three (3) Business Days prior to the date it desires all or any portion of the Credit to be a LIBOR Loan. Subject to Section 2.3(b) hereof, Borrower may elect to convert any portion of the Credit that is a Prime Rate Loan to a LIBOR Loan or to continue any LIBOR Loan as a new LIBOR Loan by giving notice. All notices given under this Section 2.3(a) shall be irrevocable and shall be given not later than 11:00 a.m. on the day which is not less than the number of Business Days specified above for such notice. (b) CONVERSION AND RENEWALS. The Borrower may elect from time to time to convert all or part of a Prime Rate Loan into a LIBOR Loan or a LIBOR Loan into a Prime Rate Loan or to renew all or part of a LIBOR Loan by giving Bank notice at least one (1) Business Day before conversion into a Prime Rate Loan and at least three (3) Business Days before conversion into or renewal of a LIBOR Loan specifying: (a) the renewal or conversion date; (b) the amount of the Prime Rate Loan or LIBOR Loan to be converted or renewed; (c) in the case of conversion, whether the conversion is into a Prime Rate Loan or a LIBOR Loan; and (d) in the case of a renewal of, or a conversion into, a LIBOR Loan, the duration of the Interest Period applicable thereto; provided that (i) the minimum principal amount of each Prime Rate Loan outstanding after a renewal or conversion shall be $250,000.00 and the minimum principal amount of each LIBOR Loan after a renewal or conversion shall be $250,000; and (ii) a LIBOR Loan can be converted only on the last day of the Interest Period for such LIBOR Loan. All notices given under this Section 2.3(b) shall be irrevocable and shall be given not later than 11:00 a.m. on the day which is not less than the number of Business Days specified above for such notice. If the Borrower shall fail to give Bank the notices specified above for the renewal or conversion of a LIBOR Loan prior to the end of the Interest Period with respect thereto, such LIBOR Loan shall by automatically converted into a Prime Rate Loan on the last day of the Interest Period for such LIBOR Loan. (c) PAYMENTS OF INTEREST. The Credit shall bear interest at the rates of interest set forth in Section 2.06 of the Credit Agreement. Interest on the Credit shall be paid in immediately avail- able funds to the Bank at One Marine Midland Center, Buffalo, New York as follows: (i) Except to the extent that the Credit is a LIBOR Loan, - 5 - on the first day of each month commencing after the date of this Agreement and at maturity of the Credit; and (ii) For each LIBOR Loan, on the last day of the Interest Period with respect thereto and in the case of any Interest Period greater than three months, at three month intervals after the first day of such Interest Period. (d) DEFAULT RATE. Any principal amount not paid when due (at maturity, by acceleration or otherwise) shall bear interest thereafter until paid in full, payable on demand, at a rate per annum equal to the rate of interest otherwise payable on such amount plus four percent (4%) until paid in full. 2.4 PREPAYMENT. (a) OPTIONAL PREPAYMENT - PRIME RATE LOANS. The Borrower may prepay, without premium, all or part of the indebtedness consisting of Prime Rate Loans, together with interest on the principal so prepaid to the date of prepayment. Subject to Subsection 2.4 (c) below, any partial prepayment shall be applied to payments of the Note in inverse order of maturity. (b) OPTIONAL PREPAYMENT - LIBOR LOANS. The Borrower shall have the right to prepay without premium all or any portion of the indebtedness consisting of LIBOR Loans on the expiration day of the applicable Interest Period. If any LIBOR Loan is prepaid at any other time the Borrower shall pay to the Bank such amount or amounts as the Bank deems necessary to compensate it for any loss or expense sustained or incurred by the Bank with respect to such repayment or prepayment. Subject to subsection 2.4(c) below, any partial prepayment shall be applied to payments of the Note in inverse order of maturity. (c) MANDATORY PREPAYMENT. In addition to the installments otherwise specified in the Note, the Borrower shall prepay $100,000 of principal of the Note in five (5) annual installments. The Borrower has prepaid one (1) installment on April 1, 1995 in the amount of $8333.00 and one (1) installment in the amount of $22,619.75 on or before April 1, 1996, and the Borrower shall prepay three (3) installments in the amounts of $22,916.75 each, payable on or before the first day of each April of each year beginning April 1, 1997 ("Mandatory Prepayment") which Mandatory Prepayment shall be applied to installments of principal of the Note in inverse order of maturity. Any prepayment in any Plan Year exceeding the amount of the required Mandatory Prepayment shall be applied to the Mandatory Prepayment due in the immediately succeeding year or years, until the - 6 - Borrower has prepaid the full $100,000 which must be paid pursuant to this Section 2.4(c). 2.5 USE OF PROCEEDS. The Borrower covenants to the Bank that the proceeds advanced under this Agreement have and will be used exclusively to acquire employer securities within the meaning of Section 409(1) of the Internal Revenue Code and Borrower directed the Bank to advance such proceeds directly to the Guarantor for such purpose. The Guarantor covenants to the Bank that it has used such proceeds, and the proceeds of the funds it received from the Borrower which the Borrower received from its $4,000,000 loan from Fleet Bank, to reduce the Guarantor's working capital lines, to pay for certain environmental remediation work (estimated to cost approximately $2,766,000) and to fund the stock redemption to the Estates of Neville Proctor and Walter Ersing. 2.6 SPECIAL PROVISIONS GOVERNING LIBOR LOANS The provisions set forth in the following sections of the Credit Agreement: Section 2.10 (Illegality), Section 2.11 (Disaster), Section 2.12 (Increased Cost), and Section 2.13 (Funding Loss Indemnification) are incorporated herein by reference as if fully set forth. The provisions as incorporated herein shall survive the termination of the Credit Agreement. 2.7 TAXES. If any taxes (other than taxes with respect to the income of the Bank), or duties of any kind shall be payable, or ruled to be payable, by or to any taxing authority of or in the United States, or any foreign country, or any political subdivision of any thereof, in respect of any of the transactions contemplated by this Agreement (including, but not limited to, execution, delivery, performance, enforcement, or payment of principal or interest of or under the Note or this Agreement, or the making of a LIBOR Loan), by reason of any now existing or hereafter enacted statute, rule, regulation or other determination (excluding any taxes imposed on or measured by the net income of the Bank), the Company will: (1) pay on written request therefor all such taxes or duties, including interest and penalty, if any, (2) promptly furnish the Bank with evidence of any such payment, and (3) indemnify and hold the Bank and any holder or holders of the Note harmless and indemnified against any liability or liabilities with respect to or in connection with any such taxes or the payment thereof or resulting from any delay or omission to pay such taxes. - 7 - ARTICLE III. REPRESENTATIONS AND WARRANTIES The Borrower makes the following representations and warranties, which shall be deemed to be continuing representations and warranties so long as any indebtedness of the Borrower to the Bank, including indebtedness for fees and expenses, remains unpaid: 3.1 AUTHORITY. The Borrower is a trust established under the laws of New York and has all necessary power and authority to enter into this Agreement and to execute, deliver and perform this Agreement, the Note, the Pledge Agreement and any other document executed in connection with this Agreement, all of which have been duly authorized by the Trust Agreement. 3.2 VALID AND BINDING OBLIGATION. This Agreement, the Pledge Agreement and any other document executed in connection herewith, and the Note constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms. 3.3 NO PENDING LITIGATION. There are not any actions, suits, proceedings (whether or not purportedly on behalf of the Borrower) or investigations pending or, to the knowledge of the Borrower, threatened against the Borrower or any basis therefor, which, if adversely determined, would, in any case or in the aggregate, materially adversely affect the financial condition of the Borrower or which question the validity of this Agreement, the Note, the Guaranty, the Pledge Agreement or other documents required by this Agreement, or any action taken or to be taken pursuant to any of the foregoing. 3.4 NO CONSENT OR FILING. Other than the filings and approvals contemplated by Section 3.5, no consent, license, approval or authorization of, or registration, declaration or filing with, any court, governmental body or authority or other person or entity is required in connection with the valid execution, delivery or performance of this Agreement, the Note, the Pledge Agreement or other documents required by this Agreement or in connection with any of the transactions contemplated thereby. 3.5 COMPLIANCE WITH LAWS AND REGULATIONS. All necessary action has been taken to adopt the ESOP and appoint the Trustees, and the Board of Directors of the Guarantor has directed the officers of the Guarantor to have the ESOP approved by the United States Department of the Treasury as qualified under Section 401(a) and 4975(e)(7) of the Internal Revenue Code as amended. - 8 - 3.6 GUARANTOR'S OBLIGATIONS. The Guarantor has full power and authority to guarantee, to execute and deliver this Agreement, the Guaranty and to take all other action called for by the Guaranty. The Guaranty and this Agreement constitute the legal, valid and binding obligations of the Guarantor enforceable in accordance with the terms contained therein, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. 3.7 FEDERAL REGULATIONS. The Borrower is not engaged principally, or as one of its important activities, in the business of extending or arranging for the extension of credit for the purpose of purchasing or carrying "margin security" or "margin stock" (as defined in Regulations G and U issued by the Board of Governors of the Federal Reserve System). Likewise, the Borrower does not own or intend to carry or purchase any such "margin security" or "margin stock," and the Borrower will not use the proceeds advanced pursuant to this Agreement to purchase or carry (or refinance any borrowing the proceeds of which were used to purchase or carry) any such "margin security" or "margin stock." 3.8 CREDIT AGREEMENT. The representations and warranties made by the Guarantor, set forth in Article VI of the Credit Agreement are true and corrent, and are incorporated herein by reference as if fully set forth. The representations and warranties as incorporated herein shall survive the termination of the Credit Agreement. ARTICLE IV. AFFIRMATIVE COVENANTS During the term of this Agreement, and so long thereafter as any indebtedness of the Borrower to the Bank shall remain unpaid, including any indebtedness for fees and expenses, the Borrower will: 4.1 PAYMENTS. Duly and punctually pay the principal of and interest on all indebtedness incurred by it pursuant to this Agreement in the manner set forth in this Agreement. 4.2 FUTURE FINANCIAL STATEMENTS. Furnish to the Bank the financial statements and other certificates and information described in Section 7.02 of the Credit Agreement. 4.3 BOOKS AND RECORDS. Keep proper books and records in accordance with generally accepted accounting principles consistently applied and notify the Bank promptly in writing of any proposed change in the location at which such books and records are maintained. - 9 - 4.4 COMPLIANCE WITH LAW. Comply in all material respects with all applicable laws and governmental rules and regulations. 4.5 USE OF PROCEEDS. Use the proceeds of the loan solely and exclusively for the purpose of acquiring employer securities within the meaning of Internal Revenue Code Section 409(1). 4.6 TAXES. Pay all taxes, assessments and other charges of every nature which may be imposed, levied or assessed against the Borrower or the ESOP (and provide to the Bank receipted bills therefor if requested by the Bank), prior to the date of attachment of any penalties or liens with respect thereto (other than liens attaching prior to payment becoming due if payment is made when due); provided, however, this Agreement shall not be deemed to require such payment so long as the validity of such tax, assessment or other charge is being contested in good faith by appropriate proceedings diligently conducted and so long as the enforcement of any such lien is appropriately stayed. 4.7 ESOP. Promptly file, or cause the Guarantor to file, with the appropriate District Director or other official of the Internal Revenue Service for a determination letter that the ESOP is a qualified plan under Internal Revenue Code Section 401(a) and take all necessary and appropriate action to maintain the ESOP in full force and effect and to keep it fully qualified under the Internal Revenue Code and regulations thereunder, from time to time in effect. 4.8 REPORTS AND NOTICES. Furnish promptly to the Bank such information as the Bank may reasonably require concerning the Borrower or the ESOP and assets held by the ESOP or the Borrower and such other information as the Bank may reasonably require; to notify the Bank promptly of any litigation instituted or threatened against Borrower or the ESOP, any deficiencies asserted or liens filed by the Internal Revenue Service against the Borrower, the ESOP or the Trustee, any audits of any Federal or State tax return of Borrower or the ESOP, and the results of any such audit; and any other matters which could reasonably be expected to adversely affect the Borrower's ability to perform its obligations under this Agreement. 4.9 INFORMATION. Provide, or cause the Trustees to provide, to the Bank copies of all information incident to the Borrower's ownership of shares of the Guarantor. 4.10 AMENDMENTS. Refrain, and cause the Guarantor to refrain, from amending or modifying, or agreeing to the amendment or modification of, the ESOP, or other matters relating to the ESOP or its operation if the effect of - 10 - any such amendment or modification, or of all such amendments and modifications in the aggregate, would be to cause the ESOP to lose its qualification under Internal Revenue Code Section 401(a) or the Trust's qualification under Section 501(a), or would jeopardize the tax effects of the ESOP or the deductibility of contributions by the Guarantor to the ESOP, or would result in any violation of the Employee Retirement Income Security Act of 1974, as amended. 4.11 NOTICE. Notify the Bank promptly in writing of the Guarantor's failure to make any contribution to the ESOP or to the Borrower that is required by the ESOP. 4.12 OTHER ACTS. Execute and deliver, or cause to be executed and delivered, to the Bank all further documents and perform all other acts and things which the Bank deems necessary or appropriate to protect or perfect any security interests in any property directly or indirectly securing payment of any indebtedness of the Borrower to the Bank. 4.13 CREDIT AGREEMENT AFFIRMATIVE COVENANTS. Guarantor shall comply with all affirmative covenants set forth in Article VII of the Credit Agreement which covenants as amended from time to time are incorporated herein by reference as if fully set forth. The foregoing covenants as incorporated herein shall survive the termination of the Credit Agreement. ARTICLE V. NEGATIVE COVENANTS During the term of this Agreement and so long thereafter as any of the indebtedness of the Borrower to the Bank, including any indebtedness for fees and expenses, shall remain unpaid, the Borrower, without the prior written consent of the Bank, will not: 5.1 BORROWED MONEY. Create, incur, assume or suffer to exist any liability for borrowed money except to the Bank, except for an existing loan from Fleet Bank in the original amount of $4,000,000.00 which loan was used only to purchase shares of stock of the Guarantor. 5.2 ENCUMBRANCES. Create, incur, assume or suffer to exist any mortgage, lien, security interest, pledge or other encumbrance on any of its property or assets, whether now owned or hereafter owned or acquired, other than encumbrances in favor of the Bank and other than a pledge of shares in favor of Fleet Bank of New York to secure payment of the loans described in Section 5.1 above. - 11 - 5.3 MAINTAIN EXISTENCE. Take any action that would cause the Borrower to not maintain itself as it is presently constituted or take any action that would cause the ESOP and the Borrower not to be a qualified employee stock ownership plan and trust under the Internal Revenue Code or the regulations promulgated thereunder. 5.4 CREDIT AGREEMENT NEGATIVE COVENANTS. Guarantor shall not breach the negative covenants set forth in Article VIII of the Credit Agreement which covenants as amended from time to time are incorporated herein by reference as if fully set forth. The foregoing covenants as incorporated herein shall survive the termination of the Credit Agreement. ARTICLE VI. DEFAULT 6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an event of default (individually, Event of Default, or, collectively, Events of Default): (a) NONPAYMENT. Nonpayment when due whether by acceleration or otherwise of principal of or interest on the Note or of any fee or premium provided for hereunder. (b) NEGATIVE COVENANTS. Default in the observance of any of the covenants or agreements of the Borrower contained in Article V of this Agreement. (c) OTHER COVENANTS. Default in the observance of any of the covenants or agreements of the Borrower contained in this Agreement, other than in Section 4.1 or Article V, or in any other agreement with the Bank, which is not remedied within thirty (30) days after notice thereof by the Bank to the Borrower. (d) REPRESENTATIONS. If any certificate, statement, representation, warranty or financial statement furnished by or on behalf of the Borrower pursuant to or in connection with this Agreement (including, without limitation, representations and warranties contained herein) or as an inducement to the Bank to enter into this Agreement or any other lending agreement with the Borrower shall prove to have been false in any material respect at the time as of which the facts therein set forth were certified, or to have omitted any substantial contingent or unliquidated liability or claim against the Borrower, or if on the date of the execution of this Agreement there shall have been any materially adverse change in any of the facts disclosed by any such statement or certificate, which change shall not have been disclosed by the Borrower to the Bank at or prior to the time of such execution. - 12 - (e) OTHER INDEBTEDNESS AND AGREEMENTS. Nonpayment by the Borrower of any indebtedness (other than as evidenced by the Note) owing by the Borrower when due (or, if permitted by the terms of the applicable document, within any applicable grace period), whether such indebtedness shall become due by scheduled maturity, by required prepayment, by acceleration, by demand or otherwise, or failure to perform any term, covenant or agreement on its part to be performed under any agreement or instrument (other than this Agreement) evidencing or securing or relating to any indebtedness owing by the Borrower when required to be performed if the effect of such failure causes the holder to accelerate the maturity of such indebtedness. (f) JUDGMENTS. If any judgment or judgments in an amount exceeding $1,000,000 in the singular or in the aggregate (other than any judgment for which it is fully insured) against the Borrower remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 45 days. (g) TERMINATION OF ESOP. The termination for any cause whatsoever of the ESOP without the prior written consent of the Bank. (h) GUARANTOR'S DEFAULT. The occurrence of any Event of Default applicable to Guarantor contained in this Article VI, or the breach by Guarantor of any term, condition or covenant contained in the Guaranty. (i) CREDIT AGREEMENT. The occurrence of any Event of Default set forth in the Credit Agreement, whether or not the Credit Agreement remains in effect. 6.2 EFFECTS OF AN EVENT OF DEFAULT. (a) Upon the happening of one or more Events of Default (except a default under either Section 6.1(d) or 6.1(e) hereof), the Bank may declare any obligations it may have hereunder to be canceled and the principal of the Note then outstanding to be immediately due and payable, together with all interest thereon and fees and expenses accruing under this Agreement. Upon such declaration, any obligations the Bank may have hereunder shall be immediately canceled and the Note then outstanding shall become immediately due and payable without presentation, demand or further notice of any kind to the Borrower. (b) Upon the happening of one or more Events of Default under Section 6.1(d) or 6.1(e) hereof, the Bank's obligations hereunder shall be canceled immediately, automatically and without notice, and the Note then outstanding - 13 - shall become immediately due and payable without presentation, demand or notice of any kind to the Borrower. ARTICLE VII. EXPENSES The Guarantor shall reimburse the Bank promptly for all of its expenses including, without limitation, reasonable counsel fees, filing fees and recording fees incurred in connection with this Agreement and with any indebtedness subject hereto, for any taxes which the Bank may be required to pay in connection with the execution and delivery of this Agreement and the Note and for any expenses, including actual counsel fees and expenses, incident to the lawful enforcement of any provision of this Agreement, the Note, the Guaranty or the Pledge Agreement. ARTICLE VIII. MISCELLANEOUS 8.1 AMENDMENTS AND WAIVERS. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof; supersedes all prior negotiations between the parties with respect to the subject matter hereof (and specifically supercedes the Original Agreement); no modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made except by a written agreement subscribed by the Trustee and duly authorized officers of the Bank and the Guarantor. 8.2 DELAYS AND OMISSIONS. No course of dealing and no delay or omission by the Bank in exercising any right or remedy hereunder or with respect to any indebtedness of the Borrower to the Bank shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. The Bank may remedy any default by the Borrower hereunder or with respect to any other person, firm or corporation in any reasonable manner without waiving the default remedied and without waiving any other prior or subsequent default by the Borrower and shall be reimbursed for its expenses in so remedying such default. All rights and remedies of the Bank hereunder are cumulative. 8.3 SUCCESSORS AND ASSIGNS. The Borrower, the Guarantor and the Bank as used herein shall include the legal representatives, successors and assigns of those parties. - 14 - 8.4 NOTICES. Any notice or demand to be given hereunder shall be duly given if delivered, sent by facsimile transmission or mailed as follows: To the Borrower - Columbus McKinnon Corporation Employee Stock Ownership Trust 140 John James Audubon Parkway Amherst, New York 14228-1197 Attn: Robert L. Montgomery, Trustee To the Bank - Marine Midland Bank One Marine Midland Center Buffalo, New York 14203 Attn: Regional Commercial Banking Department With a Copy to - Phillips, Lytle, Hitchcock, Blaine & Huber 3400 Marine Midland Center Buffalo, New York 14203 Attn: Raymond H. Seitz, Esq. To the Guarantor - Columbus McKinnon Corporation 140 John James Audubon Parkway Amherst, New York 14228-1197 Attn: Robert L. Montgomery Executive Vice President and shall be deemed effective if delivered upon delivery and if mailed upon deposit in an official depository maintained by the United States Post Office for the collection of mail. 8.5 GOVERNING LAW. This Agreement, the transaction described herein and the obligations of the Bank, the Borrower and the Guarantor shall be construed under, and governed by, the internal laws of the State of New York, without regard to principles of conflicts of laws. 8.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the Bank, the Borrower and the Guarantor on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same Agreement. - 15 - 8.7 TITLES. Titles to the sections of this Agreement are solely for the convenience of the Bank, the Borrower and the Guarantor and are not an aid in the interpretation of this Agreement or any part thereof. 8.8 INCONSISTENT PROVISIONS. The terms of this Agreement and any related agreements, instruments or other documents shall be cumulative except to the extent that they are specifically inconsistent with each other, in which case the terms of this Agreement shall prevail. 8.9 COURSE OF DEALING. Without limitation of the foregoing, the Bank shall have the right at all times to enforce the provisions of this Agreement and all other documents executed in connection herewith in strict accordance with their terms, notwithstanding any course of dealing or performance by the Bank in refraining from so doing at any time and notwithstanding any custom in the banking trade. Any delay or failure by the Bank at any time or times in enforcing its rights under such provisions in strict accordance with their terms shall not be construed as having created a course of dealing or performance modifying or waiving the specific provisions of this Agreement. 8.10 COLLATERAL RELEASE. The Bank shall release to the Borrower all Collateral remaining in its possession upon payment in full of all indebtedness of the Borrower to the Bank. Prior to such payment in full, the Bank shall release Collateral to the Borrower annually, the number of shares to be released each Plan Year to be equal to the number of encumbered shares held immediately before the release multiplied by a fraction, the numerator of which is the amount of principal and interest paid on the Note during the Plan Year and the denominator of which is the sum of the numerator plus the principal and interest to be paid on the Note for all future Plan Years. For this purpose, the interest to be paid in future years is to be computed by using the interest rates in effect as of the last day of the Plan Year for which the calculation is made. Each annual release of Collateral shall be calculated as of March 31 and shall occur within ninety (90) days of the end of the Plan Year. In the event of any change in the shares which occurs between March 31 and the date of the release, by reason of a dividend payable in shares, recapitalization, merger, consolidation, split-up, combination or exchange of shares, or the like, appropriate adjustments shall be made to the number of shares to be released. The "Plan Year" means the twelve-consecutive month period ending March 31. 8.11 THE TRUSTEE. The Bank acknowledges that the Trustee is acting solely as Trustee of the Borrower and not in its individual capacity in executing, delivering, and performing under this Agreement, the Note and the Collateral Documents, and the Bank shall look solely to the Collateral of the - 16 - Borrower and not to the individual assets of the Trustee for payment or satisfaction of any and all obligations of the Borrower hereunder. 8.12 NON-RECOURSE. Notwithstanding any other provision of this Agreement or the Note, no recourse shall be had against the Borrower for the payment of the principal of or interest on the Note other than to the collateral now or hereafter pledged pursuant to the Pledge Agreement. 8.13 JURY TRIAL WAIVER. THE BORROWER, THE BANK AND THE GUARANTOR WAIVE ANY RIGHT TO TRIAL BY JURY WHICH THEY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR EQUITY, IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS RELATED THERETO. 8.14 CONSENT TO JURISDICTION. THE BORROWER, THE BANK AND THE GUARANTOR AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT MAY BE COMMENCED IN THE SUPREME COURT OF NEW YORK IN ERIE COUNTY, OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers, all as of the 5th day of August, 1996. MARINE MIDLAND BANK By /s/ Cary J. Haller -------------------------- Cary J. Haller Vice President COLUMBUS MCKINNON COLUMBUS MCKINNON CORPORATION CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST By: /s/ Robert L. Montgomery By /s/ Robert L. Montgomery ------------------------ -------------------------- Robert L. Montgomery Robert L. Montgomery, Trustee Executive Vice President By /s/ Peter A. Grant -------------------------- Peter A. Grant, Trustee By /s/ Kenneth A. McCreadie -------------------------- Kenneth A. McCreadie, Trustee EX-10.7 6 AMENDMENT #1 TO MARINE ESOP LOAN AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AMONG COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, COLUMBUS MCKINNON CORPORATION, AND MARINE MIDLAND BANK This First Amendment to Amended and Restated Loan Agreement ("Amendment") is made as of the 16th day of October, 1996 by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, a trust which was created under the laws of the State of New York ("Borrower"), Columbus McKinnon Corporation, a corporation organized under the laws of the State of New York ("Guarantor"), and Marine Midland Bank, a banking corporation organized under the laws of the State of New York ("Bank"). W I T N E S S E T H WHEREAS, Bank, Guarantor and Borrower were parties to a Loan Agreement dated October 27, 1994 ("Original Loan Agreement"); and WHEREAS, Bank, Guarantor, Fleet Bank, and Fleet Bank, as Administrative Agent, have previously entered into a Credit Agreement dated as of August 5, 1996 ("Prior Credit Agreement"); and WHEREAS, the Original Loan Agreement was amended and restated on August 5, 1996 ("Restated Agreement") to incorporate certain covenants and pricing provisions of the Prior Credit Agreement; and WHEREAS, all obligations of the parties under and arising out of the Prior Credit Agreement have been or will be paid in full on or prior to the date hereof, and the Prior Credit Agreement has been or will be terminated, and of no further force or effect, on or prior to the date hereof; and WHEREAS, Guarantor, certain banks, financial institutions and other institutional lenders party thereto, and Fleet Bank, as Administrative Agent for the Lender Parties ("Administrative Agent") have entered or will enter into a Credit Agreement, dated of even date herewith ("New Credit Agreement"); and WHEREAS, Bank, Guarantor and Borrower wish to amend the Restated Agreement to delete certain covenants and provisions of the Prior Credit Agreement which were incorporated into the Restated Agreement, incorporate certain covenants and provisions of the New Credit Agreement into the Restated Agreement and make certain other changes, as and to the extent set forth in this - 2 - Amendment and subject to the terms and conditions stated herein; it being understood that no additional money is being advanced in connection with this Amendment and that the Note (as defined in the Restated Agreement) is not being replaced and remains an obligation of the Borrower. NOW, THEREFORE, it is agreed as follows: A. DEFINITIONS. All capitalized terms used but not herein defined shall have the meanings set forth in the Restated Agreement. B. AMENDMENTS. The Restated Agreement is hereby amended as follows: 1. The definitions of "Credit Agreement", "Leverage Ratio", "LIBOR Interest Rate", "London Interbank Offered Rate", "Prime Rate" and "Tangible Net Worth" set forth in Section 1.1 of the Restated Agreement are hereby deleted in their entirety. 2. The Restated Agreement is hereby amended to add the following definitions to Section 1.1 in the applicable alphabetical order: "Credit Agreement" - the Credit Agreement among the Guarantor, the banks, financial institutions and other institutional lenders party thereto, and Fleet Bank, as Administrative Agent for the Lender Parties, dated as of even date herewith as amended, restated or otherwise modified from time to time. "LIBOR Interest Rate" - shall have the meaning of "Eurodollar Rate" as set forth in the Credit Agreement. "Prime Rate" - shall have the meaning set forth in the Credit Agreement. 3. The first sentence of Section 2.3(c) of the Restated Agreement is hereby deleted and replaced in its entirety by the following: PAYMENTS OF INTEREST. The Credit shall bear interest at the rates of interest set forth in Section 2.07 of the Credit Agreement. For purposes of this subsection 2.3(c) only, the term "Advances" as defined in the Credit Agreement shall include the outstanding and unpaid principal amount of the Credit owed to the Bank hereunder, the term "Prime Rate Advance" shall include Prime Rate Loans, the term "Eurodollar Rate Advances" shall include LIBOR Loans, and other defined terms used in Section 2.07 of the Credit - 3 - Agreement shall have the meanings ascribed thereto in the Credit Agreement. 4. The first sentence of Section 2.6 of the Restated Agreement is hereby deleted and replaced in its entirety by the following: 2.6 SPECIAL PROVISIONS GOVERNING LIBOR LOANS The provisions set forth in the following sections of the Credit Agreement: Section 2.02(d), Section 2.10 (Increased Costs, Etc.), and subsection 8.04(c) (Costs and Expenses) are incorporated herein by reference as if fully set forth, mutatis mutandis. 5. The first sentence of Section 3.8 of the Restated Agreement is hereby deleted and replaced in its entirety by the following: 3.8 CREDIT AGREEMENT. The representations and warranties made by the Guarantor, set forth in Article IV of the Credit Agreement are true and correct, and are incorporated herein by reference as if fully set forth. 6. Section 4.2 of the Restated Agreement is hereby deleted and replaced in its entirety by the following: 4.2 FUTURE FINANCIAL STATEMENTS. Furnish to the Bank the financial statements and other certificates and information described in Section 5.03 of the Credit Agreement, at the times specified in such Section 5.03. 7. Section 4.13 of the Restated Agreement is hereby deleted and replaced in its entirety by the following: 4.13 CREDIT AGREEMENT AFFIRMATIVE COVENANTS. Guarantor shall comply with all affirmative and financial covenants and reporting requirements set forth in Sections 5.01, 5.03 and 5.04 of the Credit Agreement which covenants and requirements as amended from time to time are incorporated herein by reference as if fully set forth. The foregoing covenants and requirements as incorporated herein shall survive the termination of the Credit Agreement. 9. The first sentence of Section 5.4 of the Restated Agreement is hereby deleted and replaced in its entirety by the following: - 4 - 5.4 CREDIT AGREEMENT NEGATIVE COVENANTS. Guarantor shall not breach the negative covenants set forth in Section 5.02 of the Credit Agreement which covenants as amended from time to time are incorporated herein by reference as if fully set forth. C. REPRESENTATIONS AND WARRANTIES. 1. The Borrower and the Guarantor have full power, authority and legal right to enter into this Amendment, and to take all action required of them under this Amendment. The Borrower hereby represents and warrants that the execution, delivery and performance by the Borrower of this Amendment has been duly authorized by all necessary action, if any, and that this Amendment is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally or to general principles of equity. 2. The Borrower and the Guarantor each hereby represents and warrants that the execution, delivery and performance of this Amendment by the Borrower and the Guarantor, respectively does not, and will not, contravene or conflict with any provision of (i) law or (ii) any judgment, decree or order, and does not, and will not, contravene or conflict with, or cause any lien to arise under, any provision of the Trust Agreement or any other agreement, instrument or other document binding upon or otherwise affecting the Borrower, the Guarantor, any property subject to the Trust Agreement or Plan, or any property of the Guarantor. 3. All of the representations and warranties contained in the Restated Agreement, after giving effect to this Amendment, including, without limitation, those contained in Article 3 thereof, and each other agreement and document executed in connection therewith are true and correct on and as of the date hereof as though made on the date hereof, and no Event of Default exists under the Restated Agreement or will exist after or be triggered by the execution and delivery of this Amendment or any of the other agreements and documents contemplated hereby. In addition, the Borrower hereby represents, warrants and affirms that each of the other agreements and documents executed in connection with or relating to the Restated Agreement remain in full force and effect. 4. Guarantor hereby acknowledges that it has read the Amendment and consents to the terms hereof and further confirmsand agrees that, - 5 - notwithstanding the effectiveness of the Amendment, the obligations of the Guarantor under the Guaranty shall not be impaired or affected and the Guaranty is and shall continue to be in full force and effect and is hereby confirmed. D. CONDITIONS PRECEDENT TO AMENDMENTS. The effectiveness of this Amendment shall be subject to the fulfillment (to the satisfaction of the Bank) of the following conditions precedent: 1. AMENDMENT DOCUMENTATION. The Borrower shall have delivered to Bank all of the following, each duly executed if required, and dated the date hereof, and each in form and substance satisfactory to Bank: a. AMENDMENT. The Borrower, the Bank and the Guarantor shall have executed and delivered this Amendment. b. OPINION OF COUNSEL. Counsel to the Borrower shall have delivered to Bank an opinion in form and substance satisfactory to Bank and its counsel, which opinion shall include an express statement to the effect that Bank is authorized to rely on such opinion. c. OTHER. Such other documents and such other actions as Bank may reasonably request. 2. NO DEFAULT. As of the closing date of this Amendment, no Event of Default shall have occurred or be continuing under the Restated Agreement after giving effect to this Amendment. 3. REPRESENTATIONS AND WARRANTIES. The repre- sentations and Warranties set forth in Section C hereof shall be true and correct on the closing date of this Amendment. 4. LEGAL MATTERS. All legal matters incident hereto shall be satisfactory to counsel to the Bank. E. MISCELLANEOUS. 1. Except as specifically amended by this Amend- ment, the Restated Agreement and each other agreement and document executed in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. 2. The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition or to any amendment or modification of any term or condition of the Restated Agreement or any other - 6 - agreement or document executed in connection therewith, except, upon the effectiveness of this Amendment, as specifically amended hereby, or (ii) prejudice any right, power or remedy which Bank now has or may have in the future under or in connection with the Restated Agreement or any other agreement or document executed in connection therewith. Upon the effectiveness of this Amendment, each reference in the Restated Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Restated Agreement as amended hereby and each reference in any other agreement or document executed in connection with the Restated Agreement to the Restated Agreement or any word or words of similar import shall be and mean a reference to the Restated Agreement as amended hereby. 3. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. 4. COSTS AND EXPENSES. The Guarantor and the Borrower jointly and severally shall reimburse Bank promptly for all reasonable costs and expenses, including reasonable counsel fees and expenses, incurred by Bank in connection with this Amendment, any indebtedness created or evidenced hereunder and, in the case of Guarantor, any other obligations; and for costs and expenses, including reasonable counsel fees, of Bank incident to the enforcement of any provision of this Amendment, the Note, any other documents executed in connection with the Restated Agreement and, in the case of the Guarantor, any other obligations. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 6. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [SIGNATURE PAGE FOLLOWS] - 7 - IN WITNESS WHEREOF, Borrower, Guarantor and Bank have entered into this First Amendment to Amended and Restated Loan Agreement on the date first written above. COLUMBUS McKINNON CORPORATION STOCK OWNERSHIP TRUST By: /s/ Kenneth G. McCreadie ----------------------------- KENNETH G. McCREADIE, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement By: /s/ Peter A. Grant ----------------------------- PETER A. GRANT, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement By: /s/ Robert L. Montgomery, Jr. ----------------------------- ROBERT L. MONTGOMERY, JR., as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- Robert L. Montgomery, Jr. Executive Vice President MARINE MIDLAND BANK By: /s/ Cary J. Haller ----------------------------- Cary J. Haller Vice President EX-10.8 7 2ND AMENDMENT TO RESTATED MARINE ESOP LOAN SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AMONG COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, COLUMBUS MCKINNON CORPORATION, MARINE MIDLAND BANK ---------------------------------------- This Second Amendment to Amended and Restated Loan Agreement is made as of March 31, 1998 (this "Second Amendment"), is entered into by and among COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, a trust which was created under the laws of the State of New York ("Borrower"), COLUMBUS MCKINNON CORPORATION, a corporation organized under the laws of the State of New York ("Guarantor"), and MARINE MIDLAND BANK, a banking corporation organized under the laws of the State of New York ("Bank"). W I T N E S S E T H: WHEREAS, Bank, Guarantor and Borrower are parties to a Loan Agreement dated October 27, 1994 (the "Original Loan Agreement"); and WHEREAS, Guarantor, the banks, financial institutions and other institutional lenders party thereto, and Fleet Bank, as Administrative Agent, have previously entered into a Credit Agreement dated as of October 16, 1996, as amended (the "Prior Credit Agreement"); and WHEREAS, the Original Loan Agreement was amended and restated on August 5, 1996 and further amended by the First Amendment thereto, dated as of October 16, 1996 (the "First Amendment" and the Original Loan Agreement as so amended, restated and further amended, the "Restated Agreement"); and WHEREAS, the obligations of the parties under and arising out of the Prior Credit Agreement have been or will be paid in full on or prior to the date hereof, and the Prior Credit Agreement has been or will be terminated and of no further force and effect on or prior to the date hereof; and WHEREAS, Guarantor, the banks, financial institutions and other institutional lenders party thereto, and Fleet National Bank, as Administrative Agent, have entered into a Credit Agreement, dated as of even date herewith (the "New Credit Agreement"); and WHEREAS, Bank, Guarantor and Borrower wish to amend the Restated Agreement to delete certain provisions of the Prior Credit Agreement which were incorporated into the Restated Agreement incorporate certain provisions of the New Credit Agreement and make incorporate certain provisions of the New Credit Agreement and make such other changes, as and to the extent set forth in this Second amendment and subject to the terms and conditions stated herein; it being understood that no additional money is being advanced in connection with this Second amendment and that the Note (as defined in the restated Agreement) is not being replaced and remains an obligation of the Borrower. NOW THEREFORE, it is agreed as follows: A. Definitions. All capitalized terms used but not herein defined shall have the meanings set forth in the Restated Agreement. B. Amendments. The Restated Agreement is hereby amended as follows: 1. Section l.1 of the Restated Agreement is hereby amended by deleting the existing definition of "Credit Agreement" in its entirety, and replacing it with the following, in the appropriate alphabetical order: "'Credit Agreement' - The Credit Agreement among Guarantor, the banks, financial institutions and other institutional lenders party thereto, and Fleet National Bank as Administrative Agent, dated as of March , 1998, as amended, restated or otherwise modified from time to time." 2. Section 2.6 of the Restated Agreement (as amended by the First Amendment) is hereby amended by deleting the first sentence of existing Section 2.6 in its entirety and replacing it with the following: "Special Provisions Governing LIBOR Loans. The provisions set forth in the following sections of the Credit Agreement: Section 2.01(e), Section 2.10 (Increased Costs, Etc.) and Section 8.04 (c) (Costs and Expenses) are incorporated herein by reference as if fully set forth." C. Representations and Warranties. 1. The Borrower and the Guarantor have full power, authority and legal right to enter into this Second Amendment, and to take all action required of them under this Amendment. The Borrower hereby represents and warrants that the execution, delivery and performance by the Borrower of this Second Amendment has been duly authorized by all necessary action, if any, and that this Second Amendment is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally or to general principles of equity. 2. The Borrower and the Guarantor each hereby represents and warrants that the execution, delivery and performance of this Second Amendment by the Borrower and the Guarantor, respectively, does not and will not, contravene or conflict with any provision of (i) law or (ii) any judgment, decree or order, and does not, and will not, contravene or conflict with, or cause any lien to arise under, any provision of the Trust Agreement or any other agreement, instrument or other document binding upon or otherwise affecting the Borrower, the Guarantor, any property subject to the Trust Agreement or Plan, or any property of the Guarantor. 3. All of the representations and warranties contained in the Restated Agreement, after giving effect to this Second Amendment, including, without limitation, those contained in Article 3 thereof, and each other agreement and document executed in connection therewith are true and correct on and as of the date hereof as though made on the date hereof, and no Event of Default exists under the Restated Agreement or will exist after or be triggered by the execution and delivery of this Second amendment or any of the other agreements and documents contemplated hereby. In addition, the Borrower hereby represents, warrants and affirms that each of the other agreements and documents executed in connection with or relating to the Restated Agreement remain in full force and effect. 4. Guarantor hereby acknowledges that it has read the Second Amendment and consents to the terms hereof and further confirms and agrees that, notwithstanding the effectiveness of the Second amendment, the obligations of the Guarantor under the Guaranty shall not be impaired or affected and the Guaranty is and shall continue to be in full force and effect and is hereby confirmed. D. Conditions Precedent to Amendments. The effectiveness of this Second Amendment shall be subject to the fulfillment (to the satisfaction of the Bank) of the following conditions precedent. 1. Amendment Documentation. The Borrower shall have delivered to Bank all of the following, each duly executed, if required, and dated the date hereof, and each in form and substance satisfactory to Bank: a. Amendment. The Borrower, the Bank and the Guarantor shall have executed and delivered this Second Amendment. b. Opinion of Counsel. Counsel to the Borrower shall have delivered to Bank an opinion in form and substance satisfactory to Bank and its counsel and which opinion shall include an express statement to the effect that Bank is authorized to rely on such opinion. c. Other. Such other documents and such other actions as Bank may reasonably request. 2. No Default. As of the closing date of this Second Amendment, no Default or Event of Default shall have occurred or be continuing under the Restated Agreement. 3. Representations and Warranties. The representations and warranties set forth in Section C hereof shall be true and correct on the closing date of this Second Amendment. 4. Legal Matters. All legal matters incident hereto shall be satisfactory to counsel to the Bank. E. Miscellaneous 1. Except as specifically amended by this Second Amendment, the Restated Agreement and each other agreement and document executed in connection therewith shall remain in full force and effect and is hereby ratified and confirmed. 2. The execution, delivery and effect of this Second Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition or to any amendment or modification of any term of condition of the Restated Agreement of any other agreement or document executed in connection therewith, except, upon the effectiveness of this Second Amendment, as specifically amended hereby, or (ii) prejudice any right, power or remedy which Bank now has or may have in the future under or in connection with the Restated Agreement or any other agreement or document executed in connection therewith. Upon the effectiveness of this Second Amendment, each reference in the Restated Agreement to "this Agreement" "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference in any other agreement or document executed in connection with the Restated Agreement to the Restated Agreement or any word or words of similar import shall be and mean a reference to the Restated Agreement as amended thereby. 3. Counterparts. This Second Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. 4. Costs and Expenses. The Guarantor and the Borrower jointly and severally shall reimburse Bank promptly for all reasonable costs and expenses, including reasonable counsel fees and expenses, incurred by Bank in connection with this Second Amendment, any indebtedness created or evidenced hereunder and, in the case of Guarantor, any other obligations; and for costs and expenses, including reasonable counsel fees, of Bank incident to the enforcement of any provision of this Second Amendment, the Note, any other documents executed in connection with the Restated Agreement and, in the case of the Guarantor, any other obligations. 5. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONTRUED IN CCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 6. Headings. Section headings in this Second Amendment are included herein for convenience of reference only and shall not constitute a part of this Second Amendment for any other purpose. [Signature page follows] IN WITNESS WHEREOF, this Second Amendment to Amended and Restated Loan Agreement has been duly executed as of the date first written above. MARINE MIDLAND BANK By: /s/ Randolph M. Ross ---------------------------- Title: Authorized Aignatory #9107 -------------------------- COLUMBUS MC KINNON COLUMBUS MCKINNON CORPORATION CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST By: /s/ R. L. Montogmery By: /s/ Ivan E. Shawvan -------------------- ----------------------- Title: Executive Vice President Title: Trustee ------------------------ -------------------- By: /s/ Timothy R. Harvey ----------------------- Title: Trustee -------------------- By: /s/ Karen L. Howard ----------------------- Title: Trustee -------------------- By: /s/ R. L. Montgomery ----------------------- Title: Trustee -------------------- EX-10.9 8 3RD AMENDMENT TO MARINE ESOP TRUST LOAN AGREEMENT THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AMONG COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, COLUMBUS MCKINNON CORPORATION, AND MARINE MIDLAND BANK This Third Amendment to Amended and Restated Loan Agreement ("Amendment") is made as of the 30th day of November, 1998 by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, a trust which was created under the laws of the State of New York ("Borrower"), Columbus McKinnon Corporation, a corporation organized under the laws of the State of New York ("Guarantor"), and Marine Midland Bank, a banking corporation organized under the laws of the State of New York ("Bank"). W I T N E S S E T H WHEREAS, Bank, Guarantor and Borrower were parties to a Loan Agreement dated October 27, 1994 ("Original Loan Agreement"); and WHEREAS, Guarantor, the banks, financial institutions and other institutional lenders party thereto, and Fleet National Bank, as Administrative Agent, have previously entered into a Credit Agreement dated as of March 31, 1998 ("Credit Agreement"); and WHEREAS, the Original Loan Agreement was amended and restated on August 5, 1996 and further amended by the First Amendment thereto dated as of October 16, 1996, and by the Second Amendment thereto dated as of March 31, 1998 (the Original Loan Agreement, as so amended, the "Restated Agreement"); and WHEREAS, the Credit Agreement has been amended pursuant to Amendment No. 1 thereto dated as of September 23, 1998 to allow the Guarantor to make certain secured loans to the Borrower in an aggregate amount up to $10,000,000 to purchase shares of stock of the Guarantor which shares of stock will be pledged as security for the repayment of such loans ("Guarantor Loans"); WHEREAS, the Borrower has requested that the term of the Restated Agreement be extended until April 1, 2002 and as consideration for such extension, Guarantor has agreed that principal payments on the Guarantor Loans shall not commence until after the maturity date of the loans under the Restated Agreement; WHEREAS, Bank, Guarantor and Borrower wish to amend the Restated Agreement to provide for the Guarantor Loans, to provide for an extension of the term of the Restated Agreement and to make certain other changes, as and to the extent set forth in this Amendment and subject to the terms and conditions - 2 - stated herein; it being understood that no additional money is being advanced in connection with this Amendment and that the Note (as defined in the Restated Agreement) is being replaced in its entirety in connection herewith ("Replacement Note"). NOW, THEREFORE, it is agreed as follows: A. Definitions. All capitalized terms used but not herein defined shall have the meanings set forth in the Restated Agreement. B. Amendments. The Restated Agreement is hereby amended as follows: 1. Section 2.2 of the Restated Agreement is hereby deleted and replaced in its entirety by the following: "2.2 The Note. The Credit is evidenced by a replacement note made by Borrower to Bank dated as of November 30, 1998 ("Note"), payable in accordance with the terms and conditions set forth therein. The Note is also subject to mandatory prepayment as set forth in Section 2.4(c) of this Agreement." 