-----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, SFqJAZDla84Fc0CJMkn3TOnruml2Z7uwKRdD1Vku8Qc1kI4kwILJmjAYC0KSZlko mT2KgCIf8NzC8iqgdfrMGQ== 0001014858-98-000084.txt : 19981229 0001014858-98-000084.hdr.sgml : 19981229 ACCESSION NUMBER: 0001014858-98-000084 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNIQUIP INTERNATIONAL INC CENTRAL INDEX KEY: 0001023973 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 431721419 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-21461 FILM NUMBER: 98776526 BUSINESS ADDRESS: STREET 1: 222 E MAIN ST CITY: PORT WASHINGTON STATE: WI ZIP: 53074 BUSINESS PHONE: 4142688965 MAIL ADDRESS: STREET 1: 369 WEST WESTERN AVENUE CITY: PORT WASHINGTON STATE: WI ZIP: 53074 10-K 1 OMNIQUIP INTERNATIONAL, INC./FORM 10-K FILING ========================================================================== FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number 0-21461 --------------- OMNIQUIP INTERNATIONAL, INC. [Exact name of registrant as specified in its charter] DELAWARE 43-1721419 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 222 East Main Street Port Washington, Wisconsin 53074 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (414) 268-8965 -------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered ------------------- ------------------- None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock Preferred Stock Purchase Rights Series A Preferred Stock, $.01 par value (Title of class) -------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 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. [ ] As of December 18, 1998, the aggregate market value of the common stock held by non-affiliates (13,474,639 shares) of the registrant was $176,854,637 (based on the closing price, on such date, of $13.125 per share). As of December 18, 1998, there were 14,271,000 shares of common stock, $0.01 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement dated on or about December 31, 1998 (portion) (Part III) ========================================================================== OMNIQUIP INTERNATIONAL, INC. INDEX TO FORM 10-K Page ---- Part I Item 1. Business.................................................... 1 Item 2. Properties.................................................. 12 Item 3. Legal Proceedings........................................... 13 Item 4. Submission of Matters to a Vote of Security Holders......... 13 Part II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters........................................ 13 Item 6. Selected Consolidated Financial Data........................ 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 15 Item 7a. Quantitative and Qualitative Disclosures about Market Risk.. 24 Item 8. Financial Statements and Supplementary Data................. 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................ 47 Part III Item 10. Directors and Executive Officers of the Registrant.......... 47 Item 11. Executive Compensation...................................... 47 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................. 47 Item 13. Certain Relationships and Related Transactions.............. 47 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................................... 48 Item 1. Business General OmniQuip International, Inc. (the "Company" or "OmniQuip") is the largest North American manufacturer of telescopic material handlers and one of the leading North American producers of aerial work platforms. Other products manufactured by the Company include skid steer loaders and a range of other material handling equipment. OmniQuip's highly versatile products are used in a variety of applications for construction, industrial, maintenance, military and agricultural markets. The Company's principal products are marketed under the well-recognized and highly-regarded SKY TRAK, LULL, SNORKELIFT and WILDCAT brand names. Telescopic material handlers are especially useful in rough terrain environments and congested job sites, where their maneuverability and ability to raise, extend and lower payloads provide significant advantages over more traditional material handling equipment, such as cranes, straightmast forklifts and elevators. The Company's telescopic material handlers have a maximum lift capacity of 5,000 pounds to 10,000 pounds and can position payloads from 28 feet to 54 feet above the ground or 15 feet to 39 feet in front of the machine's chassis. The versatility of these units allows users to lower overall costs by substituting a single telescopic material handler for one or more other types of material handling equipment, as well as for certain labor intensive material handling tasks. The Company believes it manufactures the broadest product line of telescopic material handlers in North America. Shipments of commercial telescopic material handlers increased from approximately 950 units in calendar 1990 to approximately 3,550 units in fiscal 1998. Based upon industry reports, the Company believes that its North American market share of fiscal 1998 shipments of telescopic material handlers was approximately 31%. In addition, OmniQuip has been a principal supplier since 1988 of telescopic material handlers to the military. The Company has a contract to supply the U.S. Army with a new generation of telescopic material handlers to support the logistics requirements of the Rapid