2. Section 5.1 of the Restated Agreement is hereby deleted in its entirety and replaced with the following: "5.1 Borrowed Money. Create, incur, assume or suffer to exist any liability for borrowed money (i) except to the Bank, (ii) except for an existing loan from Fleet National Bank in the original amount of $4,000,000.00 which loan was used only to purchase shares of stock of the Guarantor, and (iii) except for a certain loan or loans from the Guarantor in an aggregate principal amount up to $10,000,000 which loans shall be used only to purchase shares of stock of the Guarantor ("Guarantor Loans"), provided however that principal repayments on the Guarantor Loans shall not commence until after the scheduled maturity date of the existing loans in favor of the Bank." 3. Section 5.2 of the Restated Agreement is hereby deleted in its entirety and replaced with the following: "5.2 Encumbrances. Create, incur, assume or suffer to exist any mortgage, lien, security interest, pledge or other encumbrance on any of its property or assets, whether now owned or hereafter owned or acquired, other than encumbrances in favor of the Bank and other than a pledge of shares in favor of Fleet National Bank and/or Guarantor to secure payment of the loans described in Section 5.1 above." - 3 - C. Representations and Warranties. 1. The Borrower and the Guarantor have full power, authority and legal right to enter into this Amendment, and to take all action required of them under this Amendment. The Borrower hereby represents and warrants that the execution, delivery and performance by the Borrower of this Amendment has been duly authorized by all necessary action, if any, and that this Amendment is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally or to general principles of equity. 2. The Borrower and the Guarantor each hereby represents and warrants that the execution, delivery and performance of this Amendment by the Borrower and the Guarantor, respectively does not, and will not, contravene or conflict with any provision of (i) law or (ii) any judgment, decree or order, and does not, and will not, contravene or conflict with, or cause any lien to arise under, any provision of the Trust Agreement or any other agreement, instrument or other document binding upon or otherwise affecting the Borrower, the Guarantor, any property subject to the Trust Agreement or Plan, or any property of the Guarantor. 3. All of the representations and warranties contained in the Restated Agreement, after giving effect to this Amendment, including, without limitation, those contained in Article 3 thereof, and each other agreement and document executed in connection therewith are true and correct on and as of the date hereof as though made on the date hereof, and no Event of Default exists under the Restated Agreement or will exist after or be triggered by the execution and delivery of this Amendment or any of the other agreements and documents contemplated hereby. In addition, the Borrower hereby represents, warrants and affirms that each of the other agreements and documents executed in connection with or relating to the Restated Agreement remain in full force and effect. 4. Guarantor hereby acknowledges that it has read the Amendment and consents to the terms hereof and further confirms and agrees that, notwithstanding the effectiveness of the Amendment, the obligations of the Guarantor under the Guaranty shall not be impaired or affected and the Guaranty - 4 - is and shall continue to be in full force and effect and is hereby confirmed. D. Conditions Precedent to Amendments. The effectiveness of this Amendment shall be subject to the fulfillment (to the satisfaction of the Bank) of the following conditions precedent: 1. Amendment Documentation. The Borrower shall have delivered to Bank all of the following, each duly executed if required, and dated the date hereof, and each in form and substance satisfactory to Bank: a. Amendment. The Borrower, the Bank and the Guarantor shall have executed and delivered this Amendment. b. Replacement Note. The Borrower shall have executed and delivered to Bank the Replacement Note dated the date hereof in the principal amount of $1,008,699.79. c. Opinion of Counsel. Counsel to the Borrower shall have delivered to Bank an opinion in form and substance satisfactory to Bank and its counsel, which opinion shall include an express statement to the effect that Bank is authorized to rely on such opinion. d. Other. Such other documents and such other actions as Bank may reasonably request. 2. No Default. As of the closing date of this Amendment, no Event of Default shall have occurred or be continuing under the Restated Agreement after giving effect to this Amendment. 3. Representations and Warranties. The representations and Warranties set forth in Section C hereof shall be true and correct on the closing date of this Amendment. 4. Legal Matters. All legal matters incident hereto shall be satisfactory to counsel to the Bank. E. Miscellaneous. 1. Except as specifically amended by this Amendment, the Restated Agreement and each other agreement and document executed in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. 2. The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition or to any amendment or modification of any term - 5 - or condition of the Restated Agreement or any other agreement or document executed in connection therewith, except, upon the effectiveness of this Amendment, as specifically amended hereby, or (ii) prejudice any right, power or remedy which Bank now has or may have in the future under or in connection with the Restated Agreement or any other agreement or document executed in connection therewith. Upon the effectiveness of this Amendment, each reference in the Restated Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Restated Agreement as amended hereby and each reference in any other agreement or document executed in connection with the Restated Agreement to the Restated Agreement or any word or words of similar import shall be and mean a reference to the Restated Agreement as amended hereby. 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. 4. Costs and Expenses. The Guarantor and the Borrower jointly and severally shall reimburse Bank promptly for all reasonable costs and expenses, including reasonable counsel fees and expenses, incurred by Bank in connection with this Amendment, any indebtedness created or evidenced hereunder and, in the case of Guarantor, any other obligations; and for costs and expenses, including reasonable counsel fees, of Bank incident to the enforcement of any provision of this Amendment, the Note, any other documents executed in connection with the Restated Agreement and, in the case of the Guarantor, any other obligations. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [SIGNATURE PAGE FOLLOWS] - 6 - IN WITNESS WHEREOF, Borrower, Guarantor and Bank have entered into this Third Amendment to Amended and Restated Loan Agreement on the date first written above. COLUMBUS McKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST By: /s/ Karen L. Howard --------------------------- KAREN L. HOWARD, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement By: /s/ Timothy R. Harvey ----------------------------- TIMOTHY R. HARVEY, as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement By: /s/ Robert L. Montgomery, Jr. ------------------------------ ROBERT L. MONTGOMERY, JR., as Trustee under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ------------------------------ Robert L. Montgomery, Jr. Executive Vice President MARINE MIDLAND BANK By: /s/ M. F. Brown -------------------------- M.F. Brown Authorized Signatory EX-10.13 9 AMENDMENT #2 TO CREDIT AGREEMENT SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this "AMENDMENT"), dated as of February __, 1999, is by and among COLUMBUS MCKINNON CORPORATION, a New York corporation (the "BORROWER"), the banks, financial institutions and other institutional lenders which are parties to the Credit Agreement (as such term is defined below) (the "LENDERS"), FLEET NATIONAL BANK, as Initial Issuing Bank (the "INITIAL ISSUING BANK"), FLEET NATIONAL BANK, as the Swing Line Bank (the "SWING LINE BANK"; each of the Lenders, the Initial Issuing Bank and the Swing Line Bank, individually, a "LENDER PARTY" and, collectively, the "LENDER PARTIES"), and FLEET NATIONAL BANK, as administrative agent (together with any successor appointed pursuant to Article VII of the Credit Agreement, the "ADMINISTRATIVE AGENT") for the Lender Parties. W I T N E S S E T H : WHEREAS, the Borrower, Lenders, Initial Issuing Bank, Swing Line Bank and Administrative Agent are party to that certain Credit Agreement, dated as of March 31, 1998, as amended by that certain First Amendment to Credit Agreement, dated as of September 23, 1998 (the "FIRST AMENDMENT") (as so amended and as it may hereafter be further amended, supplemented, restated, extended or otherwise modified from time to time, the "CREDIT AGREEMENT"); WHEREAS, the Borrower desires to consummate certain acquisitions which would require the consent of the Lenders to the waiver or amendment of certain provisions of the Credit Agreement in order to permit such acquisitions; WHEREAS, for administrative simplicity, operational efficiency and other reasons, the Borrower has proposed making certain changes in the organizational structure of the Borrower and its Subsidiaries, including the merger of Yale Industrial Products, Inc. ("YALE") with and into the Borrower, with the Borrower as the surviving corporation (the "YALE MERGER"), the merger of LICO Conveyor Company ("LICO CONVEYOR") with and into Automatic Systems, Inc. ("ASI"), with ASI as the surviving corporation (the "LICO CONVEYOR MERGER"), the merger of LICO, Inc. ("LICO") with and into ASI, with ASI as the surviving corporation (the "LICO MERGER"); WHEREAS, for administrative simplicity, operational efficiency and other reasons, the Borrower has proposed making certain other changes in the organizational structure of the Borrower and its Subsidiaries, and certain other related changes; -1- WHEREAS, the Borrower, the Administrative Agent and the Lender Parties are mutually desirous of amending the Credit Agreement to make certain changes in connection with the recent adoption of the Euro as the common currency of certain participating member states of the European Union, including the Federal Republic of Germany; WHEREAS, the Borrower has requested that the Administrative Agent and the Lender Parties amend the Credit Agreement to allow the Borrower to incur additional senior subordinated debt in an amount not to exceed $50,000,000; WHEREAS, the Borrower has requested that the Administrative Agent and Lender Parties amend the Credit Agreement and certain of the other Loan Documents to permit the proposed acquisitions and proposed changes in the organizational structure of the Borrower and its Subsidiaries; and WHEREAS, the Administrative Agent and Lender Parties are agreeable to the foregoing, in each instance as and to the extent set forth in this Amendment and subject to each of the terms and conditions stated herein. NOW THEREFORE, in consideration of the premises and the mutual covenants set forth herein and of the loans or other extensions of credit heretofore, now or hereafter made to, or for the benefit of, the Borrower and its Subsidiaries by the Lender Parties, the parties hereto hereby agree as follows: 1. DEFINITIONS. Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement. 2. AMENDMENTS. 2.1 Section 1.01 of the Credit Agreement is amended to include the following definitions in the appropriate alphabetical order: "'ADDITIONAL SENIOR SUBORDINATED DEBT' has the meaning specified in Section 5.02(b)(viii)." "'ADDITIONAL SENIOR SUBORDINATED DEBT DOCUMENTS' means the indenture, notes and all other documents, instruments and agreements executed and delivered in connection with the original issuance of any Additional Senior Subordinated Debt, each of which indenture, notes and other documents, instruments and agreements shall satisfy the requirements set forth in Section 5.02(b)(viii), and in each case, as the same shall, subject to the terms of this Agreement, be amended, supplemented or otherwise modified and in effect from time to time." -2- "'CONVERSION DATE' means, for any European country, the date, if any, on which such country adopts the Euro as a lawful currency of such country and on which the European Central Bank sets an official exchange rate for such country's currency against the Euro." "'EURO' means the common currency adopted by those member states of the European Union participating in the program of introducing, changing over to and operating a single or unified European currency." 2.2 Section 1.01 of the Credit Agreement is further amended by inserting in the definition of "ALTERNATIVE CURRENCY" after the words "Alternative Currency Letters of Credit," and before the words "Danish Crowns" the words "the Euro". 2.3 Section 1.01 of the Credit Agreement is further amended by inserting in the definition of "ASSIGNED DOLLAR VALUE" before the words "Pounds Sterling" in clause (b)(ii)(A) thereof the words "the Euro,". 2.4 Section 1.01 of the Credit Agreement is further amended by deleting the definition of "Exchange Rate" in its entirety and replacing with the following: "'EXCHANGE RATE' shall mean, on any day, (a) with respect to the Euro, Pounds Sterling (prior to the Conversion Date for the United Kingdom), Danish Crowns (prior to the Conversion Date for Denmark) and Deutsche Marks (prior to the Conversion Date for the Federal Republic of Germany), the spot rate at which U.S. Dollars are offered on such day by the Administrative Agent in London for such Alternative Currency at approximately 11:00 A.M. (London time), (b) with respect to U.S. Dollars in relation to the Euro, Pounds Sterling (prior to the Conversion Date for the United Kingdom), Danish Crowns (prior to the Conversion Date for Denmark) and Deutsche Marks (prior to the Conversion Date for the Federal Republic of Germany), the spot rate at which such Alternative Currency is offered on such day by the Administrative Agent in London for U.S. Dollars at approximately 11:00 A.M. (London time) and (c) with respect to Pounds Sterling (on and after the Conversion Date for the United Kingdom), Danish Crowns (on and after the Conversion Date for Denmark) and Deutsche Marks (on and after the Conversion Date for the Federal Republic of Germany), the official exchange rate for such currency as recognized by the European Central Bank on the Conversion Date for such country. For purposes of determining the Exchange Rate in connection with an Alternative Currency Revolving Credit Borrowing, such Exchange Rate shall be determined as of the Exchange Rate Determination Date for such Borrowing. The Administrative Agent shall provide Borrower with the then current Exchange Rate from time to time upon Borrower's request therefor." -3- 2.5 Section 4.01(c) of the Credit Agreement is amended in the following respects: (a) By inserting in the third line thereof after the words "Senior Subordinated Note Document" the words "and Additional Senior Subordinated Debt Document, if any, "; and (b) By inserting in the fourth line thereof after the words "Senior Subordinated Notes" the words "and Additional Senior Subordinated Debt (if such an offering is made)". 2.6 Section 4.01(d) of the Credit Agreement is amended in the following respects: (a) By inserting in the fifth line thereof after the words "Senior Subordinated Note Document" the words "or Additional Senior Subordinated Debt Document"; and (b) By inserting in the sixth line thereof after the words "Senior Subordinated Notes" the words "or Additional Senior Subordinated Debt (if such an offering is made)". 2.7 Section 4.01(e) of the Credit Agreement is amended by inserting the following additional sentence at the end thereof: "If any Additional Senior Subordinated Debt is incurred (it being understood that any such incurrence must be made in compliance with the terms and conditions of this Agreement), each Additional Senior Subordinated Debt Document, when delivered, will have been duly executed and delivered by each Loan Party thereto and will be the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms." 2.8 Section 4.01(hh) of the Credit Agreement is amended in the following respects: (a) By inserting before the words "Senior Subordinated Notes" in the first line thereof the words "Additional Senior Subordinated Debt or"; (b) By inserting in the twelfth line thereof before the period (I.E. ".") at the end of the first sentence of such Section 4.01(hh) the following: "or Senior Debt or any comparable term (as defined in the Additional Senior Subordinated Debt Documents) and Designated Senior Debt or any comparable term (as defined in the Additional Senior Subordinated Debt Documents)"; (c) By inserting in the fourteenth line thereof after the words "Senior Subordinated Note Documents" the words "or Additional Senior Subordinated Debt Documents, as the case may be,"; and -4- (d) By inserting in the sixteenth line thereof after the words "(and to the holders thereof)" the following: "or, in the case of the Additional Senior Subordinated Debt Documents, in respect of Senior Debt and Designated Senior Debt or any comparable terms (as defined in the Additional Senior Subordinated Debt Documents)(and to the holders thereof)". 2.9 Section 5.02(a) of the Credit Agreement is amended by deleting from clause (v) thereof the words "Section 5.02(b)(iii)(B)" and inserting in place thereof the words "Section 5.02(b)(iv)(B)". 2.10 Section 5.02(b) of the Credit Agreement is amended as follows: (a) By deleting the word "and" from the end of clause (vi) thereof; and (b) By deleting the period at the end of clause (vii) thereof and replacing it with the following: "; (viii) Debt of a Target assumed in connection with a Permitted Acquisition; PROVIDED, THAT, (A) such Debt was pre-existing Debt of the Target not incurred in connection with, or contemplation of, the Permitted Acquisition, (B) such Debt is unsecured, (C) the amount of such Debt is included as part of the sum of all amounts payable in connection with all Permitted Acquisitions during the relevant Fiscal Year as required for purposes of determining whether the condition to such Permitted Acquisition set forth in clause (4) of Section 5.02(d)(iii)(B) has been satisfied and (D) all of the conditions to such Permitted Acquisition set forth in Section 5.02(d)(iii)(B), including, without limitation, the conditions set forth in clauses (4), (5), (6) and (7) of such Section 5.02(d)(iii)(B), are fully satisfied; and (ix) unsecured, fully subordinated Debt of the Borrower and those of its Subsidiaries which are Restricted Subsidiaries under the Senior Subordinated Note Indenture in an aggregate amount not to exceed $50,000,000 (the "ADDITIONAL SENIOR SUBORDINATED DEBT"); PROVIDED, THAT, (A) such Additional Senior Subordinated Debt is issued pursuant to and evidenced by Additional Senior Subordinated Debt Documents containing subordination provisions which are at least as favorable, as determined by the Administrative Agent, to the interests and rights of the Administrative Agent and the Lender Parties as those contained in the Senior Subordinated Note Indenture and the other Senior Subordinated Note Documents, (B) the Additional Senior Subordinated Debt Documents contain terms and conditions, other than interest rate and other pricing terms, which are no less favorable, as determined by the Administrative Agent, to the Administrative Agent and the Lender Parties than those contained in the Senior Subordinated Note Indenture and the other Senior Subordinated Note Documents (it being understood that the Borrower, in its discretion, may agree to interest rate and -5- other pricing terms which are then available for such subordinated Debt in the financial marketplace) and (C) no Default or Event of Default shall have occurred and be continuing, either before or after giving effect to the incurrence of such Additional Senior Subordinated Debt. If Additional Senior Subordinated Debt is issued pursuant to and evidenced by the Senior Subordinated Note Indenture and the other Senior Subordinated Note Documents it shall automatically be deemed to have satisfied the requirements set forth in subclauses (A) and (B) of this clause (ix) (it being understood that the Borrower, in its discretion, may agree to interest rate and other pricing terms which are then available for such subordinated Debt in the marketplace) and with respect to such Additional Senior Subordinated Debt, the Senior Subordinated Note Indenture and other Senior Subordinated Note Documents shall for all purposes of this Credit Agreement be deemed to be and constitute the Additional Senior Subordinated Debt Documents governing such Additional Senior Subordinated Debt.". 2.11 Section 5.02(d)(iii)(6) of the Credit Agreement is amended as follows: (a) By inserting in the first line thereof after the words "Permitted Acquisition," the following: "(A) if the Target is an entity organized under the laws of the United States of America or any State thereof,"; (b) By inserting before the word "Significant" in the sixth line thereof the word "Domestic"; (c) By inserting after the words "capital stock" and before the comma (I.E. ",") in the seventh line thereof the following: "and in sixty-five percent (65%) of each of its Foreign Significant Subsidiaries' capital stock"; and (d) By inserting at the end thereof after the words "in connection therewith;" the following: "or (B) if the Target is an entity organized under the laws of any jurisdiction other than the United States of America or any State thereof and if, after giving pro forma effect to the Permitted Acquisition, the Target would be a Significant Subsidiary, the Administrative Agent, on behalf of the Secured Parties, shall be granted a first priority Lien (subject to no other Liens) in sixty-five percent (65%) of the Target's capital stock and the Borrower, each of the Borrower's Subsidiaries and the Target and each of the Target's Subsidiaries shall each have executed and delivered all such Collateral Documents, legal opinions and other documents and taken all such actions as may be required by the Administrative Agent in connection therewith". 2.12 Section 5.02(f) of the Credit Agreement is amended as follows: (a) By deleting the word "and" from the end of clause (iv) thereof; and -6- (b) By deleting the period at the end of clause (v) thereof and replacing it with the following: "; and (vi) Investments consisting of Permitted Acquisitions.". 2.13 Section 5.02(k) of the Credit Agreement is amended as follows: (a) By inserting in the fifth and sixth lines of clause (i) thereof, in each such case, after the words "the Senior Subordinated Notes" the following: "or Additional Senior Subordinated Debt"; (b) By inserting in subclause (C) of clause (i) thereof after the words "the Senior Subordinated Note Indenture" the following: "or Additional Senior Subordinated Debt in accordance with the terms and conditions of the Additional Senior Subordinated Debt Documents"; (c) By inserting in subclause (D) of clause (i) thereof after the words "Senior Subordinated Notes" the following: "or Additional Senior Subordinated Debt"; (d) By inserting in subclause (D) of clause (i) thereof after the words "Senior Subordinated Note Indenture" the following: "or Additional Senior Subordinated Debt Documents, as the case may be,"; (e) By inserting in subclause (E) of clause (i) thereof after the words "Senior Subordinated Note Documents" the following: "or Additional Senior Subordinated Debt Documents"; and (f) By inserting in clause (ii) thereof after the words "Senior Subordinated Notes" the following: "and Additional Senior Subordinated Debt". -7- 2.14 Section 5.02(l) of the Credit Agreement is amended as follows: (a) By inserting in the first line thereof in the heading before the words "or Senior Subordinated Note Documents" the words "Additional Senior Subordinated Debt Documents,"; and (b) By inserting in the second, fourth, sixth and eighth lines thereof, in each such case, before the words "or Senior Subordinated Note Document" the words ", Additional Senior Subordinated Debt Document". 2.15 Section 5.03(o) of the Credit Agreement is amended by inserting in the third and eighth lines thereof, in each such case, after the words "Senior Subordinated Note Document" the words ", Additional Senior Subordinated Debt Document". 2.16 Section 5.04 (c) of the Credit Agreement is amended by inserting in subclause (x) of clause (ii) thereof after the words "Senior Subordinated Notes" the words "and Additional Senior Subordinated Debt". 2.17 Section 6.01(e) of the Credit Agreement is amended by inserting in the third line thereof after the words "Senior Subordinated Notes" the words "or Additional Senior Subordinated Debt". 2.18 Section 6.01(r) of the Credit Agreement is amended as follows: (a) By inserting in the first line thereof before the words "Senior Subordinated Notes" the words "Additional Senior Subordinated Debt,"; (b) By inserting in the thirteenth line thereof just before the period (I.E. ".") at the end of the first sentence of such Section 6.01(r) the following: "or Senior Debt or any comparable term (as defined in the Additional Senior Subordinated Debt Documents) and Designated Senior Debt or any comparable term (as defined in the Additional Senior Subordinated Debt Documents)"; and (c) By inserting in the fifteenth line thereof after the words "(and to the holders thereof)" the following: "or, in the case of the Additional Senior Subordinated Debt Documents, in respect of Senior Debt and Designated Senior Debt or any comparable terms (as defined in the Additional Senior Subordinated Debt Documents)(and to the holders thereof)". -8- 2.19 Section 8.04 (b) of the Credit Agreement is amended as follows: (a) By deleting the word "or" from immediately prior to clause (v) in the eighteenth line thereof; (b) By inserting after the words "Loan Party or any of its Subsidiaries" in the twentieth line thereof the following: "or (vi) the offering and/or issuance of the Additional Senior Subordinated Debt or any related transaction of the Borrower or any of its Subsidiaries or other Affiliates and any of the other transactions contemplated by the Additional Senior Subordinated Debt Documents"; (c) By inserting in the thirtieth line thereof before the words "the Facilities" the words "the Additional Senior Subordinated Debt,"; and (d) By inserting in the thirty-second line thereof after the words "the Senior Subordinated Note Documents" the words ", the Additional Senior Subordinated Debt Documents". 2.20 The following shall be inserted into the Credit Agreement after Section 8.13 as a new Section 8.14: "Section 8.14. THE EURO AND CONTINUITY OF CONTRACT. On the Conversion Date for each of the United Kingdom, Denmark or the Federal Republic of Germany, as the case may be, all references to Pounds Sterling, Danish Crowns or Deutsche Marks, as the case may be, shall be substituted in this Credit Agreement by the Euro for all purposes. From and after the Conversion Date for each of the United Kingdom, Denmark or the Federal Republic of Germany, as the case may be, any amount payable hereunder or under any other Loan Document by the Administrative Agent or any Lender Party to the Borrower, by the Borrower or any Guarantor to the Administrative Agent or any Lender Party, by any Lender Party to any other Lender Party or the Administrative Agent or by the Administrative Agent to any Lender Party, shall be paid in the Euro and not in Pounds Sterling, Danish Crowns or Deutsche Marks, as the case may be. Neither the introduction of the Euro, nor the substitution of Pounds Sterling, Danish Crowns or Deutsche Marks, as the case may be, as a lawful currency of the United Kingdom, Denmark or the Federal Republic of Germany, respectively, nor the fixing of the official conversion rate, nor any economic consequences that arise from or in connection with any of the aforementioned events shall cause this Credit Agreement to terminate or give rise to any right to terminate prematurely, contest, cancel, rescind, modify or otherwise renegotiate or alter this Credit Agreement or any of its provisions, or to raise any other objections and/or exceptions or to assert any claims for compensation under or in connection with this Credit Agreement. As of January 1, 1999, with -9- respect to the Federal Republic of Germany and for all purposes of the Credit Agreement and each of the other Loan Documents, the Conversion Date has occurred." 3. CONSENTS TO CORPORATE RESTRUCTURING TRANSACTIONS. 3.1 Section 5.01(f) of the Credit Agreement, among other things, requires that the Borrower preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name and rights (charter and statutory). Notwithstanding the provisions of such Section 5.01(f), but subject to the conditions precedent set forth in Section 3.4 and the other terms and conditions of this Amendment, the Administrative Agent and Lender Parties hereby consent to (a) the Yale Merger, (b) the LICO Conveyor Merger, (c) the LICO Merger, (d) the dissolution (the "LICO INTERNATIONAL DISSOLUTION") of LICO International Corporation, a foreign sales corporation and a wholly-owned Subsidiary of LICO ("LICO INTERNATIONAL"), or, alternatively, the merger of LICO International with and into Audubon Export, Inc., a foreign sales corporation and a direct wholly-owned Subsidiary of the Borrower ("AUDUBON EXPORT"), with Audubon Export as the surviving corporation (the "LICO INTERNATIONAL MERGER"), (e) the dissolution (collectively, the "DUFF-NORTON ASIA DISSOLUTIONS") of Duff-Norton Asia Pacific Pty. Ltd. ("DUFF-NORTON ASIA") and Kunming Duff-Norton Machinery Company Limited ("KUNMING DUFF-NORTON"), each of which is currently an inactive company, (f) the transfer (the "YALE UK TRANSFER") of all of the outstanding shares of capital stock of Yale Industrial Products Ltd., a wholly-owned Subsidiary of Yale ("YALE UK"), to Yale Industrial Products GmbH, a direct wholly-owned Subsidiary of Yale ("YALE GERMANY"); PROVIDED, THAT, there shall be no material tax impact as a result of the Yale UK Transfer, as determined by the Administrative Agent, and (g) the transfer (the "EGYPTIAN TRANSFER") of the ownership interest in Egyptian American Crane Company, an existing joint venture, from Yale to Yale Germany; PROVIDED, THAT, there shall be no material tax impact as a result of the Egyptian Transfer, as determined by the Administrative Agent. 3.2 Section 5.02(d)(i) of the Credit Agreement, among other things, prohibits the Borrower or any of its Subsidiaries from merging into or consolidating with any Person or permitting any Person to merge into it. Section 5.02(d)(ii) of the Credit Agreement prohibits, among other things, the Borrower or any of its Subsidiaries from liquidating, winding up or dissolving itself. Notwithstanding the provisions of such Sections 5.02(d)(i) and 5.02(d)(ii), but subject to the conditions precedent set forth in Section 3.4 and the other terms and conditions of this Amendment, the Administrative Agent and Lender Parties hereby consent to (a) the Yale Merger, (b) the LICO Conveyor Merger, (c) the LICO Merger, (d) the LICO International Dissolution or, alternatively, the LICO International Merger, (e) the Duff-Norton Asia Dissolutions, (f) the Yale UK Transfer and (g) the Egyptian Transfer. 3.3 Section 5.02(i) of the Credit Agreement, among other things, prohibits the Borrower or any of its Subsidiaries from amending its certificate or articles of incorporation or bylaws. Notwithstanding the provisions of such Section 5.02(i), but subject to the conditions precedent set forth in Section 3.4 and the other terms and conditions of this Amendment, the Administrative Agent and Lender Parties consent to any amendments of the certificate or articles of incorporation and bylaws of Yale, LICO Conveyor, ASI, LICO, LICO -10- International, Audubon Export, Duff-Norton Asia, Kunming Duff-Norton, Yale UK or Yale Germany, as the case may be, that are reasonably necessary to carry out the Yale Merger, the LICO Conveyor Merger, the LICO Merger, the LICO International Dissolution or, alternatively, the LICO International Merger, the Duff-Norton Asia Dissolutions or the Yale UK Transfer, as the case may be, in each instance to the extent, and solely to the extent, that such amendments are in form and substance reasonably acceptable to the Administrative Agent. 3.4 Each transaction consented to in Section 3.1, 3.2 and 3.3 above is subject to the satisfaction, as determined by the Administrative Agent, of each of the following conditions precedent: (a) The Borrower shall have delivered to the Administrative Agent such Amended and Restated Schedules to each of the Credit Agreement, Security Agreement and Intellectual Property Security Agreement to replace such existing Schedules which, upon the consummation of such transaction, shall no longer be true, correct and complete, including, by way of example only and not of limitation, to the extent applicable: (i) Schedule 3.01(a)(ix to the Credit Agreement, STATES IN WHICH LOAN PARTIES ARE QUALIFIED TO DO BUSINESS; (ii) Schedule 4.01(b) to the Credit Agreement, SUBSIDIARIES; (iii) Schedule 4.01(k) to the Credit Agreement, PLANS, MULTIEMPLOYER PLANS AND WELFARE PLANS; (iv) Schedule 4.01(bb) to the Credit Agreement, OWNED REAL ESTATE; (v) Schedule 4.01(cc) to the Credit Agreement, LEASED REAL ESTATE; (vi) Schedule 4.01(ff) to the Credit Agreement, INTELLECTUAL PROPERTY; (vii) Schedule I to the Security Agreement, PLEDGED SHARES AND PLEDGED DEBT; (viii) Schedule III to the Security Agreement, LOCATIONS OF EQUIPMENT AND INVENTORY; (ix) Schedule IV to the Security Agreement, TRADE NAMES; (x) Schedule I to the Intellectual Property Security Agreement, PATENTS AND PATENT APPLICATIONS; (xi) Schedule II to the Intellectual Property Security Agreement, TRADEMARK REGISTRATIONS AND APPLICATIONS; (xii) Schedule III to the Intellectual Property Security Agreement COPYRIGHT REGISTRATIONS AND APPLICATIONS; and (xiv) Schedule IV to the Intellectual Property Security Agreement, LICENSES. (b) The Borrower shall, and shall have caused each of its Domestic Subsidiaries to, have executed and delivered such agreements, instruments and other documents, including, without limitation, UCC-1 financing statements, UCC-3 amendments to financing statements and -11- amendments to intellectual property filings, as shall be necessary or as the Administrative Agent shall have otherwise requested in order to maintain the perfected first priority status of the Administrative Agent's security interests in the Collateral of the Borrower and its Domestic Subsidiaries. (c) As of the date of the consummation of such transaction, no Default or Event of Default shall have occurred and be continuing. (d) The representations and warranties contained in Section 5 of this Amendment, the Credit Agreement and each other Loan Document shall be true, correct and complete on and as of the date of the consummation of such transaction, as though made on such date. (e) The Borrower shall, and shall have caused its Subsidiaries to, have taken all such actions and executed and delivered all such agreements, instruments, legal opinions and other documents as the Administrative Agent shall have reasonably requested in connection with such transaction. 3.5 The foregoing consents in Sections 3.1, 3.2 and 3.3 are only applicable and shall only be effective in the specific instances and for the specific purposes for which made. Such consents are expressly limited to the facts and circumstances and subject to the conditions referred to herein and shall not operate (a) as a waiver of or consent to non-compliance with any other Section or provision of the Credit Agreement or any other Loan Document, (b) as a waiver of any right, power or remedy of either the Administrative Agent or any Lender Party under the Credit Agreement or any other Loan Document or (c) as a waiver of or consent to any Event of Default or Default under the Credit Agreement or any other Loan Document. 4. CONSENTS TO ACQUISITIONS 4.1 Section 5.02(d)(iii)(B) of the Credit Agreement permits the Borrower or any wholly-owned Subsidiary of the Borrower to make Permitted Acquisitions subject to the satisfaction of certain conditions, number (4) of which is that the sum of all amounts payable in connection with all Permitted Acquisitions (including all transaction costs and all Debt, liabilities and contingent obligations incurred or assumed in connection therewith or otherwise reflected on a balance sheet of the Target) shall not exceed $35,000,000 in the aggregate in any Fiscal Year. Notwithstanding the provisions of such condition number (4) of Section 5.02(d)(iii)(B), but subject to the conditions precedent set forth in Section 4.3 and the other terms and conditions of this Amendment, the Administrative Agent and Lender Parties hereby consent to (a) the acquisition (the "TIGRIP/CAMLOK ACQUISITION") by Yale Germany of Camlok Lifting Clamps Limited, a company organized under the laws of England and Wales, and the assets of the Tigrip product line, in each case from Schmidt-Krantz & Co. GmbH; PROVIDED, THAT, (i) the Tigrip/Camlok Acquisition shall be financed by Yale Germany and not by the Borrower, (ii) no portion of the proceeds of any Borrowing under the Credit Agreement shall be used to finance the Tigrip/Camlok Acquisition, (iii) neither the Borrower nor any of its Domestic Subsidiaries shall guarantee the payment of the purchase price for the Tigrip/Camlok -12- Acquisition or any loan agreement or other financing incurred by Yale Germany to finance the Tigrip/Camlok Acquisition, (iv) the aggregate purchase price paid by Yale Germany for the Tigrip/Camlok Acquisition shall not exceed the Dollar Equivalent of $11,000,000; and (v) the terms and conditions of the Tigrip/Camlok Acquisition shall otherwise be satisfactory to the Administrative Agent; (b) the acquisition (the "GL ACQUISITION") by the Borrower of all of the outstanding shares of capital stock of GL International, Inc. ("GL"); PROVIDED, THAT, (i) no more than 1,333,333 shares of common stock of the Borrower and no other consideration, except for cash paid in lieu of fractional shares and the payment of transaction costs, shall be exchanged for all of the outstanding shares of capital stock of GL in full payment of the purchase price for the GL Acquisition, (ii) the terms and conditions of the GL Acquisition shall otherwise be satisfactory to the Administrative Agent and (iii) the Administrative Agent and its counsel shall have completed a due diligence investigation in scope and with results satisfactory to the Administrative Agent; and (c) the acquisition (the "WASHINGTON EQUIPMENT ACQUISITION") by the Borrower of all of the outstanding shares of capital stock of Washington Equipment Company ("WASHINGTON EQUIPMENT"); PROVIDED, THAT, (i) the aggregate purchase price of the Washington Equipment Acquisition shall not exceed $6,900,000, (ii) no portion of the proceeds of any Borrowing under the Credit Agreement shall be used to finance the Washington Equipment Acquisition and (iii) the terms and conditions of the Washington Equipment Acquisition shall otherwise be satisfactory to the Administrative Agent. In furtherance and not in limitation of the foregoing, and notwithstanding the various provisions of the Credit Agreement and the other Loan Documents, the Administrative Agent and Lender Parties consent to the Borrower, if the Borrower so elects, (i) structuring the GL Acquisition by having a newly-formed, wholly-owned Subsidiary merge into GL, or having GL merge into such a Subsidiary, with GL being the surviving corporation of such merger and thereupon being a wholly-owned Subsidiary of the Borrower and (ii) structuring the Washington Equipment Acquisition by having a newly-formed, wholly-owned Subsidiary merge into Washington Equipment, or having Washington Equipment merge into such a Subsidiary, with Washington Equipment being the surviving corporation of such merger and thereupon being a wholly-owned Subsidiary of the Borrower. 4.2 Section 5.02(r) of the Credit Agreement, among other things, prohibits the Borrower from issuing any shares of its capital stock, subject to certain exceptions, none of which exceptions is available in connection with the GL Acquisition. Notwithstanding the provisions of such Section 5.02(r), but subject to the conditions precedent set forth in Section 4.3 and the other terms and conditions of this Amendment, the Administrative Agent and Lender Parties consent to the issuance of up to 1,333,333 shares of common stock of the Borrower in exchange for all of the outstanding shares of capital stock of GL in order to consummate the GL Acquisition. 4.3 Each transaction consented to in Section 4.1 and 4.2 above is subject to the satisfaction, as determined by the Administrative Agent, of each of the following conditions precedent: -13- (a) Except as expressly set forth in Section 4.1 of this Amendment, such transaction shall be consummated in full compliance with each of the conditions set forth in Section 5.02(d)(iii) of the Credit Agreement. (b) Except as expressly set forth in Section 4.1 and 4.2 of this Amendment, such transaction shall be consummated in full compliance with each of the terms and conditions contained in the Credit Agreement and each other Loan Document (it being understood that, for purposes of determining whether the provisions set forth in clauses (C) and (D) of the proviso of Section 5.02(b)(viii) of the Credit Agreement have been satisfied, compliance with the provisions of condition (4) of Section 5.02(d)(iii)(B) of the Credit Agreement is waived as and to the extent expressly set forth in Section 4.1 of this Amendment). (c) Neither the Borrower nor any Subsidiary of the Borrower shall consummate any additional Permitted Acquisition prior to the end of the Fiscal Year ending March 31, 1999, without the prior written consent of the Administrative Agent and Lenders. (d) As of the date of the consummation of such transaction, no Default or Event of Default shall have occurred and be continuing. (e) The representations and warranties contained in Section 5 of this Amendment, the Credit Agreement and each other Loan Document shall be true, correct and complete on and as of the date of the consummation of such transaction, as though made on such date. (f) The Borrower and the Target shall, and shall have caused their respective Subsidiaries to, have taken all such actions and executed and delivered all such agreements, instruments, legal opinions and other documents as the Administrative Agent shall have reasonably requested in connection with such transaction. 4.4 The foregoing consents in Sections 4.1 and 4.2 are only applicable and shall only be effective in the specific instances and for the specific purposes for which made. Such consents are expressly limited to the facts and circumstances and subject to the conditions referred to herein and shall not operate (a) as a waiver of or consent to non-compliance with any other Section or provision of the Credit Agreement or any other Loan Document, (b) as a waiver of any right, power or remedy of either the Administrative Agent or any Lender Party under the Credit Agreement or any other Loan Document or (c) as a waiver of or consent to any Event of Default or Default under the Credit Agreement or any other Loan Document. 5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants as follows: 5.1 Each of the representations and warranties set forth in the Credit Agreement, including, without limitation, in Article IV of the Credit Agreement, and in each other Loan Document, is true, correct and complete on and as of the date hereof as though made on the date hereof. In addition, the Borrower hereby -14- represents, warrants and affirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect. 5.2 As of the date hereof, there exists no Default or Event of Default under the Credit Agreement or any other Loan Document, and no event which, with the giving of notice or lapse of time, or both, would constitute a Default or Event of Default. 5.3 The execution, delivery and/or performance by each applicable Loan Party of this Amendment, the reaffirmations and confirmations attached hereto, each other Loan Document, each document comprising or effectuating the transactions consented to in Sections 3 and 4 of this Amendment, and each other agreement or document related to or contemplated by the foregoing to which it is or is to be a party or otherwise bound, and the consummation of the transactions consented to in Sections 3 and 4 of this Amendment, are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not, and will not, (i) contravene such Loan Party's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended), rule, regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, indenture, mortgage, deed of trust, lease or other material instrument or agreement binding on or affecting any Loan Party, any of its Subsidiaries or any of their respective properties or (iv) except for the Liens created under the Collateral Documents and except for the Liens created solely on the assets of Yale Germany in connection with the financing by Yale Germany of the purchase price to be paid for the Tigrip/Camlok Acquisition, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. Neither any Loan Party nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument or agreement, the violation or breach of which could reasonably be expected to have a Material Adverse Effect. 5.4 Each of this Amendment and each other Loan Document has been duly executed and delivered by each Loan Party party thereto. Each of this Amendment and each other Loan Document is the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms. 5.5 No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execu tion, delivery, recordation, filing or performance by any Loan Party of this Amendment, any other Loan Document or any other agreement or document related hereto or thereto or contemplated hereby or thereby to which it is or is to be a party or otherwise bound, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first and only priority nature thereof) or (iv) the exercise by the Administrative Agent or any Lender Party of its rights under the -15- Loan Documents or remedies in respect of the Collateral pursuant to the Collateral Documents. 6. CONDITIONS PRECEDENT TO THIS AMENDMENT. The effectiveness of this Amendment is subject to the satisfaction, in form and substance satisfactory to the Administrative Agent, of each of the following conditions precedent: 6.1 AMENDMENT DOCUMENTATION. (a) The Borrower shall have duly executed and delivered this Amendment. (b) The Borrower shall have delivered a certificate of its Secretary or Assistant Secretary certifying as to each of the following: (i) resolutions of the Borrower's Board of Directors authorizing the execution and delivery of this Amendment and the other agreements, instruments and documents contemplated hereby, and each of the various transactions contemplated hereby, (ii) all documents evidencing other necessary corporate action, if any, (iii) copies of all approvals or consents, if any, necessary with respect to this Amendment and (iv) the names and signatures of the Borrower's officers authorized to sign this Amendment and all other documents, certificates, instruments or agreements to be delivered hereunder or in connection herewith. (c) The Administrative Agent shall have received the opinion of Phillips, Lytle, Hitchcock, Blaine & Huber, counsel for the Borrower, and/or other counsel to the Borrower, all in form and substance satisfactory to, and covering such matters as are requested by, the Administrative Agent and its counsel and to include an express statement to the effect that the Administrative Agent and Lender Parties are authorized to rely on such opinion. (d) No new UCC-1 Financing Statement, other financing statement, mortgage or other instrument perfecting any Lien shall have been filed with respect to any real or personal property owned, leased or otherwise held by the Borrower, any Guarantor or any other Subsidiary of the Borrower since March 31, 1998, other than filings in favor of the Administrative Agent, on behalf of the Secured Parties. (e) The Borrower and its Subsidiaries shall have delivered such other documents and taken such other actions as the Administrative Agent may reasonably request. 6.2 NO DEFAULT. No Default or Event of Default shall have occurred and be continuing. 6.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in Section 5 of this Amendment, the Credit Agreement and each other Loan Document shall be true, correct and complete on and as of the closing date of this Amendment as though made on such date. -16- 6.4 AMENDMENT FEES. The Borrower shall have paid an amendment fee to the Administrative Agent, for the account of each Lender which has approved this Amendment, as evidenced by such Lender's timely execution and delivery of a counterpart signature page to this Amendment (each such Lender being an "APPROVING LENDER"), in an amount equal to 0.05% (i.e. 5 basis points) of such Approving Lender's Revolving Credit Commitment. 6.5 OTHER CONDITIONS PRECEDENT. (a) The Borrower shall have taken all actions and executed and delivered all agreements, instruments and other documents necessary, or otherwise requested by the Administrative Agent, in order to grant to the Administrative Agent, on behalf of the Secured Parties, a perfected first priority security interest in all personal property acquired by the Borrower from Abell-Howe Company, including, without limitation, the filing of UCC-1 financing statements and the making of all intellectual property filings. (b) The Administrative Agent shall have received such other information, approvals, opinions, instruments, agreements or documents as any Lender through the Administrative Agent may reasonably request, the Borrower and its Subsidiaries shall have taken all such other actions as any Lender through the Administrative Agent may reasonably request, and all legal matters incident to the foregoing shall be satisfactory to the Administrative Agent and its counsel. 7. COVENANTS. 7.1 COLLATERAL FILINGS The Borrower and its Subsidiaries hereby covenant and agree to cooperate with the Administrative Agent in any manner necessary or desirable in order to continue, or, in the case of after-acquired property, create, the perfected first and only priority security interest of the Administrative Agent, on behalf of the Secured Parties, in all Collateral of the Borrower and its Subsidiaries, whether now owned or hereafter acquired by any of them. 7.2 ASSUMPTION OF LIABILITIES UNDER THE LOAN DOCUMENTS. The Borrower hereby covenants and agrees to assume and discharge, upon the consummation of the Yale Merger, all liabilities and obligations of Yale under, in respect of or otherwise relating to the Credit Agreement or any other Loan Document. ASI hereby covenants and agrees to assume and discharge, upon the consummation of the LICO Merger, all liabilities and obligations of LICO under, in respect of or otherwise relating to the Credit Agreement or any other Loan Document. 8. EFFECTIVENESS OF AMENDMENT. 8.1 This Amendment shall not become effective unless and until each of the conditions precedent set forth in Section 6 hereof has been satisfied. -17- 8.2 In the event that the Borrower or any other Loan Party breaches or otherwise fails to fulfill any of the conditions precedent, covenants, agreements, representations and warranties or obligations under this Amendment and the Borrower or such other Loan Party fails to remedy such breach or otherwise fulfill or satisfy such condition precedent, covenant, agreement, representation and warranty or obligation to the Administrative Agent's satisfaction within thirty (30) days following notice thereof, then, upon expiration of such thirty (30) day period, automatically and without any further act or deed by the Administrative Agent, any Lender Party, any Loan Party or any other Person, an Event of Default shall be deemed to have occurred under the Credit Agreement and the Administrative Agent and the Lender Parties shall be entitled to all of the rights and remedies available following the occurrence of an Event of Default under the Credit Agreement and the other Loan Documents, at law or in equity. 9. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS. 9.1 Except as specifically amended in Section 2 above, the Credit Agreement and each of the other Loan Documents shall remain in full force and effect and each is hereby ratified and confirmed. 9.2 The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (a) be a consent to any waiver of any term or condition or to any amendment or modification of any term or condition of the Credit Agreement or any other Loan Document, except as specifically amended in Section 2 above and for the specific consents set forth in Sections 3 and 4 hereof (in each instance subject to the terms and conditions of such consents set forth herein), or (b) prejudice any right, power or remedy which the Administrative Agent or any Lender Party now has or may have in the future under or in connection with the Credit Agreement or any other Loan Document. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. 10. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Amendment. 11. COSTS AND EXPENSES. The Borrower shall pay on demand all reasonable fees, costs and expenses incurred by Administrative Agent (including, without limitation, all reasonable attorneys' fees) in connection with the preparation, execution and delivery of this Amendment and the taking of any actions by any Person in connection herewith. -18- 12. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 13. HEADINGS. Article headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [Signature Pages Follow] -19- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above. COLUMBUS MCKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- Title: Executive Vice President The undersigned hereby acknowledge and agree to this Amendment, and agree that the Guaranty, dated March 31, 1998, the Security Agreement, dated March 31, 1998, and the Intellectual Property Security Agreement, dated March 31, 1998, and each other Loan Document executed by the undersigned shall remain in full force and effect and each is hereby ratified and confirmed by and on behalf of the undersigned, this 12th day of February, 1999. YALE INDUSTRIAL PRODUCTS, INC. By: /s/ Robert L. Montgomery, Jr. ------------------------------ Title: Treasurer LICO, INC. By: /s/ Robert L. Montgomery, Jr. ------------------------------ Title: Treasurer AUTOMATIC SYSTEMS, INC. By: /s/ Robert L. Montgomery, Jr. ------------------------------ Title: Treasurer LICO STEEL, INC. By: /s/ Robert L. Montgomery, Jr. ------------------------------ Title: Treasurer FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT By: /s/ John G. Tierney -------------------------- Title: Vice President -------------------------- FLEET NATIONAL BANK, AS INITIAL ISSUING BANK By: /s/ John G. Tierney -------------------------- Title: Vice President -------------------------- FLEET NATIONAL BANK, AS SWING LINE BANK By: /s/ John G. Tierney -------------------------- Title: Vice President -------------------------- LENDERS FLEET NATIONAL BANK By: /s/ John G. Tierney -------------------------- Title: Vice President -------------------------- LENDERS ABN-AMRO BANK N.V. NEW YORK BRANCH, AS A CO-AGENT AND LENDER By: /s/ Lisa Megeaski --------------------------- Title: Vice President --------------------------- By: /s/ Donald Sutton --------------------------- Title: Vice President --------------------------- LENDERS THE BANK OF NOVA SCOTIA, AS A CO-AGENT AND LENDER By: /s/ J. Alan Edwards ------------------------- Title: Authorized Signatory ------------------------- LENDERS MANUFACTURERS AND TRADERS TRUST COMPANY, AS A CO-AGENT AND LENDER By: /s/ Stephen J. Wydysh ------------------------- Title: Vice President ------------------------- LENDERS MARINE MIDLAND BANK, AS A CO-AGENT AND LENDER By: /s/ Martin F. Brown ------------------------- Title: Authorized Signatory ------------------------- LENDERS COMERICA BANK By: /s/ David W. Shirey ------------------------- Title: Assistant Vice President ------------------------- LENDERS FIRST UNION NATIONAL BANK By: /s/ Mark B. Felker ------------------------- Title: Senior Vice President ------------------------- LENDERS KEYBANK NATIONAL ASSOCIATION By: /s/ Lawrence A. Mack -------------------------- Title: Senior Vice President -------------------------- LENDERS MELLON BANK, N.A. By: /s/ Edward J. Kloecker -------------------------- Title: Vice President -------------------------- LENDERS BANKERS TRUST COMPANY By: /s/ Anthony LoGrippo ------------------------ Title: Principal ------------------------ LENDERS THE BANK OF NEW YORK By: /s/ Thomas McCrohan --------------------- Title: Vice President --------------------- LENDERS NATIONAL BANK OF CANADA By: /s/ Robert G Uhrig --------------------------- Title: Vice President --------------------------- By: /s/ Michael R. Brace --------------------------- Title: Marketing Officer --------------------------- LENDERS NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ William A. Feldmann ----------------------- Title: Vice President ----------------------- EX-10.25 10 1ST AMENDMENT AND RESTATEMENT OF 1995 ISO PLAN COLUMBUS MCKINNON CORPORATION AMENDED AND RESTATED 1995 INCENTIVE STOCK OPTION PLAN --------------------------- WHEREAS, Columbus McKinnon Corporation, a New York corporation with offices at 140 John James Audubon Parkway, Amherst, New York (the "Company") has adopted an incentive stock option plan known as the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan (the "Original Plan") on October 27, 1995 to enable the Company to attract and retain highly qualified individuals as officers and key employees of the Company by providing such officers and key employees an equity based form of incentive compensation; and WHEREAS, the Company desires to amend and restate the Original Plan; NOW, THEREFORE, the Company hereby adopts the following as the Amendment and Restatement of the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan effective as of June 16, 1999: 1. PURPOSE OF PLAN. The Columbus McKinnon Corporation Amended and Restated 1995 Incentive Stock Option Plan (the "Plan") is intended to provide officers and other key employees of the Company and officers and other key employees of any subsidiaries of the Company as that term is defined in Section 3 below (hereinafter individually referred to as a "Subsidiary" and collectively as "Subsidiaries") with an additional incentive for them to promote the success of the business, to increase their proprietary interest in the success of the Company and its Subsidiaries, and to encourage them to remain in the employ of the Company or its Subsidiaries. The above aims will be effectuated through the granting of certain stock options, as herein provided, which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as the same has been and shall be amended ("Code"). 2. ADMINISTRATION. The Plan shall be administered by a Committee (the "Committee") composed of not less than two (2) Directors of the Company who shall be appointed by and serve at the pleasure of the Board of Directors of the Company. Any Director that serves as a member of the Committee shall not receive or be eligible to receive a grant of an option or any other equity security of the Company or any Subsidiary under this Plan during the period of his or her service as a member of the Committee and during the one year period prior to his or her service as a member of the Committee. If the Committee is composed of two (2) Directors, both members of the Committee must approve any action to be taken by the Committee in order for such action to be deemed to be an action of the Committee pursuant to the provisions of this Plan. If the Committee is composed of more than two (2) Directors, a majority of the Committee shall constitute a quorum for the conduct of its business, and (a) the action of a majority of the Committee members present at any meeting at which a quorum is present, or (b) action taken without a meeting by the approval in writing of a majority of the Committee members, shall be deemed to be action by the Committee pursuant to the provisions of the Plan. The Committee is authorized to adopt such rules and regulations for the administration of the Plan and the conduct of its business as it may deem necessary or proper. Any action taken or interpretation made by the Committee under any provision of the Plan or any option granted hereunder shall be in accordance with the provisions of the Code, and the regulations and rulings issued thereunder as such may be amended, promulgated, issued, renumbered or continued from time to time hereafter in order that, to the greatest extent possible, the options granted hereunder shall constitute "incentive stock options" within the meaning of the Code. All action taken pursuant to this Plan shall be lawful and with a view to obtaining for the Company and the option holder the maximum advantages under the law as then obtaining, and in the event that any dispute shall arise as to any action taken or interpretation made by the Committee under any provision of the Plan, then all doubts shall be resolved in favor of such having been done in accordance with the said Code and such revenue laws, amendments, regulations, rulings and provisions as may then be applicable. Any action taken or interpretation made by the Committee under any provision of the Plan shall be final. No member of the Board of Directors or the Committee shall be liable for any action, determination or interpretation taken or made under any provision of the Plan or otherwise if done in good faith. 3. PARTICIPATION. The Committee shall determine from among the officers and key employees of the Company and its Subsidiaries (as such term is defined in Section 424 of the Code) those individuals to whom options shall be granted (sometimes hereinafter referred to as "Optionees"), the terms and provisions of the options granted (which need not be identical), the time or times at which options shall be granted and the number of shares of the Company's common stock, $.01 par value per share (hereinafter "Common Stock"), (or such number of shares of stock in which the Common Stock may at any time hereafter be constituted), for which options are granted. In selecting Optionees and in determining the number of shares for which options are granted, the Committee may weigh and consider the following factors: the office or position of the Optionee and his degree of responsibility for the growth and success of the Company and its Subsidiaries, length of service, remuneration, promotions, age and potential. The foregoing factors shall not be considered to be exclusive or obligatory upon the Committee, and the Committee may properly consider any other factors which to it seems appropriate. The terms and conditions of any option granted by the Committee under this Plan shall be contained in a written statement which shall be delivered by the Committee to the Optionee as soon as practicable following the Committee's establishment of the terms and conditions of such option. An Optionee who has been granted an option under the Plan may be granted additional options under the Plan if the Committee shall so determine. Notwithstanding the foregoing, if during the twelve (12) month period following the effective date of this amendment and restatement, any options are granted to employees of the Company that are also members of the Board of Directors of the Company and if this amendment and restatement is not approved by the shareholders of the Company during such twelve (12) month period, any options granted to any employees that are also members of the Company's Board of Directors shall continue to be binding upon the Company according to their terms but shall not be deemed to be "incentive stock options" as defined in Section 422(b) of the Code. In addition, if at the time an option is granted to an individual under this Plan, the individual owns stock of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, (or if such individual would be deemed to own such percentage of such stock under Section 424(d) of the Code) such option shall continue to be valid and binding upon the Company according to its terms but shall not be deemed to be an "incentive stock option" as defined in Section 422(b) of the Code unless: (a) the price per share at which common stock of the Company may be acquired in connection with the exercise of such options is not less than one hundred ten percent (110%) of the fair market value of such common stock, determined as of the date of the grant of such options; and (b) the period of time within which such options must be exercised does not exceed five (5) years from the date on which such options are granted. Finally, in no event shall any options be granted under this Plan at any time after the termination date set forth at the end of this Plan. 4. SHARES SUBJECT TO THE PLAN. The aggregate number of shares of Common Stock which have been reserved for issuance pursuant to the terms of options granted pursuant to the terms of this Plan and the aggregate number of shares of Common Stock which the Company is authorized to issue pursuant to options granted pursuant to the terms of this Plan is 1,250,000, subject to anti-dilutive adjustments, if any, made at any time after October 27, 1995, pursuant to the provisions of Section 5 hereof. With respect to shares which may be acquired pursuant to options which expire or terminate pursuant to the provisions of this Plan without having been exercised in full, such shares shall be considered to be available again for placement under options granted thereafter under the Plan. Shares issued pursuant to the exercise of incentive stock options granted under the Plan shall be fully paid and non-assessable. 5. ANTI-DILUTION PROVISIONS. The aggregate number of shares of Common Stock and the class of such shares as to which options may be granted under the Plan, the number and class of such shares subject to each outstanding option, the price per share thereof (but not the total price), and the number of such shares as to which an option may be exercised at any one time, shall all be adjusted proportionately in the event of any change, increase or decrease in the outstanding shares of Common Stock of the Company or any change in classification of its Common Stock without receipt of consideration by the Company which results either from a split-up, reverse split or consolidation of shares, payment of a stock dividend, recapitalization, reclassification or other like capital adjustment so that upon exercise of the option, the Optionee shall receive the number and class of shares that he would have received had he been the holder of the number of shares of Common Stock for which the option is being exercised immediately preceding such change, increase or decrease in the outstanding shares of Common Stock. Any such adjustment made by the Committee shall be final and binding upon all Optionees, the Company, and all other interested persons. Any adjustment of an incentive stock option under this paragraph shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Anything in this Section 5 to the contrary notwithstanding, no fractional shares or scrip representative of fractional shares shall be issued upon the exercise of any option. Any fractional share interest resulting from any change, increase or decrease in the outstanding shares of Common Stock or resulting from any reorganization, merger, or consolidation for which adjustment is provided in this Section 5 shall disappear and be absorbed into the next lowest number of whole shares, and the Company shall not be liable for any payment for such fractional share interest to the Optionee upon his exercise of the option. 6. OPTION PRICE. The purchase price for each share of Common Stock which may be acquired upon the exercise of each option issued under the Plan shall be determined by the Committee at the time the option is granted, but in no event shall such purchase price be less than one hundred percent (100%) of the fair market value of the Common Stock on the date of the grant. Notwithstanding the foregoing, in the case of an individual that owns stock of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries (or if such individual would be deemed to own such percentage of such stock under Section 424 (d) of the Code), (any such individual being hereinafter referred to as a "Ten Percent Shareholder") in no event shall the purchase price for each share of Common Stock which may be acquired upon the exercise of each option issued to such Ten Percent Shareholder be less than one hundred ten percent (110%) of the fair market value of the Common Stock on the date of the grant. If the Common Stock is listed upon an established stock exchange or exchanges on the day the option is granted, such fair market value shall be deemed to be the closing price of the Common Stock on such stock exchange or exchanges on the day the option is granted, or if no sale of the Company's Common Stock shall have been made on any stock exchange on that day, on the next preceding day on which there was a sale of such stock. If the Common Stock is listed in the NASDAQ National Market System, the fair market value of the Common Stock shall be the average of the high and low closing sale prices in the NASDAQ National Market System on the day the option is granted, or if no sale of the Common Stock shall have been made on the NASDAQ National Market System on that day, on the next preceding day on which there was a sale of such stock. 7. OPTION EXERCISE PERIODS. The time within which any option granted hereunder may be exercised shall be, by its terms, not earlier than one (1) year from the date such option is granted and not later than ten (10) years from the date such option is granted; provided that, in the case of any options granted to a Ten Percent Shareholder, the time within which any option granted to such Ten Percent Shareholder may be exercised shall be, by its terms, not earlier than one (1) year from the date such option is granted and not later than five (5) years from the date such option is granted. Subject to the provisions of Section 10 hereof, the Optionee must remain in the continuous employment of the Company or any of its Subsidiaries from the date of the grant of the option to and including the date of exercise of option in order to be entitled to exercise his option. Options granted hereunder shall be exercisable in such installments and at such dates as the Committee may specify. In addition, with respect to all options granted under this Plan, unless the Committee shall specify otherwise, the right of each Optionee to exercise his option shall accrue, on a cumulative basis, as follows: (a) one-fourth (1/4) of the total number of shares of Common Stock which could be purchased (subject to adjustment as provided in Section 5 hereof) (such number being hereinafter referred to as the "Optioned Shares") shall become available for purchase pursuant to the option at the end of the one (1) year period beginning on the date of the option grant; (b) one-fourth (1/4) of the Optioned Shares shall become available for purchase pursuant to the option at the end of the two (2) year period beginning on the date of the option grant; (c) one-fourth (1/4) of the Optioned Shares shall become available for purchase pursuant to the option at the end of the three (3) year period beginning on the date of the option grant; and (d) one-fourth (1/4) of the Optioned Shares shall become available for purchase pursuant to the option at the end of the four (4) year period beginning on the date of the option grant. Continuous employment shall not be deemed to be interrupted by transfers between the Subsidiaries or between the Company and any Subsidiary, whether or not elected by termination from any Subsidiary of the Company and re-employment by any other Subsidiary or the Company. Time of employment with the Company shall be considered to be one employment for the purposes of this Plan, provided there is no intervening employment by a third party or no interval between employments which, in the opinion of the Committee, is deemed to break continuity of service. The Committee shall, at its discretion, determine the effect of approved leaves of absence and all other matters having to do with "continuous employment". Where an Optionee dies while employed by the Company or any of its Subsidiaries, his options may be exercised following his death in accordance with the provisions of Section 10 below. Notwithstanding the foregoing provisions of this Section 7, in the event that the Company or the stockholders of the Company enter into an agreement to dispose of all or substantially all of the assets or stock of the Company by means of a sale, merger, consolidation, reorganization, liquidation, or otherwise, or in the event a Change of Control (as hereinafter defined) shall occur, each outstanding option shall become immediately exercisable with respect to the full number of shares subject to that option and shall remain exercisable until the expiration of the original term of the option. The Committee may provide in connection with such transaction for assumption of options previously granted or the substitution for such options of new options covering the securities of a successor corporation or an affiliate thereof, with appropriate adjustments as to the number and kind of securities and prices. For purposes of this Plan, a "Change in Control" shall be deemed to have occurred if: (a) there shall be consummated: (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's common stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") but excluding the Company and each of the Company's officers and directors, whether individually or collectively), shall become the beneficial owner (within the meaning of 13d-3 under the Exchange Act) of 20% or more of the Company's outstanding common stock; or (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors of the Company shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of a least two-thirds of the directors then still in office who were directors at the beginning of the period. Any change or adjustment made pursuant to the terms of this paragraph shall be made in such a manner so as not to constitute a "modification" as defined in Section 424 of the Code, and so as not to cause any incentive stock option issued under this Plan to fail to continue to qualify as an incentive stock option as defined in Section 422(b) of the Code. Notwithstanding the foregoing, in the event that any agreement providing for the sale or other disposition of all or substantially all the stock or assets of the Company shall be terminated without consummating the disposition of said stock or assets, any unexercised unaccrued installments that had become exercisable solely by reason of the provisions of this paragraph shall again become unaccrued and unexercisable as of said termination of such agreement; subject, however, to such installments accruing pursuant to the normal accrual schedule provided in the terms under which such option was granted. Any exercise of an installment prior to said termination of said agreement shall remain effective despite the fact that such installment became exercisable solely by reason of the Company or its stockholders entering into said agreement to dispose of the stock or assets of the Company. 8. EXERCISE OF OPTION. Options shall be exercised as follows: (a) Notice and Payment. Each option, or any installment thereof, shall be exercised, whether in whole or in part, by giving written notice to the Company at its principal office, specifying the options being exercised (by reference to the date of the grant of the option), the number of shares to be purchased and the purchase price being paid, and shall be accompanied by the payment of all or such part of the purchase price as shall be required to be paid in connection with the exercise of such option (as specified in the written notice of exercise of such option) (i) in cash, certified or bank check payable to the order of the Company, (ii) by tendering (either actually or by attestation) shares (or a sufficient portion thereof) valued as determined by the Committee at the time of exercise, (iii) by authorizing a third party to sell shares (or a sufficient portion thereof) acquired upon exercise of an option and to remit to the Company a sufficient portion of the sale proceeds to pay for all the shares acquired through such exercise and any resulting tax withholding obligations or (iv) by any other method prescribed by the Committee. Each such notice shall contain representations on behalf of the Optionee that he acknowledges that the Company is selling the shares being acquired by him under a claim of exemption from registration under the Securities Act of 1933 as amended (the "Act"), as a transaction not involving any public offering; that he represents and warrants that he is acquiring such shares with a view to "investment" and not with a view to distribution or resale; and that he agrees not to transfer, encumber or dispose of the shares unless: (i) a registration statement with respect to the shares shall be effective under the Act, together with proof satisfactory to the Company that there has been compliance with applicable state law; or (ii) the Company shall have received an opinion of counsel in form and content satisfactory to the Company to the effect that the transfer qualifies under Rule 144 or some other disclosure exemption from registration and that no violation of the Act or applicable state laws will be involved in such transfer, and/or such other documentation in connection therewith as the Company's counsel may in its sole discretion require. (b) Issuance of Certificates. Certificates representing the shares purchased by the Optionee shall be issued as soon as practicable after the Optionee has complied with the provisions of Section 8(a) hereof. (c) Rights as a Stockholder. The Optionee shall have no rights as a stockholder with respect to the shares of Common Stock purchased until the date of the issuance to him of a certificate representing such shares. 9. ASSIGNMENT OF OPTION. (a) Subject to the provisions of Sections 9(b) and 10(c) hereof, options granted under this Plan may not be assigned voluntarily or involuntarily or by operation of law and any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to execution, attachment or similar process, any incentive stock option, or any right thereunder, contrary to the provisions hereof shall be void and ineffective, shall give no right to the purported transferee, and shall, at the sole discretion of the Committee, result in forfeiture of the option with respect to the shares involved in such attempt. (b) Notwithstanding anything to the contrary contained in the terms of the Plan as in effect at any time prior to the date hereof and notwithstanding anything to the contrary contained in the terms of any statement, letter or other document or agreement setting forth the terms and conditions of any options previously issued pursuant to the terms of this Plan, any and all Non-Qualified Options (as defined in Section 13 hereof) previously issued to any officer of the Company (as defined in Rule 16A-a(f) issued under the Securities and Exchange Act of 1934 (hereinafter an "Executive Officer")) pursuant to the terms of the Plan and, subject to the approval of the Committee, any Non-Qualified Options which may be granted or issued to any Executive Officer of the Company at any time in the future pursuant to the terms of the Plan shall be transferable by the Executive Officer to whom such Non-Qualified Options have been or are granted to: (i) the spouse, children or grandchildren of the Executive Officer (hereinafter "Immediate Family Members"); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership or limited liability company in which such Immediate Family Members are the only partners or members; or (iv) a private foundation established by the Executive Officer; provided that: (x) there may be no consideration for any such transfer; (y) in the case of Non-Qualified Options which may be granted in the future, the statement, letter or other document or agreement setting forth the terms and conditions of any such Non-Qualified Options must expressly provide for and limit the transferability of such Non-Qualified Options to transfers which are permitted by the foregoing provisions of this Section 9(b); and (z) any subsequent transfer of transferred Non-Qualified Options shall, except for transfers occurring as a result of the death of the transferee as contemplated by Section 10(e), be prohibited. Following the transfer of any Non-Qualified Options as permitted by the foregoing provisions of this Section 9(b), any such transferred Non-Qualified Options shall continue to be subject to the same terms and conditions applicable to such Non-Qualified Options immediately prior to the transfer; provided that, for purposes of this Plan, the term "Optionee" shall be deemed to refer to the transferee. Notwithstanding the foregoing, the events of termination of employment of Section 10 hereof shall continue to be applied with respect to the original Optionee for the purpose of determining whether or not the Non-Qualified Options shall be exercisable by the transferee and, upon termination of the original Optionee's employment, the Non-Qualified Options shall be exercisable by the transferee only to the extent and for the periods that the original Optionee (or his estate) would have been entitled to exercise such Options as specified in Section 10 below. 10. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. (a) In the event that an Optionee's employment with the Company or the Subsidiary by whom the Optionee was employed is terminated either by reason of: (i) a discharge for cause; (ii) voluntary separation on the part of the Optionee (other than any termination of employment by the Optionee which qualifies as a termination for "Good Reason" pursuant to the terms of a letter agreement between the Optionee and the Company (a "Good Reason Termination")) and without consent of the Company or the Subsidiary by whom the Optionee was employed, any rights of the Optionee to purchase shares of Common Stock pursuant to the terms of any option or options granted to him under this Plan shall terminate immediately upon such termination of employment to the extent such options have not theretofore been exercised by him. (b) In the event of the termination of employment of an Optionee (otherwise than by reason of death or retirement of the Optionee at his Retirement Date) by the Company or by any of the Subsidiaries employing the Optionee at such time or pursuant to a Good Reason Termination, any option or options granted to him under the Plan to the extent not theretofore exercised shall be deemed cancelled and terminated forthwith, except that, subject to the provisions of subparagraph (a) of this Section, such Optionee may exercise any options theretofore granted to him, which have not then expired and which, as of the date the Optionee's employment with the Company is terminated, were otherwise exercisable within the provisions of Section 7 hereof, within three (3) months after such termination. If the employment of an Optionee shall be terminated by reason of the Optionee's retirement at his Retirement Date by the Company or by any of the Subsidiaries employing the Optionee at such time, the Optionee shall have the right to exercise such option or options held by him to the extent that such options have not expired, at any time within three (3) months after such retirement. The provisions of Section 7 to the contrary notwithstanding, upon retirement, all options held by an Optionee shall be immediately exercisable in full. The transfer of an Optionee from the employ of the Company to a Subsidiary of the Company or vice versa, or from one Subsidiary of the Company to another, shall not be deemed to constitute a termination of employment for purposes of this Plan. (c) In the event that an Optionee shall die while employed by the Company or by any of the Subsidiaries or shall die within three (3) months after retirement on his Retirement Date (from the Company or any Subsidiary), any option or options granted to him under this Plan and not theretofore exercised by him or expired shall be exercisable by the estate of the Optionee or by any person who acquired such option by bequest or inheritance from the Optionee in full, notwithstanding the provisions of Section 7 hereof, at any time within one (1) year after the death of the Optionee. References herein above to the Optionee shall be deemed to include any person entitled to exercise the option after the death of the Optionee under the terms of this Section. (d) In the event of the termination of employment of an Optionee by reason of the Optionees' disability, the Optionee shall have the right, notwithstanding the provisions of Section 7 hereof, to exercise all options held by him, in full, to the extent that such options have not previously expired or been exercised, at any time within one (1) year after such termination. The term "disability" shall, for the purposes of this Plan, be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986. (e) For the purposes of this Plan, "Retirement Date" shall mean, with respect an Optionee, the date the Optionee actually retires from his employment with the Company or, if applicable, the Subsidiary by whom he is employed; provided that such date occurs on or after the date the Optionee is otherwise entitled to retire under the terms of the defined benefit pension plan which the Optionee is a participant in (and which plan is maintained by the Company or, if applicable, the Subsidiary by whom the Optionee is employed). 11. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors of the Company may at any time suspend, amend or terminate the Plan; provided, however, that except as permitted in Section 13 hereof, no amendment or modification of the Plan which would: (a) increase the maximum aggregate number of shares as to which options may be granted hereunder (except as contemplated in Section 5); or (b) reduce the option price or change the method of determining the option price; or (c) increase the time for exercise of options to be granted or those which are outstanding beyond a term of ten (10) years; or (d) change the designation of the employees or class of employees eligible to receive options under this Plan, may be adopted unless with the approval of the holders of a majority of the outstanding shares of Common Stock represented at a stockholders' meeting of the Company, or with the written consent of the holders of a majority of the outstanding shares of Common Stock. No amendment, suspension or termination of the Plan may, without the consent of the holder of the option, terminate his option or adversely affect his rights in any material respect. 12. INCENTIVE STOCK OPTIONS; POWER TO ESTABLISH OTHER PROVISIONS. It is intended that the Plan shall conform to and (except as otherwise expressly set forth herein) each option shall qualify and be subject to exercise only to the extent that it does qualify as an "incentive stock option" as defined in Section 422 of the Code and as such section may be amended from time to time or be accorded similar tax treatment to that accorded to an incentive stock option by virtue of any new revenue laws of the United States. The Board of Directors may make any amendment to the Plan which shall be required so to conform the Plan. Subject to the provisions of the Code, the Committee shall have the power to include such other terms and provisions in options granted under this Plan as the Committee shall deem advisable. The grant of any options pursuant to the terms of this Plan which do not qualify as "incentive stock options" as defined in Section 422 of the Code is hereby approved provided that the maximum number of shares of Common Stock of the Company which can be issued pursuant to the terms of this Plan (as provided for in Section 4 hereof but subject to anti-dilutive adjustments made pursuant to Section 5 hereof) is not exceeded by the grant of any such options and, to the extent that any options previously granted pursuant to the terms of this Plan were not "incentive stock options" within the meaning of Section 422 of the Code, the grant of such options is hereby ratified, approved and confirmed. 13. MAXIMUM ANNUAL VALUE OF OPTIONS EXERCISABLE. Notwithstanding any provisions of this Plan to the contrary if: (a) the sum of: (i) the fair market value (determined as of the date of the grant) of all options granted to an Optionee under the terms of this Plan which become exercisable for the first time in any one calendar year; and (ii) the fair market value (determined as of the date of the grant) of all options previously granted to such Optionee under the terms of this Plan or any other incentive stock option plan of the Company or its subsidiaries which also become exercisable for the first time in such calendar year; exceeds (b) $100,000; then, (c) those options shall continue to be binding upon the Company in accordance with their terms but, to the extent that the aggregate fair market of all such options which become exercisable for the first time in any one calendar year (determined as of the date of the grant) exceeds $100,000, such options (referred to, for purposes of this Plan, as "Non-Qualified Options") shall not be deemed to be incentive stock options as defined in Section 422(b) of the Code. For purposes of the foregoing, the determination of which options shall be recharacterized as not being incentive stock options issued under the terms of this Plan shall be made in inverse order of their grant dates and, accordingly, the last options received by the Optionee shall be the first options to be recharacterized as not being incentive stock options granted pursuant to the terms of the Plan. 14. GENERAL PROVISIONS (a) No incentive stock option shall be construed as limiting any right which the Company or any parent or subsidiary of the Company may have to terminate at any time, with or without cause, the employment of an Optionee. (b) The Section headings used in this Plan are intended solely for convenience of reference and shall not in any manner amplify, limit, modify or otherwise be used in the construction or interpretation of any of the provisions hereof. (c) The masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the other whenever the content so indicates or requires. (d) No options shall be granted under the Plan after ten (10) years from the date the Plan is adopted by the Board of Directors of the Company or approved by the stockholders of the Company, whichever is earlier. 15. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan became effective on October 27, 1995, the date the adoption of the Plan was approved by the Board of Directors of the Company. On January 8, 1996, as required by Section 422 of the Code, the Plan was approved by the Stockholders of the Company. The Plan will terminate on October 27, 2005; provided however, that the termination of the Plan shall not be deemed to modify, amend or otherwise affect the terms of any options outstanding on the date the Plan terminates. IN WITNESS WHEREOF, the undersigned has executed this Plan by and on behalf of the Company as of the 16th day of June, 1999. COLUMBUS MCKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- DATE ADOPTED BY BOARD OF DIRECTORS: October 27, 1995 DATE APPROVED BY STOCKHOLDERS: January 8, 1996 TERMINATION DATE: October 27, 2005 EX-10.27 11 AMENDED AND RESTATED NON-QUAL. STOCK OPTION PLAN COLUMBUS MCKINNON CORPORATION AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION PLAN -------------------------- WHEREAS, Columbus McKinnon Corporation, a New York corporation with offices at 140 John James Audubon Parkway, Amherst, New York (the "Company") has adopted a non-qualified stock option plan known as the "First Amendment and Restatement of the Columbus McKinnon Corporation Non-Qualified Stock Option Plan") to enable the Company to attract to membership on the Board of Directors of the Company, individuals with substantial consulting experience with respect to the legal, financial and operational concerns of large public and privately held corporations; and WHEREAS, the Company desires to further amend and restate the Plan; NOW, THEREFORE, the Company hereby adopts the following as the Columbus McKinnon Corporation Amended and Restated Non-Qualified Stock Option Plan effective as of June 16, 1999: 1. PURPOSE OF PLAN. The Columbus McKinnon Corporation Amended and Restated Non-Qualified Stock Option Plan (the "Plan") is intended to provide a tool to the management of the Company for attracting, motivating and retaining highly qualified officers and key employees to employment with the Company, its divisions and subsidiaries by providing such officers and other key employees with an additional incentive to promote the success of the business, to increase their proprietary interest in the success of the Company and to encourage them to remain in the employ of the Company and its divisions, subsidiaries and affiliates. A further purpose of the Plan is to provide the Company's management with an additional equity based program which can be used to attract individuals with substantial consulting experience with respect to the legal, financial and operational concerns of large public and privately held corporations to membership on the Company's Board of Directors. 2. ADMINISTRATION. The Plan shall be administered by a Committee (the "Committee") which shall be composed of not less than two (2) Directors of the Company who shall be appointed by and serve at the pleasure of the Board of Directors of the Company. If the Committee is composed of two (2) Directors, both members of the Committee must approve, in writing, any action to be taken by the Committee in order for such action to be deemed an action of the Committee pursuant to the provisions of this Plan. If the Committee is composed of more than two (2) Directors, a majority of the Committee shall constitute a quorum for the conduct of its business, and (a) the action of a majority of the Committee members present at any meeting at which a quorum is present, or (b) action taken without a meeting by the approval, in writing, of a majority of the Committee members, shall be deemed to be action by the Committee pursuant to the provisions of the Plan. The Committee is authorized to adopt such rules and regulations for the administration of the Plan as it may deem necessary or proper. Any action taken or interpretation made by the Committee under any provision of the Plan shall be final. No member of the Board of Directors or the Committee shall be liable for any action, determination or interpretation taken or made under any provision of the Plan or otherwise if done in good faith. 3. PARTICIPATION. The Committee shall determine which individuals shall be granted options under the terms of this Plan, which individuals may, but are not required to, include officers and employees of the Company, legal or financial advisors to the Company and non-employee Directors of the Company (all such individuals being sometimes hereinafter referred to as "Optionees"). 4. OPTION TERMS. The Committee shall establish the terms and conditions (which need not be identical) upon which the options granted hereunder may be exercised, the time or times at which options to purchase shares of the Company's common stock, $.01 par value per share (hereinafter "Common Stock") shall be granted and the number of shares of Common Stock (or such number of shares of stock in which such Common Stock may at any time hereafter be constituted), for which options are granted. The terms and conditions established by the Committee with respect to any option granted by the Committee under this Plan shall be contained in a written statement which shall be delivered by the Committee to the Optionee as soon as practicable following the Committee's establishment of the terms and conditions of such Option. Notwithstanding the foregoing, unless otherwise modified by action of the Company's Board of Directors, the following terms and conditions shall apply with respect to any options granted hereunder: (a) in the case of an individual that is an employee of the Company or any of its direct or indirect subsidiaries or affiliates, the right to exercise options granted hereunder shall be conditioned on the continuous employment of such individual by the Company or any of its direct or indirect subsidiaries or affiliates between the date of the grant of the option and the date of exercise of the option; (b) in the case of an individual that is a member of the Board of Directors of the Company or the Board of Directors of any subsidiary or affiliate of the Company but is not an employee of the Company or any direct or indirect subsidiary or affiliate of the Company, the right to exercise options granted hereunder shall be conditioned on the continuous membership by such individual on the Board of Directors of the Company or any such subsidiary or affiliate; (c) except as otherwise specified by the Committee at the time of the grant of any options under this Plan and except as provided in Section 7 hereof, the right to exercise such options shall accrue, on a cumulative basis, as follows: (i) one fourth (1/4) of the total number of shares of Common Stock which could be purchased (subject to adjustment as provided for in Section 6 hereof) (such number being hereinafter referred to as the "Optioned Shares") shall become available for purchase pursuant to the option at the end of the one (1) year period following the date of the option grant; (ii) one-fourth (1/4) of the Optioned Shares shall become available for purchase pursuant to the option at the end of the two (2) year period following the date of the option grant; (iii) one-fourth (1/4) of the Optioned Shares shall become available for purchase pursuant to the option at the end of the three (3) year period following the date of the option grant; and (iv) one-fourth (1/4) of the Optioned Shares shall become available for purchase pursuant to the option at the end of the four (4) year period following the date of the option grant. An Optionee who has been granted an option under the Plan may be granted additional options under the Plan if the Committee shall so determine. The purchase price payable for Common Stock in connection with the exercise of options granted hereunder shall be determined by the Committee at the time of the grant of any options hereunder. 5. SHARES SUBJECT TO THE PLAN. The aggregate number of shares of the Common Stock which have been reserved for issuance pursuant to the terms of options granted pursuant to the terms of this Plan and the aggregate number of shares of Common Stock which the Company is authorized to issue pursuant to options granted pursuant to the terms of this Plan is two hundred fifty thousand (250,000) shares, subject to anti-dilutive adjustments, if any, made at any time after October 27, 1995, pursuant to the provisions of Section 6 hereof. With respect to shares which may be acquired pursuant to options which expire or terminate pursuant to the provisions of this Plan without having been exercised in full, such shares shall be considered to be available again for placement under options granted thereafter under the Plan. Shares issued pursuant to the exercise of incentive stock options granted under the Plan shall be fully paid and non-assessable. 6. ANTI-DILUTION PROVISIONS. The aggregate number of shares of Common Stock and the class of such shares as to which options may be granted under the Plan, the number and class of such shares subject to each outstanding option, the price per share thereof (but not the total price), and the number of such shares as to which an option may be exercised at any one time, shall all be adjusted proportionately in the event of any change, increase or decrease in the outstanding shares of Common Stock or any change in classification of its Common Stock without receipt of consideration by the Company which results either from a split-up, reverse split or consolidation of shares, payment of a stock dividend, recapitalization, reclassification or other like capital adjustment so that upon exercise of the option, the Optionee shall receive the number and class of shares that he would have received had he been the holder of the number of shares of Common Stock for which the option is being exercised immediately preceding such change, increase or decrease in the outstanding shares of Common Stock. Any such adjustment made by the Committee shall be final and binding upon all Optionees, the Company and all other interested persons. Anything in this Section 6 to the contrary, no fractional shares or scrip representative of fractional shares shall be issued upon the exercise of any option. Any fractional share interest resulting from any change, increase or decrease in the outstanding shares of Common Stock or resulting from any reorganization, merger or consolidation for which adjustment is provided in this Section 6 shall disappear and be absorbed into the next lowest number of whole shares, and the Company shall not be liable for any payment for such fractional share interest to the Optionee upon his exercise of the Option. 7. OPTION EXERCISES UPON A CHANGE IN CONTROL. Notwithstanding the provisions of Section 4 hereof, in the event that the Company or the stockholders of the Company enter into an agreement to dispose of all or substantially all of the assets or stock of the Company by means of a sale, merger, consolidation, reorganization, liquidation, or otherwise, or in the event a Change of Control (as hereinafter defined) shall occur, each outstanding option shall become immediately exercisable with respect to the full number of shares subject to such option and shall remain exercisable until the expiration of the original term of the option. The Committee may provide in connection with such transaction for assumption of options previously granted or the substitution for such options of new options covering the securities of a successor corporation or an affiliate thereof, with appropriate adjustments as to the number and kind of securities and prices. For purposes of this Plan, a "Change in Control" shall be deemed to have occurred if: (a) there shall be consummated: (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's common stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") but excluding the Company and each of the Company's officers and directors, whether individually or collectively), shall become the beneficial owner (within the meaning of 13d-3 under the Exchange Act) of 20% or more of the Company's outstanding common stock; or (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors of the Company shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of a least two-thirds of the directors then still in office who were directors at the beginning of the period. Notwithstanding the foregoing, in the event that any agreement providing for the sale or other disposition of all or substantially all the stock or assets of the Company shall be terminated without consummating the disposition of said stock or assets, any unexercised unaccrued installments that had become exercisable solely by reason of the provisions of this paragraph shall again become unaccrued and unexercisable as of said termination of such agreement; subject, however, to such installments accruing pursuant to the normal accrual schedule provided in the terms under which such option was granted. Any exercise of an installment prior to said termination of said agreement shall remain effective despite the fact that such installment became exercisable solely by reason of the Company or its stockholders entering into said agreement to dispose of the stock or assets of the Company. 8. EXERCISE OF OPTION. Options shall be exercised as follows: (a) Notice and Payment. Each option, or any installment thereof, shall be exercised, whether in whole or in part, by giving written notice to the Company at its principal office, specifying the options being exercised (by reference to the date of the grant of the option), the number of shares to be purchased and the purchase price being paid, and shall be accompanied by the payment of all or such part of the purchase price as shall be required to be paid in connection with the exercise of such option (as specified in the written notice of exercise of such option) (i) in cash, certified or bank check payable to the order of the Company, (ii) by tendering (either actually or by attestation) shares (or a sufficient portion thereof) valued as determined by the Committee at the time of exercise, (iii) by authorizing a third party to sell shares (or a sufficient portion thereof) acquired upon exercise of an option and to remit to the Company a sufficient portion of the sale proceeds to pay for all the shares acquired through such exercise and any resulting tax withholding obligations or (iv) by any other method prescribed by the Committee. Each such notice shall contain representations on behalf of the Optionee that he acknowledges that the Company is selling the shares being acquired by him under a claim of exemption from registration under the Securities Act of 1933 as amended (the "Act"), as a transaction not involving any public offering; that he represents and warrants that he is acquiring such shares with a view to "investment" and not with a view to distribution or resale; and that he agrees not to transfer, encumber or dispose of the shares unless: (i) a registration statement with respect to the shares shall be effective under the Act, together with proof satisfactory to the Company that there has been compliance with applicable state law; or (ii) the Company shall have received an opinion of counsel in form and content satisfactory to the Company to the effect that the transfer qualifies under Rule 144 or some other disclosure exemption from registration and that no violation of the Act or applicable state laws will be involved in such transfer, and/or such other documentation in connection therewith as the Company's counsel may in its sole discretion require. (b) Issuance of Certificates. Certificates representing the shares purchased by the Optionee shall be issued as soon as practicable after the Optionee has complied with the provisions of Section 8(a) hereof. (c) Rights as a Stockholder. The Optionee shall have no rights as a stockholder with respect to the shares purchased until the date of the issuance to him of a certificate representing such shares. 9. ASSIGNMENT OF OPTION. (a) Subject to the provisions of Sections 9(b) and 10(e) hereof, options granted under this Plan may not be assigned voluntarily or involuntarily or by operation of law and any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to execution, attachment or similar process, any stock option, or any right thereunder, contrary to the provisions hereof shall be void and ineffective, shall give no right to the purported transferee, and shall, at the sole discretion of the Committee, result in forfeiture of the option with respect to the shares involved in such attempt. (b) Notwithstanding anything to the contrary contained in the terms of the Plan as in effect at any time prior to the date hereof and notwithstanding anything to the contrary contained in the terms of any statement, letter or other document or agreement setting forth the terms and conditions of any options previously issued pursuant to the terms of this Plan, any and all options previously issued pursuant to the terms of the Plan and, subject to the approval of the Committee, any options which may be granted or issued at any time in the future pursuant to the terms of the Plan shall be transferable by the Optionee to whom such options have been or are granted to: (i) the spouse, children or grandchildren of the Optionee (hereinafter "Immediate Family Members"); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership or limited liability company in which such Immediate Family Members are the only partners or members; or (iv) a private foundation established by the Optionee; provided that (x) there may be no consideration for any such transfer; (y) in the case of options which may be granted in the future, the statement, letter or other document or agreement setting forth the terms and conditions of any such options must be approved by the Committee and must expressly provide for and limit the transferability of such options to transfers which are permitted by the foregoing provisions of this Section 9(b); and (z) any subsequent transfer of transferred options shall, except for transfers occurring as a result of the death of the transferee as contemplated by Section 10(e), be prohibited. Following the transfer of any options as permitted by the foregoing provisions of this Section 9(b), any such transferred options shall continue to be subject to the same terms and conditions applicable to such options immediately prior to the transfer; provided that, for purposes of this Plan, the term "Optionee" shall be deemed to refer to the transferee. Notwithstanding the foregoing, the events of termination of employment of Section 10 hereof shall continue to be applied with respect to the original Optionee for the purpose of determining whether or not the options shall be exercisable by the transferee and, upon termination of the original Optionee's employment, the options shall be exercisable by the transferee only to the extent and for the periods that the original Optionee (or his estate) would have been entitled to exercise such Options as specified in Section 10 below. 