Deployment Forces. The Army has estimated that its requirements under the contract could range up to a maximum of 1,200 ATLAS vehicles, or a maximum contract value of $120 million. Through September 30, 1998, the Company has sold approximately 248 vehicles under this contract. The Company believes that this contract will enhance its ability to pursue sales to other branches of the United States armed forces and to foreign military agencies. Aerial work platforms are mobile, versatile units designed to position workers and materials easily in elevated work locations. Such highly versatile products allow users to increase productivity in certain labor-intensive tasks in an enhanced safety environment compared to equipment traditionally used to reach elevated and difficult to reach positions such as scaffolding and ladders. The Company's broad product line includes self-propelled telescoping and/or articulating boom-type platforms, which have maximum elevation capabilities ranging from 33 feet to 126 feet from ground to platform height and self-propelled scissor-type platforms with maximum elevation capabilities ranging from 15 feet to 40 feet from ground to platform height. The Company also manufactures a small line of truck-mounted and trailer-mounted booms with elevation capabilities ranging from 40 feet to 69 feet in height. Shipments of aerial work platforms marketed under the SNORKELIFT and WILDCAT brand names increased from approximately 1,900 units in 1990 to approximately 4,700 units in fiscal 1998. OmniQuip sells and distributes its material handling and aerial work platform products commercially through independent equipment dealers and rental companies, including national rental fleets, located in the United States and Canada. Internationally, OmniQuip markets and distributes its products through a variety of arrangements with dealers and distributors in approximately 50 countries. To facilitate the sale of its material handling products, OmniQuip offers its independent equipment dealers floor plan and rental fleet financing assistance in connection with the purchase of the Company's products. Such assistance consists of limited, backup financing guarantees and repurchase agreements which benefit dealers by providing them the opportunity to obtain attractive financing terms on the Company's products, which in turn allows dealers to stock more units for sale or rental. Industry Overview OmniQuip competes principally in selected segments of the material handling and light equipment markets which utilize engines of less than 130 horsepower. With limited exceptions, competitors with leading market shares in these segments typically are not large full-line construction equipment manufacturers. North American shipments of construction and allied equipment grew from $30.8 billion in 1990 to $43.1 billion in 1996, representing a nominal compound annual growth rate of 5.8%. According to industry estimates, shipments of telescopic material handlers in North America grew from approximately 2,400 units in 1990 to approximately 9,100 units in 1997, representing a real compound annual growth rate of 20.8%, and shipments of aerial work platforms increased from approximately 13,200 units in 1990 to approximately 40,900 units in 1997, representing a real compound annual growth rate of 17.6%. For the twelve months ended September 30, 1998, unit shipments of telescopic material handlers, boom-type aerial work platforms and scissor-type aerial work platforms grew approximately 32.9%, 6.1% and 33.1%, respectively, each as compared to the twelve months ended September 30, 1997. The Company believes growth rates for telescopic material handlers and aerial work platforms are attributable to a number of factors, including the following: Increased Productivity and Safety. Telescopic material handlers and aerial work platforms enable users to reduce costs through increased labor productivity compared to other methods using alternative equipment or direct labor. Productivity enhancements include a reduction in the number of indirect personnel required for material handling support to load, transport and place building materials and to operate certain other types of construction equipment. The versatility and variety of attachments available for telescopic material handlers results in higher utilization of the equipment and permits end-users to increase inventory turnover at job sites more rapidly by taking loads directly off delivery trucks and placing them where they will be used. Aerial work platforms provide distinct safety and productivity advantages over alternative equipment and are increasingly attractive in light of federal and state safety rules requiring the use of tethers and other safety devices for workers in elevated work environments. Product Versatility. Telescopic material handlers are more versatile than other material handling equipment such as cranes, straightmast forklifts and elevators. Telescopic material handlers can unload, carry and place materials up to five stories high in rough terrain work environments, eliminating the need for multiple pieces of more specialized equipment and reducing the labor required to handle materials at the work site. In addition, using one or more of the approximately 40 Company-approved attachments, OmniQuip's telescopic material handlers can be used in numerous applications. Attachments