10. EFFECT OF TERMINATION OF EMPLOYMENT, REMOVAL, DEATH OR DISABILITY. (a) If an Optionee is employed by the Company or any direct or indirect subsidiary or affiliate of the Company on the date he receives a grant of an option and if such Optionee's employment with the Company, or any direct or indirect subsidiary or affiliate of the Company, is terminated by reason of: (i) a discharge for cause; (ii) voluntary separation on the part of the Optionee (other than any termination of employment by the Optionee which qualifies as a termination for "Good Reason" pursuant to the terms of a letter agreement between the Optionee and the Company (a "Good Reason Termination")) and without consent of the Company or such direct or indirect subsidiary or affiliate of the Company that the Optionee is employed by, any rights of the Optionee to purchase shares of Common Stock pursuant to the terms of any option or options granted to him under this Plan shall terminate immediately upon such termination of employment to the extent such options have not theretofore been exercised by him. (b) If an Optionee is a non-employee member of the Board of Directors of the Company or a non-employee member of the Board of Directors of any direct or indirect subsidiary or affiliate of the Company on the date he receives the grant of an option and if such Optionee's membership on the Board of Directors of the Company and on the Board of Directors of all other direct or indirect subsidiaries and affiliates of the Company is terminated by reason of: (i) removal for cause; or (ii) voluntary resignation on the part of the Optionee without the consent of the other members of the Board of Directors of the Company or the other members of each direct or indirect subsidiary or affiliate of the Company whose Board of Directors the Optionee is a member of, any rights of the Optionee to purchase shares of Common Stock pursuant to the terms of any option or options granted to him under this Plan during the two (2) year period ending on the date of the termination of his membership on the Board of Directors of the Company and any direct or indirect subsidiary and affiliate whose Board of Directors the Optionee is a member of, shall be terminated immediately upon termination of such Optionee's membership on the Board of Directors of the Company and on the Board of Directors of all other direct or indirect subsidiaries and affiliates to the extent such options have not theretofore been exercised by him. (c) If an Optionee is employed by the Company or any direct or indirect subsidiary or affiliate of the Company at the time he receives a grant of an option hereunder and if such Optionee's employment with the Company or any such direct or indirect subsidiary or affiliate of the Company is terminated (i) by reason of the Optionee's retirement at or after his attainment of his normal retirement date as defined under the terms of the defined benefit pension plan which the Optionee is a participant in (and which plan is maintained by the Company or the direct or indirect subsidiary or affiliate of the Company that is the employer of such Optionee), the Optionee shall, notwithstanding the provisions of Section 4(c) hereof, have the right to exercise such option or options held by him, in full, to the extent that such options have not expired, at any time within three (3) months after such retirement; or (ii) pursuant to a Good Reason Termination or by the Company or such direct or indirect subsidiary or affiliate that the Optionee is employed by (otherwise than by reason of death) any option or options granted to him under the Plan to the extent not theretofore exercised shall be deemed cancelled and terminated forthwith except that, subject to the provisions of subparagraph (a) of this Section, such Optionee may exercise any options theretofore granted to him, which have not then expired and which, as of the date the Optionee's employment is terminated, were otherwise exercisable within the provisions of Section 4 hereof, within three (3) months after such termination. (d) If an Optionee is a non-employee member of the Board of Directors of the Company or any direct or indirect subsidiary or affiliate of the Company at the time he receives a grant of an option hereunder and if such Optionee's membership on the Board of Directors of the Company and all other direct or indirect subsidiaries and affiliates of the Company is terminated by reason of the Optionee's resignation at or after his attainment of age 65, the Optionee shall, notwithstanding the provisions of Section 4(c) hereof, have the right to exercise such option or options held by him, in full, to the extent that such options have not expired, at any time within three (3) months after such retirement. (e) In the event that an Optionee shall die at any time that options granted hereunder are outstanding, any option or options granted to him under this Plan and not theretofore exercised by him or expired shall, notwithstanding the provisions of Section 4(c) hereof, be exercisable by the estate of the Optionee or by any person who acquired such option by bequest or inheritance from the Optionee, in full, at any time within one (1) year after the death of the Optionee. References hereinabove to the Optionee shall be deemed to include any person entitled to exercise the option after the death of the Optionee under the terms of this Section. (f) If an Optionee is employed by the Company or any direct or indirect subsidiary or affiliate of the Company at the time he receives a grant of an option hereunder and if his employment with the Company or any direct or indirect subsidiary or affiliate of the Company is terminated by reason of his disability, the Optionee shall, notwithstanding the provisions of Section 4(c) hereof, have the right to exercise all options held by him, in full, to the extent that such options have not previously expired or been exercised, at any time within one (1) year after such termination. If an Optionee is a non-employee member of the Board of Directors of the Company or any direct or indirect subsidiary or affiliate of the Company at the time he receives a grant of an option hereunder and if his membership on the Board of Directors of the Company and all other direct or indirect subsidiaries and affiliates of the Company is terminated by reason of his disability, the Optionee shall, notwithstanding the provisions of Section 4(c) hereof, have the right to exercise all options held by him, in full, to the extent that such options have not previously expired or been exercised, at any time within one (1) year after such termination. The term "disability" shall, for the purposes of this Plan, be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986. 11. INDEMNITY. The Company shall indemnify and hold harmless any person who is or has been a member of the Committee appointed under Section 2 hereof or the Board of Directors of the Company, from and against any and all loss, expense, liability or costs, including, without limitation, reasonable attorney's fees that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan provided that such person provides the Company prompt written notice of any such claim together with the opportunity to defend against claim or action at the Company's expense. 12. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors of the Company may at any time suspend, amend or terminate the Plan; provided, that no suspension, amendment or termination of the Plan may, without the consent of the holder of the option, terminate his option or adversely affect his rights in any material respect. 13. GENERAL PROVISIONS. (a) No stock option granted hereunder shall be construed as limiting any right which the Company or any parent or subsidiary of the Company may have to terminate at any time, with or without cause, the employment of an Optionee or an Optionee's membership on the Board of Directors of the Company or the Board of Directors of any direct or indirect subsidiary or affiliate of the Company. (b) The Section headings used in this Plan are intended solely for convenience of reference and shall not in any manner amplify, limit, modify or otherwise be used in the construction or interpretation of any of the provisions hereof. (c) The masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the other whenever the content so indicates or requires. 14. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan became effective on October 27, 1995 and shall continue until terminated by the Board of Directors of the Company or, if earlier, the date that all shares of Common Stock which may be issued in connection with the exercise of options which may be granted under the terms of the Plan have been issued. IN WITNESS WHEREOF, the undersigned has executed this Plan as of the 16th day of June, 1999. COLUMBUS MCKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- EX-10.29 12 AMENDMENT #1 TO 1998 401(K) RESTATEMENT COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN AMENDMENT NO. 1 OF THE 1998 PLAN RESTATEMENT Columbus McKinnon Corporation (the "Corporation") hereby amends the Columbus McKinnon Corporation Thrift 401(K) Plan (the "Plan"), as amended and restated in its entirety effective April 1, 1998, as permitted under Section 14.1 of the Plan, as follows: 1. Section 3.3, entitled "Rollover Contributions", is amended effective January 1, 1999, by changing subsection 3.3(d) thereof to read as follows: (d) In-Service Distribution. Participant may, upon written request to the Committee, withdraw from his rollover account such amount as he shall specify. Such a withdrawal will be effective as of the first Valuation Date that occurs at least 15 days after his withdrawal request is filed. 2. Section 10.4, entitled "Loans", is amended effective January 1, 1998 by changing the first sentence of such section (before subsection (a)) to read as follows: 10.4 Loans. A Participant may borrow from his Salary reduction Contribution Account (but not from his Matching Contribution Account, Rollover Account or any other Account) in accordance with the rules set forth in this Section 10.4. 3. New Schedule B, entitled "Special Rules for Acquired Employees", is added to the Plan effective September 1, 1998 and shall read as follows: Columbus McKinnon Corporation Thrift 401(k) Plan Schedule B -- Special Rules for Acquired Employees SB.1 Certain Former Employees of Abell-Howe Company. Each Employee who is an Eligible Employee on September 1, 1998 and who was a nonunion employee of Abell-Howe Company when that entity was acquired by the Corporation in August 1998-- (a) Special Participation Rule-- shall be eligible to become a Participant in the Plan on September 1, 1998 or, if later, on the first day of the month coinciding with or next following the expiration of 90 calendar days since the first day on which the Employee was entitled to payment for the performance of duties by Abell-Howe Company, and Columbus McKinnon Corporation Thrift 401(k) Plan Page 2 of Amendment No. 1 of 1998 Restatement (b) Special Vesting Rule-- shall be credited with Years of Vesting Service calculated on the assumption that Hours of Service earned as an employee of Abell-Howe Company before September 1, 1998 were Hours of Service earned as an Employee of the Corporation. IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 10th day of December, 1998. COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- Title: Executive Vice President ----------------------------- EX-10.32 13 AMENDMENT #1 TO 1998 MRB PLAN RESTATEMENT COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Amendment No. 1 of the 1998 Plan Restatement Columbus McKinnon Corporation (the "Company") hereby amends the Columbus McKinnon Corporation Monthly Retirement Benefit Plan (the "Plan"), as amended and restated in its entirety effective April 1, 1998, as permitted under Section 10.1 of the Plan, as follows: 1. Section 1.22, entitled "Highly Compensated Employee", is amended effective April 1, 1998 to read as follows: 1.22 "Highly Compensated Employee" includes highly compensated active employees and highly compensated former employees. (a) A highly compensated active employee means any Employee who: (1) was a 5-percent owner (as defined in Section 416(i)(1) of the Code) of the Corporation or an Affiliate at any time during the current or preceding year, or (2) for the preceding year-- (A) had compensation from the Corporation and all Affiliates in excess of $80,000 (as adjusted by the Secretary of the Treasury pursuant to Section 415(d) of the Code, except that the base period shall be the calendar quarter ending September 30, 1996), and (B) if the Corporation elects the application of this clause 1.22(a)(2)(B) for the preceding year, was in the top-paid group of Employees for such preceding year. For this purpose, an Employee is in the top-paid group of Employees for any year if the Employee is in a group consisting of the top 20 percent of the Employees when ranked on the basis of compensation paid during such year. (b) A former Employee shall be highly compensated employee if: (1) the Employee was a Highly Compensated Employee when the Employee separated from service, or (2) the Employee was a Highly Compensated Employee at any time after attaining age 55. COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 2 of Amendment No. 1 of 1998 Plan Restatement (c) Meaning of "Compensation". For the purpose of this Section 1.22, the term "compensation" means compensation within the meaning of Section 415(c)(3) of the Code. For Plan Years beginning before January 1, 1998, the determination of "compensation" shall be made without regard to Sections 125, 402(e)(3), and 402(h)(1)(B) of the Code and, in the case of employer contributions made pursuant to a salary reduction agreement, without regard to Section 403(b) of the Code. (d) Application of Code and Regulations. The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, shall be made in accordance with Section 414(q) of the Code and the regulations thereunder. 2. Section 4.4, entitled "55/15 Early Retirement Benefit", is amended effective April 1, 1998 to correct a typographical error by changing the reference to "62/25 early retirement benefit" to "55/15 early retirement benefit." 3. Section 11.1, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 1998 by changing subsection (b) thereof to read as follows: (b) "Annual Benefit" means the benefit payable annually in the form of a straight life annuity under the terms of the Plan (aggregated with other defined benefit plans as described in (j) below) exclusive of any benefit not required to be considered for purposes of applying the limitations of Code Section 415 to the Plan. If the Annual Benefit is payable in any form other than a straight life annuity or a qualified joint and survivor annuity within the meaning of Code Section 417, it shall be adjusted to an Actuarial Equivalent benefit in the form of a straight life annuity. In the case of the adjustment of a benefit that is not subject to Code Section 417(e)(3), the adjustment shall be made using an interest rate equal to the greater of the rate specified in the Plan or 5 percent. 4. Table 3 of Appendix A is amended effective April 1, 1998 to read as follows: APPENDIX A TABLE 3 TABLE OF ACTUARIAL EQUIVALENT FACTORS TO BE USED IN DETERMINING THE AMOUNT OF LIFE ANNUITY COMMENCING ON AN EARLY RETIREMENT DATE COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 3 of Amendment No. 1 of 1998 Plan Restatement Age at Early Actuarial Retirement Date Equivalent Factor --------------- ----------------- 65 1.000 64 .906 63 .824 62 .750 61 .685 60 .626 59 .574 58 .527 57 .484 56 .446 55 .411 Factors will be determined by interpolation based on the attained age to the completed month. 5. New Schedule 2, entitled "Pension Plan for Non-Union Hourly Employees of Columbus McKinnon Corporation, Merger into the MRB Plan, Treatment of Former Participants" is added to the Plan effective December 31, 1998 in the form attached to this Amendment No. 1 and incorporated herein by this reference. 6. New Schedule 5, entitled "Duff-Norton Company, Inc. Pension Plan for Salaried Employees of Yale Hoists, Merger into the MRB Plan, Treatment of Former Participants" is added to the Plan effective December 31, 1998 in the form attached to this Amendment No. 1 and incorporated herein by this reference. 7. New Schedule 6, entitled "Duff-Norton Company, Inc. Retirement Plan for Employees of American Lifts Division, Merger into the MRB Plan, Treatment of Former Participants" is added to the Plan effective February 28, 1999 in the form attached to this Amendment No. 1 and incorporated herein by this reference. COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 4 of Amendment No. 1 of 1998 Plan Restatement 8. Schedule 3, entitled "Retirement Plan for Salaried Employees of the Duff-Norton Companies, Merger into the MRB Plan, Treatment of Former Participants" is amended and restated effective June 30, 1998 in the form attached to this Amendment No. 1 and incorporated herein by this reference. 9. Schedule 4, entitled "Duff-Norton Company, Inc. Retirement Plan for Wadesboro Hourly Employees, Merger into the MRB Plan, Treatment of Former Participants" is amended and restated effective June 30, 1998 in the form attached to this Amendment No. 1 and incorporated herein by this reference. IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 10th day of December, 1998, to be effective as of the dates recited herein. COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- Title: Executive Vice President ----------------------------- EX-10.33 14 AMENDMENT #2 TO 1998 MRB PLAN RESTATEMENT COLUMBUS MCKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN AMENDMENT NO. 2 OF THE 1998 PLAN RESTATEMENT IRS TECHNICAL AMENDMENT Columbus McKinnon Corporation (the "Company") hereby amends the Columbus McKinnon Corporation Monthly Retirement Benefit Plan (the "Plan"), as amended and restated in its entirety effective April 1, 1998, as permitted under Section 10.1 of the Plan, as follows: 1. Section 11.1, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 1998 by changing subsection (b) thereof to read as follows: "(b) "ANNUAL BENEFIT" means the benefit payable annually in the form of a straight life annuity under the terms of the Plan (aggregated with other defined benefit plans as described in (j) below) exclusive of any benefit not required to be considered for purposes of applying the limitations of Code Section 415 to the Plan. If the Annual Benefit is payable in any form other than a straight life annuity or a qualified joint and survivor annuity within the meaning of Code Section 417, it shall be adjusted to an Actuarial Equivalent benefit in the form of a straight life annuity. (1) In the case of the adjustment of a benefit that is not subject to Code Section 417(e)(3), the adjustment shall be made using the mortality table described in Section 1.4(b) and an interest rate equal to the greater of the rate specified in Section 1.4(c) or 5 percent. (2) In the case of the adjustment of a benefit that is subject to Code Section 417(e)(3), the adjustment shall be made using the mortality table described in Section 1.4(b) and an interest rate equal to the greater of the rate specified in Section 1.4(b) or Section 1.4(c)." 2. Section 11.2, entitled "Maximum Annual Benefit" is amended effective April 1, 1998 by changing Section 11.2(b)(2) to read as follows: "(2) BENEFITS COMMENCING BEFORE SOCIAL SECURITY RETIREMENT AGE. If the Annual Benefit begins before the Participant's Social Security Retirement Age, then the Dollar Limit shall be reduced as provided in this Section 11.2(b)(2) or in such other manner as the Secretary of the Treasury shall prescribe as consistent with the reduction for old-age insurance COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 2 of Amendment No. 2 of 1998 Plan Restatement benefits commencing before the Social Security Retirement Age under the Social Security Act: (A) If the benefit begins after the Participant has attained age 62, the Dollar Limit shall be reduced 5/9 of 1% for each month by which the Annuity Starting Date precedes the Participant's Social Security retirement age for the first 36 months and shall be reduced 5/12 of 1% for each additional month by which the Annuity Starting Date precedes his Social Security retirement age. (B) If the benefit begins before the Participant has attained age 62, the Dollar Limit shall be reduced as provided in Section 11.2(b)(2)(A) in order to determine the Dollar Limit in effect at age 62. The Dollar Limit in effect on the Annuity Starting Date shall be the Actuarial Equivalent of the Dollar Limit in effect at age 62. For the purpose of determining Actuarial Equivalence, the interest rate shall be the greater of 5 percent or the rate set forth in Section 1.4(c) and the mortality table shall be the table described in Section 1.4(b) provided, however, that the mortality decrement shall be ignored to the extent that a forfeiture does not occur at death." 3. Section 11.2, entitled "Maximum Annual Benefit" is amended effective April 1, 1998 by changing Section 11.2(b)(3) to read as follows: "(3) BENEFITS COMMENCING AFTER SOCIAL SECURITY RETIREMENT AGE. If the Annual Benefit begins after the Participant's Social Security Retirement Age, then the Dollar Limit shall be increased so that the Dollar Limit in effect on the Annuity Starting Date shall be the Actuarial Equivalent of the Dollar Limit as of the Participant's Social Security Retirement Age. For the purpose of determining Actuarial Equivalence, the interest rate shall be the lesser of 5 percent or the rate set forth in Section 1.4(c) and the mortality table shall be the table described in Section 1.4(b) provided, however, that the mortality decrement shall be ignored to the extent that a forfeiture does not occur at death." IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 26th day of May, 1999, to be effective as of the dates recited herein. COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery, Jr. ----------------------------- Title: Executive Vice President ----------------------------- EX-10.35 15 CHANGE IN CONTROL AGREEMENT PRIVILEGED AND CONFIDENTIAL [Date] [Executive] [Position] Columbus McKinnon Corporation 140 John James Audubon Parkway Amherst, New York l4228-1197 Dear [Executive]: Columbus McKinnon Corporation (the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Company may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. In order to induce you to remain in the employ of the Company in your current executive position, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment in your current executive position with the Company is terminated under the circumstances described below subsequent to a "change in control of the Company" (as defined in Section 2). 1. TERM OF AGREEMENT. This agreement shall commence on [Date], and shall continue in effect through [Date]; provided, however, that commencing on [Date], and each [Day] thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than [Day] of such year, the Company shall have given notice that it does not wish to extend this Agreement (provided that no such notice may be given during the pendency of a potential change in control of the Company, as defined in Section 2); and provided, further, that if a change in control of the Company, as defined in Section 2, shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of not less than thirty-six (36) months beyond the month in which such change in control occurred. Notwithstanding anything provided herein to the contrary, the term of this Agreement shall not extend beyond the end of the month in which you attain "normal retirement age" under the provisions of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan (or any amendment, restatement or successor thereto) or any other tax-qualified retirement plan of the Company or any of its subsidiaries in which you are participating (any such plan being referred to herein as the "Company Pension Plan"). 2. CHANGE IN CONTROL, POTENTIAL CHANGE IN CONTROL. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below. For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if (a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any Company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the Company's then outstanding voting securities; (b) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c), (d) or (e) of this Section) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the consummation of a reorganization, merger or consolidation of the Company with any other company, other than (1) a reorganization, merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such reorganization, merger or consolidation or (2) a reorganization, merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as herein above defined) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the Company's then outstanding voting securities; (d) any Person or Persons acquire all or substantially all of the assets of the Company, whether in a single transaction or series of transactions; or (e) the stockholders of the Company approve a plan of dissolution or complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if: (a) the Company enters in an agreement, the consummation of which would result in the occurrence of a change in control of the Company; (b) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (c) any person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or a person who is then currently properly eligible to file and has properly filed a Schedule 13G (or any successor filing) pursuant to the Exchange Act and the rules and regulations thereunder, indicating beneficial ownership of securities of the Company and stating that the securities were acquired in the ordinary course of business and were not acquired with the purpose nor with the effect of changing or influencing the control of the Company, for so long as such statement is true and correct) who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Company's then outstanding securities and, without the written consent of the Company, increases within a one-year period his beneficial ownership of such securities by 3 percentage points or more; or (d) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. 3. TERMINATION FOLLOWING CHANGE IN CONTROL. (i) GENERAL. If any of the events described in Section 2 constituting a change in control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 4(iii) upon termination of your employment within thirty-six (36) months following such a change in control of the Company unless such termination is (a) because of your death or Disability, (b) by the Company for Cause, or (c) by you other than for Good Reason. In the event your employment with the Company is terminated for any reason and subsequently a change in control of the Company should have occurred, you shall not be entitled to any benefits hereunder. (ii) DISABILITY. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability." (iii) CAUSE. Termination by the Company of your employment for "Cause" shall mean termination (a) upon the commission by you of a willful serious act, such as embezzlement, against the Company which is intended to enrich you at the expense of the Company or upon your conviction of a felony involving moral turpitude or (b) in the event of willful, gross neglect or willful, gross misconduct resulting in either case in material harm to the Company. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. (iv) GOOD REASON. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Company of any of the following circumstances unless such circumstances are fully corrected prior to the Date of Termination (as defined in Section 3(vi)) specified in the Notice of Termination (as defined in Section 3(v)) given in respect thereof: (a) a reduction by the Company in your annual base salary as in effect on the date hereof or as the same may be increased from time to time; (b) the Company's requiring you to be based at a Company office more than 50 miles from the Company's offices at which you are principally employed immediately prior to the date of the change in control except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; (c) the failure by the Company to pay to you any portion of your current compensation within seven (7) days of the date such compensation is due or any portion of your compensation under any deferred compensation program of the Company within thirty (30) days of the date such compensation is due; (d) any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii) hereof), which purported termination shall not be effective for purposes of this Agreement; or (e) the assignment to you of any duties or responsibilities that are inconsistent with your position, duties, responsibilities or status immediately preceding such change in control, or any other action by the Company which results in a diminution in such position, duties, responsibilities or status. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (v) NOTICE OF TERMINATION. Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (vi) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (a) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such 30-day period), and (b) if your employment is terminated pursuant to Subsection (iii) or (iv) hereof or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than thirty (30) nor more than sixty (60) days from the date such Notice of Termination is given); provided, however, that if within fifteen (15) days after any Notice of Termination is given, or, if the Notice of Termination is not properly given, prior to the Date of Termination (as determined without regard to an extension of such Date of Termination as described in this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties or by a binding arbitration award; and provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. During the pendency of any dispute, (i) the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection and (ii) you will have no obligation to perform any duties as an employee of the Company on or after the Date of Termination (as determined without regard to an extension of such Date of Termination as described in the preceding sentence). Amounts paid under this Subsection are in addition to all other amounts due under this Agreement, and shall not be offset against or reduce any other amounts due under this Agreement and shall not be reduced by any compensation earned by you as the result of employment by another employer. 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a change in control of the Company, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment as the case may be, provided that such period of disability or termination occurs during the term of this Agreement: (i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Company's disability plan or program or other similar plan during such period, until this Agreement is terminated pursuant to Section 3(ii) hereof. Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Company's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment by the Company should be terminated by the Company other than for Cause or Disability or if you should terminate your employment for Good Reason, you shall be entitled to the benefits provided below: (a) the Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company, at the time such payments are due; (b) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, at the time specified in Subsection (iv), a lump sum severance payment (together with the payments provided in paragraphs (c), (d), (e) and (f) below, the "Severance Payments") equal to THREE (3) TIMES the sum (such sum, the "Compensation Level") of (x) the greater of your annual rate of base salary in effect on the Date of Termination and your annual rate of base salary in effect immediately prior to such change in control of the Company, plus (y) the greater of (a) the annual target bonus (annualized in the case of any bonus paid with respect to a partial year) under the Company's then current Management EVA(R) Incentive Compensation Plan or any then current similar plan (the "Management Incentive Plan") in effect on the Date of Termination or (b) the annual target bonus (annualized in the case of any bonus paid with respect to a partial year) under the Management Incentive Plan in effect immediately prior to such change in control; (c) the Company shall pay to you all reasonable legal fees and expenses incurred by you as a result of such termination, including all such fees and expenses, if any, as incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement; provided that you shall repay such amounts to the Company if it is finally determined by a court of competent jurisdiction that such contest or dispute was brought by you frivolously and in bad faith; (d) for a period of thirty-six (36) months after such termination, the Company shall (i) arrange to provide you with all benefits under the Company's medical, prescription, dental, employee life and group life plans and programs, which are substantially similar to those which you were receiving immediately prior to the change in control or (ii) reimburse you for your out-of-pocket costs for providing yourself with any medical, prescription, dental, employee life and group life plans and programs which are substantially similar to those which you were receiving immediately prior to the change in control; (e) at your option, you may either elect in writing (i) to continue to participate in the Company Pension Plan (and be deemed to have continued to be employed by the Company for a period of three (3) additional years and deemed to have accumulated three (3) additional calendar years of compensation (for purposes of determining your pension benefits under the Company Pension Plan), in an amount equal to the Compensation Level determined under Section 4(iii)(b) hereof), in which case you would be fully vested under the Company Pension Plan as of the Date of Termination, but in no event shall you be deemed to have continued to be employed by the Company after your normal retirement age, or (ii) to receive from the Company a lump sum payment, in cash, equal to the actuarial equivalent of the retirement pension (determined as a straight life annuity commencing at age 65) which you would have accrued under the terms of the Company Pension Plan (without regard to the limitations imposed by section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code"), or any amendment to the Plan made subsequent to a change in control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had continued to be employed by the Company (after the Date of Termination) for three (3) additional years and as if you had accumulated three (3) additional calendar years of compensation (for purposes of determining your pension benefits thereunder), each in an amount equal to the Compensation Level determined under Section 4(iii)(b) hereof, but in no event shall you be deemed to have continued to be employed by the Company after your normal retirement age. For purposes of this Subsection, "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company Pension Plan immediately prior to the change in control of the Company; (f) the Company shall provide to you outplacement services with an outplacement firm selected by you for a period of up to six months and for an amount not to exceed $25,000; and (g) notwithstanding anything to the contrary contained in any stock option agreement, you shall be fully vested as of the date of the change in control in any and all stock options held by you immediately prior to such change in control; and (iv) The payments provided for in Subsection (iii) shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you payable on the fifth day after demand therefor by the Company (together with interest at the rate provided in section 1274(b)(2)(B) of the Code). (v) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise. (vi) Notwithstanding any provision of this Agreement to the contrary, the aggregate present value of all "payments in the nature of compensation" (within the meaning of Section 28OG of the Code) provided to you in connection with a change in control of the Company or the termination of your employment shall be one dollar less than the amount that is fully deductible by the Company under Section 28OG of the Code and, to the extent necessary, payments and benefits under this Agreement shall be reduced in order that this limitation not be exceeded. It is the intention of this Subsection (vi) to avoid excise taxes on you under Section 4999 of the Code or the disallowance of a deduction to the Company pursuant to Section 28OG of the Code. 5. SUCCESSORS, BINDING AGREEMENT. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a change in control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. (iii) The Company expressly acknowledges and agrees that you shall have a contractual right to the benefits provided hereunder, and the Company expressly waives any ability, if possible, to deny liability for any breach of its contractual commitment hereunder upon the grounds of lack of consideration, accord and satisfaction or any other defense. In any dispute arising after a change in control of the Company as to whether you are entitled to benefits under this Agreement, there shall be a presumption that you are entitled to such benefits and the burden of proving otherwise shall be on the Company. (iv) All benefits to be paid hereunder shall be in addition to any disability, workers' compensation, or other Company benefit plan distribution, unpaid vacation or other unpaid benefits that you have at the Date of Termination. 6. NOTICE. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. In the event of a change in control of the Company during the term of this Agreement, the obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement consistent with the periods referenced in Section 4. 8. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in the State of New York, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and during the term of the Agreement supersedes the provisions of all prior change in control agreements entered into between you and the Company and all other prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto with respect to the subject matter hereof. 12. APPLICABLE LAW. This Agreement shall be governed and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed wholly within such State. If this letter sets forth our agreement on the subject matter thereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, COLUMBUS McKINNON CORPORATION By: Name: Timothy T. Tevens Title: President and Chief Executive Officer Agreed as of the ------------ day of , ------------- ------- - ------------------------------ Executive EX-10.37 16 GL AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of February 16, 1999, by and among Columbus McKinnon Corporation, a New York corporation ("Parent"), GL Delaware, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), G.L. International Inc., a Delaware corporation (the "Company") and Larco Industrial Services, Ltd. an Ontario corporation ("Larco"), the holders of all outstanding capital stock of the Company (the "GL Shareholders"), and the holders of Non-Voting Exchangeable Shares (the "Larco Shareholders") of Larco all of the voting stock of which is owned by the Company. The GL Shareholders and the Larco Shareholders are sometimes referred to herein individually as a "Shareholder" and collectively as the "Shareholders". WHEREAS, the Boards of Directors of Parent and Sub and the Board of Directors of the Company and Larco and the Shareholders deem it advisable and in their best interests to approve and consummate the business combination transaction provided for in this agreement ("Agreement") in which Sub would merge with and into the Company and the Company would become a wholly-owned subsidiary of Parent (the "Merger"); WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Parent's and Sub's willingness to enter into this Agreement, the Shareholders are executing an agreement dated as of the date hereof regarding voting in favor of this Agreement ("Voting Agreement"); WHEREAS, for accounting purposes, it is intended that the Merger shall be accounted for as a pooling of interests under United States generally accepted accounting principles ("GAAP"); WHEREAS, for Federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"); and NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Related Agreements (as hereinafter defined) the parties hereto agree as follows: ARTICLE I THE MERGER SECTION 1.01 The Merger; Effective Time of the Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time (as hereinafter defined). Subject to the provisions of this Agreement, a certificate of merger (the "Certificate of Merger") shall be duly prepared and properly executed and thereafter duly filed with the Secretary of State of the State of Delaware, as provided in the DGCL, as soon as practicable on or after the Closing Date (as hereinafter defined). The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such time thereafter as is provided in the Certificate of Merger (the "Effective Time"). SECTION 1.02 Closing. The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified by Parent which shall be no later than the second business day after the earlier of (i) early termination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") or (ii) expiration of the HSR Act waiting period, provided that the other closing conditions set forth in Article X have been met or waived as provided in Article X at or prior to the Closing (the "Closing Date"), at the offices of Phillips, Lytle, Hitchcock, Blaine & Huber LLP, 3400 Marine Midland Center, Buffalo, New York 14203 unless another date or place is agreed to in writing by Parent and the Company. SECTION 1.03 Effects of the Merger. At the Effective Time (i) the separate existence of the Sub shall cease and the Sub shall be merged with and into the Company (Sub and the Company are sometimes referred to herein as the "Constituent Corporations" and the Company is sometimes referred to herein as the "Surviving Corporation") and the Surviving Corporation shall be a wholly-owned subsidiary of Parent, (ii) the Certificate of Incorporation of the Company shall be the Certificate of Incorporation of the Surviving Corporation, (iii) the By-laws of the Company as in effect immediately prior to the Effective Time shall be the By-laws of the Surviving Corporation, and (iv) the Merger shall have all the effects provided by applicable law, including Section 259 of the DGCL. SECTION 1.04 Directors and Officers of the Surviving Corporation. From and after the Effective Time (i) Robert L. Montgomery, Jr., Lois H. Demler and Timothy T. Tevens shall be the directors of the Surviving Corporation and (ii) the present officers of Sub shall be the officers of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation, as amended, and By-laws, as amended. ARTICLE II CONVERSION OF SECURITIES SECTION 2.01 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of capital stock of the Constituent Corporations or Parent: (a) Capital Stock of Sub. Each share of the common stock of Sub, par value $1.00 per share ("Sub Common Stock"), which is issued and outstanding immediately prior to the Effective Time, shall be converted into and shall become one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. (b) Cancellation of Treasury Stock. All shares of common stock of the Company, par value $.01 per share, (the "Company Common Stock") that are owned by the Company as treasury shares shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Shares of Dissenting Holders. Notwithstanding any of the provisions of this Agreement, any issued and outstanding shares of the Company Common Stock held by a person who shall not have voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal of such shares in accordance with Section 262 of the DGCL and who objects to the Merger and complies with all provisions of the DGCL concerning the right of such person to dissent from the Merger and demand appraisal of such shares ("Dissenting Holder") shall not be converted into the right to receive the Merger Consideration (as hereinafter defined), but shall from and after the Effective Time represent only the right to receive such consideration as may be determined to be due to such Dissenting Holder pursuant to the DGCL; PROVIDED, HOWEVER, that shares of the Company Common Stock outstanding immediately prior to the Effective Time and held by a Dissenting Holder who shall, after the Effective Time, effectively withdraw the demand for appraisal or lose the right of appraisal of such shares, in either case pursuant to the DGCL shall be deemed to be converted, as of the Effective Time, into the right to receive the Merger Consideration specified in Section 2.01(d), without interest. Nothing in this Section 2.01(c) shall relieve any Shareholder of such Shareholder's obligation under a voting agreement which shall be entered into by the Shareholders in the form and on substantially the same terms as Schedule 2.01(c) hereto (the "Voting Agreement"). (d) Exchange Ratio for the Company Common Stock. Subject to Section 2.02(e), each issued and outstanding share of the Company Common Stock (other than shares to be canceled in accordance with Section 2.01(b)) shall be converted into the right to receive that number of fully paid and nonassessable shares of common stock, par value $0.01 per share, of Parent ("Parent Common Stock"), including the corresponding number of rights ("Parent Rights") to purchase shares of Parent Preferred Stock pursuant to the Rights Agreement dated as of October 25, 1997, as amended, between American Stock Transfer & Trust Company, as Rights Agent and Columbus McKinnon Corporation determined by dividing the Preliminary Aggregate Merger Consideration determined in accordance with Section 2.01(e) below ("the Preliminary Merger Consideration") by 4,562,833. The Preliminary Merger Consideration shall be subject to reduction by virtue of the adjustment provided for in Section 2.04 and, as so adjusted shall be deemed to be the "Merger Consideration". All such shares of the Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration (or any cash in lieu of fractional shares of Parent Common Stock) to be issued or paid in consideration therefor upon the surrender of such certificate in accordance with Section 2.02, without interest. All references in this Agreement to Parent Common Stock to be received pursuant to the Merger shall be deemed to include Parent Rights. The determination of the exchange ratio, the Preliminary Aggregate Merger Consideration and the Merger Consideration are based upon the representations, warranties and covenants of the Company and the Shareholders that the number of outstanding shares of Company Common Stock (as hereafter defined), the Exchangeable Shares (as hereafter defined), the outstanding Company Options (as hereafter defined) and Larco Options (as hereafter defined) are as represented in this Agreement and remain unchanged through the Effective Time, except for the exchange of the Exchangeable Shares which shall occur as provided in Section 5.04 hereof. (e) Calculation of Preliminary Aggregate Merger Consideration. The Preliminary Aggregate Merger Consideration shall be that number of shares of Parent Common Stock determined on the basis of the average closing price per share of Parent Common Stock on each of the days on which Parent Common Stock is traded beginning on the day after the date of this Agreement and ending five business days prior to the Closing ("Closing Price") equal to the difference between: (A)(i) if the Closing Price is $27.25 or more the Preliminary Aggregate Merger Consideration shall be 950,000 shares of Parent Common Stock; (ii) if the Closing Price is equal to or greater than $17.7418 but less than $27.25, the Preliminary Aggregate Merger Consideration shall be that number of shares of Parent Common Stock equal to $25,887,500 divided by the product of: (A) the Closing Price and (B) one plus the product of (x) .03096 and (y) the difference between $27.25 and the Closing Price; (iii) if the Closing Price is less than $17.7418 but greater than $15.00, the Preliminary Aggregate Merger Consideration shall be that number of shares of Parent Common Stock equal to the quotient of $20,000,000 divided by the Closing Price; and (iv) if the Closing Price is less than $15.00, the Preliminary Aggregate Merger Consideration shall be 1,333,333 shares of Parent Common Stock; and (B) that number of shares of Parent Common Stock equal to $200,000 divided by the Closing Price. Schedule 2.01(e) hereto shows examples of the determination of the Preliminary Aggregate Merger Consideration at various Closing Prices. SECTION 2.02 Exchange of Certificates. (a) Exchange of Certificates. As of the Effective Time, Parent shall make available, for the benefit of the holders of shares of the Company Common Stock, for exchange in accordance with this Article II, certificates representing the shares of Parent Common Stock issuable pursuant to Section 2.01 as the Preliminary Merger Consideration in exchange for Company Common Stock. Such shares of Parent Common Stock, together with any dividends or distributions with respect thereto, if any, are sometimes collectively referred to herein as the "Exchange Fund". (b) Exchange Procedures. Prior to the Effective Time, Parent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of the Company Common Stock (the "Certificates") whose shares are to be converted pursuant to Section 2.01 into the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to Parent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Immediately after the Effective Time, upon surrender of a Certificate for cancellation to Parent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Parent Common Stock which such holder has the right to receive as the Preliminary Merger Consideration, less the number of shares deposited into escrow pursuant to the terms of Section 12.01(i) without interest, pursuant to the provisions of this Article II, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of the Company Common Stock which is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Parent Common Stock may be issued to a transferee if the Certificate representing such Company Common Stock is presented to Parent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration (or the cash payment in lieu of any fractional shares of Parent Common Stock) as contemplated by this Section 2.02. (c) Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby until the holder of record of such Certificate shall surrender such Certificate. Subject to the effect of applicable law, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Parent Common Stock. (d) No Further Ownership Rights in the Company Common Stock. The Merger Consideration (including any cash paid pursuant to Section 2.02(e)) issued upon the surrender for exchange of shares of the Company Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of the Company Common Stock. There shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of the Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, the Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article II. (e) No Fractional Shares. No certificate or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of the Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a shareholder of Parent; however, in lieu thereof, each owner who would otherwise be entitled to a fraction of a share, will upon the surrender of the Certificates relating thereto, be issued a check by Parent representing the cash amount, if any, equal to such fraction multiplied by the Closing Price. No interest shall be paid on such amount. All shares of the Company Common Stock held by a holder will be aggregated for purposes of computations of the Merger Consideration (or cash in lieu of fractional shares payable hereunder). (f) Anti-Dilution Provision. If between the date of this Agreement and the Effective Time the outstanding shares of Parent Common Stock shall have been changed into a different number of shares or a different class, in both cases by reason of any stock dividend, subdivision, reclassification, recapitalization, split-up, combination or exchange of shares, Parent shall appropriately adjust the Preliminary Aggregate Merger Consideration. (g) No Liability. Neither Parent nor the Company shall be liable to any holder of shares of the Company Common Stock or Parent Common Stock, as the case may be, for such shares, Merger Consideration (or dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. SECTION 2.03 Exchange Ratio for Options. As of the Effective Time each outstanding option (a "Company Option") under the Company's 1997 Stock Option Plan (the "Company Plan"), to purchase Company Common Stock and each outstanding option (a "Larco Option") under Larco's 1997 Stock Option Plan (the "Larco Plan") to purchase Non-Voting Exchangeable Shares ("Exchangeable Shares") shall be assumed by Parent and converted into an option to purchase shares of Parent Common Stock, as provided below. Following the Effective Time, each Company Option and Larco Option shall continue to have, and shall be subject to, the same terms and conditions set forth in the Company Plan and Larco Plan, respectively, pursuant to which such Company Option or Larco Option was granted, as in effect immediately prior to the Effective Time, except that (i) each such Company Option and Larco Option shall be exercisable for that number of shares of Parent Common Stock that the holder of such Company Option or Larco Option would have received pursuant to Section 2.01(d) hereof, after taking into account the adjustment, if any, provided in Section 2.04 hereof, if such Company Option had been exercised or such Larco Option had been exercised and the Exchangeable Shares so received exchanged for shares of Company Common Stock, all immediately prior to the Effective Time, rounded, in the case of any Company Option other than any incentive stock option and any Larco Option, up and, in the case of any Company Option which is an incentive stock option, down to the nearest whole share, if necessary, and (ii) the exercise price per share of such Company Option or Larco Option, shall be equal to the aggregate exercise price of such Company Option or Larco Option immediately prior to the Effective Time divided by the number of shares of Parent Common Stock for which such Company Option or Larco Option shall be exercisable as determined in accordance with the preceding clause (i), rounded up to the next highest cent, if necessary. It is the intention of the parties that, to the extent that any Company Option constitutes an incentive stock option immediately prior to the Effective Time, such Company Option shall continue to qualify as an incentive stock option to the maximum extent permitted by Section 422 of the Code, and that the amendment of the Company Options provided by this Agreement shall satisfy the conditions of Section 424(a) of the Code. SECTION 2.04 Adjustment of Merger Consideration. The Merger Consideration shall be reduced if the consolidated stockholders equity of the Company as of the date immediately preceding the Closing Date results in a "Performance Deficit" as hereinafter determined. (a) Final Financial Statement Determination. Parent shall cause Ernst & Young LLP ("E & Y"), Parent's independent certified public accountants, with the assistance of Deloitte & Touche LLP, the Company's independent certified public accountants, as requested by E & Y, to prepare and deliver to each of Parent and the Representative (as hereinafter defined) within forty-five (45) days following the Closing, a proposed consolidated final balance sheet of the Company and its Subsidiaries (as hereinafter defined), as of the close of business on the day preceding the Closing Date ("Final Balance Sheet") and profit and loss statement for the period than ended ("Final P&L Statement"). The Final Balance Sheet and Final P&L Statement shall be prepared by E&Y in accordance with GAAP and applying the same accounting principles and practices as the Company has applied in the preparation of audited, consolidated financial statements for the fiscal year ended March 31, 1998 (notwithstanding that such Final Balance Sheet and Final P&L Statement will be for an interim financial period) and shall not include footnote disclosure. Preparation of the Final Balance Sheet and Final P&L Statement on this basis will mean specifically, among other things, that accruals, for example for reserves for doubtful accounts receivable, taxes, bonuses and health, welfare and benefit plans, will be adjusted as if the Company's and the Subsidiaries' fiscal year had ended as of the close of business on the day preceding the Closing Date with appropriate year-end type adjustments for reserves for doubtful accounts receivable, tax, bonus, health, welfare and benefit plans and similar accruals. E & Y shall audit the Final Balance Sheet and Final P&L Statement with respect to those matters requested by Parent for the purposes of expressing an opinion on such matters. The inventory reflected on the Final Balance Sheet shall reflect the inventory of the Company and the Subsidiaries as of the close of business on the day preceding the Closing Date and shall be determined based on the physical inventory conducted before the Closing Date and observed by E & Y, and rolled forward to the close of business on the day preceding the Closing Date. In determining stockholders' equity in the Final Balance Sheet, all costs and expenses of the Company and any of its Subsidiaries related to this transaction up to $500,000 ($200,000 of which shall be a fee paid to Cardinal Investment Company, Inc.) will be added back. (b) Disputes. The Representative shall have thirty (30) days from the date of its receipt of the Final Balance Sheet and Final P&L Statement to raise any objection to the Final Balance Sheet and Final P&L Statement. In the event the Representative disputes the Final Balance Sheet or the Final P&L Statement, it shall notify Parent in writing (the "Dispute Notice") setting forth the amount, nature and basis of the dispute in reasonable detail. Within the thirty (30) days following the delivery of a Dispute Notice to Parent, the parties shall use their best efforts to resolve such dispute. Upon their failure to do so, Parent and the Representative shall, within ten (10) days from the end of such 30 day period, refer the dispute to a third accounting firm, which accounting firm shall be in the first instance Arthur Anderson LLP, or in the event such firm is unwilling or unable to serve in such capacity, to the firm of PriceWaterhouseCoopers LLP, or to any other firm as the parties may mutually select. If Parent and the Representative fail to agree upon or obtain the agreement of an accounting firm to make a final determination of the Final Balance Sheet and Final P&L Statement, the American Arbitration Association shall, upon the request of either Parent or the Representative, select an independent accounting firm, which shall be one of the "Big Five" public accounting firms with no existing or previous relationship with either Parent, the Company, Larco or any of the Shareholders, if possible, to make such determination. The third accounting firm so selected shall be engaged jointly by Parent and the Representative to decide the dispute within thirty (30) days from its appointment. Parent and the Representative shall use their best efforts to cooperate with such third accounting firm in providing, or providing access to, any documents or witnesses reasonably requested by the third accounting firm. The decision of the third accounting firm shall be final and binding upon the parties, and accordingly a judgment by a court of competent jurisdiction may be entered in accordance therewith. Such decision shall be set forth in writing and shall be accompanied by a copy of the Final Balance Sheet and Final P&L Statement, modified to the extent necessary to give effect to such decision. A copy thereof shall be delivered to each of Parent and the Representative. (c) Performance Deficit. The performance deficit ("Performance Deficit"), if any, shall be an amount equal to the amount by which the consolidated stockholders equity in the Final Balance Sheet (after any disputes are resolved pursuant to Section 2.04(b)) is less than the sum of (i) $5,008,344 and (ii) $6,149 times the number of days between April 1, 1998 and the Effective Time. (d) Adjustment. Any Performance Deficit shall reduce the Preliminary Aggregate Merger Consideration by that number of shares of Parent Common Stock determined by dividing the amount of the Performance Deficit by the Closing Price (the "Reduction Amount"). The Reduction Amount shall not exceed that number of shares equal to five percent (5%) of the Preliminary Aggregate Merger Consideration. To give effect to any reduction in the Preliminary Aggregate Merger Consideration, the GL Shareholders shall deliver written instructions to the Escrow Agent to deliver from the Escrow Deposit to Parent for cancellation that number of shares of Parent Common Stock equal to 0.8527957 multiplied by the Reduction Amount (together with any dividends or other distributions in respect thereof) and such reduction shall be borne by all of the GL Shareholders in proportion to the percentage of outstanding shares of Company Common Stock owned by each GL Shareholder immediately prior to the Effective Time. The holders of the Company Options and the Larco Options shall have the number of shares of Parent Common Stock to be received upon exercise of such options reduced as provided in Section 2.03. (e) Fees and Expenses. The fees and expenses of E & Y hereunder shall be borne by Parent. The fees and expenses of Deloitte & Touche LLP hereunder shall be borne by the Company. The fees and expenses of the third accounting firm in connection with the resolution of disputes above shall be equally shared between Parent on the one hand and Shareholders on the other hand. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent as follows: SECTION 3.01 Organization. The Company and each Subsidiary (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the jurisdiction of its incorporation and has all requisite power and authority, corporate and other, and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have a material adverse effect on the Company or such Subsidiary, as the case may be. The Company and each Subsidiary is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a material adverse effect. As used in this Agreement, any reference to any event, change or effect being "material" or being "materially adverse" to, or having a "material adverse effect" on, or with respect to an entity means such event, change or effect is materially adverse to the condition (financial or other), properties, assets (including intangible assets), liabilities (including contingent liabilities), businesses, business prospects or results of operations of such entity and its direct and indirect subsidiaries taken as a whole. Gaffey, Inc., an Oklahoma corporation, Gaffey, Inc. of Texas, a Texas corporation, Handling Systems and Conveyors, Inc., a Delaware corporation, Larco, an Ontario corporation and Larco Material Handling Inc., an Ohio corporation are sometimes referred to in this Agreement individually as a "Subsidiary" and collectively as the "Subsidiaries." The Subsidiaries, excluding Larco, are sometimes referred to in this Agreement as the "US Subsidiaries". SECTION 3.02 Capital Stock; Subsidiaries. Schedule 3.02 accurately sets forth with respect to the Company and each Subsidiary, its authorized capital stock, its capital stock issued and outstanding and its capital stock held in treasury. All the outstanding shares of the Company's and each Subsidiary's capital stock are duly authorized, validly issued, fully paid and non-assessable and, except as disclosed in Schedule 3.02, free of any preemptive rights with respect thereto. Schedule 3.02 hereto sets forth a complete and accurate list showing the record and beneficial ownership of the outstanding capital stock of the Company and each Subsidiary. There are no bonds, debentures, notes or other indebtedness having the right to vote (or convertible into securities having the right to vote) on any matters on which shareholders of the Company or any Subsidiary may vote ("Voting Debt") issued or outstanding. Except as set forth on Schedule 3.02, there are no options, warrants, calls, subscriptions or other rights or other agreements or commitments of any character relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interests in, the Company or any Subsidiary or securities convertible into or exchangeable for such shares or equity interests or obligating the Company or any Subsidiary to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement or commitment. Schedule 3.02 lists the holders of all outstanding options, the number of shares of capital stock of the Company or any Subsidiary subject to such options, the dates when such options are exercisable, the exercise price for such options and whether such options are incentive stock options within the meaning of Section 422 of the Code. Except as disclosed in Schedule 3.02, there are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any Subsidiary. Except for the Subsidiaries, the Company does not have any ownership interest, direct or indirect, in any other business organization or entity. The various Schedules referred to in Article III are collectively referred to as the "Disclosure Schedules." SECTION 3.03 Authority. The Company, and holders of Company Options and Larco Options and Shareholders have the requisite power and authority, corporate and other, to execute and deliver this Agreement and the other agreements contemplated hereby (the "Related Agreements") and to consummate the transactions contemplated hereby and thereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the outstanding shares of the Company Common Stock). The execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the Merger and of the other transactions contemplated hereby and thereby have been duly and effectively authorized by all necessary corporate action on the part of the Company and each Subsidiary and no other corporate proceedings on the part of the Company or any Subsidiary are necessary to authorize this Agreement or the Related Agreements or to consummate the transactions contemplated hereby and thereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the outstanding shares of the Company Common Stock). This Agreement and the Related Agreements have been duly executed and delivered by the Company, the Shareholders, the holders of Company Options and Larco Options, as the case may be, and constitute the valid and binding obligations of the Company, and the Shareholders, and the holders of Company Options and Larco Options, enforceable against each of them in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium and other similar laws relating to creditors' rights and the discretion of courts to award equitable relief ("Enforceability Qualifications"). SECTION 3.04 No Violation. Except as set forth in Schedule 3.04 or as contemplated by Section 3.05, the execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby will not conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest or other encumbrance on the Company's or any Subsidiary's properties or assets (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, shall be referred to as a "Violation"), pursuant to (i) any provision of the Certificate of Incorporation, as amended, or By-laws, as amended, of the Company, or the certificate of incorporation or other charter document, as the case may be, or By-laws, as amended, of any Subsidiary (ii) any provision of any loan or credit agreement, note, mortgage, indenture, lease, Benefit Plans (as defined in Section 3.18) or other agreement, obligation, instrument, permit, concession, franchise or license, or (iii) any judgment, order, decree, statute, law, ordinance, rule, promulgation or regulation ("Applicable Laws") applicable to the Company, any Subsidiary, or any of the Shareholders or their respective properties or assets, which Violation, in the case of each of clauses (ii) and (iii), would have a material adverse effect on the Company, any Subsidiary, or the consummation of the transactions contemplated hereby. SECTION 3.05 Consents and Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with any court, administrative or regulatory agency, tribunal or commission or other governmental agency, authority or instrumentality, federal, state, provincial, county or municipal, domestic or foreign (a "Governmental Entity"), is required by or with respect to the Company, any Subsidiary, any of the Shareholders or any of the holders of Company Options or Larco Options in connection with the execution and delivery of this Agreement and the Related Agreements or the consummation by the Company, any Subsidiary, the Shareholders or any of the holders of Company Options or Larco Options of the transactions contemplated hereby and thereby, the failure to obtain which would have a material adverse effect on the Company or any Subsidiary or the consummation of the transactions contemplated hereby, except for: (i) the filing of a pre-merger notification report by the Company under the HSR Act, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL and the filing of the appropriate documents with the relevant authorities of other states in which the Company is qualified to transact business, and (iii) such filings, authorization orders and approvals as may be required of state and local governmental authorities (the "Local Approvals") which are specified in Schedule 3.05 hereto. SECTION 3.06 Financial Statements. The audited consolidated balance sheet of the Company and the Subsidiaries as at March 31, 1998, and the related consolidated statement of income, changes in stockholder's equity and cash flows for the fiscal year then ended (including the notes thereto) and the unaudited consolidated balance sheet of the Company and the Subsidiaries as at December 31, 1998 and the related unaudited statement of income for the nine (9) month period then ended attached hereto as Schedule 3.06 present fairly the financial position of such entities as of such dates and the results of their operations and changes in their financial position for such periods, and have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of similar periods for preceding years except that the unaudited consolidated balance sheet and statement of income will not have the usual year end adjustments and notes. Copies of all such financial statements are attached to Schedule 3.06 hereto. The Balance Sheet of the Company as of March 31, 1998 is referred to herein as the "Base Balance Sheet", and March 31, 1998 is referred to herein as the "Base Balance Sheet Date". The books and records of the Company and the Subsidiaries accurately reflect the basis for the financial condition and results of operations of the Company and the Subsidiaries as set forth in the financial statements attached as Schedule 3.06 hereto. The Company does not believe that it and its Subsidiaries will experience materially adverse financial performance for the quarter beginning on January 1, 1999. SECTION 3.07 Absence of Certain Changes or Events. Since the Base Balance Sheet Date except as specified in Schedule 3.07 hereto, neither the Company nor any Subsidiary has (i) undergone any change in its condition (financial or other), properties, assets, liabilities, business, operations or prospects except changes in the ordinary and usual course of its business and consistent with its past practice and which have not been, either in any case or in the aggregate, materially adverse to its condition (financial or other), properties, assets, liabilities, business, operations or prospects; (ii) declared, set aside or paid any dividend or other distribution in respect of its capital stock or made any direct or indirect redemption, purchase or other acquisition of any shares of its capital stock or made any payment to any of its shareholders except for employment compensation in the ordinary and usual course of business and consistent with past practice; (iii) issued or sold any shares of its capital stock or any options, warrants or other rights to purchase any such shares or any securities convertible into or exchangeable for such shares or taken any action to reclassify or recapitalize or split up its capital stock; (iv) mortgaged, pledged or subjected to any lien, lease, security interest, pledge, liability, claim, encumbrance or other restriction ("Liens"), any of its properties or assets; (v) acquired or disposed of any interest in any material asset or material property except the purchase of materials and supplies and the sale of inventory in the ordinary and usual course of its business and consistent with its past practice; (vi) forgiven or canceled any debt or claim, waived any right, or, except in the ordinary and usual course of its business and consistent with its past practice, incurred or paid any liability or obligation; (vii) adopted or amended any profit sharing plan, agreement, arrangement or practice for the benefit of any director, officer or employee or changed the compensation (including bonuses) to be paid to any director, officer, or employee; (viii) suffered any damage, destruction or loss (whether or not covered by insurance) which has a material adverse effect on its condition (financial or other), properties, assets, business, operations or prospects; (ix) amended or terminated any material contract, agreement, or lease; (x) experienced any material labor difficulty or loss of employees or customers; (xi) entered into any collective bargaining agreement; (xii) sold or granted or transferred to any party or parties any contract or license, or granted an option to acquire a license, to manufacture or sell any of the products of the Company or any Subsidiary, or to use any trademark, service mark, trade name, copyright, patent or any pending application for any foregoing, or any trade secret or know-how of the Company or any Subsidiary; (xiii) amalgamated, merged, consolidated or entered into any binding share exchange or other business combination, or acquired any stock, equity interest or business of any other person or undertaken a corporate reorganization; (xiv) changed the accounting methods or practices followed by it; (xv) without limiting the generality of any of the foregoing, entered into any transaction except in the ordinary and usual course of its business and consistent with its past practice; or (xvi) agreed to, permitted or suffered any of the acts, transactions or other things described in Subsections (i) through (xv) of this Section 3.07. SECTION 3.08 Liabilities. Neither the Company nor any Subsidiary has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, except (i) as set forth in the unaudited consolidated balance sheet of the Company and its Subsidiaries as December 31, 1998 included in Schedule 3.06 or identified as such in Schedule 3.08 hereto; and (ii) those liabilities and obligations incurred since December 31, 1998 in the ordinary and usual course of its business and consistent, in type and amount, with its past practice and experience. SECTION 3.09 Taxes. (A) Company and US Subsidiaries: Each of the Company and the US Subsidiaries (including any predecessors) has timely filed when due all Tax returns required to be filed by it and has paid, or has made adequate provision for or set up in accordance with generally accepted accounting principles an adequate accrual or reserve for the payment of, all Taxes required to be paid in respect of all periods for which returns have been filed or are due (whether or not shown as being due on any Tax returns), and has established an adequate accrual or reserve for the payment of all Taxes payable in respect of any period for which no return has been filed or is due, and the Base Balance Sheet reflects in accordance with generally accepted accounting principles a reserve for all Taxes payable by the Company or any of the US Subsidiaries accrued through the Base Balance Sheet Date. Except as set forth in Schedule 3.09, no material deficiencies for Taxes have been proposed, asserted in writing or assessed against the Company or any of the US Subsidiaries, and no audit of any of the Tax returns of the Company or any of the US Subsidiaries is currently being conducted by any Taxing authority. Copies of all Tax returns required to be filed by the Company and each of the Subsidiaries for each of the last five years, together with all schedules and attachments thereto, have been delivered by the Company to Parent. Neither the Company nor any of the US Subsidiaries is a party to, is bound by, and has any obligation under any Tax sharing or similar agreement. For the purpose of this Agreement, the term "Tax" (including, with correlative meaning, the terms "Taxes", "Taxing", and "Taxable") shall include, whether disputed or not, all Federal, state, local, provincial, municipal and foreign income, profits, franchise, gross receipts, payroll, sales, employment, use, real and personal property, capital gains, transfer, recording, license, value-added, withholding, excise, goods and services, capital, alternative, net worth and employer health and other taxes, duties, charges, fees, levies, imposts or similar charges in the nature of a tax including Canada Pension Plan and provincial pension plan contributions, unemployment insurance payments and workers' compensation premiums, together with any installments with respect thereto or assessments of any nature whatsoever (whether payable directly or by withholding), together with any and all information reporting and estimated Tax, interest, fines and penalties and additions to Tax imposed with respect to such amounts and any obligations in respect thereof under any Tax sharing, Tax allocation, Tax indemnity or similar agreement as well as any obligations arising pursuant to Treasury Regulation Section 1.1.502-6 or comparable state, local or foreign provision. (B) Larco: (a) Tax Filings. Larco has prepared and filed on time with all appropriate governmental bodies all Tax returns, declarations, remittances, information returns, reports and other documents of every nature required to be filed by or on behalf of Larco in respect of any Taxes or in respect of any other provision in any domestic or foreign federal, provincial, municipal, state, territorial or other taxing statute for all fiscal periods ending prior to the date hereof and will continue to do so in respect of any fiscal period ending on or before the Closing Date. All such returns, declarations, remittances, information returns, reports and other documents are correct and complete in all material respects, and no material fact has been omitted therefrom. No extension of time in which to file any such returns, declarations, remittances, information returns, reports or other documents is in effect. All Taxes shown on all such returns, or on any assessments or reassessments in respect of any such returns have been paid in full. (b) Taxes Paid. Larco has paid in full all Taxes required to be paid on or prior to the date hereof and has made adequate provision in the Base Balance Sheet in accordance with generally accepted accounting principles for the payment of all Taxes in respect of all fiscal periods ending on or before the Base Balance Sheet Date. Larco will show as a liability in the Final Balance Sheet all Taxes payable in respect of all fiscal periods ending on or before the Closing Date. (c) Reassessments of Taxes. There are no reassessments of Larco's Taxes that have been issued and are outstanding and there are no outstanding issues which have been raised and communicated to Larco by any governmental body for any taxation year in respect of which a Tax return of Larco has been audited. No governmental body has challenged, disputed or questioned Larco in respect of Taxes or of any returns, filings or other reports filed under any statute providing for Taxes. Larco is not negotiating any draft assessment or reassessment with any governmental body. The Company is not aware of any contingent liabilities for Taxes or any grounds for an assessment or reassessment of Larco, including, without limitation, unreported benefits conferred on any shareholder of Larco, other than as disclosed in the Base Balance Sheet. Neither Larco nor the Company has received any indication from any governmental body that an assessment or reassessment of Larco is proposed in respect of any Taxes, regardless of its merits. Larco has not executed or filed with any governmental body any agreement or waiver extending the period for assessment, reassessment or collection of any Taxes. (d) Withholdings and Remittances. Larco has withheld from each payment made to any of its present or former employees, officers and directors, and to all persons who are non-residents of Canada for the purposes of the Income Tax Act (Canada) all amounts required by law to be withheld, and furthermore, has remitted such withheld amounts within the prescribed periods to the appropriate governmental body. Larco has remitted all Canada Pension Plan contributions, provincial pension plan contributions, unemployment insurance premiums, employer health taxes and other Taxes payable by it in respect of its employees and has remitted such amounts to the proper governmental body within the time required under the applicable legislation. Larco has charged, collected and remitted on a timely basis all Taxes as required under applicable legislation on any sale, supply or delivery whatsoever, made by Larco. (e) Depreciable Property. At the Closing Date, for purposes of the Income Tax Act (Canada), Larco will own depreciable property of the prescribed classes and having undepreciated capital costs as set out in Schedule 3.09. (f) Capital Gains. Larco will not at any time be deemed to have a capital gain pursuant to subsection 80.03(2) of the Income Tax Act (Canada) as a result of any transaction or event taking place in any taxation year ending on or before the Closing Date. SECTION 3.10 Title to and Condition of Real Estate. (a) All of the real property presently owned, occupied or used by the Company or any Subsidiary or in which the Company or any Subsidiary otherwise has an interest and the owners thereof are identified in Schedule 3.10 hereto (the "Premises"). Except as set forth in the Environmental Reports (as hereinafter defined), the Premises, all improvements located thereon, and the use thereof, comply in all material respects with all zoning, land use, environmental, building, health, safety and fire laws, by-laws, codes, permits, licenses and certificates, rules, orders, ordinances, regulations and all restrictions and conditions applicable to the Premises or the operations conducted by the Company or any Subsidiary thereon. To the best knowledge of the Company there are no actions, suits, proceedings or investigations pending or threatened before any federal, state, provincial, foreign, municipal, regulatory or administrative authority affecting the Premises. The Company, any of the Subsidiaries and, to the Company's knowledge, the owners of the Leased Premises (as hereinafter defined) are not in default with respect to any order, judgment, injunction or decree of any court or other governmental authority with respect to the Premises. The improvements located on the Premises are in good condition and are free from all latent and patent structural defects. To the Company's knowledge, all mechanical systems serving the Premises, including, but not limited to the heating, ventilation, air conditioning, plumbing and electrical systems, are in good working order. To the Company's knowledge, the Premises have adequate access to public streets. The improvements located on the Premises do not contain asbestos of any kind whatsoever, or urea formaldehyde foam insulation. To the Company's knowledge, all water, sewer, gas, electric, telephone and drainage facilities and all other utilities required for the use and operations of the Company and each Subsidiary at the Premises are available, and such utilities enter the boundaries of such facilities through adjoining public streets or easement rights-of-way. To the best of the Company's knowledge, such public utilities are all connected pursuant to valid permits, are all in good working order and are adequate to service the operations of the Premises as currently conducted. Except as may be set forth in the title policies described in Schedule 3.10-2, neither the Company nor any Subsidiary has any knowledge of any pending or threatened assessments for municipal improvements which may affect or become a Lien on the Premises. Schedule 3.10-1 hereto sets forth the legal description of the Premises owned by the Company or any of the Subsidiaries ("Owned Premises"). All loan and fee title insurance policies, title opinions, title searches and surveys relating to the Owned Premises in the Company's possession have been delivered to Parent. The Company or a Subsidiary, as the case may be, has good, insurable and indefeasible fee simple title to the Owned Premises, free and clear of all mortgages, Liens, easements, covenants or rights-of-way of any nature whatsoever, except mortgages, Liens, easements, covenants, rights-of-way and other encumbrances or restrictions identified on Schedule 3.10-2, hereto ("Permitted Encumbrances"), and zoning restrictions, none of which prohibit or in any material respect interfere with the operations of the Company or any Subsidiary on the Owned Premises or materially detract from its value or marketability. Except as may be set forth in the title policies described in Schedule 3.10-2, all structures and other improvements on the Owned Premises are within the lot lines and do not encroach on the properties of any other person. Except as otherwise disclosed in the environmental reports identified in Schedule 3.11 ("Environmental Reports"), no portion of the Owned Premises is located in a 100 year flood plain, flood hazard area or designated conservation or wetlands area, is in an area designated or zoned as hazardous or environmentally significant or sensitive in any official plan, zoning by-law or other planning instrument or is listed on the National Priorities List, CERCLIS or any similar listing of contaminated sites. Except as may be set forth in the title policies described in Schedule 3.10-2, neither the Company nor any Subsidiary has received any written or, to the Company's knowledge, oral notice of assessments for public improvements against the Owned Premises (or any portion thereof) or any written or oral notice or order by any Governmental Entity any insurance company which has issued a policy with respect to any of the Owned Premises or any board of fire underwriters or other body exercising similar functions that (A) relates to violations of building, safety or fire ordinances or regulations, (B) claims any defect or deficiency with respect to any of the Owned Premises or (C) requests the performance of any repairs, alterations or other work to or in any of the Owned Premises or in the streets bounding the same. There is no pending condemnation, expropriation, eminent domain or similar proceeding against the Company or any Subsidiary affecting all or any portion of the Owned Premises. Except as set forth in Schedule 3.10-2, none of the Owned Premises is subject to any leases (oral or written). (b) Any of the Premises not owned by the Company or any Subsidiary ("Leased Premises") are leased to the Company or its Subsidiary pursuant to leases ("Leases") that are valid and binding agreements, enforceable in accordance with their respective terms subject to the Enforceability Qualifications and are in full force and effect. Schedule 3.10-3 provides a summary of the material terms of each Lease. The Company and each of the Subsidiaries has performed all material obligations required to be performed by them to date under the Leases and are not in material breach in any respect thereunder, and there has been no event which, with the giving of notice or the lapse of time or both, would become a material breach thereunder by the Company or a Subsidiary. To the knowledge of the Company, no other party to any of the Leases is in material breach thereunder. Neither the Company nor any Subsidiary has received any notice of default under any of the Leases that have not been cured, and all rental and other payments due under each of the Leases have been fully paid. To the knowledge of the Company, except as shown in Schedule 3.10-3, none of the Leased Premises is subject to any Lien, easement, right-of-way, building or use restriction, variance or reservation that materially interferes with or impairs the use thereof in the usual and normal conduct of the business and operations of the Company or any of the Subsidiaries. SECTION 3.11 Environmental Compliance. (a) Definition of "Environmental Laws". As used in this Agreement, the term "Environmental Laws" shall mean any and all applicable laws, statutes, codes, rules, regulations, ordinances, by-laws, permits, directives, orders, codes of practice and judicial and administrative law decisions applicable to, affecting or relating to the protection, preservation or remediation of the environment or public health enacted, issued, promulgated, published, passed, made, decided or required by any United States of America federal, state, county or municipal or any Canadian federal, provincial, regional or municipal legislative, executive, judicial or regulatory authority, as the case may be. Because some of the Premises are located in the United States of America, while other of the Premises are located in Canada, it is the intent of the parties to this Agreement that the term "Environmental Laws" shall include any and all such applicable laws in any of the jurisdictions of the United States of America or Canada in which the Premises are located, including, but not limited to, the following: (x) with reference to the laws of the United States of America, (1) Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA 9601 ET SEQ., (2) Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 USCA 6901 ET SEQ., (3) Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, as amended, 33 USCA 1251 ET SEQ., (4) Toxic Substances Control Act of 1976, as amended, 15 USCA 2601 ET SEQ., (5) Emergency Planning and Community Right-To-Know Act of 1986, 42 USCA 11001 ET SEQ., (6) Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 USCA 7401 ET SEQ., (7) National Environmental Policy Act of 1970, as amended, 42 USCA 4321 ET SEQ., (8) Rivers and Harbors Act of 1899, as amended, 33 USCA 401 ET seq., (9) Endangered Species Act of 1973, as amended, 16 USCA 1531 ET SEQ., (10) Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 ET SEQ., (11) Safe Drinking Water Act of 1974, as amended, 42 USCA 300(f) ET SEQ., (12) Pollution Prevention Act of 1990, 42 USCA 13101 ET SEQ., (13) Oil Pollution Act of 1990, 33 USCA 2701 ET SEQ., and similar state and municipal laws in the jurisdictions in which the Premises are located; and (y) with reference to the laws of Canada, (1) Canadian Environmental Protection Act, R.S.C. 1985, c.C-16, as amended, (2) Canadian Environmental Assessment Act, S.C. 1992, c.37, as amended, (3) Transportation of Dangerous Goods Act, 1992, S.C. 1992, c.34, as amended, (4) Fisheries Act, R.S.C. 1995, c.F-14, as amended, (5) Environmental Protection Act, R.S.O. 1990, c.E.19, (6) Ontario Water Resources Act, R.S.O. 1990, c.O.40, (7) Dangerous Goods Transportation Act, R.S.O. 1990, c.D.1, (8) Health Protection and Promotion Act, R.S.O. 1990, c.H.7, (9) Occupational Health and Safety Act, R.S.O. 1990, c.O.1, (10) Public Health Act, R.S.O. 1980, c. 409; all as amended from time to time. The term "Environmental Laws" shall also include any rules, regulations, ordinances, permits, by-laws, orders, directives, and judicial and administrative law decisions enacted, issued, promulgated, published, decided or required by or under the laws referred to in this Section 3.11(a), as well as any similar laws applicable to, affecting or relating to the protection, preservation or remediation of the environment or public health in the jurisdictions in which the Premises are located. (b) Definition of "Environmental Permits". As used in this Agreement, the terms "Environmental Permits" shall mean any and all permits, licenses, certificates, approvals, authorizations, orders, directives, requirements, consents or registrations required by any Environmental Laws in connection with the ownership, construction, equipping, use and/or operation of the business of the Company and the Subsidiaries or the Premises, for the storage, treatment, generation, transportation, processing, handling, production, recycling or disposal of Hazardous Substances or the sale, transfer or conveyance of the Premises. (c) Definition of "Hazardous Substance". As used in this Agreement, the term "Hazardous Substance" shall mean, without limitation, any flammable, explosive or radioactive materials, radon, asbestos, urea formaldehyde foam insulation polychlorinated biphenyls, petroleum, petroleum constituents, petroleum products, methane, hazardous materials, hazardous wastes, contaminants, hazardous or toxic substances or related materials, pollutants, and toxic pollutants, as defined, prescribed, regulated or controlled in any Environmental Law including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 USCA Sections 9601, ET SEQ.), the Hazardous Materials Transportation Act, as amended (49 USCA 1801, ET SEQ., the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery Act, (42 USCA Section 6901, ET SEQ.), the Toxic Substances Control Act, as amended (15 USCA Sections 2601, ET SEQ.), the Federal Waters Pollution Control Act, as amended, (33 USCA Sections 1251 ET SEQ.), for the Premises located in Canada, the Canadian Environmental Protection Act, R.S.C. 1988, c.15.3, and similar state, provisional, regional and municipal laws in the jurisdictions in which the Premises are located, as well as any rules, regulations, ordinances, permits and judicial and administrative law decisions issued, promulgated, published, decided or required thereunder by any United States of America federal, state, county or municipal or any Canadian federal, provincial, regional or municipal executive, judicial or regulatory authority. (d) Definition of "Release". As used in this Agreement, the term "Release" shall have the same meaning as given to that term in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 USCA Section 9601, ET SEQ.), and the regulations promulgated thereunder. (e) Definition of "Customer". As used in this Agreement, the term "Customer" shall mean those individuals, corporations, partnerships or other entities or organizations with whom the Company or any Subsidiary enters into contractual arrangements and for whom the Company performs services on the Customers' Properties pursuant to or in connection with any such contractual arrangements. (f) Definition of "Customers' Properties". As used in this Agreement, the term "Customers' Properties" shall mean any real estate (including, without limitation, any improvements thereon) owned, operated, leased or otherwise under the control of the Company's or any Subsidiaries' Customers. (g) Except as otherwise disclosed on Schedule 3.11 or in the Environmental Reports: (i) Neither the Premises nor, to the Company's knowledge, any property adjacent to or within the immediate vicinity of the Premises is being or has been used in violation of any Environmental Laws for the storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance or as a landfill or other waste management or disposal site or for military purposes. (ii) Underground storage tanks are not and have not been located on the Owned Premises nor, to the Company's knowledge, on the Leased Premises. (iii) The soil, subsoil, bedrock, surface water and groundwater of the Owned Premises and, to the Company's knowledge, the Leased Premises, are free of Hazardous Substances, other than any such substances that occur naturally or are in compliance with Environmental Laws. (iv) There has been no Release or threat of a Release of any Hazardous Substance on, at, under or from the Owned Premises or, to the best of the Company's knowledge, the Leased Premises or any property adjacent to or within the immediate vicinity of the Premises which through soil, subsoil, bedrock, surface water, groundwater or airborne migration could come to be located on, at, in or under the Premises. The Company has not received any form of notice or inquiry from any federal, provincial, state or local Governmental Entity or authority, any prior owner, operator, tenant, subtenant, licensee or occupant of the Premises or any owner or operator of property adjacent to or within the immediate vicinity of the Premises or any other person with regard to a Release or the threat of a Release of any Hazardous Substance on, at or from the Premises or any property adjacent to or within the immediate vicinity of the Premises. The Company has not received any form of notice or inquiry from any Customer with regard to a Release or a threat of a Release of any Hazardous Substance on, at, under or from any of the Customers' Properties resulting or allegedly resulting from activities undertaken thereon by the Company or any Subsidiary. (v) All Environmental Permits necessary for the construction, equipping, ownership, use or operation of the business of the Company or any of the Subsidiaries or the Premises by the Company and the Subsidiaries have been obtained and are in full force and effect and the Company and each of the Subsidiaries is in material compliance therewith. (vi) No event has occurred with respect to the operations of the Company or any Subsidiary or the Owned Premises or, to the Company's knowledge, the Leased Premises which, with the passage of time or the giving of notice, or the failure to give notice, would constitute a violation of or non-compliance with, any applicable Environmental Laws or Environmental Permits. (vii) All wastes generated, stored, handled, transported, treated, recycled or disposed of by the Company and each of the Subsidiaries on, at, in or under the Premises have been generated, stored, handled, transported, treated, recycled or disposed of, as the case may be, in strict compliance with Environmental Laws. (viii) To the best of Company's knowledge, no act or omission of the Company or the Subsidiaries at, upon or in any of the Customers' Properties has been or is in violation of any applicable Environmental Law. (ix) There are no agreements, consent orders, decrees, judgments, licenses or permit conditions or other orders or directives of any federal, provincial, state or local court, administrative tribunal, officers, inspectors, or other official or Governmental Entity relating to the past, present or future construction, equipping, ownership, use, operation, sale, transfer or conveyance of the business of the Company or the Premises which require any change in the present condition of the business of the Company or the Premises or any notice, work, repairs, construction, containment, clean up, investigations, studies, removal or remedial action or capital expenditures in order for the business of the Company or the Premises to be in compliance with any Environmental Laws or Environmental Permits. (x) There are no charges, prosecutions, actions, suits, claims or proceedings, pending or, to the Company's knowledge, threatened against the Company or any Subsidiary, which could cause the incurrence of expenses or costs of any name or description or which seek money damages, injunctive relief, remedial action or remedy that arise out of, relate to or result from (1) environmental conditions at, on, under or in the vicinity of the Premises, (2) a violation or alleged violation of any Environmental Laws or non-compliance or alleged non-compliance with any Environmental Permits, (3) the presence of any Hazardous Substance or a Release or the threat of a release of any Hazardous Substance on, at or from the Premises or property adjacent to or within the immediate vicinity of the Premises or (4) human exposure to any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the extent the same arise from the businesses of the Company or any Subsidiary or the condition of the Premises or the acquisition, construction, equipping, ownership, use, operation, sale, transfer or conveyance thereof, or (5) to the knowledge of the Company, the Release, threat of Release or generation of any Hazardous Substance at, on, in or from any of the Customers' Properties resulting from activities undertaken thereon by the Company or the Subsidiaries. SECTION 3.12 Title to and Condition of Properties and Assets. The material tangible assets owned or leased (which shall be designated as leased on Schedule 3.12) by the Company or any Subsidiary including, without limitation, all machinery, equipment, fixtures, furniture, office equipment, computer equipment, tooling and vehicles are listed or described in the Disclosure Schedules (the "Fixed Assets"). The Company and each Subsidiary has good and marketable title to all of the properties and assets reflected in the Base Balance Sheet, those listed in Schedule 3.12 hereto, and those used by the Company or any Subsidiary, subject to no Lien other than the Liens disclosed in the Disclosure Schedules. Except as otherwise specified in Schedule 3.12 hereto, the Fixed Assets are, in all material respects, in good condition and repair for their current use, reasonable wear and tear excepted and subject to replacement in the ordinary course of business; have been properly maintained, and conform with all Applicable Laws; and the Company does not know of any pending or threatened change of any Applicable Laws or zoning or other law, standard or requirement with which any of such property would not conform. SECTION 3.13 Proprietary Rights; Date Calculation. Schedule 3.13 hereto contains a brief description of all patents, trademarks, service marks, trade names, copyrights (including any pending applications and registrations for any of the foregoing), inventions, trade secrets and any other material intellectual or intangible rights owned or used under license by the Company or any Subsidiary other than standard off-the-shelf third party software (collectively referred to as "Proprietary Rights"). The Proprietary Rights are not subject to any outstanding licenses, liens, encumbrances, claims or other restrictions or rights of others and there are no pending or threatened challenges against the Company or a Subsidiary with respect to any of the Proprietary Rights. Schedule 3.13 hereto also includes a complete list of all inventions for which patent applications have not yet been filed but as to which the Company or any Subsidiary may hereafter file patent applications. The business of the Company and each of the Subsidiaries as heretofore conducted does not infringe or constitute, and has not infringed or constituted, an unlawful invasion of any rights of any person and no notice of any infringement or invasion has been received by the Company or any Subsidiary. The Company and each Subsidiary has the right to use all of the Proprietary Rights, including without limitation, formulae, trade secrets, customer lists, processes and know-how used in connection with the conduct of its business and no other intellectual property is used or necessary to be used in the conduct of its business. Neither the Company nor any Subsidiary has sold, licensed or otherwise disposed of any Proprietary Rights to any person or agreed to indemnify any person for patent, trademark or copyright infringement. Neither the Company nor any Subsidiary has any obligation to pay any royalty, fee or other compensation to any person in respect of the Proprietary Rights. The computer systems and software used by the Company or the Subsidiaries and any other equipment or products used by the Company or the Subsidiaries that use software or embedded chips (the "Company's Equipment") will accurately accept, create, manipulate, sort, store, output and otherwise process calendar-related data from, into and between the twentieth and twenty-first centuries and will operate before, during and after the year 2000 without error relating to calendar-related or "date" data (including data received from or passed to other computer systems or programs), including without limitation error that relates to, or is the result of, calendar-related data that represents or refers to different centuries or to more than one century or that reflects the existence of a leap year. Without limiting the generality of the foregoing, the Company's Equipment will not, because of calendar-related or "date" data (including without limitation data that represents or refers to different centuries or to more than one century or that reflects the existence of a leap year), cease prematurely or abnormally to function before completing its intended operation or generate invalid or incorrect results. The Company's Equipment that is date aware is capable, or is in the process of being made (and is scheduled to be made) capable on a timely basis, of storing explicit values with respect to century data and uses a four-digit year in all date data elements, whether internal to the software logic, external at interfaces with other programs or stored on-line or off-line, and recognizes and correctly processes dates for leap year. The next date when the manipulation of calendar-related data could cause any of the Company's Equipment to cease prematurely or abnormally to function or to generate invalid or incorrect results is at least 50 years from the date of this Agreement. SECTION 3.14 Contracts; No Defaults; Major Clients. (a) Schedule 3.14 attached hereto contains a true, complete and correct list and description of the following contracts and agreements, whether written or oral: (i) all loan agreements, indentures, mortgages and guaranties to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or their respective property is bound; (ii) all pledges, conditional sale or title retention agreements, security agreements, equipment obligations, personal property leases and lease purchase agreements to which the Company or any Subsidiary is a party or by which the Company or any of the Subsidiary or any of their respective property is bound; (iii) all contracts, agreements, commitments, purchase orders to which the Company or any Subsidiary is a party or by which any of their respective property is bound (other than for product deliveries to customers in the normal course of business upon the Company's or any Subsidiary's standard terms) or other understandings or arrangements which (A) involve payments or receipts by any of them of not more than $25,000 in the case of any single contract, agreement, commitment, understanding or arrangement under which full performance (including payment) has not been rendered by all parties thereto or (B) will, if not performed, not materially adversely affect the condition (financial or otherwise) or the properties, assets, business or prospects of the Company or any Subsidiary; (iv) all collective bargaining agreements, employment and consulting agreements, non-competition agreements, trust agreements, executive compensation plans, bonus, 401(k), or profit-sharing plans, deferred compensation agreements, pension plans, retirement plans, employee stock option or stock purchase plans and group life, health and accident insurance and other employee benefit plans, agreements, memoranda of understanding, arrangements or commitments to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties is bound; (v) all material agency, distributor, sales representative and similar agreements to which the Company or any Subsidiary is a party; (vi) all material contracts, agreements or other understandings or arrangements, whether written or oral, between the Company or any Subsidiary and any shareholder, employee, officer or director of the Company or any Subsidiary; (vii) all material leases of personal property whether operating, capital or otherwise, under which the Company or any Subsidiary is lessor or lessee; (viii) all contracts, agreements and other material documents relating to disposal of waste (whether or not hazardous); (ix) all return policies and product warranties relating to products, goods or systems manufactured, distributed or installed by the Company or any Subsidiary as the same are currently in effect or may have been in effect from time to time since March 26, 1997 as well as any exception to such policies, all cooperative advertising arrangements and all rebate, discount or allowance arrangements; (x) all material contracts related to operation, maintenance or management of the Premises; (xi) all material agreements relating to the licensing of intellectual property under which the Company or any Subsidiary is licensor or licensee. (b) With respect to each contract to which the Company or any Subsidiary is a party or pursuant to which it is bound (whether or not identified in Schedule 3.14): (i) such contract is a valid and binding agreement of the Company or the Subsidiary that is a party thereto, enforceable against the Company or the Subsidiary and, to the Company's knowledge, the other parties thereto in accordance with its terms subject to the Enforceability Qualifications; (ii) except as disclosed in Schedule 3.14, the Company and each of the Subsidiaries that is a party thereto has fulfilled all material obligations required to have been performed by it prior to the date hereof, and neither the Company nor any Subsidiary has any reason to believe that it will not be able to fulfill, when due, all of its obligations under such contract which remain to be performed after the date hereof to the Closing; (iii) except as disclosed in Schedule 3.14, neither the Company nor any of the Subsidiary is in material breach of such contract, and no event has occurred which with the passage of time or giving notice or both would constitute a default by the Company or any Subsidiary, result in a loss of rights or result in the creation of any lien, charge or encumbrance, thereunder or pursuant thereto; (iv) to the knowledge of the Company, there is no existing material breach by any other party to such contract, and, to the Company's knowledge, no event has occurred which with the passage of time or giving of notice or both would constitute a default by such other party, result in a loss of rights or result in the creation of any lien, charge or encumbrance thereunder or pursuant thereto; (v) neither the Company nor any Subsidiary is restricted or, so far as the Company or any of the Shareholders now reasonably foresees, may be restricted in the future, by such contract, from carrying on its respective business anywhere in the world; (vi) except as otherwise disclosed in Schedule 3.14, the continuation, validity and effectiveness of such contract would not be affected by this Agreement and the transactions contemplated hereby and, except as disclosed in Schedules 3.05 and 3.14, such contract does not require the consent or approval of any party thereto in connection with this Agreement or the transactions contemplated hereby; (vii) a true, correct and complete copy of such contract has been heretofore made available to Parent; and (viii) The Company has no reason to believe such contract will not be renewed (if renewable under its terms) and neither the Company nor any Subsidiary has received any notification that such contract is not likely to be renewed (if renewable under its terms). (c) Except as disclosed in Schedules 3.05 and 3.14, this Agreement and the transactions contemplated hereby will not create a default under or permit the termination of or otherwise have any materially adverse effect on any material contract of the Company or any Subsidiary. (d) Schedule 3.14 hereto includes a complete and correct list of the ten (10) largest customers of the Company and each Subsidiary in terms of revenue recognized in respect of such customers during the current fiscal year showing the amount of revenue recognized for each such customer during such period. Except as set forth in Schedule 3.14, the Company and the Shareholders have no reason to believe that any of the customers so listed in Schedule 3.14 hereto will terminate or reduce in any material respect, or otherwise materially and adversely change, the business or relationship between such customer and the Company or any Subsidiary. (e) Except as disclosed in Schedules 3.14 and 3.16, neither the Company nor any Subsidiary has accrued for a loss in respect of any uncompleted customer contract nor is such an accrual warranted under generally accepted accounting principles or anticipated based upon current information. SECTION 3.15 Inventories; Order Backlog. The inventory of the Company and each Subsidiary consists of items of good and merchantable quality, salable at normal prices or usable in the ordinary and usual course of its business, subject to reserves for obsolete inventory. The amounts at which inventories are carried on the Base Balance Sheet and the Company's December 31, 1998 consolidated balance sheet and on the books of the Company reflect the normal inventory valuation policy of the Company and each Subsidiary of valuing inventory at the lower of cost or market value in accordance with generally accepted accounting principles. 