include forks and carriages, grapples, buckets, augers, concrete hoppers and truss booms. The numerous applications provided by such attachments used in conjunction with the Company's telescopic material handlers allow customers to decrease aggregate equipment costs and increase utilization of their material handling equipment. Aerial work platforms also offer increased versatility relative to more traditional devices such as ladders and scaffolding. Growth of Equipment Rentals. The equipment rental industry serves a wide variety of industrial, manufacturing, construction and governmental markets. The equipment rental industry, including rental centers, national rental fleets and independent dealers who offer equipment for either sale or rental, has grown significantly. A survey conducted for an industry 2 trade association estimates that construction equipment rental revenues were approximately $6.6 billion in 1990 and increased to approximately $16.2 billion in 1996. Increased availability of rental construction equipment has substantially broadened the group of potential end-users for the Company's products. Equipment rentals provide end-users having limited needs or resources with the ability to conveniently and economically rent material handling equipment, as well as necessary attachments. Rental companies can fulfill significant, but temporary, needs of large end-users, supplementing capacity during peak activity periods. Additionally, rental companies can rent a single unit to small contractors for short-term projects. Growth of Non-Construction Applications. Historically, the primary market for telescopic material handlers has been the construction market while the principal markets for aerial work platforms have been the construction and building maintenance markets. In recent years, however, applications for each product line have emerged in other markets. For example, since 1988, telescopic material handlers have been used by the Army for munitions handling and, more recently, general logistics purposes. Telescopic material handlers have also experienced increasing acceptance in the industrial and agricultural markets where they are used, among other applications, to transport and position bulk materials. Aerial work platforms are increasingly used in the industrial and commercial market by automobile and other manufacturers, airlines and ship builders, among others. Business Strategy The Company's strategy is to grow primarily within selected segments of the material handling and light equipment markets which (i) are growing faster than the construction equipment industry generally, (ii) constitute core rental products for the construction equipment rental industry, (iii) utilize engines of less than 130 horsepower, and (iv) are not typically dominated by full-line construction equipment manufacturers. Key elements of the Company's business strategy include: Providing superior products. The Company focuses on developing innovative, high performance products with low life-cycle cost. By introducing unique product features and enhancements, the Company believes that it increases demand for the Company's products. Examples include the pioneering introduction in 1994 of a SKY TRAK model capable of lifting and positioning materials up to five stories above ground, the proprietary sliding telescopic booms developed by one of the Company's wholly-owned subsidiaries, Lull International, Inc. ("Lull"), which permit higher precision, horizontal maneuvering of materials at various lift heights, and the introduction by Snorkel International, Inc. ("Snorkel") of industry-leading safety features, such as envelope management, slope-level interlocks and pothole protection. Recently, the Company introduced its first model of a new range of telescopic material handlers designed to be used for expanded applications in North America and to be competitive with products currently used in international markets. Pursuing a multiple brand distribution strategy. The Company is pursuing a strategy of marketing multiple light construction equipment products with leading brand names through independently owned distributors and increasingly through rapidly expanding national rental fleets. While these national companies have grown primarily through acquisition of many of the Company's formerly independent dealers and rental houses, strong representation of one or more of the Company's brands in these expanding fleets insures broad market coverage and the opportunity to leverage the sale of other products and/or brands to these customers. This strategy affords the Company the opportunity to realize economies of scale in providing parts 3 supply and other aftermarket services to its customers, while achieving similar economies in component purchasing and manufacturing for the Company. OmniQuip's multiple brand distribution strategy is designed to appeal to customers' differing price, performance and support needs. Acquiring complementary businesses. A key component of the Company's growth strategy is the identification and completion of complementary acquisitions. The Company's acquisition of Lull in August 1996 and Snorkel in November 1997 reflects the Company's strategy of acquiring businesses which utilize complementary distribution channels or which manufacture and market products which complement the products currently manufactured and sold by the Company. The Company has identified numerous potential acquisition candidates in the relatively fragmented under-130 horsepower market segment. Achieving cost savings from the integration of acquired operations. The Company believes that it can realize substantial additional cost savings from the integration of acquired operations. For example, the Company anticipates that it can increase purchasing efficiencies for components and materials, eliminate duplicative overhead costs, streamline production processes and achieve other economies of scale in areas such as parts supply, product design and development and dealer finance. Penetrating international markets. While the Company is the largest North American manufacturer of telescopic material handlers, its sales of such products outside North America are relatively modest. The Company is in the process of "globalizing" its telescopic material handler products to increase their appeal in international markets. The Company believes that its acquisition of Snorkel will help it improve its distribution networks outside North America by utilizing Snorkel's existing sales force, particularly in the Far East, and by enabling the Company to offer a broader line of products to international distributors. Products The Company designs, manufactures and markets telescopic material handlers and aerial work platforms as its principal product lines. In addition, the Company manufactures and distributes a variety of other material handling equipment and attachments and offers parts and service with respect to the products it sells. Pro Forma (Unaudited) Net Sales By Product Category1 (in thousands)
Fiscal Year Ended September 30, ----------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Telescopic material handlers................ $263,005 $225,778 $166,041 $121,464 $ 75,245 Aerial work platforms....................... 151,778 142,889 146,780 103,998 70,400 Other2...................................... 56,762 52,486 54,237 45,047 29,362 -------- -------- -------- -------- -------- Total.................................. $471,545 $421,345 $367,058 $270,509 $175,007
- --------------- (1) The information in the foregoing table reflects the pro forma net sales by product category of TRAK International, Inc. ("TRAK"), a wholly-owned subsidiary of the Company, Lull and Snorkel for the applicable periods as if the acquisitions of these companies had occurred on October 1, 1993. 4 (2) Includes parts and service, skid steer loaders and other miscellaneous equipment lines and attachments. Telescopic Material Handlers Telescopic material handlers are rough terrain vehicles used to transport, lift and position materials between ground locations, between vehicles and to elevations up to five stories in height. This equipment is typically utilized in North America by residential and non-residential building contractors to handle a wide range of building materials and components, including bricks, concrete blocks, open-wall panels, roof trusses, lumber, drywall sheets, structural steel and roofing materials. In addition, by using one or more of the approximately 40 Company-approved attachments, the Company's telescopic material handlers can also be used in nontraditional, specialized applications, such as steel building construction or pole and post hole drilling. Available attachments include forks and carriages, grapples, buckets, augers, concrete hoppers and truss booms. End-users for the Company's telescopic material handlers currently include the construction, military, agricultural, landscaping and industrial markets. The Company currently manufactures 15 models of telescopic material handlers marketed under the SKY TRAK and LULL brand names. These models have rated load capacities of 5,000, 6,000, 8,000 and 10,000 pounds and possess the capacity to place loads 28, 36, 37, 42 and 54 feet above the ground. Suggested list prices for these products range from approximately $70,000 to approximately $135,000 per unit. Each of the Company's two brands of telescopic material handlers has unique characteristics, which have contributed to strong competitive positions in the market. The success of the SKY TRAK brand has been built on a reputation for strong product performance and design innovation, with emphasis on design simplicity and serviceability. The LULL brand has a long tradition associated with its patented transfer carriage technology, which facilitates the precision placement of palletized loads. LULL brand products enjoy a premium reputation for their ease of operation, durability, and high resale value. The Company believes the combination of its well-known SKY TRAK and LULL brand names, its ability to offer the industry's broadest product line and its dual-brand distribution strategy provide OmniQuip with competitive advantages in the telescopic material handler market. Since 1988, OmniQuip has been the primary supplier of telescopic material handlers to the United States military. Such products are used by the United States military for a variety of logistics requirements, including loading certain types of rocket launchers, loading and unloading military equipment, and for a variety of other military materials handling tasks. The U.S. military exclusively used the Company's telescopic material handlers in Operation Desert Storm. In May 1995, the