1 SECTION 3.16 Accounts Receivable. All accounts receivable of the Company and each Subsidiary have arisen only through sales in the ordinary course of business consistent with past practice for goods sold or services performed. Except as set forth in Schedule 3.16, the accounts receivable of the Company and each Subsidiary shown on the Base Balance Sheet and all accounts receivable of the Company and each Subsidiary which have arisen subsequent to the Base Balance Sheet Date are good and collectable in the ordinary and usual course of its business and are not subject to any claims or offsets. SECTION 3.17 Labor Matters. Except as set forth in Schedule 3.19, there are no strikes, arbitrations, material grievances, other labor disputes or union organizational drives or labor relations board proceedings pending or, to the Company's knowledge, threatened between the Company or any Subsidiary and any of its employees or union representing or seeking to represent its employees. Except as described in Schedule 3.17 hereto, neither the Company nor any Subsidiary is party to any union, collective bargaining or other similar agreements or is under any current or anticipated obligation to engage in collective bargaining with respect to any of its employees. Except as set forth in Schedule 3.17, the Company and each Subsidiary has paid or accrued in full all wages, salaries, commissions, bonuses and other compensation (including severance pay and vacation benefits) for all services performed by its employees. Neither the Company nor any Subsidiary is liable for any arrears of wages or any payroll taxes or any penalties or other damages for failure to comply with any applicable foreign, federal, state, foreign and local laws relating to the employment of labor. There is no pending or, to the Company's knowledge, threatened claim or proceeding against the Company or any of its Subsidiaries relating to occupational health and safety, workers' compensation, employment standards, human rights or pay equity legislation or to constructive or wrongful dismissal. SECTION 3.18 Other Employee Matters. A. In General (a) "Controlled Group". For purposes of this Section, "Controlled Group" shall mean the Company and the Subsidiaries and any trade or business, whether or not incorporated, which is part of a controlled group under common control or affiliated with the Company within the meaning of Section 4001(b)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Sections 414(b), (c), (m) or (o) of the Code. Each member of the Controlled Group is listed in Schedule 3.18(A)(a). (b) Schedule 3.18(A)(b) hereto sets forth the name, title, total annual compensation for the most recently completed fiscal year (including bonus and commissions), current base salary rate, accrued bonus, accrued sick leave, accrued severance pay and accrued vacation benefits, of each present employee of the Company and the Subsidiaries and each other member of the Controlled Group. (c) Except as disclosed in Schedule 3.18(A)(c) hereto, neither the Company nor any other member of the Controlled Group maintains or is a party to or contributes to, or is obligated to maintain or be a party to or contribute to, or has ever maintained or been a party to or contributed to, nor entered into an agreement with respect to, any compensation plan, fund, arrangement or practice, whether or not in writing and whether or not enforceable, including, without limitation, any retirement, deferred compensation, incentive compensation, pension, profit sharing, thrift, stock bonus, stock purchase, stock grant, stock option, phantom stock or bonus program, which provides for or promises benefits to any current or former officer, consultant, director or employee of the Company or of any other member of the Controlled Group, that is not a Welfare Plan (as hereinafter defined), a Pension Plan (as hereinafter defined) or an Employee Program (as hereinafter defined). B. Company and U.S. Subsidiaries (a) Delivery of Benefit Plan Materials. With respect to each of the plans, funds, arrangements or practices, set forth in the schedules identified below ("Benefit Plans"), the Company has heretofore delivered to Parent true and complete copies of: (A) all plan documents relating to the Benefit Plan and all amendments thereto and, where applicable, related trust agreements and group annuity contracts, and all amendments thereto, and insurance policies, certificates and related documents, and current financial statements, (B) all material contracts relating to the Benefit Plan, including, without limitation, insurance contracts, investment management agreements, subscription and participation agreements and record keeping agreements; (C) in the case of a Pension Plan (as defined below) which is a defined benefit plan, 3 the three most recent actuarial reports or valuations relating to the Benefit Plan; (D) the most recent Summary Plan Description of the Benefit Plan and any Summary of Material Modifications or other writings furnished to employees with respect to the Benefit Plan; (E) the three most recent annual returns/reports in the Form 5500 series relating to the Benefit Plan, and any amendments thereto, as filed with the Internal Revenue Service, together with all enclosures and attachments thereto, including, without limitation, audited financial statements, and related Summary Annual Reports; (F) with respect to each Pension Plan (as defined below) intended to qualify under the Code, the most recent Internal Revenue Service determination letter determining that the Benefit Plan is qualified for federal income tax purposes under Section 401(a) or Section 403(a) of the Code and that any related trust is exempt from taxation under Section 501(a) of the Code, and complete copies of the application for such determination letter, including all correspondence, attachments and supplemental materials and information furnished to the Internal Revenue Service with respect to the Benefit Plan; and (G) any and all collective bargaining agreements under which the Benefit Plan is maintained. (b) Employee Welfare Benefit Plans. Except as disclosed in Schedule 3.18(B)(b) hereto, neither the Company nor any other member of the Controlled Group directly or indirectly maintains, or is a party to or contributes to, or is obligated to maintain or be a party to or contribute to, or has ever maintained or been a party to or contributed to, any employee welfare benefit plan, fund, arrangement or practice, whether or not in writing, which provides or promises to provide employee benefits including, without limitation, benefits payable by reason of termination of employment (other than benefits provided by a Pension Plan as defined below) to employees or former employees employed in the United States by the Company or any other member of the Controlled Group or their dependents or other individuals, including, without limitation, health, accident, disability, cafeteria, dependent care, employee assistance, unemployment severance benefits, fringe benefits, or life insurance or other death benefits, or any "employee welfare benefit plan" as defined in Section 3(1) of ERISA, whether formal or informal, written. With respect to each plan, fund, arrangement or practice listed in Schedule 3.18(B)(b) ("Welfare Plan"), except as disclosed in Schedule 3.18(B)(b): (A) the Welfare Plan is, and has at all times been, operated in compliance in all material respects with its governing documents (except as otherwise required by applicable law), ERISA, the Code, all regulations, rulings and announcements promulgated or issued under ERISA and the Code, and all other applicable law, including, without limitation, the reporting and disclosure requirements of ERISA; (B) neither the Company, nor any other member of the Controlled Group, nor the Welfare Plan, nor, to the Company's and the Shareholders' knowledge, any "party in interest" (as defined in Section 3(14) of ERISA) or "disqualified person" (as defined in Section 4975 of the Code), nor, to the Company's and the Shareholders' knowledge, any fiduciary with respect to the Welfare Plan, nor, to the Company's and the Shareholders' knowledge, any other party, has engaged in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) other than a transaction subject to a statutory or administrative exemption; (C) all contributions, premiums or 4 benefit payments required to be made to or on behalf of the Welfare Plan by law, contract or the terms of the Welfare Plan have been made, and all expenses relating to contributions, premiums or benefit payments due or owing with respect to the Welfare Plan have been properly accrued and reflected in the Base Balance Sheet; (D) except for the processing of routine claims in the ordinary course of administration, there is no pending, or, the Company's knowledge, anticipated or threatened litigation, arbitration, or claim, by or against or otherwise involving the Welfare Plan or any fiduciary thereof in respect of the Welfare Plan, nor is there any judgment, decree, injunction, rule or order of any court, governmental body, commission, agency or arbitrator, outstanding against or in favor of or otherwise involving the Welfare Plan or any fiduciary thereof in respect of the Welfare Plan; (E) the Welfare Plan is not a "voluntary employees' beneficiary association" (as defined in Section 501(c)(9) of the Code ("VEBA")) nor is there any related trust or arrangement described in Section 501(c) of the Code which is intended to be exempt from taxation under Section 501(a) of the Code; (F) the Welfare Plan, if funded, and any related trust, is in compliance with Sections 419 and 419(A) of the Code and, if intended to be a VEBA, is in compliance with Section 501(c)(9) of the Code; (G) the Welfare Plan, if a group health plan within the meaning of Section 607(1) of ERISA and Section 5000(b)(1) of the Code, is and at all times has been in compliance with Sections 601 through 608 of ERISA and Section 4980B of the Code; (H) there is no "disqualified benefit" (as such term is defined in Section 4976(b) of the Code) which would subject the Company or any other member of the Controlled Group or Parent or Sub to a tax under Section 4976 of the Code; (I) if the Welfare Plan is intended to meet the requirements for tax favored treatment under Subchapter B of Chapter 1 of the Code, it meets such requirements; (J) the Welfare Plan may be amended or terminated by Parent or the Company on or at any time after the Closing Date, without liability to any person; (K) the Welfare Plan, if a group health plan within the meaning of Section 706(a) of ERISA and Section 9832(a) of the Code, is in compliance with Sections 701 through 707 of ERISA and Sections 4980D and 9801 through 9803 of the Code; and (L) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder will not result in any obligation or liability of the Company or any other member of the Controlled Group, or of Parent or Sub to the Welfare Plan or to any employee, former employee or other person. Except as required under Sections 601 through 608 of ERISA or by other applicable law, neither the Company nor any other member of the Controlled Group provides or has ever provided health benefits to any retiree, other former employee or dependent or survivor of a retiree or other former employee. (c) Employee Pension Benefit Plans. Except as disclosed in Schedule 3.18(B)(c) hereto, neither the Company nor any other member of the Controlled Group directly or indirectly maintains, or is a party to or contributes to, or is obligated to maintain, be a party to or contribute to, or has ever maintained or been a party to or contributed to, any deferred compensation plan or any plan, fund, arrangement or practice, whether formal or informal, whether or not in writing, and whether or not legally binding, that is or may be an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) or any "multiemployer plan" (as defined in Section 3(37) or 4001(a)(3) of ERISA), nor has the Company nor any other current or former member of the Controlled Group withdrawn from any such multiemployer plan in a complete or partial withdrawal within the meaning of Title IV of ERISA. With respect to each plan, fund, arrangement or practice listed in Schedule 3.18(B)(c) ("Pension Plan"): (A) each Pension Plan that is intended to be qualified under Section 401(a) or 403(a) of the Code has received a favorable determination letter which is currently effective, and no fact or circumstance exists or has existed at any time which would adversely affect the qualified status of the Pension Plan or any trust through which the Pension Plan is funded; (B) the Pension Plan is, and at all times has been, operated in compliance in all material respects with its governing documents (except as otherwise required by applicable law), ERISA, the Code, all regulations, rulings and announcements promulgated or issued under ERISA and the Code, and all other applicable law, including, without limitation, the reporting and disclosure requirements of ERISA; (C) the Pension Plan has not suffered an "accumulated funding deficiency" (as defined in Section 302(a)(2) of ERISA or Section 412(a) of the Code) whether or not waived; (D) if the Pension Plan is subject to Title IV of ERISA, the present value of all accrued benefits under the Pension Plan does not exceed the present value of the assets of such Pension Plan allocable to such accrued benefits, based upon reasonable actuarial assumptions utilized for the Pension Plan in its most recent actuarial valuation; (E) neither the Company nor any other member of the Controlled Group, nor the Pension Plan, nor, to the Company's and the Shareholders' knowledge, any "party in interest" (as defined in Section 3(14) of ERISA) or "disqualified person" (as defined in Section 4975 of the Code), nor, to the Company's and the Shareholders' knowledge, any fiduciary with respect to the Pension Plan, nor, to the Company's and the Shareholders' knowledge, any other party, has engaged in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) other than a transaction subject to statutory or administrative exemption; (F) if the Pension Plan is subject to Title IV of ERISA, it has not been subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the reporting of which has not been waived by regulation; (G) no termination or partial termination of the Pension Plan within the meaning of Section 4042 of ERISA or Section 411(d)(3) of the Code has occurred, and no condition exists that would constitute grounds for the termination or partial termination of the Pension Plan; (H) all material contributions, premiums and benefit payments required to be made to or on behalf of the Pension Plan by law, contract or the terms of the Pension Plan have been made, and all expenses relating to contributions, premiums or benefit payments due or owing with respect to the Pension Plan have been properly accrued and reflected in the Company's financial statements as of the Closing Date; (I) except for the processing of routine claims in the ordinary course of administration, there is no pending, or to the Company's and the Shareholders' knowledge, anticipated or threatened litigation, arbitration, or claim by or against or otherwise involving the Pension Plan or any fiduciary thereof, nor is there any judgment, decree, injunction, rule or order of any court, governmental body, commission, agency or arbitrator, outstanding against or in favor of or otherwise involving the Pension Plan or any fiduciary thereof in respect of the Pension Plan; (J) if the Pension Plan is subject to Title IV of ERISA, all premiums due to the Pension Benefit Guaranty Corporation ("PBGC") for plan termination insurance have been paid in full on a timely basis, and a variable rate premium was not due as of the most recent premium due date; (K) neither the Company nor any other member of the Controlled Group has incurred or expects to incur, either directly or indirectly, any liability under Title IV of ERISA, including, without limitation, any withdrawal liability within the meaning of Title IV of ERISA with respect to any multiemployer plan (as defined in Section 4001(a)(3) of ERISA), but excluding liability for premiums to the PBGC; (L) the Pension Plan may be amended or terminated by Parent or the Surviving Corporation on or at any time after the Closing Date without material liability to any person; and (M) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder will not result in any material obligation or liability, individually or in the aggregate, of the Company or any other member of the Controlled Group, or of Parent or Sub to the Pension Plan or to any employee, former employee or other person. Neither the Company nor any other member of the Controlled Group maintains an "employee stock ownership plan" (as defined in Section 4975(e)(7) of the Code) or a tax credit employee stock ownership plan (within the meaning of Section 409(a) of the Code). Neither the Company nor any other member of the Controlled Group has any "leased employees" (as defined in Section 414(n) of the Code) who must be taken into account for the requirements of Section 414(n)(3) of the Code. Nothing in this Section 3.18(B) applies to the Employee Programs (as hereinafter defined in Section 3.18(C). C. Larco: (a) Schedule 3.18(C)(a) sets forth all the employee benefit, health, welfare, supplemental unemployment benefits, bonus, pension, profit sharing, deferred compensation, stock compensation, stock purchase, retirement, hospitalization insurance, medical, dental, legal, disability and similar plans or arrangements or practices relating to the employees employed by Larco (the "Employees") which are currently maintained or were maintained, at any time in the last five calendar years (the "Employee Programs"). (b) All of the Employee Programs are and have been registered, invested and administered, in all material respects, in accordance with all laws, regulations, orders or other legislative, administrative or judicial promulgations applicable to the Employee Programs ("Applicable Laws") and in accordance with all understandings, written or oral, between the Company, Larco and the Employees. To the Company's or Larco's knowledge, no fact or circumstance exists that could adversely affect the tax-exempt status of an Employee Program. (c) All obligations regarding the Employee Programs have been satisfied, there are no outstanding defaults or violations by any party thereto and no taxes, penalties or fees are owing or exigible under any of the Employee Programs. (d) To the Company's or Larco's knowledge, no Employee Program, nor any related trust or other funding medium thereunder, is subject to any pending investigation, examination or other proceeding, action or claim initiated by any governmental agency or instrumentality, or by any other party (other than routine claims for benefits), and there exists no state of facts which after notice or lapse of time or both could reasonably be expected to give rise to any such investigation, examination or other proceeding, action or claim or to affect the registration of any Employee Program required to be registered. (e) All contributions or premiums required to be made by the Company and/or Larco under the terms of each Employee Program or by Applicable Laws have been made in a timely fashion in accordance with Applicable Laws and the terms of the Employee Programs, and none of the Company or any of the Subsidiaries has, and as of Closing will not have, any liability (other than liabilities accruing after the Closing Date) with respect to any of the Employee Programs. Contributions or premiums will be paid by the Company and the Subsidiaries on an accrual basis for the period up to Closing even though not otherwise required to be made until a later date in respect of the period that includes Closing. (f) No amendments have been made to any Employee Program and no improvements to any Employee Program have been promised and, except where required by Applicable Laws, no amendments or improvements to an Employee Program will be made or promised after the date hereof and prior to the Closing Date by the Company or Larco. There have been no improper withdrawals, and, to the knowledge of the Company and Larco, there have been no improper applications or transfers of assets from any Employee Program or the trusts or other funding media relating thereto. (g) The Company has furnished or made available to Parent true, correct and complete copies of all plan text relating to the Employee Programs as amended as of the date hereof together with all related documentation including, without limitation, funding agreements, actuarial reports, (if any) funding and financial information returns and statements, copies of material correspondence with all regulatory authorities with respect to each Employee Program in the possession of the Company or Larco and plan summaries, booklets and personnel manuals. (h) To the knowledge of the Company or Larco, none of the Employee Programs enjoys any special tax status under the Income Tax Act (Canada) or under other applicable legislation, nor have any advance tax rulings been sought or received in respect of the Employee Programs. All employee data necessary to administer each Employee Program has been provided or made available by the Company to Parent and, to the knowledge of the Company or Larco, is true and correct as of the date hereof and the Company will notify Parent of any material changes thereto occurring prior to the Closing Date. To the knowledge of the Company or Larco, no insurance policy or any other contract or agreement affecting any Employee Program requires or permits a retroactive increase in premiums or payments due thereunder. The level of insurance reserves held for the account of Larco under each insured Employee Program is reasonable and sufficient to provide for all incurred but unreported claims. (i) Except as disclosed in Schedule 3.18(C)(a), none of the Employee Programs provides benefits to retired employees or to the beneficiaries or dependents of retired employees. SECTION 3.19 Litigation and Claims. Except as summarized in Schedule 3.19 hereto, there is no pending or, to the Company's knowledge, threatened action, suit, proceeding, claim, investigation or notice by or against the Company or any of the Subsidiaries whether or not covered by insurance, and there is no outstanding order, notice, writ, injunction or decree of any court, government or governmental agency against or affecting the Company or any of the Subsidiaries. The resolution of the matters referred to in Schedule 3.19 will not have a material adverse effect on the Company or any of the Subsidiaries taken as a whole. To the Company's knowledge, there are no incidents or occurrences (whether or not covered by insurance) of any kind which may give rise to material claims against the Company or any of the Subsidiaries, whether or not covered by insurance. SECTION 3.20 Insurance. Included in Schedule 3.20 hereto is a list of all policies of property, fire, liability, life and other forms of insurance, and indemnity bonds, carried by the Company or any Subsidiary identifying the nature of risks covered and the amount of coverage in each case. The amount of coverage for each such policy has been equal to or greater than the amount required by contracts entered into by the Company or any of the Subsidiaries. All such policies are in full force. The Company believes that the Company and each of the Subsidiaries are adequately insured against the kinds of risks usually incurred by corporations of similar size engaged in the same or similar business. Since March 26, 1997, the Company and each Subsidiary has given due and timely notice of any claim and of any occurrence known to the Company which may give rise to a claim which may be covered by any such insurance and has otherwise complied with the provisions of such policies. The liability of the Company and its Subsidiaries arising out of the lawsuit referred to as number 5 on Schedule 3.19 is covered by the Company's insurance coverage subject to the deductible and maximum coverage set forth in Schedule 3.19. SECTION 3.21 Compliance with Applicable Laws. The Company and each Subsidiary holds all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of its business (the "Company Permits"). The Company and each Subsidiary is in compliance with the terms of the Company Permits. Except as disclosed in Schedule 3.21 hereto, neither the Company nor any Subsidiary is in material violation of any Applicable Laws and no notice has been received from any Governmental Entity alleging such violation. SECTION 3.22 Warranty and Product Matters. (a) Except as set forth on Schedules 3.19 and 3.22 (i) there has not been any "Products Liability Claim" (as hereafter defined) since March 26, 1997, and, to the Company's knowledge, prior hereto, except for routine claims for warranty repair and service; (ii) since March 26, 1997, and, to the Company's knowledge, prior thereto, there has not been any product recall, rework, retrofit or post-sale warning (collectively, "Recalls") by the Company or any Subsidiary concerning any products made or distributed by any of them or any investigation or consideration of the Company or any Subsidiary concerning whether to undertake or not to undertake any Recalls; and (iii) there are no material defects in design, manufacturing, materials, or workmanship, including, without limitation, any failure to warn which involve any product made or distributed by the Company or any Subsidiary, except for defects which are or have been or may be adequately satisfied and remedied by ordinary warranty repairs and replacements and without any obligation of the Company or any Subsidiary to pay material damages in connection therewith. (b) For purposes of this Section 3.22, the term "Products Liability Claim" shall mean any accident, happening or event which is caused or allegedly caused by any alleged hazard or alleged defect in manufacture, design, materials or workmanship including, without limitation, any alleged failure to warn or any breach of express or implied warranties or representations with respect to, or any such accident, happening or event otherwise involving, a product (including any parts or components) made or distributed by the Company or any Subsidiary on or prior to the Closing Date which results or is alleged to have resulted in injury or death to any person or damage to or destruction of property, or other consequential damages. SECTION 3.23 Finders' Fees. Except as set forth in Schedule 3.23, no person acting on behalf of the Company, any Subsidiary or any of the Shareholders has claims to, or is entitled to, under any contract or otherwise, any payment as a broker, finder or intermediary in connection with the origin, negotiation, execution or consummation of the transactions provided for in this Agreement or the Related Agreements. SECTION 3.24 Transactions with Certain Persons. Except as disclosed on Schedule 3.24 hereto, no current or, to the Company's knowledge, no former director, officer, employee or shareholder of the Company, any of the Subsidiaries or any of their Affiliates (as defined below) or family members or trusts for the benefit of any such person or persons has any interest in any property, real or personal, tangible or intangible, used in or pertaining to the business of the Company or any of the Subsidiaries and there have been no transactions between the Company and any current or, to the Company's knowledge any former director, officer, employee or shareholder of the Company, any of the Subsidiaries or any of their Affiliates except employment arrangements as disclosed in this Agreement or the Schedules hereto. As used in this Agreement, the word "Affiliate" shall have the same meaning as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). SECTION 3.25 General Representation and Warranty. Neither this Agreement nor any Schedule or other documents and information furnished by or on behalf of the Company or the Shareholders in connection with this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained herein or therein not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Each of Parent and Sub represents and warrants to the Company and each Shareholder as follows: SECTION 4.01 Organization. Each of Parent and the Significant Subsidiaries (as hereinafter defined) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite power and authority, corporate and all other necessary governmental approvals to own, lease and operate its properties and to carry on its business as now and heretofore being conducted except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have a material adverse effect on Parent. Parent and each of its Significant Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not in the aggregate have a material adverse effect on Parent. As used in this Agreement, the Significant Subsidiaries shall mean Sub and each other subsidiary of Parent that is a "significant subsidiary" as described in Rule 12b-1 of the Exchange Act. SECTION 4.02 Capital Stock. As of the date hereof, the authorized capital stock of Parent consists of: (i) 50,000,000 shares of Parent Common Stock of which, as of August 14, 1998, 13,756,858 shares were issued and outstanding and no shares were held in treasury; and (ii) 1,000,000 shares of preferred stock, par value $1.00 per share, of which, as of August 14, 1998, none were issued and outstanding. As of August 14, 1998, 198,500 shares of Parent Common Stock were reserved for issuance upon exercise of outstanding options pursuant to Parent's stock options plan ("Parent Stock Plan") and 250,000 shares of Parent Preferred Stock were reserved for issuance in accordance with Parent Rights Agreement. The authorized capital stock of Sub consists of 1000 shares of common stock, par value $1.00 per share, all of which are validly issued, fully paid and nonassessable and are owned by Parent. All outstanding shares of Parent Common Stock and Sub Common Stock are, and all shares of Parent Common Stock which are to be issued pursuant to the Merger will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and, except as provided by Section 630 of the New York Business Corporation Law ("NYBCL"), non-assessable and free of any preemptive rights with respect thereto. As of the date hereof, no Voting Debt of Parent is issued or outstanding. Except as set forth above and except in connection with Parent Rights Agreement and this Agreement, as of August 14, 1998 there are no existing options, warrants, calls, subscriptions or other rights or other agreements or commitments of any character relating to the issued or unissued capital stock or Voting Debt of Parent or obligating Parent to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interests in, Parent or securities convertible into or exchangeable for such shares or equity interests or obligating Parent to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement or commitment. SECTION 4.03 Corporate Authority. Parent and Sub have all requisite power and authority, corporate and other, to execute and deliver this Agreement and the Related Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the Merger and of the other transactions contemplated hereby and thereby have been duly and effectively authorized by all necessary corporate action on the part of Parent or Sub and no other corporate proceedings on the part of Parent and Sub are necessary to authorize this Agreement and the Related Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Related Agreements have been duly executed and delivered by Parent and Sub, as the case may be, and constitute valid and binding obligations of Parent and Sub, enforceable against each of them in accordance with their respective terms subject to the Enforceability Qualifications. SECTION 4.04 No Violation. Except as described in Schedule 4.04 or as contemplated by Section 4.05, the execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby will not result in any Violation pursuant to (i) any provision of the Certificate of Incorporation, as amended, or By-laws, as amended, of Parent or the Certificate of Incorporation or By-laws of Sub or (ii) any provision of any loan or credit agreement, note, mortgage, indenture, lease, benefit plan or other agreement, obligation, instrument, permit, concession, franchise, license or (iii) any Applicable Laws applicable to Parent or Sub or their respective properties or assets, which Violation, in the case of each of clauses (ii) and (iii), would have a material adverse effect on Parent or the transactions contemplated hereby. SECTION 4.05 Consents and Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent or Sub in connection with the execution and delivery of this Agreement and the Related Agreements by Parent and Sub or the consummation by Parent or Sub of the transactions contemplated hereby and thereby, the failure to obtain which would have a material adverse effect on Parent or the transactions contemplated hereby, except for: (i) the filing of a pre-merger notification report by Parent under the HSR Act, (ii) the filing of such documents with, and the qualification with, the various state securities authorities under state securities or legal investment laws (the "Blue-Sky Laws"), that may be required in connection with the transactions contemplated by this Agreement (the "Blue-Sky Filings"), (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL and the filing of appropriate documents with the relevant authorities of other states in which Parent and Sub are qualified to transact business; and (iv) the Local Approvals. SECTION 4.06 SEC Filings; Financial Statements. (a) Parent has filed all forms, reports and documents required to be filed with the United States Securities and Exchange Commission ("SEC") since April 1, 1996, and has heretofore delivered or made available to Company in the form filed with the SEC, together with any amendments thereto, its (i) Annual Reports on Form 10-K for the fiscal years ended March 31, 1997 and 1998, (ii) all proxy statements relating to Parent's last two meetings of shareholders, (iii) Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 1998, and (iv) all other reports or registration statements filed by Parent with the SEC since January 1, 1998 (collectively, the "Parent SEC Reports"). The SEC Reports (i) were prepared substantially in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act, as the case may be, and the rules and regulations promulgated under each of such respective acts, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Parent does not believe that it will experience materially adverse financial performance for the quarter beginning on January 1, 1999. (b) The financial statements, including all related notes and schedules, contained in the Parent SEC Reports (or incorporated by reference therein) fairly present the consolidated financial position of Parent and its Subsidiaries as at the respective dates thereof and the consolidated results of operations and cash flows of Parent and its Subsidiaries for the periods indicated in accordance with GAAP applied on a consistent basis throughout the periods involved (except for changes in accounting principles disclosed in the notes thereto) and subject in the case of interim financial statements to normal year-end adjustments. SECTION 4.07 Absence of Certain Changes or Events. Except as disclosed in the Parent SEC Reports filed prior to the date hereof and on Schedule 4.07, since December 31, 1998, Parent and its Subsidiaries have not incurred any material liability, except in the ordinary course of their businesses, and there has not been any change, or any event involving a prospective change, in the business, financial condition or results of operations of Parent and its Subsidiaries which has had, or is reasonably likely to have, a Material Adverse Effect on Parent, and Parent and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices. SECTION 4.08 Interim Operations of Sub. Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. SECTION 4.09 Finders' Fees. No person acting on behalf of Parent or Sub has claims to, or is entitled to, under any contract or otherwise, any payment as a broker, finder or intermediary in connection with the origin, negotiation, execution or consummation of the transactions provided for in this Agreement or the Related Agreements. SECTION 4.10 General Representation and Warranty. Neither this Agreement nor any Schedule or other documents and information furnished by or on behalf of Parent in connection with this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained herein or therein not misleading. SECTION 4.11 Environmental Reports. Parent and Sub represent that they have engaged an environmental consultant to conduct an environmental assessment of the Premises. Parent and Sub have received reports from the environmental consultant that identify certain environmental conditions and environmental compliance issues at the Premises. Parent and Sub will be responsible for all fees and expenses charged by such environmental consultant. SECTION 4.12 Date Calculation. The computer systems and software used by Parent and any other equipment or products used by Parent that use software or embedded chips (the "Parent's Equipment") will accurately accept, create, manipulate, sort, store, output and otherwise process calendar-related data from, into and between the twentieth and twenty-first centuries and will operate before, during and after the year 2000 without error relating to calendar-related or "date" data (including data received from or passed to other computer systems or programs), including without limitation error that relates to, or is the result of, calendar-related data that represents or refers to different centuries or to more than one century or that reflects the existence of a leap year. Without limiting the generality of the foregoing, the Parent's Equipment will not, because of calendar-related or "date" data (including without limitation data that represents or refers to different centuries or to more than one century or that reflects the existence of a leap year), cease prematurely or abnormally to function before completing its intended operation or generate invalid or incorrect results. The Parent's Equipment is capable, or is in the process of being made (and is scheduled to be made) capable on a timely basis, of storing explicit values with respect to century data and uses a four-digit year in all date data elements, whether internal to the software logic, external at interfaces with other programs or stored on-line or off-line, and recognizes and correctly processes dates for leap year. The next date when the manipulation of calendar-related data could cause any of the Parent's Equipment to cease prematurely or abnormally to function or to generate invalid or incorrect results is at least 50 years from the date of this Agreement. SECTION 4.13 Federal Income Tax Representations. (a) Prior to the Merger, Parent will be in control of Sub within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code"). (b) Parent has no present plan or intention to cause Company to issue additional shares of its stock that would result in Parent losing control of the Surviving Corporation within the meaning of Section 368(c) of the Code. (c) Parent has no present plan or intention to reacquire any of its stock issued in the Merger, except for any escrowed shares pursuant to Section 12.01(i). (d) Parent has no present plan or intention to liquidate the Surviving Corporation; to merge the Surviving Corporation with or into another corporation; to sell or otherwise dispose of the stock of the Surviving Corporation except for a merger with or transfers of stock to another corporation controlled by Parent; or to cause the Surviving Corporation to sell or otherwise dispose of any of its assets, except for dispositions made in the ordinary course of business or transfers of assets to a corporation controlled by Parent. (e) Following the Merger, Parent's present intent is that the Surviving Corporation will continue the historic business of Company or use a significant portion of the historic business assets of Company in a business. (f) Parent does not own, nor has it owned during the past five years, any shares of stock of Company. (g) Each of Parent and Sub is undertaking the Merger for a bona fide business purpose and not merely for the avoidance of federal income tax. (h) Sub will have no liabilities assumed by Company, and will not transfer to Company any assets subject to liabilities, in the Merger. (i) Neither Parent nor Sub is an investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code. (j) The payment under Section 2.02(e) of this Agreement of cash in lieu of fractional shares of Parent Common Stock is solely for the purpose of avoiding the expense and inconvenience to Parent of issuing fractional shares and does not represent separately bargained-for consideration. (k) As of the Effective Time, the fair market value of the assets of Sub will exceed the sum of Sub's liabilities plus the amount of other liabilities, if any, to which Sub's assets are subject. (l) Parent has no present plan or intention to settle at a discount any intercompany indebtedness existing between Company and Parent or between Sub and Company. (m) No stock of Sub will be issued in the Merger. (n) As of the Effective Time, the Parent Common Stock does not constitute nonqualified preferred stock as defined in Section 351(g)(2) of the Code. ARTICLE V CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SHAREHOLDERS SECTION 5.01 Shareholder Representations, Warranties and Covenants. Each of the Shareholders represents, warrants and covenants to Parent, and to Sub as follows: (i) such Shareholder is the sole and exclusive record and beneficial owner of the shares of the Company Common Stock or Exchangeable Shares set forth opposite such Shareholder's name in Schedule 3.02 hereto, free and clear of any claims, Liens, pledges, options, rights of first refusal or other encumbrances or restrictions of any nature whatsoever (other than pursuant to the Shareholders' Agreement), and, except as set forth on Schedule 3.02 hereto, there are no agreements, arrangements or understandings with respect to the Company any Subsidiary or securities issued by the Company or any Subsidiary to which such Shareholder is a party; (ii) except as specifically provided Section 5.04 with respect to the Exchangeable Shares, such Shareholder shall not sell, transfer or otherwise dispose of or in any way encumber any of such Shareholder's shares of the Company Common Stock or Exchangeable Shares prior to the Effective Time and shall take no action inconsistent with the approval and consummation of this Agreement, the Related Agreements and the transactions contemplated hereby and thereby; (iii) such Shareholder has all necessary legal capacity, right, power and authority to execute and deliver this Agreement and the Related Agreements executed by such Shareholder and to consummate the transactions contemplated hereby and thereby, and this Agreement and the Related Agreements executed by such Shareholder constitute valid and binding obligations of such Shareholder enforceable against such Shareholder in accordance with their respective terms, and (iv) the execution and delivery of this Agreement and the Related Agreements by such Shareholder and the consummation of the transactions contemplated hereby and thereby will not result in any Violation pursuant to (A) any provision of any note, bond, indenture, mortgage, security agreement, lease franchise, permit, agreement or other instrument or obligation to which such Shareholder is a party, or by which such Shareholder or any of such Shareholder's properties or assets may be bound, or result in the creation of any material Lien, or other right of any third party of any kind whatsoever upon the properties or assets of such Shareholder pursuant to the terms of any such instrument or obligation, which Violation would have a material adverse effect on such Shareholder's ability to perform such Shareholder's obligations under this Agreement or the Related Agreements, or (B) Applicable Laws applicable to such Shareholder or such Shareholder's properties or assets. SECTION 5.02 Restrictive Legends. The Shareholders hereby acknowledge and agree that the transfer agent for Parent Common Stock shall have the authority to place the legend, substantially in the following form, on each certificate representing shares of Parent Common Stock issued to any Shareholder pursuant to the Merger: "The sale, transfer or other disposition of shares represented by this certificate is not permitted unless effected pursuant to an effective registration statement or compliance with Rule 145 of the Securities Act of 1933, as amended. SECTION 5.03 Accredited Investor Status. Each Shareholder is an "accredited investor" as that term is defined in Rule 501(a) promulgated under the Securities Act. SECTION 5.04 Exchangeable Shares. All the parties agree that immediately prior to the Effective Time, without the necessity of any further action by any of the parties hereto, all Exchangeable Shares shall for all purposes be thereupon deemed to be exchanged for and converted into the shares of Company Common Stock into which they are exchangeable. ARTICLE VI COVENANTS OF THE COMPANY AND THE SHAREHOLDERS SECTION 6.01 Conduct of Business Pending Closing. From the date of this Agreement to the Closing Date: (a) Negative Covenants. Except as otherwise expressly provided by this Agreement or as Parent may otherwise consent to in writing, the Company shall not and shall cause each of the Subsidiaries not to, engage in any activity or enter into any transaction outside of the ordinary and usual course of its business or which would be inconsistent with its past practice or with the terms of this Agreement or which would render inaccurate as of the Closing Date any of the representations and warranties set forth in Article III as if such representations and warranties were made at and as of the Closing Date. Without limiting the generality of the foregoing, the Company shall not and shall cause each of the Subsidiaries not to, do any of the following: (i) undergo any change in its condition (financial or other), properties, assets, liabilities, business or operations except changes in the ordinary and usual course of its business and consistent with its past practice and which have not been, either in any case or in the aggregate, materially adverse to its condition (financial or other), properties, assets, liabilities, business, operations or prospects; (ii) declare, set aside, or pay any dividend or other distribution in respect of its capital stock or make any direct or indirect redemption, purchase or other acquisition of any shares of its capital stock or make any payment to the Shareholders except payments of employment compensation in the ordinary and usual course of the Business consistent with past practice; (iii) issue, grant or sell any shares of its capital stock or any options, warrants or other rights to purchase any such shares or any securities convertible into or exchangeable for such shares or take any action to reclassify or recapitalize or split up its capital stock; (iv) except as provided in its agreements with lenders identified in Schedule 3.05, mortgage, pledge or subject to any material Lien, lease, security interest, encumbrance, or other restriction, any of its properties or assets or to such restriction outside of the ordinary course of its business whether or not material; (v) acquire or dispose of any interest in any asset or property except the purchase of materials and supplies and the sale of inventory in the ordinary and usual course of its business and consistent with its past practice; (vi) forgive or cancel any debt or claim (other than accounts receivable write offs in Schedule 3.16 or in the ordinary course of business), waive any right, or, except in the ordinary and usual course of its business and consistent with its past practice incur or pay any liability or obligation; (vii) except as required by this Agreement, adopt or amend any Employee Program, profit sharing plan, agreement, arrangement or practice for the benefit of any director, officer or employee or change the compensation (including bonuses) to be paid to any director, officer or employee; (viii) suffer any damage, destruction or loss (whether or not covered by insurance); (ix) amend or terminate any material contract, agreement or lease other than renewals in the ordinary course of business; (x) experience any material labor difficulty, or loss of employees or customers; (xi) enter into any collective bargaining agreement; (xii) sell or grant or transfer to any party or parties any license, or grant an option to acquire a license to manufacture or sell any of the products of the Company or any of the Subsidiaries, or to use any trademark, service mark, trade name, copyright, patent or pending application for any of the foregoing, or any trade secret or know-how of the Company or any of the Subsidiaries; (xiii) amalgamate, merge or consolidate or enter into a binding share exchange or any other business combination or acquire any stock, equity interest or business of any other person or undertake a corporate reorganization; (xiv) declare any bonus or increase in the salary or compensation of any employee except in the ordinary course of business consistent with past practices or as disclosed in the Disclosure Schedules; (xv) change the accounting methods or practices followed by it; (xvi) amend its Certificate of Incorporation or By-Laws or those of any of the Subsidiaries or (xvii) without limiting the generality of any of the foregoing, enter into any transaction except in the ordinary and usual course of its business and consistent with its past practice; (xviii) or agree to, permit or suffer any of the acts, transactions or other things described in Subsections (i) through (xvii) of this Section 6.01. (b) Conduct of Business. The Company and the Shareholders shall each use their reasonable best efforts to cause the Company and each of the Subsidiaries to preserve intact its business organization, to retain its present officers and employees and to preserve its good will with all suppliers, customers, employees and others having business relations with it. (c) Access to Information. The Company and each of the Subsidiaries shall afford Parent and its representatives access, during normal business hours and upon reasonable notice, to all of the assets, properties, books, records, and agreements of the Company or any of the Subsidiaries, and shall furnish to Parent and its representatives all other information concerning its business, properties and personnel as Parent may reasonably request. The confidentiality and other obligations of the parties referred to in Section 13.04 hereof shall be applicable to all such information. The Company shall cooperate with Parent in visiting or contacting employees and customers of, and persons having other business relationships with the Company or any of the Subsidiaries as Parent shall specify prior to the Closing. The Company shall also cooperate with Parent in an inspection of the Premises and all improvements thereon, including, without limitation, an environmental audit of the Premises. (d) Transfers or Restrictions. No Shareholder shall sell, transfer or otherwise dispose of any of the shares of the Company common stock or any interest therein or subject the same to any Lien. SECTION 6.02 Change in Representations and Warranties. In the event the Company or any Shareholder learns that any of the representations and warranties of the Company or Shareholders contained in or referred to in this Agreement is or will become inaccurate, such party shall give prompt detailed written notice thereof to Parent. SECTION 6.03 Acquisition Proposals. Until the earlier of (i) May 30, 1999 or (ii) the termination of this Agreement pursuant to Article XI, Shareholders, the Company and each of the Subsidiaries and their respective representatives will not initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to shareholders of the Company) with respect to a merger, consolidation, binding share exchange or any other business combination or similar transaction involving, or any purchase of all or any significant portion of the assets or any equity securities of the Company or any of the Subsidiaries (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"), engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal. Shareholders, the Company and each of the Subsidiaries will terminate any existing activities, discussion or negotiations with any parties conducted heretofore with respect to any of the foregoing. Shareholders, the Company and each of the Subsidiaries will notify Parent promptly if any such inquiries or proposals are received, any such information is requested, or any such negotiations or discussions are sought to be initiated or continued. The Shareholders represent and acknowledge that compliance with Section 6.03 does not affect the fiduciary obligations of directors of the Company because such Shareholders have agreed to vote for the transactions contemplated hereby. SECTION 6.04 Certain Shareholder Obligation Efforts. The Shareholders shall cause the Company to comply with its obligations under this Article VI from the date hereof through the Effective Time. SECTION 6.05 Shareholders Approval. The Company shall call a meeting of its shareholders to be held as promptly as practicable for the purpose of obtaining the requisite shareholder approval of this Agreement and the transactions contemplated hereby. The Company will, through its Board of Directors, recommend to its shareholders approval of this Agreement. SECTION 6.06 Rule 145 Affiliates. Prior to the Closing Date the Company shall deliver to Parent a letter substantially in the form attached hereto as Schedule 6.06(a), identifying all persons who may be, at the time this Agreement is submitted for approval to the shareholders of the Company, "affiliates" of the Company for purposes of Rule 145 under the Securities Act. The Company shall cause each such person to deliver to Parent on or prior to the Closing Date a written agreement, substantially in the form attached as Schedule 6.06(b) hereto. SECTION 6.07 Parent's Expenses. In the event that this Agreement is terminated because of a failure of the Shareholders to approve this Agreement (such termination being referred to as a "Section 6.07 Event") and Parent is not in material violation of this Agreement, then the Company shall, within three business days following notification by Parent to the Company of the Section 6.07 Event, reimburse Parent up to $200,000 for out-of-pocket fees and expenses incurred by Parent in connection with the transactions contemplated by this Agreement. The existence of Parent's rights under this Section 6.07 does not constitute an election of remedies or in any way limit or impair Parent's right to pursue any other remedy against the Company or the Shareholders to which Parent may be entitled under this Agreement, at law or in equity, or otherwise. SECTION 6.08 Company Options. Within 10 days after the date of execution of this Agreement, the Company shall, if necessary, amend the Company Plan to provide that, upon the Effective Time, each Company Option shall be converted into an option to purchase that number of shares of Parent Common Stock that the holder of such Company Option would have received had he fully exercised his Company Option immediately prior to the Effective Time (assuming such Company Option was then fully exercisable), subject to the adjustment set forth in Section 2.04 hereof. In furtherance of such amendment, the Company shall also enter into an agreement with each holder of a Company Option in form and substance the same as Schedule 6.08 hereto. Such agreements shall be delivered to Parent within 10 days after the date of execution of this Agreement. SECTION 6.09 Larco Options. Within 10 days after the date of execution of this Agreement, the Company shall, if necessary, cause Larco to amend the Larco Plan to provide that upon the Effective Time each Larco Option shall be converted into an option to purchase that number of shares of Parent Common Stock that the holder of such Larco Option would have received had he fully exercised his Larco Option and exchanged his Exchangeable Shares immediately prior to the Effective Time (assuming such Larco Option was then fully exercisable), subject to the adjustment set forth in Section 2.04 hereof. In furtherance of such amendment, the Company shall also cause Larco to enter into an agreement with each holder of a Larco Option in the same form and substance as Schedule 6.09 hereto. Such agreements shall be delivered to Parent within 10 days after the date of execution of this Agreement. SECTION 6.10 Repayment of Debt. At least five (5) days prior to the Closing, the Shareholders shall notify Parent of the amount necessary to repay at the Closing all indebtedness for borrowed money of the Company or any Subsidiary ("Debt"). If Parent elects to repay all Debt at the Closing, Parent will arrange to have representatives of the lender or lenders present to, or will otherwise make provision for, tender to Parent at the Closing evidence of the payment and discharge of the Debt and releases of all security interests on the assets of the Company and the Subsidiaries securing the Debt. SECTION 6.11 SHAREHOLDER AGREEMENTS. THE SHAREHOLDERS SHALL TERMINATE OR AMEND THE STOCKHOLDER AGREEMENTS AND OTHER DOCUMENTS REFERRED TO IN SCHEDULE 3.02(B)(1), (B)(6) AND (B)(7) IN SUCH A MANNER AS WILL PERMIT CONSUMMATION OF THE TRANSACTIONS AS CONTEMPLATED BY THIS AGREEMENT AND SHALL PROVIDE PARENT COPIES OF DOCUMENTS EFFECTING SUCH TERMINATION OR AMENDMENT PRIOR TO THE DAY OF CLOSING. ARTICLE VII COVENANTS OF PARENT SECTION 7.01 Conduct of Business Pending the Closing. Except as otherwise provided in this Agreement, or as the Company may otherwise consent to in writing, Parent shall not, pending the Closing, engage in any activity or enter into any transaction which would render inaccurate as of the Closing Date any of its representations and warranties set forth in this Agreement as if such representations and warranties were made at and as of the Closing Date. SECTION 7.02 Access to Information. Upon reasonable notice, Parent shall afford to representatives of the Company, reasonable access, during normal business hours during the period prior to the Effective Time, to its properties, books, contracts, commitments and records and, during such period, shall furnish all other information concerning its business, properties and personnel as Company may reasonably request. The confidentiality and other obligations of the parties referred to in Section 13.04 hereof shall be applicable to all such information. The investigation by and knowledge of the Company and furnishing of information to the Company shall not affect its right to rely on the representations, warranties, covenants and agreements of Parent. SECTION 7.03 Notice of Breach. In the event Parent has actual knowledge prior to the Effective Time that the Company or a Shareholder has breached any of its or his representations or warranties Parent shall give prompt written notice thereof to the Company. SECTION 7.04 Mark Kirkpatrick Employment. Following the Merger, the Company will offer Mark Kirkpatrick ("Kirkpatrick") an employment arrangement pursuant to which he would continue to be employed by the Company at his current salary for at least three months following the Effective Time. If Kirkpatrick continues his employment with the Company for at least three months following the Effective Time, he shall be paid a bonus of one month's salary upon termination of his employment. Nothing in this paragraph will preclude the Company from offering to extend the term of this employment arrangement. Unless Parent notifies the Company in writing that it intends to account for this transaction using the pooling method, all unvested Company Options shall vest upon termination of Kirkpatrick's employment with the Company and shall be exercisable, in whole or in part, at any time within six (6) months of such termination. SECTION 7.05 Compliance with Post-Closing Obligations. Parent will timely comply with its post-closing obligations in this Agreement. SECTION 7.06 Registration of Parent Options. As soon as reasonably practicable following the Closing, Parent will cause the Parent Common Stock to be issued pursuant to Options and Larco Options to be registered with the SEC pursuant to an appropriate Registration Statement. ARTICLE VIII CERTAIN OTHER COVENANTS SECTION 8.01 Legal Conditions to Merger. Subject to the limitations contained in Section 10.01(b), Company, Parent and the Shareholders will each take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on them with respect to this Agreement (including furnishing all information (i) required under the HSR Act, the Securities Act and the Exchange Act and (ii) the Certificate of Merger and the Local Approvals and approvals of or filings with any other Governmental Entity and will promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them in connection with the Merger. Subject to the limitations contained in Section 10.01(b), the Company, Parent and the Shareholders will each take all reasonable actions necessary to obtain (and will cooperate with each other in obtaining) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private third party, required to be obtained or made by Parent or the Company in connection with the Merger or the taking of any action contemplated thereby or by this Agreement or the Related Agreements. Parent and the Company will make their HSR Act filing within one business day after the signing of this Agreement and both agree to seek early termination of the HSR Act waiting period as of the initial HSR Act filing. SECTION 8.02 Pooling of Interests. The Company, Parent and the Shareholders will each use all commercially reasonable efforts to cause the transactions contemplated by this Agreement to be accounted for as a pooling of interests in accordance with GAAP, and such accounting treatment to be accepted by Parent and Parent's independent certified public accountants and, if requested by Parent, the SEC. In that connection each Shareholder, in order to preserve pooling treatment, represents he has not sold or transferred any shares of Company Common Stock or Exchangeable Shares since January 1, 1999 and covenants that to the extent necessary to preserve pooling treatment he will not do so and will not sell or transfer any shares of Parent Common Stock until the financial results covering at least 30 days of the combined operations of the Company and Parent have been published. SECTION 8.03 Tax Treatment. Parent, Sub and the Company each agree to treat the Merger as a reorganization within Section 368(a) of the Code. SECTION 8.04 Escrow Agreement. Each of the Shareholders (including spouses of the Shareholders) and Parent shall enter into an escrow agreement ("Escrow Agreement") with the Escrow Agent (as hereinafter defined) within 10 days after the date hereof on the same terms as are contained in Schedule 8.04 hereto ("Escrow Agreement"). SECTION 8.05 Market Activity. Parent will not repurchase any of its capital stock prior to the Effective Time. Further, Parent shall give the Company written notice of any "road shows" or unusual promotional activities it intends to undertake prior to the Effective Time. The Company and the Shareholders shall not, and shall cause their affiliates not to, make any transactions in securities of Parent or otherwise take any actions that, may adversely affect the market price of Parent Common Stock prior to the Effective Time. SECTION 8.06 Certain Employee Benefit Matters. Parent agrees to the following with respect to any individual who is an employee of the Company or its Subsidiaries on the Closing Date (individually, a "Company Employee", and collectively, the "Company Employees"): (a) Service before the Closing Date which was performed for the Company, a Subsidiary or a predecessor of either by a Company Employee will be treated as service with Parent for purposes of determining eligibility to participate in Parent's employee benefit plans; provided, however, that nothing contained herein shall require Parent to provide for the participation by any Company Employees in any such plan; and (b) Employees affected by subparagraph (a) above who are offered eligibility by Parent in one or more employee benefit plans sponsored by Parent will be eligible to commence participation in such plan(s) as of the relevant entry date defined in each such plan as of which each such Company Employee satisfies all eligibility requirements for that plan. (c) Service before the Closing Date which was performed for the Company, a Subsidiary or a predecessor of either by a Company Employee will be treated as service with Parent for purposes of calculating severance pay under Parent's severance pay plan; provided, however, that such service shall not be credited under the Parent's severance pay plan to the extent that it is taken into account under any other severance arrangement. SECTION 8.07 Consent of Lenders. Parent agrees to use commercially reasonable efforts to obtain in a timely fashion the consent of the lenders referred to in Section 10.02(f). ARTICLE IX NON-COMPETITION AND NON-DISCLOSURE SECTION 9.01 Non-competition and Non-disclosure. Following the Closing Date and thereafter: (a) each of Larry Di Stefano and Andy Everett agrees not to, except to the extent limited in Schedule 9.01A, for a period of 5 years following the Closing Date, engage or become interested, directly or indirectly, as owner, employee, partner, through stock ownership (except ownership of less than five percent (5%) of the number of shares outstanding of any securities which are listed for trading on any securities exchange), investment of capital, lending of money or property, rendering of services, or otherwise, whether alone or in association with others, in the operation of any business or enterprise in any way competitive to the business heretofore conducted by the Company or any of its Subsidiaries anywhere in the world; (b) each of Larry Di Stefano and Andy Everett agrees not to solicit or accept orders for goods or services competitive to those heretofore provided or sold by the Company or any of its Subsidiaries from any then or previous customer of the Company or any of its Subsidiaries or otherwise induce or attempt to induce any such customer to reduce such customer's patronage of the Company or any of its Subsidiaries; (c) each of Larry Di Stefano and Andy Everett agrees not to solicit any employee of the Company or any of its Subsidiaries to leave the employ of the Company or any of its Subsidiaries; (d) each of the Shareholders agrees not to use the names "GL", "GL International", "Gaffey", "Larco", "Handling Systems and Conveyors", "HSC", or any variation thereof in any organization or enterprise or business; or (e) each of the Shareholders agrees not to divulge, communicate, or utilize any confidential information of or pertaining to the business of Company or any of its Subsidiaries. The obligations of Larry Di Stefano and Andy Everett under this Section 9.01(a) are expressly subject to the terms of the severance agreements in Schedule 9.01A. SECTION 9.02 Equitable Remedies. Each of the Shareholders specifically acknowledges and agrees that the remedy at law for any breach of any provision of this Article IX will be inadequate and that Parent, in addition to any other relief available to it, shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damage. SECTION 9.03 Severability. If any provision of this Article IX shall for any reason be held to be excessively broad as to any activity or subject, it shall be construed, by limiting and reducing it, to be enforceable to the extent compatible with applicable law. If any provision in this Article IX shall, notwithstanding the preceding sentence, be held illegal or unenforceable, such illegality or unenforceability shall not affect any other provision of this Article IX but this Agreement shall be construed as if such illegal or unenforceable provision had never been contained herein. SECTION 9.04 No Waiver. The rights of Parent and obligations of the Shareholders set forth in this Article IX are in addition to, and not in lieu of, all other rights and obligations provided by applicable law. ARTICLE X CONDITIONS SECTION 10.01 Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of the Company and Parent to effect the Merger shall be subject to the satisfaction prior to the Closing Date of the following conditions: (a) Certain Approvals. Other than the filing provided for by Section 1.01, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity the failure to obtain which would have a material adverse effect on Parent, shall have been filed, occurred or been obtained including, but not limited to, the HSR Act and the Local Approvals (and all applicable waiting periods, if any, including any extensions thereof, under any Applicable Laws, including, but not limited to, the HSR Act, shall have expired or terminated). (b) Absence of Certain Injunctions and Government Actions. There (i) shall not be in effect a temporary restraining order or a preliminary or permanent injunction or other order, decree or ruling by a Governmental Entity which (A) restrains or prohibits the Merger or the consummation of all or any of the other transactions contemplated hereby, or (B) prohibits or restricts the ownership or operation by Parent (or any of its subsidiaries) of any portion of its (or their) or the Company's or any Subsidiary's business or assets which is material to the business of such entities, or compels Parent (or any of its subsidiaries) to dispose of or hold separate any portion of its (or their) or the Company's or any Subsidiary's business or assets which, if required to be disposed of, would be likely to materially diminish the value of the Company or any Subsidiary to Parent, or would be likely to have a material adverse effect on Parent following the Closing, including the Surviving Corporation, or (C) imposes any limitations on the ability of Parent or any of its subsidiaries effectively to control in any material respect the business and operation of the Company or any Subsidiary, or (D) is otherwise reasonably likely to have a material adverse effect on Parent or any of its subsidiaries; or (ii) shall not be pending before any Governmental Entity, any action or proceeding, whether in law or in equity or otherwise, brought by any Governmental Entity which seeks as relief a result described in clause (i) above; or (iii) shall not have been promulgated or enacted by a Governmental Entity a statute, rule, regulation or executive order which has an effect described in clauses (i) (A), (B) or (C) above; provided, however, that (x) the parties shall use their best efforts to litigate against the entry of, or to obtain the lifting of, such temporary restraining order or preliminary or permanent injunction or other governmental action; (y) in no event shall a party be obligated to take or accept or refrain from taking any action if the taking, acceptance or refraining from taking such action is reasonably likely to materially diminish the value of the Company or any Subsidiary to Parent; and (z) the existence of a temporary restraining order as described in clause (i) or the pendency of an action or proceeding as described in clause (ii) shall operate only to delay the Closing until the 30th day following the lifting of such temporary restraining order or the conclusion of such action or proceeding, except that there shall be deemed to be a failure of this condition if such action or proceeding shall not have concluded, the parties agreeing, subject to the other provisions of this Agreement by May 30, 1999, to exercise their best efforts to close as soon as reasonably practicable following the lifting of any such temporary restraining order or the conclusion of any such action or proceeding. SECTION 10.02 Conditions to Obligations of Parent. The obligations of Parent to effect the Merger are subject to the satisfaction of the following conditions unless waived by Parent. (a) Representations and Warranties. The representations and warranties of the Company and the Shareholders set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except as otherwise provided in this Agreement, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to such effect and such certificate shall be deemed to be a representation and warranty of the Company and the Shareholders only as of the time immediately preceding the Closing. (b) Performance of Obligations of the Company and Shareholders. The Company and the Shareholders shall have performed all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to such effect. (c) Affiliate Letters. Parent shall have received the letters and agreements contemplated by Section 6.06 hereof. (d) Opinions. Parent shall have received the opinions from counsel to the Company, dated the Closing Date, in substantially the same form and substance as Schedule 10.02(d) hereto. (e) Dissenters. No Shareholders shall have demanded appraisal rights in respect of the Merger and not waived such appraisal rights. (f) Consent of Lenders. At or prior to the Closing Parent shall have received, pursuant to its loan agreements with Fleet National Bank as administrative agent for a syndicate of lenders, Fleet National Bank's consent to this Agreement and the transactions contemplated hereby. (g) Releases. The directors and executive officers of the Company and each Subsidiary shall each have furnished the Company with duly executed general releases of liabilities and obligations of the Company, other than the Company's obligations to provide compensation and employee benefits pursuant to arrangements disclosed in the Schedules hereto. Such releases shall be in the form attached hereto as Schedule 10.02(g). (h) Certain Authorizations. Parent shall have received all permits and other authorizations necessary under the Blue-Sky Laws to issue Parent Common Stock pursuant to this Agreement. (i) Other Closing Documents. Parent shall have received, on and as of the Closing Date, the duly executed Certificate of Merger, the Related Agreements and such other agreements and instruments as Parent shall reasonably request, in each case reasonably satisfactory in form and substance to Parent. (j) Shareholder Approval. This Agreement and the transactions contemplated hereby, shall have been approved and adapted by the affirmation vote of the holders of a majority of the outstanding shares of Company Common Shares. (k) Exchangeable Shares. All of the Exchangeable Shares shall have been exchanged for shares of Company Common Stock. (l) Severance Agreement. Parent shall have received the agreement of Andrew G. Everett and Larry DiStefano to the Severance Agreement attached hereto as Schedule 9.01A. (m) Discharge of Debt. If Parent elects to repay Debt at Closing pursuant to Section 6.10, then upon such payment Parent shall have received from the lender or lenders evidence of payment and discharge of the Debt and releases of all security interests on the assets of the Company and the Subsidiaries securing the Debt in form and substance reasonably satisfactory to Parent. (n) Estoppel Certificates. The Company shall have used all reasonable efforts to obtain from each lessor of the Leased Premises certificates reasonably satisfactory in form and substance to Parent regarding the continuing validity of the leases of the Leased Premises and the absence of any breach or basis for termination thereof. SECTION 10.03 Conditions of Obligations of the Company and the Shareholders. The obligation of the Company and the Shareholders to effect the Merger is subject to the satisfaction of the following conditions unless waived by the Company: (a) Representations and Warranties. The representa-tions and warranties of Parent set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as through made on and as of the Closing Date, except as otherwise provided by this Agreement, and the Company shall have received a certificate signed on behalf of Parent by the chief executive officer and the chief financial officer of Parent to such effect and such certificate shall be deemed to be a representation and warranty of Parent only as of the time immediately preceding the Closing. (b) Performance of Obligations of Parent. Parent shall have performed all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by the chief executive officer and the chief financial officer of Parent to such effect. (c) Opinion. The Company shall have received an opinion from Phillips, Lytle, Hitchcock, Blaine & Huber LLP, counsel to Parent, dated the Closing Date, in substantially the same form and substance as Schedule 10.03(c) hereto. (d) Registration Agreement. The Shareholders shall have received the Registration Agreement duly executed by Parent on substantially the same terms as set forth in Schedule 10.03(d) hereto. (e) Other Closing Documents. The Company shall have received, on and as of the Closing Date, the duly executed Certificate of Merger, the Related Agreements and such other agreements and instruments as the Company shall reasonably request, in each case reasonably satisfactory in form and substance to the Company. ARTICLE XI TERMINATION AND AMENDMENT SECTION 11.01 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the Shareholders of the Company: (a) by mutual consent of Parent and the Company; (b) by Parent (i) if there has been a breach of any representation, warranty, covenant or agreement on the part of the Company or the Shareholders set forth in this Agreement, or (ii) if any permanent injunction or other order of a court or other competent authority preventing the consummation of the Merger shall have become final and non-appealable; (c) by the Company (i) if there has been a breach of any representation, warranty, covenant or agreement on the part of Parent set forth in this Agreement, or (ii) if any permanent injunction or other order of a court or other competent authority preventing the consummation of the merger shall have become final or nonappealable; (d) by either Parent or the Company if the Merger shall not have been consummated on or before May 30, 1999; (e) by Parent if any required approval of the Shareholders of the Company shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of Shareholders or at any adjournment thereof however, such termination shall not relieve the Company or any of the Shareholders of any liability for violation of this Agreement or any of the Related Agreements. (f) by Parent if, since December 31, 1998, there has been a materially adverse change in the financial condition, operations, business or prospects of the Company; (g) by the Company if, since December 31, 1998, there has been a materially adverse change in the financial condition, operations, business or prospects of Parent. SECTION 11.02 Effect of Termination. In the event of a termination of this Agreement by either the Company or Parent as provided in Section 11.01, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent or the Company or their respective officers or directors or the Shareholders, EXCEPT (a) with respect to the penultimate sentence of Section 7.02 and Section 6.07 and (b) to the extent that such termination results from the breach by a party hereto of any of its representations and warranties or a breach of its covenants or agreements set forth in this Agreement or the Related Agreements. Notwithstanding the foregoing, but subject to clause (a) of this Section 11.02 any party who terminates this Agreement as a result of an unintentional breach by another party of a representation, warranty, covenant or agreement shall have no further remedy with respect thereto. Nothing in this Section 11.02 shall preclude the availability of equitable relief. SECTION 11.03 Amendment. This Agreement may be amended by Parent and the Company, by action duly taken or authorized, at any time before or after approval of the matters presented in connection with the Merger by the Shareholders or the Shareholders of Parent, but, after any such approval, no amendment shall be made which by law requires further approval by such shareholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of Parent and the Company. SECTION 11.04 Extension; Waiver. (a) Parent. At any time prior to the Effective Time, Parent, by action duly taken, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or in any document delivered pursuant hereto and (iii) waive compliance of the other parties hereto with any of the agreements or conditions contained herein. (b) The Company. At any time prior to the Effective Time, the Company, by action duly taken, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of Parent, (ii) waive any inaccuracies in the representations and warranties of Parent contained herein or in any document delivered pursuant hereto and (iii) waive compliance of Parent with respect to any of the agreements or conditions contained herein. (c) Form of Waiver or Extension. Any agreement on the part of Parent or the Company hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party and no party can assert a claim with respect to a matter so waived, it being understood that all Shareholders shall be deemed to have no rights with respect to any matter waived by the Company. ARTICLE XII SURVIVAL AND INDEMNIFICATION SECTION 12.01 Survival of Representations, Warranties, Covenants and Agreements. (a) Survival. The representations, warranties, covenants, agreements and undertakings of the Company, Larco, the Shareholders and Parent in this Agreement, the Related Agreements and in any instrument delivered pursuant to this Agreement and all rights of Parent, Sub and the Surviving Corporation and the Shareholders with respect thereto shall survive the Closing and the Merger and continue except to the extent otherwise provided in this Article XII. (b)(i) Indemnity Obligations of the Shareholders. Following the Closing, each of the Shareholders hereby agrees to indemnify and hold Parent and Sub harmless from and against, and to reimburse Parent and Sub for or in respect of, any and all losses, damages, deficiencies, liabilities, claims, economic injury, obligations, expenses (including, without limitation, all out-of-pocket expenses, reasonable investigation expenses and reasonable fees and disbursements of accountants and counsel), net of any tax benefit actually realized and any insurance proceeds and other third party reimbursement actually received (which Parent agrees in both cases to use its best efforts to pursue if reasonably available), suffered or incurred by Parent or Sub (collectively, "Parent Damages") arising out of, based upon, or by reason of (A) any breach of any representation or warranty of the Company or any of the Shareholders which is contained in this Agreement, or in any Schedule or certificate delivered pursuant thereto; (B) any breach or nonfulfillment of, or any failure to perform, any of the covenants, agreements or undertakings of the Company, Larco or any of the Shareholders which are contained in or made pursuant to this Agreement, which, as to the Company or Larco, occur prior to the Effective Time; or (C) any claim for indemnification or advances made by any person by reason of his service as an officer or director of the Company or any Subsidiary or any predecessor against the Company or any Subsidiary. In order to provide for Shareholders Indemnification Threshold and Parent's Indemnification Threshold (each as hereafter defined), the parties agree that for the purposes of this Article XII a representation shall be deemed false and a warranty, agreement, covenant or undertaking shall be deemed breached or not fulfilled if the same would have been false, breached or not fulfilled had the representation, warranty, agreement, covenant or undertaking not been qualified by the words "material", "materially", "in all material respects" or words of similar import. (b)(ii) Indemnity Obligations of Parent. Following the Closing, Parent hereby agrees to indemnify and hold the Shareholders harmless from and against, and to reimburse the Shareholders for or in respect of, any and all losses, damages, deficiencies, liabilities, claims, economic injury, obligations, expenses (including, without limitation, all out-of-pocket expenses, reasonable investigation expenses and reasonable fees and disbursements of accountants and counsel), net of any tax benefit actually realized and any insurance proceeds and other third party reimbursement actually received (which Shareholders agree in both cases to use their best efforts to pursue, if reasonably available) (collectively "Shareholder Damages") suffered or incurred by the Shareholders arising out of, based upon, or by reason of (A) any breach of any representation or warranty of Parent which is contained in this Agreement or (B) any breach or non-fulfillment of, or any failure to perform, any of the covenants, agreements or undertakings of Parent in this Agreement. Any amounts owed by Parent to the Shareholders under this Article XII shall be allocated among them in accordance with their proportionate share ("Proportionate Share") as set forth in Schedule 12.01(b)(ii) hereto. (c)(i) Certain Limitations on Shareholders' Indemnification Obligations. Subject to the remaining provisions of this Section 12.01(c)(i), notwithstanding anything to the contrary herein, any claim by Parent or Sub against the Shareholders under Article XII of this Agreement for breach of representation or warranty (other than for breach of the Unlimited Warranties, as hereafter defined), shall be payable by the Shareholders only in the event and to the extent that the accumulated amount of Parent Damages, for breaches of representations or warranties shall exceed $925,000 in the aggregate (the "Shareholders' Indemnification Threshold"); and that at such time as the aggregate amount of Parent Damages for breaches of representations or warranties shall exceed the Shareholders' Indemnification Threshold, the Shareholders shall thereafter be liable on a dollar-for-dollar basis for the full amount of all Parent Damages, for breach of representation or warranty, in excess of the Shareholders' Indemnification Threshold, it being the intention of the parties that the initial $925,000 of Parent Damages excluded by reason of the Shareholders' Indemnification Threshold would not be recoverable against the Shareholders but would be borne by Parent. In no event shall the Shareholders' aggregate liability for Parent Damages, for breach of representations and warranties (other than for breach of the Unlimited Warranties), exceed $3,000,000 ("Ceiling Amount"). The liability of any Shareholder for a breach of a representation or warranty contained in Article V (the "Unlimited Warranties") shall not be subject to the Shareholders' Indemnification Threshold, shall not count against the Shareholders' Indemnification Threshold and shall not be limited by the Ceiling Amount. No Shareholder shall have any liability for a breach of any representation or warranty or covenant contained in Article V by any other Shareholder, it being the intention of the parties that the representations and warranties and covenants in Article V are being made severally and not jointly and severally. Subject to the immediately preceding paragraph no Shareholder shall be liable for more than such Shareholder's Proportionate Share of Parent Damages. (c)(ii) Certain Limitations on Parent's Indemnification Obligations. Subject to the remaining provisions of this Section 12.01(c)(ii), notwithstanding anything to the contrary herein, any claim by the Shareholders against Parent under Article XII of this Agreement shall be payable by Parent only in the event and to the extent that the accumulated amount of Shareholder Damages for breach of representation or warranty shall exceed in the aggregate the amount of $925,000 (the "Parent's Indemnification Threshold"); and that at such time as the aggregate amount of Shareholder Damages for breach of representation or warranty shall exceed the Parent's Indemnification Threshold, Parent shall thereafter be liable on a dollar-for-dollar basis for the full amount of all Shareholder Damages, for breach of representation or warranty, in excess of the Parent's Indemnification Threshold, it being the intention of the parties that the initial $925,000 of Shareholder Damages excluded by reason of the Parent's Indemnification Threshold would not be recoverable against Parent but would be borne by the Shareholders. In no event shall Parent's aggregate liability for Shareholder Damages, for breach of representations and warranties, exceed $3,000,000. (d) Duration. Except in respect of any claims for breach of representation or warranty as to which a notice of claim for Shareholders Damages or Parent Damages shall have been given prior to the First Anniversary of the Effective Time, all representations and warranties contained in Articles III and IV and all rights with respect thereto shall expire on the First Anniversary of the Effective Time. (e) Indemnification Procedures. In the event that subsequent to the Effective Time any person or entity entitled to indemnification under this Agreement (an "Indemnified Party") receives notice of the assertion of any claim, or of the commencement of any action or proceeding by any person who is not a party to this Agreement or an Affiliate of a party (a "Third Party Claim") against such Indemnified Party, against which a party to this Agreement is required to provide indemnification under this Agreement (an "Indemnitor"), the Indemnified Party shall give written notice thereof together with a statement of any available information regarding such claim to the Indemnitor within thirty (30) days after receiving written notice of such claim (or within such shorter time as may be necessary to give the Indemnitor a reasonable opportunity to respond to and defend such claim). The Indemnitor shall have the right, upon written notice to the Indemnified Party (the "Defense Notice") within thirty (30) days after receipt from the Indemnitor of notice of such claim, to conduct at its expense the defense against such claim in its own name, or if necessary in the name of the Indemnified Party; provided, however, that the Indemnified Party shall have the right to approve the defense counsel selected by the Indemnitor, which approval shall not be unreasonably withheld, and in the event the Indemnitor and the Indemnified Party cannot agree upon such counsel within ten days after the Defense Notice is provided, then the Indemnitor shall propose an alternate defense counsel, who shall be subject again to the Indemnified Party's reasonable approval. The Indemnified Party shall take all action reasonably necessary to preserve all rights and defenses of the Indemnitor until the earlier of: (i) the Indemnitor's assumption of the defense of such claim, or (ii) thirty (30) days after the Indemnitor's receipt of the notice of the Third Party Claim. In the event that the Indemnitor shall fail to give the Defense Notice, it shall be deemed to have elected not to conduct the defense of the subject claim, and in such event the Indemnified Party shall have the right to conduct such defense in good faith. If an offer is made to settle such subject claim, and the Indemnified Party desires to accept and agree to such offer, the Indemnified Party will give written notice to the Indemnitor to that effect. The Indemnitor must either consent to such firm offer within fifteen (15) calendar days after its receipt of such notice, or the Indemnitor must assume the contest or defense of such claim;and in the event that the Indemnitor does not consent to such firm offer and assumes the contest or defense of such claim, then the maximum liability of the Indemnified Party as to such claim will not exceed any amount that the Indemnified Party would have had to pay under such settlement offer and the balance of any such claim shall be borne by the Indemnitor regard-less of any limitations imposed under subsection (c)(i) or (c)(ii), as the case may be, and any Parent Damages or Shareholder Damages, as the case may be, in excess of such settlement offer shall not count towards the limitations set forth in subsection (c)(i) or (c)(ii), as the case may be. The Indemnitor will not enter into any settlement of such claim, if as a result of such settlement or cessation, (i) injunctive or other equitable relief would be imposed against the Indemnified Party, (ii) such settlement or cessation would lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder, (iii) such settlement includes a written admission of guilt, or (iv) such settlement results in a material interference with the business, operations, assets or condition (financial or otherwise) of the Indemnified Party, unless any of the consequences described in (i), (ii), (iii) or (iv) above was part of, or was included in, the original settlement offer. In the event that the Indemnitor does elect to conduct the defense of the subject claim, the Indemnified Party will cooperate with and make available to the Indemnitor such assistance and materials as may be reasonably requested by it, all at the expense of the Indemnitor, and the Indemnified Party shall have the right at its expense to participate in the defense assisted by counsel of its own choosing and at its own expense, provided that the Indemnified Party shall have the right to compromise and settle the claim only with the prior written consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. Without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld or delayed, the Indemnitor will not enter into any settlement of any Third Party Claim or cease to defend against such claim, if pursuant to or as a result of such settlement or cessation, (i) injunctive or other equitable relief would be imposed against the Indemnified Party, (ii) such settlement or cessation would lead to liability or create any financial or other obligation on the part of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder, (iii) such settlement includes a written admission of guilt, or (iv) such settlement results in a material interference with the business, operations, assets or condition (financial or otherwise) of the Indemnified Party. The Indemnitor shall not be entitled to control, and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of any claim to the extent that claim seeks an order, injunction or other equitable relief against the Indemnified Party which, if successful, could materially interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party (and the reasonable cost of such defense shall constitute an amount for which the Indemnified Party is entitled to indemnification hereunder). If an offer is made to settle a Third Party Claim, which offer the Indemnitor is not permitted to settle under this Section without the consent of the Indemnified Party, and the Indemnitor desires to accept and agree to such offer, the Indemnitor will give written notice to the Indemnified Party to that effect. If the Indemnified Party fails to consent to such firm offer within 15 calendar days after its receipt of such notice, the Indemnified Party shall continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnitor as to such Third Party Claim will not exceed the amount of such settlement offer and without the prior written consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed, the Indemnified Party will not enter into any settlement of any Third Party Claim or cease to defend against such claim, if pursuant to or as a result of such settlement or cessation, (i) injunctive or other equitable relief would be imposed against the Indemnitor, (ii) such settlement includes a written admission of guilt, or (iii) such settlement results in a material interference with the business, operations, assets or condition (financial or otherwise) of the Indemnitor, unless such consequence described in (i), (ii) or (iii) above was part of, or was included in, the original settlement offer. Any judgment entered or settlement agreed upon in the manner provided herein shall be binding upon the Indemnitor and Indemnified Party, if necessary, and each party will comply with such settlement. The Indemnitor shall be subrogated to the Indemnified Party's rights of recovery to the extent of any Parent Damages or Shareholder Damages, as the case may be, reimbursed by the Indemnitor. The Indemnified Party shall execute and deliver such instruments and papers as are necessary to assign without recourse such rights and assist in the exercise thereof, including access to books and records of such party. (f) Remedies. With the exception of contribution and cost recovery actions authorized under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA 9601, ET. SEQ., as amended, and similar state laws, each party hereto shall not be liable or responsible in any manner whatsoever to the other party, whether for indemnification or otherwise, with respect to any matter arising out of the representations, warranties or covenants of this Agreement or any Schedule hereto or any opinion or certificate delivered in connection herewith except for (i) equitable relief, (ii) pursuant to remedies expressly provided for elsewhere in this Agreement and (iii) indemnification and other rights provided in this Article XII, all of which provide the exclusive remedy of the parties hereto after the Effective Time. Nothing in this Agreement shall operate to limit any remedies of the parties with respect to any breach or violation of any of the Related Agreements. (g) Appointment of Representative. Each of the Shareholders hereby appoints Marshall B. Payne as such Shareholder's exclusive agent to act on such Shareholder's behalf with respect to any and all claims arising under this Agreement. In such representative capacity, Marshall B. Payne or any person who shall succeed him in such representative capacity is sometimes referred to in this Agreement as the "Representative." The Representative shall take, and the Shareholders agree that the Representative shall take, any and all actions which such Representative believes are necessary or appropriate under this Agreement for and on behalf of the Shareholders, as fully as if the Shareholders were acting on their own behalf, including, without limitation, defending, consenting to, compromising or settling all claims for Parent Damages or Shareholder Damages, conducting negotiations with Parent and its representatives regarding such claims, taking any and all actions specified in or contemplated by Article XII of this Agreement and engaging counsel, accountants or other representatives in connection with the foregoing matters provided however, on any matter for which a Shareholder is solely liable, such as a breach of Article V, such Shareholder may elect to represent himself or herself alone, outside this Section 12.01(g). Parent shall have the right to rely upon all actions taken or omitted to be taken by the Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon each of the Shareholders. In the event of a dispute among the Shareholders with respect to any action to be taken by the Representative on the Shareholders' behalf, the Representative shall be fully entitled to act as directed by the Shareholders who received a majority of the Parent Common Stock included in the Merger Consideration and such action of the Representative shall be binding on all Shareholders. (i) Each Shareholder hereby authorizes and empowers the Representative to execute any other notice, waiver, or other direction required hereunder on behalf of such Shareholder pursuant to this Agreement. (ii) The Shareholders jointly and severally agree to indemnify and save the Representative harmless from all loss, cost, damages, fees and expenses, including, but not limited to attorney's fees and court costs suffered or incurred by the Representative in connection with this Agreement other than as a result of the Representative's own gross negligence or wilful misconduct. (iii) The Shareholders agree that the Representative shall be protected in acting upon any written notice, request, waiver, consent, certificate, receipt, opinion of counsel, authorization, power of attorney or other paper or document which the Representative in good faith believes to be (a) genuine and what it purports to be and (b) in compliance with the terms of this Agreement. (iv) The Shareholders agree that the Representative shall not be liable to the Shareholders for anything which the Representative may do or refrain from doing in connection herewith, except the Representative's own gross negligence or willful misconduct. (v) The Representative may consult with legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof or the Representative's duties hereunder, and the Representative shall incur no liability and shall be fully protected in acting in accordance with this Agreement and the reasonable opinion and instructions of such counsel. (vi) The Representative's duties are not intended to create any fiduciary or other duty on the part of the Representative with respect to the Shareholders. The Representatives has no implied duties to the Shareholders. (vii) The Shareholders shall be responsible for all costs or expenses of the Representative. (h) Arbitration. Notwithstanding anything herein to the contrary, in the event that there shall be a dispute among the parties after the Closing concerning the obligations of the parties under this Article XII, the parties agree that such dispute shall be submitted to binding arbitration in New York City, New York before a single arbitrator jointly agreed to by the parties, in accordance with the rules of the American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding between the parties thereto, and shall be enforceable by any court having jurisdiction over the party against whom enforcement is sought. (i) Escrow. Parent and the Shareholders acknowledge that, out of the shares of Parent Common Stock to be issued to the Shareholders in the Merger, the Exchange Agent on behalf of the Shareholders shall and is hereby authorized by and on their behalf as their agent to deposit into escrow, with the Escrow Agent named in the Escrow Agreement, a number of shares equal to 5% of the Preliminary Aggregate Merger Consideration (such deposit, being referred to as the "Escrow Deposit"), with each Shareholder being deemed to have received such shares of Parent Common Stock and having thereupon transferred into such Escrow Deposit that number of shares of Parent Common Stock (rounded to the nearest whole number of shares of Parent Common Stock to eliminate any fractional shares) equal to such Shareholder's Proportionate Share of the Escrow Deposit. The Shareholders authorize the Exchange Agent to register such Shares of Parent Common Stock in the name of the Escrow Agent. Other than with respect to a Shareholder's Unlimited Warranties, Parent and the Shareholders agree that Parent Damages shall be satisfied first out of the shares of Parent Common Stock held in the Escrow Deposit, as further provided under the terms of the Escrow Agreement. For purposes hereof, each share of Parent Common Stock returned to Parent in settlement of any Parent Damages under the Escrow Agreement shall be valued at the Closing Market Price. At such time as the aggregate amount of Parent Damages which have been definitively resolved in favor of Parent shall exceed the value of Parent Common Stock then remaining in the Escrow Deposit, each of the Shareholders shall thereafter be jointly and severally liable to Parent for the amount of such excess (for purposes hereof, an "Excess Claim"), subject to the limitations herein. Any liability of the Shareholders for Parent Damages for an Excess Claim may be satisfied by the Shareholder either through (A) the delivery of shares of Parent Common Stock to Parent, such shares to be valued as set forth above or (B) a cash payment to Parent equal to the amount of the Excess Claim. (i) Environmental Reports. Notwithstanding any- thing to the contrary in this Agreement, neither Parent, Sub, nor anyone claiming through Parent or Sub shall be entitled to make any claim against the Shareholders with respect to the environmental matters disclosed in the Environmental Reports and no amounts incurred in connection with such environmental matters will count against the Shareholders' Indemnification Threshold. ARTICLE XIII MISCELLANEOUS SECTION 13.01 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Sub, to Columbus McKinnon Corporation 140 James Audubon Parkway Amherst, New York 14228 Attention: Robert L. Montgomery, Jr. with a copy to Frederick G. Attea, Esq. Phillips, Lytle, Hitchcock, Blaine & Huber LLP 3400 Marine Midland Center Buffalo, New York 14203 and if to the Company, to G.L. International Inc. 2350 Airport Freeway, Suite 380 Bedford, Texas 76022 Attention: Andy Everett with a copy to Richard L. Waggoner, Esq. Gardere & Wynne, L.L.P. 1601 Elm Street Suite 3000 Dallas, Texas 75201 If to the Representative, to Marshall B. Payne 500 Crescent Court Suite 250 Dallas, Texas 75201 with a copy to Richard L. Waggoner, Esq. Gardere & Wynne, L.L.P. 1601 Elm Street Suite 3000 Dallas, Texas 75201 SECTION 13.02 Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation". For purposes of this Agreement (i) the Company shall be deemed to "know", "have knowledge of" or "best knowledge of" any matter known by an executive officer or Shareholder of the Company; and (ii) Parent shall be deemed to "know", "have knowledge of" or "best knowledge of" any matter known by an executive officer or Shareholder of Parent. SECTION 13.03 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 13.04 Entire Agreement; No Third Party Beneficiaries; Schedules. This Agreement (including the documents and the instruments referred to herein or reasonably contemplated hereby) and the Confidentiality Agreement dated April 27, 1998 entered into by Parent and the Company (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) are not intended to, and shall not, confer upon any person other than the parties hereto any rights or remedies hereunder. Inclusion of or reference to matters in a schedule does not constitute an admission of what is material or the materiality of such matter. SECTION 13.05 Action by the Shareholders. The Shareholders hereby irrevocably authorize and appoint the Representative as their agent and attorney who may on behalf of the Shareholders make any amendments or modifications of this Agreement and all other agreements and documents contemplated hereby and to waive inaccuracies of representations and warranties or performance or compliance with any of the provisions herein contained that such agent believes in such agent's sole discretion, to be in the best interest of the Shareholders. SECTION 13.06 Governing Law. This Agreement shall be governed and construed in accordance with the internal laws of the State of New York without regard to any applicable conflicts of law. SECTION 13.07 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Parent may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to any direct or indirect wholly-owned subsidiary of Parent or to any person to whom it transfers by operation of law; agreement or otherwise a substantial portion of the business or assets of the Company. Any purported assignment or delegation in violation of this Section 13.07 shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 13.08 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner, to the end that the transactions contemplated by this Agreement are consummated to the extent possible. SECTION 13.09 Publicity. Parent and the Company shall promptly consult with each other as to the form and substance thereof prior to the release or issuance of any press release or other public disclosure related to this Agreement, the Merger or any other transactions contemplated hereby. The Shareholders, Parent and the Company agree not to release or issue any such press release or other public disclosure without the approval of the Company and Parent unless otherwise required by applicable law. SECTION 13.10 Enforcement of the Agreement. The parties hereto agree that irreparable damage would result in the event that any provision of this Agreement is not performed in accordance with specific terms or is otherwise breached. It is accordingly agreed that the parties hereto will be entitled to equitable relief including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof. Section 13.11 Consent To Jurisdiction. Except as otherwise provided in Section 12.01(h), any action, suit or proceeding arising out of or relating to this Agreement or any of the Related Agreements may be brought in any Supreme Court of the State of New York or in any United States District Court in New York, in each case having situs in New York City and each of the Shareholders, the Company and Parent hereby irrevocably submits to the exclusive jurisdiction of any of such courts for the purpose of any such action, suit or proceeding (or if any such court refuses to exercise jurisdiction, such suit may be commenced in any other court that will assert jurisdiction. Each of the Shareholders hereby irrevocably appoints the firm of Gardere & Wynne, L.L.P., with an office at 1601 Elm Street, Suite 3000, Dallas, Texas 75201, as such Shareholder's agent to receive on behalf of such Shareholder and such Shareholder's property, service of copies of the summons and complaint and any other process which may be served in any such