Company was awarded a fixed-price government contract to serve as sole supplier to the Army of the ATLAS, the latest generation of the military version of the Company's rough terrain telescopic material handler. ATLAS is designed as an integral component of the Army's logistics support strategy for its Rapid Deployment Forces. The contract provides for the supply of the Army's requirements over a period of four years. The Army has estimated that its requirements for ATLAS vehicles over this period could range up to a maximum of 1,200 units, or a maximum contract value of $120 million, although the Army is not obligated to purchase any specified number of ATLAS vehicles. The contract also affords the Army an option to order an additional 300 units above the 1,200 unit maximum. The Company believes that the award of the ATLAS contract also will provide additional opportunities to market the ATLAS product directly and through the Army to other branches of the United States armed forces and to foreign military agencies. Aerial Work Platforms Aerial work platforms are mobile, versatile units designed to position workers and materials easily in elevated work locations. These platforms are used primarily by building contractors 5 and commercial and industrial end-users to enable workers to quickly and easily reach elevated work sites and to perform tasks inside and outside of buildings at heights up to 126 feet. Aerial work platforms compete with ladders and scaffolding, but provide superior flexibility and improved safety features. For example, the Occupational Safety and Health Administration mandates that individuals working above a certain height be tethered to prevent potential accidents. Aerial work platforms allow such workers to comply with the regulation while at the same time being highly mobile and efficient. The Company manufactures and markets a full line of boom-type telescoping aerial work platforms. The Company also manufactures and markets scissor-type aerial work platforms and a limited range of truck- and trailer-mounted equipment. The Company manufactures 22 models of boom-type work platforms. The Company's products include units with straight telescoping booms, telescoping booms with articulating jib, units with articulating booms and articulated booms with articulating jib. Telescoping boom aerial work platforms can place workers from 37 feet to 126 feet high. Units with articulating booms and articulating jibs can place work platforms from 33 feet to 60 feet high. List prices of the Company's boom-type aerial work platforms range from approximately $40,000 to $270,000. The Company also manufactures 12 scissor-type aerial work platforms. Finished-surface ("slab") scissor-type aerial work platforms can lift workers 15 feet to 40 feet from ground to maximum platform height. Rough-terrain scissor-type aerial work platforms have a maximum range of 25 feet to 40 feet from ground to platform height. The list prices of the Company's scissor-type aerial work platforms range from approximately $13,000 to $56,000. Other Other products manufactured and marketed by the Company include (i) skid steer loaders (under the SCAT TRAK name), which are compact and versatile material handling machines used to dig, lift and transport bulk materials, (ii) specialized material handling equipment, such as crucible transporters (under the ERICKSON brand name) and, (iii) a limited range of self-propelled power haulers and power lifters (under the WORKPRO brand name) and articulated forklifts and loaders, all of which are used primarily in the masonry industry. In addition, the Company markets a limited line of straightmast forklifts and mini-excavators. The Company also provides product service support to its distribution networks, and produces and sells through its distributors a wide range of service parts to maintain the operational performance of its end products throughout their useful lives. The sale of service parts provides an important source of revenue and profitability, as such sales are historically less sensitive to industry cycles and typically generate higher gross margins than sales of original equipment. The Company seeks to provide a high level of parts availability and timely shipments of orders to maintain the production availability of its products on customer job sites. Marketing and Distribution The Company sells its products to independent equipment dealers for retail sale and rental and to equipment rental companies, including independent rental centers and national rental fleets, for rental. The Company has a multiple brand strategy in its telescopic material handler product line to appeal to customers' differing price, performance and support needs. This strategy provides wider coverage of the available customer base while affording the Company the opportunity to realize economies of scale in providing parts supply, service, attachments, dealer finance, component purchasing and manufacturing. In addition, current customer consolidation initiatives being driven by the national rental companies are rapidly increasing the overlap of several of the Company's products among common customers, again increasing the opportunity for economies of scale, particularly in providing aftermarket services. SKY TRAK and LULL brand telescopic material handlers, SNORKELIFT and WILDCAT brand aerial work platforms, and