action, suit or proceeding or any arbitration proceeding as provided in Section 12.01(h) hereto. Such service may be made by mailing or delivering a copy of such process to such firm at such firm's above address, and each Shareholder hereby irrevocably authorizes and directs each such firm to accept such service on such Shareholder's behalf. If and to the extent that service of any summons, complaint or other process cannot for any reason be effected upon such firm as herein above provided, each Shareholder further irrevocably consents to the service of any and all process in any such actions, suit, proceeding or arbitration by the mailing of copies of such process to such Shareholder in the same manner specified in Section 13.01 of this Agreement for the giving of notices. Nothing in this Section shall affect the right of Parent, Sub or Surviving Corporation to serve legal process in any other manner permitted by law or affect the right of Parent, Sub or Surviving Corporation to bring any action, suit or proceeding against any such Shareholder or such Shareholder's properties in the courts of any other jurisdiction. [rest of page intentionally left blank] IN WITNESS WHEREOF, each of the parties hereto have duly executed this Agreement as of the date first above written. COLUMBUS McKINNON CORPORATION By /s/ Robert L. Montgomery ------------------------ Robert L. Montgomery, Executive Vice President GL DELAWARE, INC. By /s/ Robert L. Montgomery ------------------------ Robert L. Montgomery, Treasurer G. L. INTERNATIONAL INC. By /s/ Larry Di Stefano ------------------------ Larry Di Stefano, President LARCO INDUSTRIAL SERVICES, LTD. By /s/ Larry Di Stefano ---------------------------- Larry Di Stefano, President SHAREHOLDERS: GL PARTNERS, L.P. By Cardinal Holding Corporation Sole General Partner By: /s/ Marshall B. Payne ---------------------------- Marshall B. Payne, President /s/ Andy Everett ---------------------------- Andy Everett /s/ Larry DiStefano ---------------------------- Larry DiStefano /s/ Dominic Stefano ---------------------------- Dominic DiStefano /s/ Steven DiStefano ---------------------------- Steven DiStefano /s/ Cesare Cagnin ---------------------------- Cesare Cagnin EX-10.38 17 CM - GL INTERNATIONAL 1997 STOCK OPTION PLAN THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 COLUMBUS MCKINNON CORPORATION G.L. INTERNATIONAL INC. 1997 STOCK OPTION PLAN INTRODUCTION This prospectus provides important information regarding the G.L. International inc. 1997 Stock Option Plan ("Plan"). However, the prospectus is qualified in its entirety by reference to the Plan, copies of which may be obtained upon request and without charge from Lois H. Demler, Secretary, Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197, (716) 689-5409, and to your Stock Option Agreement. If you have any questions regarding this prospectus or the Plan, please contact Robert L. Montgomery, Jr., Executive Vice President and Chief Financial Officer, Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197, (716) 689-5405. In this prospectus "Company", "Columbus McKinnon", "we", "us", and "our" refer to Columbus McKinnon Corporation. "GL" refers to G.L. International inc. WHERE YOU CAN FIND MORE INFORMATION Columbus McKinnon files annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission. The SEC allows us to "incorporate" into this prospectus information we file with the SEC in other documents. This means that we can disclose important information to you by referring to other documents that contain that information. The information may include documents filed after the date of this prospectus. We incorporate by reference the documents listed below and all future documents filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we terminate the offering of shares covered by this prospectus. SEC Filing (FILE NO. 0-27618) PERIOD/FILING DATE - ------------------ ------------------ Annual Report on Form 10-K Year ended March 31, 1998 Quarterly Reports on Form 10-Q Quarters ended June 28, 1998; September 27, 1998 and December 27,1998 Current Reports on Form 8-K April 8, 1998; October 29, 1998; May 18, 1999 and May 26, 1999 Description of Capital Stock contained in the Company's (1) Registration Statement on Form 8-A January 22, 1996 (2) Form 8-A/A Amendment No. 1 February 21, 1996 Description of Preferred Stock Purchase Rights contained in Registration Statement on Form 8-A October 27, 1997 You may request a copy of these documents and a copy of our most recent annual report to shareholders, and any other reports, proxy statement and other communications distributed to shareholders. These copies will be provided at no cost to you. Please make your request to Lois H. Demler, Secretary of the Company at the address and telephone number shown above. RECENT DEVELOPMENTS A group of New York City based stock traders and speculators owning 8.44% of Columbus McKinnon common stock has proposed a slate of five directors for election at the Company's Annual Meeting of Shareholders in August 1999. The group's platform is to seek a sale of the Company. The value of Columbus McKinnon's common stock could be affected by the outcome of this proxy contest. GENERAL INFORMATION REGARDING THE PLAN The Plan was adopted by the Board of Directors of G.L. International Inc. ("GL") on March 25, 1997, and subsequently approved by stockholders, for the purposes set forth below. However, the Board of Directors terminated the Plan effective March 1, 1999, pursuant to an arrangement whereby GL became a wholly owned subsidiary of the Company. Although the Plan has been terminated and no new options will be granted under the Plan, all outstanding options granted pursuant to the Plan remain outstanding and will be exercisable in accordance with the terms of the Plan and any applicable Stock Option Agreement. In this regard, all outstanding options have been converted to stock options for shares of Columbus McKinnon Corporation common stock, par value $0.01 per share. A total of 92,599 shares of the Company's common stock are covered by such outstanding options. The Plan is not a qualified plan under Section 401(a) of the Internal Revenue Code nor is it subject to any provisions of the Employee Retirement Income Security Act of 1974. PURPOSE OF THE PLAN - ------------------- The Plan was established to: o create stockholder value by providing incentives to selected key employees and directors who contribute materially to the success of GL and its subsidiaries, o provide a means of rewarding outstanding performance by those key employees, and o enhance the interests of those key employees and directors in the continued success and progress of GL by providing them a proprietary interest in GL The Plan was designed to enhance GL's ability to maintain a competitive position in attracting and retaining qualified key personnel and directors. ADMINISTRATION OF THE PLAN - -------------------------- The Plan provides for administration of the Plan by the Board of Directors of GL or, at the option of the Board, a committee which is comprised of two or more non-employee directors appointed by the Board. The Plan currently is administered by the Board of Directors which, in its capacity as administrator of the Plan, is referred to in this prospectus as the "Committee." As directors of GL, members of the Committee serve until their successors are duly elected and qualified, and are subject to removal in accordance with applicable law. Among the powers granted to the Committee are the authority to: o grant options and determine the terms and conditions of those options, including the exercise price, vesting and exercise period of the options o determine the form and provisions of the Stock Option Agreements o interpret the Plan and the Stock Option Agreements and waive any provisions of any Stock Option Agreement, provided such waiver is not inconsistent with the terms of the Plan o prescribe rules and regulations relating to the Plan o make all determinations necessary or advisable for administration of the Plan The Committee's address and telephone number is: c/o Lois H. Demler, Secretary, Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197, (716) 689-5409. GRANTS TO ELIGIBLE PARTICIPANTS IN THE PLAN - -------------------------------------------- Pursuant to the provisions of the Plan, the Committee granted options to employees of GL who were determined by it to be key employees on the date of grant. TYPES OF OPTIONS THAT HAVE BEEN GRANTED - --------------------------------------- Grants of Incentive Stock Options and Nonstatutory Stock Options have been granted to Key Employees under the Plan. It is intended that the Incentive Stock Options qualify for special tax treatment under the Internal Revenue Code. In order to qualify for special tax treatment, the Plan provides, among other things, that the aggregate fair market value (determined at the time of grant) of the shares of common stock with respect to which Incentive Stock Options are exercisable for the first time by you in any calendar year under the Plan and all plans of GL or its parent or subsidiaries shall not exceed $100,000. Neither GL, its directors, officers or employees, among others, shall be liable if the Incentive Stock Options do not in fact qualify for special tax treatment. Please refer to the tax discussion of stock options beginning on page 7. TERMS AND CONDITIONS OF OPTIONS - ------------------------------- Each stock option granted under the Plan is evidenced by a written Stock Option Grant and accompanying Stock Option Agreement, as amended by an Amendment to Stock Option Agreement effective as of March 1, 1999, (together the Stock Option Grant, accompanying Stock Option Agreement and Amendment to Stock Option Agreement are referred to as the Stock Option Agreement) which contain such terms and conditions as the Committee determined, consistent with the provisions of the Plan, including those shown below. You should refer to your Stock Option Agreement for the terms and conditions applicable to your stock options. (a) EXERCISE PRICE. The Committee determined the exercise prices of options it granted, subject to the Plan requirement that the exercise price for any Incentive Stock Option shall not be less than the fair market value of the GL common stock at the date of grant (or 110% of the fair market value in the case of an Incentive Stock Option granted to a person who owned more than 10% of the total combined voting power of all classes of stock of GL or any of its subsidiaries). Fair market value is the value at the date of grant of GL as an on-going concern, as determined in good faith by the Committee. The exercise price of your options is set forth in your Stock Option Agreement. (b) VESTING. The Committee determined the vesting schedule for all options granted. The vesting schedule for your options is set forth in your Stock Option Agreement. (c) TERM OF STOCK OPTIONS. The Plan authorizes the Committee to determine the period during which options are exercisable, except that the Plan provides that no option shall be exercisable more than five years after the date it was granted. The period during which your options are exercisable is set forth in your Stock Option Agreement. (d) OPTIONS NON-TRANSFERRABLE. All options granted are non-transferrable other than by will or the laws of descent and distribution. During an optionee's lifetime the options may be exercised only by him, or if he is disabled, his legal representative. TERMINATION OF EMPLOYMENT AND DEATH - ----------------------------------- Your Stock Option Agreement describes the conditions that apply to the exercise of your options in the event you cease to be employed by GL or a subsidiary of Columbus McKinnon. In the event of your death while employed by GL or a subsidiary of Columbus McKinnon, your estate or the person or persons to whom your rights under the option are passed under your will or the laws of descent and distribution may exercise your option to the same extent that you would be entitled to exercise the option at the date of your death. The option may only be exercised within the 90-day period following the date of your death or such other period as may be specified in your Stock Option Agreement, but in no case later than the expiration date of the option. DILUTION OR OTHER ADJUSTMENTS - ----------------------------- The number of shares of common stock issuable under any option granted to you, as well as the exercise price of any option, is subject to adjustment to reflect any o stock split o stock dividend o recapitalization o merger o consolidation o reorganization o combination or exchange of shares o or other similar events RESTRICTIONS ON ISSUANCE OF SHARES - ---------------------------------- Columbus McKinnon is not obligated to sell or issue any shares of its common stock upon the exercise of any option granted to you unless: o the shares with respect to which your option is being exercised have been registered under applicable federal securities laws or the issuance of the shares is exempt from such registration o the prior approval of the sale or issuance has been obtained from any applicable state regulatory body having jurisdiction or the sale or issuance is exempt from such prior approval requirement o if the common stock of Columbus McKinnon has been listed on any exchange, the shares with respect to which your option is being exercised have been duly listed on that exchange Your Stock Option Agreement may include other restrictions on the ownership and transfer of shares of common stock. RESTRICTIONS ON RESALE OF SHARES ACQUIRED UPON EXERCISE OF OPTIONS - ------------------------------------------------------------------ Subject to any restrictions imposed by the Plan or any Stock Option Agreement, shares of common stock acquired by a non-affiliate of Columbus McKinnon upon exercise of an option may be freely resold in ordinary brokerage transactions pursuant to Sections 4(1) and 4(4) of the Securities Act of 1933. However, securities acquired by an affiliate of Columbus McKinnon must be registered for resale by such affiliate unless the resale is made in compliance with the provisions of Rule 144 under the Securities Act of 1933 or is entitled to another exemption from the registration requirements of the Securities Act of 1933. For these purposes the term affiliate means a person who directly or indirectly controls, is controlled by or is under common control with Columbus McKinnon. In addition, if you are or become a director or officer of Columbus McKinnon, or a beneficial owner of 10 percent or more of its common stock, you should consider the effect of Section 16 of the Securities Exchange Act of 1934, and the rules thereunder, upon your ability to effect transactions in the common stock of Columbus McKinnon. MODIFICATIONS OF THE PLAN - ------------------------- The Plan may be modified or amended at any time, both prospectively and retroactively, and in such a manner as to affect outstanding Incentive Stock Options, if such amendment or modification is necessary for the Plan and the Incentive Stock Options to qualify under the Internal Revenue Code. Also, the Plan may be abandoned, suspended or terminated at any time except with respect to any options then outstanding. As noted above, the Plan was terminated effective March 1, 1999 and no new options will be granted under the Plan. All outstanding options remain outstanding and will be exercisable in accordance with the terms of the Plan and any applicable Stock Option Agreement. OTHER PROVISIONS - ---------------- Nothing in the Plan or any Stock Option Agreement confers upon you the right to continue in the employment of GL or any other subsidiary of Columbus McKinnon or restricts the rights of GL or any such other subsidiary to terminate your employment. You will not have any rights as a stockholder of Columbus McKinnon with respect to any share covered by options granted to you unless and until you become a holder of record of such share. FEDERAL INCOME TAX TREATMENT The following is a brief summary of the federal income tax aspects of the Plan, based on existing law and regulations which are subject to change. The application of state and local income taxes and other federal taxes, including, without limitation, gift and estate taxes, is not discussed. An optionee who is granted an Incentive Stock Option under the Plan is not required to recognize taxable income at the time of the grant or at the time of exercise. Under certain circumstances, however, an optionee may be subject to the alternative minimum tax with respect to the exercise of his Incentive Stock Options. GL is not entitled to a deduction at the time of grant or at the time of exercise. If an optionee does not dispose of the shares acquired pursuant to the exercise of an Incentive Stock Option before the later of two years from the date of grant of the Incentive Stock Option and one year from the transfer of the shares to him, any gain or loss realized on a subsequent disposition of the shares will be treated as capital gain or loss. Under such circumstances, GL will not be entitled to any deduction for federal income tax purposes with respect to the Incentive Stock Option. The shares must be held for more than one year for the gain or loss realized on the disposition to qualify for long-term capital gain or loss treatment. If an optionee disposes of the shares received upon the exercise of an Incentive Stock Option either (1) within one year from the transfer of the shares to him or (2) within two years after the Incentive Stock Option was granted, the optionee will generally recognize ordinary compensation income equal to the lesser of (a) the difference between the fair market value of the shares on the date the Incentive Stock Option was exercised and the exercise price of the shares, and (b) the amount of gain realized on the sale. Any gain realized in excess of the compensation income recognized, and any loss realized, will be long-term or short-term capital gain or loss, depending upon the length of the period the optionee held the shares. If an optionee is required to recognize ordinary compensation income as a result of the disposition of shares acquired on the exercise of an Incentive Stock Option, GL , subject to any applicable rules otherwise limiting an employer's deduction of compensation, will be entitled to a deduction for an equivalent amount. An optionee who is granted a Nonstatutory Stock Option is not required to recognize taxable income at the time of grant, but, at the time of exercise, must include in his gross income, for federal tax purposes, an amount equal to the excess of the fair market value of the shares on the date of exercise over the exercise price paid therefor. Subject to any applicable rules otherwise limiting an employer's deduction of compensation, GL is entitled to a corresponding deduction for the same amount. The foregoing summary does not purport to be complete, and you are advised to consult with your personal tax advisor as to the specific consequences to you of the issuance of the options, the exercise thereof, and the disposition of shares acquired upon such exercise, as well as the consequences under applicable state law. EX-10.39 18 CMC - LARCO 1997 STOCK OPTION PLAN THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 COLUMBUS MCKINNON CORPORATION LARCO INDUSTRIAL SERVICES LTD. 1997 STOCK OPTION PLAN INTRODUCTION This prospectus provides important information regarding the Larco Industrial Services Ltd. 1997 Stock Option Plan ("Plan"). However, the prospectus is qualified in its entirety by reference to the Plan, copies of which may be obtained upon request and without charge from Lois H. Demler, Secretary, Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197, (716) 689-5409, and to your Stock Option Agreement. If you have any questions regarding this prospectus or the Plan, please contact Robert L. Montgomery, Jr., Executive Vice President and Chief Financial Officer, Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197, (716) 689-5405. In this prospectus "Company", "Columbus McKinnon", "we", "us", and "our" refer to Columbus McKinnon Corporation. "Larco" refers to Larco Industrial Services Ltd. WHERE YOU CAN FIND MORE INFORMATION Columbus McKinnon files annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission. The SEC allows us to "incorporate" into this prospectus information we file with the SEC in other documents. This means that we can disclose important information to you by referring to other documents that contain that information. The information may include documents filed after the date of this prospectus. We incorporate by reference the documents listed below and all future documents filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we terminate the offering of shares covered by this prospectus. SEC Filing (FILE NO. 0-27618) PERIOD/FILING DATE - ------------------ ------------------ Annual Report on Form 10-K Year ended March 31, 1998 Quarterly Reports on Form 10-Q Quarters ended June 28, 1998; September 27, 1998 and December 27, 1998 Current Reports on Form 8-K April 8, 1998; October 29, 1998; May 18, 1999 and May 26, 1999 Description of Capital Stock contained in the Company's (1) Registration Statement on Form 8-A January 22, 1996 (2) Form 8-A/A Amendment No. 1 February 21, 1996 Description of Preferred Stock purchase rights contained in Registration Statement on Form 8-A October 27, 1997 You may request a copy of these documents and a copy of our most recent annual report to shareholders, and any other reports, proxy statement and other communications distributed to shareholders. These copies will be provided at no cost to you. Please make your request to Lois H. Demler, Secretary of the Company at the address and telephone number shown above. RECENT DEVELOPMENTS A group of New York City based stock traders and speculators owning 8.44% of Columbus McKinnon common stock has proposed a slate of five directors for election at the Company's Annual Meeting of Shareholders in August 1999. The group's platform is to seek a sale of the Company. The value of Columbus McKinnon's common stock could be affected by the outcome of this proxy contest. GENERAL INFORMATION REGARDING THE PLAN The Plan was adopted by the Board of Directors of Larco on March 26, 1997 for the purposes set forth below. However, the Board of Directors terminated the Plan effective March 1, 1999, pursuant to an arrangement whereby Larco became an indirect wholly owned subsidiary of the Company. Although the Plan has been terminated and no new options will be granted under the Plan, all outstanding options granted pursuant to the Plan remain outstanding and will be exercisable in accordance with the terms of the Plan and any applicable Stock Option Agreement. In this regard, all outstanding options have been converted to stock options for shares of Columbus McKinnon Corporation common stock, par value $0.01 per share. A total of 62,249 shares of the Company's common stock are covered by such outstanding options. The Plan is not a qualified plan under Section 401(a) of the Internal Revenue Code nor is it subject to any provisions of the Employee Retirement Income Security Act of 1974. PURPOSE OF THE PLAN - ------------------- The Plan was established to: o create stockholder value by providing incentives to selected key employees and directors who contribute materially to the success of Larco and its affiliates, as defined in the Plan, o provide a means of rewarding outstanding performance by those key employees, and o enhance the interests of those key employees and directors in the continued success and progress of Larco and its affiliates by providing them a proprietary interest in Larco The Plan was designed to enhance Larco's ability to maintain a competitive position in attracting and retaining qualified key personnel and directors. ADMINISTRATION OF THE PLAN - -------------------------- The Plan provides for administration of the Plan by the Board of Directors of Larco or, at the option of the Board, a committee which is comprised of two or more non-employee directors appointed by the Board. The Plan currently is administered by the Board of Directors which, in its capacity as administrator of the Plan, is referred to in this prospectus as the "Committee." As directors of Larco, members of the Committee serve for one-year terms and until their successors are duly elected and qualified, and are subject to removal in accordance with applicable law. Among the powers granted to the Committee are the authority to: o grant options and determine the terms and conditions of those options, including the exercise price, vesting and exercise period of the options o determine the form and provisions of the Stock Option Agreements o interpret the Plan and the Stock Option Agreements and waive any provisions of any Stock Option Agreement, provided such waiver is not inconsistent with the terms of the Plan o prescribe rules and regulations relating to the Plan o make all determinations necessary or advisable for administration of the Plan The Committee's address and telephone number is c/o Lois H. Demler, Secretary, Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197, (716) 689-5409. GRANTS TO ELIGIBLE PARTICIPANTS IN THE PLAN - -------------------------------------------- Pursuant to the provisions of the Plan, the Committee has granted options to employees of Larco who were determined by it to be key employees on the date of grant. The Committee also granted options to a non-employee director of Larco. TERMS AND CONDITIONS OF OPTIONS - ------------------------------- Each stock option granted under the Plan is evidenced by a written Stock Option Grant and accompanying Stock Option Agreement, as amended by an Amendment to Stock Option Agreement effective as of March 1, 1999, (together the Stock Option Grant, accompanying Stock Option Agreement and Amendment to Stock Option Agreement are referred to as the Stock Option Agreement) which contain such terms and conditions as the Committee determined, consistent with the provisions of the Plan, including those shown below. You should refer to your Stock Option Agreement for the terms and conditions applicable to your stock options. (a) EXERCISE PRICE. The Committee determined the exercise prices of options it granted. The exercise price of your options is set forth in your Stock Option Agreement. (b) VESTING. The Committee determined the vesting schedule for all options granted. The vesting schedule for your options is set forth in your Stock Option Agreement. (c) TERM OF STOCK OPTIONS. The Plan authorizes the Committee to determine the period during which options are exercisable, except that the Plan provides that no option shall be exercisable more than five years after the date it was granted. The period during which your options are exercisable is set forth in your Stock Option Agreement. (d) OPTIONS NON-TRANSFERRABLE. All options granted are non-transferrable other than by will or the laws of descent and distribution. During an optionee's lifetime the options may be exercised only by him, or if he is disabled, his legal representative. TERMINATION OF EMPLOYMENT AND DEATH - ----------------------------------- Your Stock Option Agreement describes the conditions that apply to the exercise of your options in the event you cease to be employed by Larco or an affiliate of Larco. In the event of your death while employed by Larco or an affiliate, your estate or the person or persons to whom your rights under the option are passed under your will or the laws of descent and distribution may exercise your option to the same extent that you would be entitled to exercise the option at the date of your death. The option may only be exercised within the 90-day period following the date of your death or such other period as may be specified in your Stock Option Agreement, but in no case later than the expiration date of the option. DILUTION OR OTHER ADJUSTMENTS The number of shares of common stock issuable under any option granted to you, as well as the exercise price of any option, is subject to adjustment to reflect any o stock split o stock dividend o recapitalization o merger o consolidation o reorganization o combination or exchange of shares o or other similar events RESTRICTIONS ON ISSUANCE OF SHARES - ---------------------------------- Columbus McKinnon is not obligated to sell or issue any shares of its common stock upon the exercise of any option granted to you unless: o the shares with respect to which your option is being exercised have been registered under applicable securities laws or the issuance of the shares is exempt from such registration o the prior approval of the sale or issuance has been obtained from any applicable state regulatory body having jurisdiction or the sale or issuance is exempt from such prior approval requirement o if the common stock of Columbus McKinnon has been listed on any exchange, the shares with respect to which your option is being exercised have been duly listed on that exchange Your Stock Option Agreement may include other restrictions on the ownership and transfer of shares of common stock. RESTRICTIONS ON RESALE OF SHARES ACQUIRED UPON EXERCISE OF OPTIONS - ------------------------------------------------------------------ Subject to any restrictions imposed by the Plan or any Stock Option Agreement, shares of common stock acquired by a non-affiliate of Columbus McKinnon upon exercise of an option may be freely resold provided such resale is effected in the United States of America in ordinary brokerage transactions pursuant to Sections 4(1) and 4(4) of the Securities Act of 1933. However, securities acquired by an affiliate of Columbus McKinnon must be registered for resale by such affiliate unless the resale is made in compliance with the provisions of Rule 144 under the Securities Act of 1933 or is entitled to another exemption from the registration requirements of the Securities Act of 1933. For these purposes the term affiliate means a person who directly or indirectly controls, is controlled by or is under common control with Columbus McKinnon. In addition, if you are or become a director or officer of Columbus McKinnon, or a beneficial owner of 10 percent or more of its common stock, you should consider the effect of Section 16 of the Securities Exchange Act of 1934, and the rules thereunder, upon your ability to effect transactions in the common stock of Columbus McKinnon. MODIFICATIONS OF THE PLAN - ------------------------- The Plan may be abandoned, suspended or terminated at any time except with respect to any options then outstanding. As noted above, the Plan was terminated effective March 1, 1999 and no new options will be granted under the Plan. All outstanding options remain outstanding and will be exercisable in accordance with the terms of the Plan and any applicable Stock Option Agreement. OTHER PROVISIONS - ---------------- Nothing in the Plan or any Stock Option Agreement confers upon you the right to continue in the employment of Larco or any of its affiliates or restricts the rights of Larco or any affiliate to terminate your employment. You will not have any rights as a stockholder of Columbus McKinnon with respect to any share covered by options granted to you unless and until you become a holder of record of such share. CANADIAN FEDERAL INCOME TAX TREATMENT The following is a brief summary of the Canadian federal income tax aspects of the Plan, based on existing law and regulations which are subject to change. The application of provincial income taxes and any other taxes, is not discussed. An optionee is not required to recognize taxable income at the time of grant of an option, but, at the time of exercise, must include in his gross income, for Canadian federal tax purposes, an amount equal to the excess of the fair market value of the shares on the date of exercise over the exercise price paid therefor and any amount paid by the optionee to acquire the option. If the exercise price related to the option is not less than the fair market value of the shares at the time the agreement relating to the option was made and the optionee is not related to Columbus McKinnon, the optionee may deduct an amount equal to one-quarter of the amount otherwise included in his income. Neither Larco nor Columbus McKinnon is entitled to a deduction for Canadian federal tax purposes with respect to the grant or exercise of an option. The foregoing summary does not purport to be complete, and you are advised to consult with your personal tax advisor as to the specific consequences to you of the issuance of the options, the exercise thereof, and the disposition of shares acquired upon such exercise, as well as the consequences under any applicable U.S., foreign, provincial, or state law. EX-21.1 19 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 EXHIBIT A COLUMBUS MCKINNIN CORPORATION SUBSIDIARIES OF THE REGISTRANT Abell-Howe Crane, Inc. (US) ASI of Australia Pty. Ltd. (Australia) Audubon Export, Inc. (FSC) (US) Automatic Systems, Inc. (US) Automatic Systems Conveyors Limited (Canada) Camlok Lifting Clamps Ltd. (UK) CM Insurance Company, Inc. (US) Columbus McKinnon Limited (Canada) Columbus McKinnon Finance Corporation (Canada) Duff-Norton Asia Pacific Pty. Ltd. (Singapore) Egyptian-American Crane Co. (Joint Venture)(Egypt) Endor, S.A. de C.V. (Mexico) G. L. International inc. (US) Gaffey, Inc. (US) Handling Systems and Conveyors, Inc. (US) Hangzhou LILA Lifting and Lashing Co. Ltd. (China) Larco Industrial Services, Ltd. (Canada) Larco Material Handling, Inc. (US) LICO International Corporation (FSC) LICO Steel, Inc. (US) Manutention Connection (France) Societe d'Exploitation des Raccords Gautier (France) Spreckels Consolidated Industries, Inc. (US) Spreckels Land Company, Inc. (US) Spreckels Water Company, Inc. (US) Spreckels Development Company, Inc. (US) Univeyor A/S (Denmark) Univeyor Conveying Systems Ltd. (UK) Univeyor Electronic A/S (Denmark) Yale Hangzhou Industrial Products (China) Yale Industrial Products, Inc. (US) Yale Industrial Products GmbH (Austria) Yale Industrial Products Ltd. (UK) Yale Industrial Products GmbH (Germany) Yale Industrial Products Pty. Ltd. (South Africa) Yale Industrial Products Asia (Thailand) Co. Ltd. (Thailand) EX-23.1 20 CONSENT OF ERNST & YOUNG LLP CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in (a) the Registration Statement (Form S-8 No. 333-3212) pertaining to the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan, the Columbus McKinnon Corporation Non-Qualified Stock Option Plan, the Columbus McKinnon Corporation Restricted Stock Plan and the Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 of Columbus McKinnon Corporation and (b) the Registration Statement (Form S-8 No. 333-81719) pertaining to the Options assumed by Columbus McKinnon Corporation originally granted under the G.L. International Inc. 1997 Stock Option Plan and the Larco Industrial Services Ltd. 1997 Stock Option Plan of our report dated May 17, 1999, with respect to the consolidated financial statements and financial statement schedule of Columbus McKinnon Corporation included in this Annual Report (Form 10-K) for the year ended March 31, 1999. /s/ Ernst & Young LLP Buffalo, New York June 29, 1999 EX-23.2 21 CONSENT OF DELOITTE & TOUCHE LLP INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements No. 333-3212 and No. 333-81719 on Form S-8 of Columbus McKinnon Corporation, of our report dated August 24, 1998, with respect to the consolidated financial statements of GL International, Inc. and subsidiaries appearing in this Annual Report of Columbus McKinnon Corporation on Form 10-K for the year ended March 31, 1999. /s/ Deloitte & Touche LLP Tulsa, Oklahoma June 29, 1999 EX-27.1 22 FDS MAR-31-99
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001005229 COLUMBUS MCKINNON CORPORATION 1,000 12-MOS MAR-31-1999 APR-01-1998 MAR-31-1999 6,867 0 136,988 2,271 115,979 286,029 90,004 42,048 766,911 120,556 421,686 0 0 146 188,528 766,911 735,445 735,445 542,975 542,975 107,388 0 35,923 50,724 23,288 27,436 0 0 0 27,436 1.94 1.92
EX-99.1 23 FORM 11-K EMPLOYEE STOCK OWNERSHIP ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 11-K /X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended March 31, 1999 / / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: COLUMBUS McKINNON CORPORATION 140 John James Audubon Parkway Amherst, NY 14228-1197 Financial Statements and Schedules Columbus McKinnon Corporation Employee Stock Ownership Plan Years ended March 31, 1999 and 1998 with Report of Independent Auditors Columbus McKinnon Corporation Employee Stock Ownership Plan Financial Statements and Schedules Years ended March 31, 1999 and 1998 CONTENTS Report of Independent Auditors .........................................1 Financial Statements Statements of Net Assets Available for Benefits.........................2 Statements of Changes in Net Assets Available for Benefits..............3 Notes to Financial Statements...........................................4 Schedules Item 27a - Schedule of Assets Held for Investment Purposes.............10 Item 27d - Schedule of Reportable Transactions.........................11 Report of Independent Auditors The Pension Committee Columbus McKinnon Corporation Employee Stock Ownership Plan We have audited the accompanying statements of net assets available for benefits of the Columbus McKinnon Corporation Employee Stock Ownership Plan (ESOP) as of March 31, 1999 and 1998, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the ESOP's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the ESOP at March 31, 1999 and 1998, and the changes in its net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of March 31, 1999, and reportable transactions for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The supplemental schedules have been subjected to the auditing procedures applied in our audit of the 1999 financial statements and, in our opinion, are fairly stated in all material respects in relation to the 1999 financial statements taken as a whole. /s/ Ernst & Young LLP Buffalo, New York June 11, 1999 1
Columbus McKinnon Corporation Employee Stock Ownership Plan Statements of Net Assets Available for Benefits MARCH 31 1999 1998 --------------------------------- ASSETS Cash ................................................... $ 4,544 $ 50 Investments: Columbus McKinnon Corporation common stock at market: Allocated (cost - $6,698,620 in 1999 and $6,124,294 in 1998) ........................... 17,844,495 23,521,768 Unallocated (cost - $9,864,296 in 1999 and $3,202,156 in 1998; held in suspense account) . 14,256,148 8,940,030 ----------- ----------- 32,100,643 32,461,798 Stable asset fund at market ......................... 100,166 85,604 Employer contribution receivable ....................... 29,975 18,116 Interest receivable .................................... 2,137 2,127 ----------- ----------- Total assets ........................................... $32,237,465 $32,567,695 =========== =========== LIABILITIES AND NET ASSETS AVAILABLE FOR BENEFITS Exempt loans payable ................................... $10,523,255 $ 3,764,789 Accrued interest payable ............................... 29,975 18,116 ----------- ----------- Total liabilities ...................................... 10,553,230 3,782,905 Net assets available for benefits: Allocated ........................................... 17,951,342 23,609,549 Unallocated ......................................... 3,732,893 5,175,241 ----------- ----------- Total net assets available for benefits ................ 21,684,235 28,784,790 ----------- ----------- Total liabilities and net assets available for benefits $32,237,465 $32,567,695 =========== =========== See accompanying notes.
2
Columbus McKinnon Corporation Employee Stock Ownership Plan Statements of Changes in Net Assets Available for Benefits YEAR ENDED MARCH 31 1999 1998 --------------------------------- Additions: Employer contributions .............................. $ 1,186,271 $ 1,007,383 Dividend income ..................................... 355,508 338,861 Interest income ..................................... 3,219 5,436 ------------ ----------- Total additions ........................................ 1,544,998 1,351,680 Deductions: Participant termination payments .................... 1,383,517 923,965 Interest expense on exempt loans payable............. 594,271 415,383 Transfer to other qualified plan .................... 101,600 -- Administrative expense .............................. 5,273 2,814 ------------ ----------- Total deductions ....................................... 2,084,661 1,342,162 Net (depreciation) appreciation in fair value of investments ................................ (6,560,892) 11,638,204 ------------ ----------- Net (decrease) increase in assets available for benefits ........................................ (7,100,555) 11,647,722 Net assets available for benefits: Beginning of year ...................................... 28,784,790 17,137,068 ------------ ------------ End of year ............................................ $ 21,684,235 $ 28,784,790 ============ ============ See accompanying notes.
3 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements March 31, 1999 and 1998 1. DESCRIPTION OF THE PLAN AND MAJOR PLAN PROVISIONS The Columbus McKinnon Corporation Employee Stock Ownership Plan (ESOP), a defined contribution plan, was established as a result of amending the previously existing Columbus McKinnon Corporation Personal Retirement Account Plan (PRA Plan), effective November 1, 1988. The PRA Plan was restated and its assets became part of the ESOP. The ESOP is an employee stock ownership plan and a stock bonus plan within the meanings of the applicable sections of the Internal Revenue Code of 1986, as amended. It is also an eligible individual account plan as defined in the applicable section of the Employee Retirement Income Security Act of 1974 (ERISA). The plan was amended effective February 23, 1996 and October 1, 1996 to incorporate valuation and distribution procedures as required for a public entity. The Plan was also amended effective April 1, 1998, to extend coverage to all domestic non-union employees of the Durbin Durco and Positech Divisions of Columbus McKinnon Corporation (the Company/CMC), and all domestic non-union employees of Yale Industrial Products, Inc. In accordance with the plan document, employees who have attained 55 years of age and ten years of participation in the Plan have the option to diversify the investments in their stock accounts by selling a specified percentage of their shares at the current market value and transferring the sale proceeds to another defined contribution plan maintained by the Company. As of March 31, 1999, $101,600 has been transferred to the Company's thrift 401(k) plan. A summary of the ESOP's provisions follows. Refer to the ESOP document or the summary plan description (SPD) for a complete description of provisions. PARTICIPATION Substantially all of Columbus McKinnon Corporation's domestic non-union employees are eligible to participate in the ESOP, excluding domestic employees of certain companies acquired in fiscal 1998 and 1999. Eligible employees must have attained age 21 and completed one year of eligibility service to be a participant. 4 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN AND MAJOR PLAN PROVISIONS (CONTINUED) VESTING OF PARTICIPANTS A participant will be fully vested and will have a non-forfeitable interest in the participant's account balance upon completion of five years of vesting service, excluding any service rendered prior to the calendar year in which he/she attained age 18, or upon attainment of normal retirement age while in the employ of the Company or any affiliated company. For participants with prior employment with the Company in an ineligible classification or with an affiliate of the Company, such employment shall be included in the calculation of eligibility and vesting service. RETIREMENT AND TERMINATION OF EMPLOYMENT Upon a vested participant's termination, the value of his/her account will be distributed if the value of the account is less than $5,000 or, at the participant's option, either immediately or at any valuation date until retirement, as provided in the ESOP. A retiree may elect to defer distribution up to 69 1/2 years of age, where at the following valuation date distribution is mandatory. Valuation dates for share distribution are September 30 and March 31. During 1999, $1,383,517, or 58,739 shares, were distributed to vested participants in the form of stock certificates ($923,965 or 44,617 shares, distributed in 1998). This resulted in the sale of 27 shares held by the ESOP back to the Company for $637 in 1999 as a result of fractional shares (27 shares for $578 in 1998). At March 31, 1999, $1,249,077 ($792,339 at March 31, 1998) is included in the ESOP assets for future distribution to terminated participants. Forfeiture of a non-vested interest shall occur in the fifth consecutive calendar year following a break in service. The forfeited accounts will be allocated among the accounts of active participants. At March 31, 1999, the ESOP assets include $212,574 ($249,682 at March 31, 1998) of undistributed forfeited accounts. ALLOCATION TO PARTICIPANT ACCOUNTS As of each valuation date (March 31), each participant account is appropriately adjusted to reflect any contributions or stock to be allocated as of such date, the income of the trust fund during the period and the increase or decrease in the fair market value of the trust fund during the period. The allocation will be based on the fraction, the numerator of which is the participant's annual earnings for the preceding calendar year and the denominator of which is the aggregate annual earnings for such calendar year of all participants entitled to an allocation. 5 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS The ESOP's investment in Columbus McKinnon Corporation common stock is at fair market value as of March 31, 1999 and 1998 based on quoted market prices. The investment in the Stable Asset Fund is also reported at market value as determined by open trading. CONTRIBUTIONS The Company will contribute to the ESOP such amount as its Board of Directors shall determine. Each participant (a) who is actively employed as an employee on the allocation date (December 31) and who has earned at least 1,000 hours of service as an employee in the calendar year ending on the allocation date, or (b) who terminates employment on or after January 1 during a plan year after attaining age 60 and completing at least five years of eligibility service, or (c) who dies on or after January 1 during a plan year, after attaining age 60 and completing at least five years of eligibility service, shall be entitled to share in the contributions made for such plan year. Contributions shall be made in cash or in shares of stock as determined by the Company, and need not be made out of current or accumulated earnings and profits. DIVIDENDS Dividends paid on stock allocated to a participant's stock account will be allocated to the participant's nonstock account. The pension committee may direct that such dividends shall be either (a) paid directly to the participant, former participant, or beneficiary within 90 days after the close of the plan year in which such dividend was paid, or (b) applied as payment on the exempt loans. Dividends paid on unallocated stock held by the trustee and acquired with the proceeds of an exempt loan shall be held by the trustee until the end of the plan year in which it was paid, and then, along with any interest or earnings, be applied as payment on the exempt loans which shall trigger a release of stock from the suspense account. ESOP TERMINATION The Company intends to continue the ESOP indefinitely, but reserves the right to terminate it at any time. If the ESOP is terminated, each participant shall be fully and nonforfeitably vested in his interest in the ESOP trust fund. 6 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses. Actual results could differ from those estimates. 3. EMPLOYER CONTRIBUTIONS The employer contribution to the ESOP for the March 31, 1999 plan year end was $1,186,271 ($1,007,383 in 1998). This includes interest on the exempt loans payable April 1, 1999; therefore, a contribution receivable from the ESOP sponsor in the amount of $29,975 has been recognized at March 31, 1999 ($18,116 at March 31, 1998 for interest due April 1, 1998). Participants are not permitted to make contributions to the ESOP. 4. INVESTMENTS At March 31, 1999 and 1998, the assets of the ESOP Plan consist of Columbus McKinnon Corporation common stock and a stable asset fund with Fleet Bank. The fair value of individual investments that represent 5% or more of the Plan's assets at the plan years ended March 31, 1999 and 1998, are as follows: 1999 1998 --------------------------------- Columbus McKinnon Corporation common stock $ 32,100,643 $ 32,461,798 7 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 5. EXEMPT LOANS PAYABLE AND SHARE RELEASE On October 27, 1994, the ESOP obtained $6,000,000 of new debt ($2,000,000 from Marine Midland Bank and $4,000,000 from Fleet Bank). The Fleet loan is payable in quarterly installments of $103,000 through January 2002, and $770,627 in April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread determined by the Company's leverage ratio (6.62% and 7.34% at March 31, 1999 and 1998, respectively). The Marine loan is payable in quarterly installments of $45,000 through January 2002, and $328,257 in April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread determined by the Company's leverage ratio (6.62% and 7.34% at March 31, 1999 and 1998, respectively). On October 13, 1998, the ESOP obtained $7,682,281 of new debt from the Company. The CMC loan is payable in quarterly installments of interest only through April 2002, and thereafter quarterly installments of $150,000 through July 2014, and $298,371 in October 2014, plus interest at the prime rate (7.75% at March 31, 1999). In October 1994 and October 1998, the ESOP purchased 609,144 and 479,900 shares, respectively, of common stock of the Company with the debt proceeds, which were recorded by the trustee in the suspense account. Such stock ceases to be collateral and is released from the suspense account as the exempt loan is repaid. In each year prior to full payment of the loan, the number of shares of stock released will equal the number of shares of stock held as collateral immediately before the release for such plan year multiplied by the release fraction. Employer contributions of $592,000 were applied to principal in 1999 and 1998. Employer contributions of $594,271 and $415,383 were applied to interest in 1999 and 1998, respectively. Dividend and interest income of $331,815 and $325,161 was applied to principal in 1999 and 1998, respectively. The loans, which are guaranteed by the Company, are collateralized by an equivalent number of shares of common stock recorded by the trustees in a suspense account. 8 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 5. EXEMPT LOANS PAYABLE AND SHARE RELEASE (CONTINUED) The numerator of the release fraction is the amount of principal and interest payments made toward the loan during the plan year and the denominator is the sum of the numerator plus the principal and interest payments to be made on the loan in the future, using the interest rate applicable at the end of the plan year. Shares of stock released from the suspense account for a plan year shall be held in the trust on an unallocated basis until allocated by the pension committee as of the last day of that plan year. That allocation shall be consistent with the method for allocating contributions to participants' accounts, which is based on a fraction of each participant's annual earnings during the preceding calendar year to the total earnings of those participants during such calendar year. The allocation of shares released resulting from dividends on participants' allocated shares, however, was based upon the fraction of each participant's allocated shares to the total number of allocated shares. As of March 31, 1999, 708,382 shares were held as collateral for the loan (325,092 shares held as of March 31, 1998); 96,610 shares were released from the suspense account in 1999 (101,416 shares released in 1998). These shares were allocated to participant accounts as of March 31, 1999. 6. TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated July 28, 1997, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code of 1986 (the "Code") and that the trust, therefore, is exempt from taxation under Section 501(a) of the Code. Once qualified, the Plan is required to operate in conformity with the Code and ERISA to maintain its tax-exempt status. The Plan was amended subsequent to the IRS determination letter. Therefore, the amendments are not covered by the determination letter. The administrator is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. 9 Schedules Columbus McKinnon Corporation Employee Stock Ownership Plan EIN: 16-0547600 Plan No. 016 Item 27a - Schedule of Assets Held for Investment Purposes March 31, 1999 IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST CURRENT VALUE - ------------------ ------------------------- ------------ ------------- *Columbus McKinnon Employer Common Stock, Corporation 1,595,066 shares $ 16,562,916 $32,100,643 Fleet Investment Stable Asset Fund $ 100,166 $ 100,166 Services * Indicates a party-in-interest 10
Columbus McKinnon Corporation Employee Stock Ownership Plan EIN: 16-0547600 Plan No. 016 Item 27d - Schedule of Reportable Transactions For the year ended March 31, 1999 Identity of Description Number Number Total Total Net Party Involved of Assets of Purchases of Sales Purchases Sales Gain (Loss) - --------------------------- --------------------- ------------- ------------ ------------- ------------ -------------- Columbus McKinnon Columbus McKinnon Corp Common Stock 486,426 shares 3 2 $7,682,000 $ 101,600 $ (2,030)
11 SIGNATURES The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. COLUMBUS McKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN RESTATEMENT EFFECTIVE APRIL 1, 1989 By: /s/ Timothy R. Harvey ---------------------------------- Timothy R. Harvey, Trustee /s/ Karen L. Howard ---------------------------------- Karen L. Howard, Trustee /s/ Robert L. Montgomery, Jr. ---------------------------------- Robert L. Montgomery, Jr., Trustee /s/ Neal E. Wixson ---------------------------------- Neal E. Wixson, Trustee CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in (a) the Registration Statement (Form S-8 No. 333-3212) pertaining to the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan, the Columbus McKinnon Corporation Non-Qualified Stock Option Plan, the Columbus McKinnon Corporation Restricted Stock Plan and the Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 of Columbus McKinnon Corporation and (b) the Registration Statement(Form S-8 No. 333-81719) pertaining to the Options assumed by Columbus McKinnon Corporation originally granted under the G.L. International Inc. 1997 Stock Option Plan and the Larco Industrial Services Ltd. 1997 Stock Option Plan of our report dated June 11, 1999, with respect to the financial statements and schedules of the Columbus McKinnon Corporation Employee Stock Ownership Plan included in this Annual Report (Form 11-K) for the year ended March 31, 1999. /s/ Ernst & Young LLP Buffalo, New York June 29, 1999 -----END PRIVACY-ENHANCED MESSAGE-----