SCAT TRAK skid steer loaders and 6 WORKPRO material handlers are marketed to a mix of independent retail dealers, rental centers and national rental fleets. Traditionally, independent dealers have focused their efforts on resale of products to end-users. In recent years, however, many independent dealers have built their own rental fleets to augment their sales activities. Rental centers are equipment rental dealers who focus exclusively on renting units on a daily, weekly or monthly basis to customers whose needs do not require purchase and full-time utilization of units. National rental fleets are large equipment rental companies which, through company-owned stores or franchises, carry out rental activities nationwide. During fiscal 1998, the light construction equipment industry began undergoing a dramatic shift as independent dealers and distributors were acquired by fast-growing national rental companies. As the national rental companies continue to purchase more distributors, the consolidation of the industry will result in fewer, but larger customers. During fiscal 1998, OmniQuip net sales to Rental Service Corporation and United Rentals, Inc. were each greater than 10% of total net sales (after giving effect to acquisitions made by each such company). The Company employs a sales and service force of field and factory based managers and representatives to support the sales, service and rental activities of its customers with product advertising, sales literature, product training and major trade show participation. OmniQuip seeks to promote end-user acceptance and continued satisfactory performance of its products worldwide. The Company pursues this goal in cooperation with a network of distributors and rental companies who provide for the maintenance and repair of all OmniQuip products for end-users. The Company promotes a high level of customer support through programs which closely monitor the performance of its products with rental fleets and with end-users. This level of product support is maintained by a variety of programs and procedures, including: a toll-free technical assistance program; on-site service representative visits; factory training programs; organization of product assessment teams facilitated by the service department; and continuing interaction among distributors, rental companies, end-users and major vendors for failure analysis of products both in and out of warranty. International sales represented approximately 12%, 10% and 11% of pro forma consolidated net sales, including the acquisitions of Lull and Snorkel, for the fiscal years ended September 30, 1996, 1997 and 1998, respectively. All of the Company's products are primarily marketed internationally through dealers and rental companies, with the exception of the LULL brand of telescopic material handlers, which is marketed internationally primarily through an exclusive distribution agreement with a single United States exporter. Most of Snorkel's international sales for such periods were made through Snorkel's Australian subsidiary to Australian and other customers principally located in the Far East. Financing The Company supports its independent dealers in obtaining conventional floor plan financing and rental fleet financing to assist in the purchase of its products. Under these financing arrangements, dealers borrow money from independent lenders on a secured basis for up to five years. Where dealer financing is provided directly by independent lenders, the Company assists the financing by providing the independent lenders either a backup guarantee of a dealer's credit or an undertaking to repurchase used equipment at a discounted price to market at specified times or under specified circumstances. At September 30, 1998, approximately $62.4 million of Company-assisted floor plan and rental fleet financing arrangements were outstanding on a consolidated basis. The Company's actual exposure under these financing arrangements is significantly less than the nominal amount outstanding. 7 Aggregate losses under substantially all of the Company's guarantee obligations to third party lenders with respect to the Company's dealers in each of calendar years 1997 and 1998 are limited to the greater of $1.5 million or 5% of the loan balance at the previous calendar year end (approximately $47.2 million and $55.0 million at December 31, 1996 and 1997, respectively). To the extent that independent lenders providing financing for the Company's dealers do not have (or do not exercise) direct recourse against the Company under backup guarantees, the Company is committed to perform its repurchase undertaking to reacquire equipment sold to a defaulting dealer at a purchase price equal to amounts due the independent lender. The Company's actual exposure under these repurchase arrangements is reduced by underlying equipment values as well as careful portfolio management, by both the Company and its lenders. At the present time, an active resale market exists for such equipment. At September 30, 1998, past due principal and interest as a percentage of the total portfolio on a pro forma consolidated basis was less than one-half of one percent. The Company's loss experience in recent years has been insignificant. Manufacturing and Raw Materials The Company fabricates, welds, machines and assembles the chassis, telescopic booms, attachments and many component parts for its telescopic material handlers and aerial work platforms. During the past three years, the Company has made significant capital investments in its principal Port Washington, Wisconsin facility to implement robotic welding and a five-station wash, automatic prime and finish coat paint system and to complete a 25,000 sq. ft. plant addition. In its St. Paul, Minnesota facility, the Company has invested in machining centers and numerically controlled plasma punching capability. These investments, along with numerous projects to improve production flow and material handling, have provided the foundation for continuing productivity improvements. Recent strong demand for telescopic material handlers has pushed the limits of the Company's manufacturing capacity. As a result, in September 1998, the Company launched a two-year, $20 million capacity expansion program to expand telescopic material handler capacity and improve production efficiencies by moving to focused factories and lean manufacturing processes. The Company believes that these integrated manufacturing approaches will shorten the lead time to deliver superior, lower cost products through the elimination of waste. A key element of this program will be the consolidation of SKY TRAK and LULL telescopic boom production into a dedicated 150,000 square foot leased facility in Port Washington. Other important elements of this program are expansion of the light fabrication facility in Oakes, North Dakota and the main LULL facility in St. Paul as well as re-layout of the main Port Washington facility, which is now dedicated to SKY TRAK production. The objective of the new and expanded facilities is to create focused factories that concentrate on specific elements of the manufacturing process such as light fabrication, boom manufacturing and LULL and SKY TRAK vehicle fabrication and assembly. It is expected that this program will result in significant increases in telescopic material handler capacity. It is expected that fiscal year 1999 capital spending related to this capacity expansion program will be approximately $16 million with the remaining $4 million to be spent in fiscal year 2000. As part of this strategy of focused factories, in fiscal year 1998, assembly of skid steer loaders was relocated from the main Port Washington factory to a separate dedicated facility. In addition, key fabrications for skid steer loaders, which were also being made in the main Port Washington facility, have been outsourced. In early 1995, the Company completed registration under ISO 9001 of its Port Washington, Wisconsin quality systems, becoming the first telescopic material handler manufacturer in North America to achieve this recognition. In early 1998, Snorkel completed registration under ISO 9001 for its Elwood, Kansas facilities. Registration under ISO 9001 represents the achievement of an internationally recognized standard of quality systems implementation and is important for competing in 8 markets with ISO requirements, such as Europe. In addition, the United States Department of Defense has mandated the use of ISO 9001 for new procurements, including the ATLAS contract. The Company expects to implement similar quality system standards in its other facilities. The Company is pursuing opportunities to reduce costs of purchased components primarily by developing strategic sourcing alliances with key suppliers. As part of this program, the Company will consolidate vendor sources and enter into long-term agreements, typically five years or more, with the suppliers that are selected. Agreements have been reached with suppliers of axles and transmissions and others are in the process of being negotiated. Potential annual savings from these alliances are expected to be in the range of $10-15 million. The principal raw materials and components used in the manufacturing of the Company's products are steel, aluminum, engines, transmissions, axles, hydraulic systems, wheels and tires and cabs. The Company procures its raw materials and components from multiple vendors, although in the case of particular models it typically purchases certain components from a single vendor. Although alternative suppliers are available for all raw materials and components, the Company could experience delays in obtaining components meeting the requisite specifications from alternative suppliers in the event a principal supplier was unable to supply a particular component. In the case of the ATLAS product supplied to the Army, the governing contract specifies precisely the source of key component parts utilized in the manufacture of the ATLAS product. In the event of unavailability of any of these key components, the Company could be precluded from completing production of ATLAS products in a timely fashion unless the Army agreed to substitution of an alternative component. The Company seeks to manage the risk of unavailability of key components and raw materials by dealing only with substantial, financially responsible vendors and managing closely its material requirements as well as its vendor relationships. To date, the Company has not experienced a material delay in obtaining a satisfactory supply of key components from vendors. Product Development and Engineering The Company maintains an active program of product development and engineering activities designed to upgrade existing product lines and develop new products. The Company employs approximately 76 employees with experience in the design of products. On a pro forma basis, including the acquisitions of Lull and Snorkel, for the fiscal years ended September 30, 1996, 1997 and 1998, the Company spent approximately $5.2 million, $5.8 million, and $7.7 million, respectively, on product development and engineering activities. Since 1987, the Company has invested in the computer systems and training of its engineering staff to support the increasing use of computer-aided design. To decrease product development time, reduce product development cost, and improve the quality of its new products, the Company has further invested to implement finite element analysis capability, three-dimensional solid design, and concurrent engineering. The Company's product development and engineering efforts during future periods are expected to emphasize continued product line expansion, design modifications to expand the worldwide acceptance of its products, and the expanded sourcing of attachments to improve access to more end-user markets. Warranty and Service OmniQuip products are warranted for design, workmanship and material quality. Warranty lengths vary depending on competitive standards within individual markets. In general, warranties tend to be for one year and cover all parts and labor for non-maintenance repairs, provided the repair was not necessitated by operator abuse. Optional extended warranties, beyond the base period, are available for purchase. Warranty work is performed only by authorized distributors. Distributors submit claims for warranty reimbursement to the Company and are credited for the cost of repairs so long as the repairs meet prescribed standards. 9 Trademarks and Patents The Company owns and maintains U.S. trademark registrations for all of its principal trademarks. The Company owns or otherwise has the right to use these trademarks in other countries where a significant volume of its products are sold and where such ownership or right to use is considered necessary to protect the Company's proprietary rights. The Company applies for and maintains patents in the United States and elsewhere where the Company believes such patents are necessary to maintain the Company's interest in its inventions. Currently, the Company possesses a patent on three-stage telescopic booms used in the LULL brand of telescopic material handlers, which expires in 2007. The Company believes this patent provides it with a competitive advantage in selected markets, but does not believe that the expiration of this patent would have a material adverse effect upon its business or ability to compete. Competition The markets for the Company's products are highly competitive. The principal competitive factors include distribution, price, design features, performance, product reliability and the availability of financing. In the market for telescopic material handlers, the Company is the largest North American manufacturer, with an estimated share of fiscal 1998 shipments of telescopic material handlers of approximately 31%, and its principal competitors include Gradall Industries, Inc. and JCB International Co., Ltd. Other competitors in the North American market include Case Corporation, Caterpillar Inc., Gehl Company, Ingersoll-Rand Company, Manitou S.A., Pettibone Corporation and Traverse Lift. Competitors in this market outside the United States include Caterpillar Inc., FDI/Sambron, JCB International Co., Ltd., Manitou S.A. and Merlo S.p.A. The largest manufacturer of aerial work platforms is JLG Industries, Inc. Other principal competitors include Genie Industries, Grove Worldwide, Skyjack Inc., Terex Corporation and UpRight, Inc. Many of the Company's competitors are larger than the Company and possess significantly greater financial, marketing and technical resources. There can be no assurance that the Company will not experience significant competition in the future from large global construction equipment manufacturers and other competitors or that existing competitors will not take actions which could adversely affect the Company's operating results. Environmental and Safety Regulation OmniQuip is subject to federal, state, local and foreign environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage and disposal of toxic and hazardous wastes. The Company is also subject to the Occupational Safety and Health Act and similar state, local and foreign statutes. The Company believes it is in material compliance with all applicable environmental laws and regulations. The Company does not expect any material impact on future recurring operating costs of compliance with currently enacted environmental regulations. Under federal, state and local laws, including the federal Comprehensive Environmental Response, Compensation, and Liability Act, a current owner or operator of real property may be held liable for the costs of cleaning up certain hazardous materials on the property. Similarly, persons who have arranged for the disposal of hazardous materials on properties owned by third parties may be held liable for cleanup costs for such properties. In each case, liability may be imposed without regard to whether the person knew of or took reasonable acts to prevent the contamination. Liability under such 10 laws is often joint and several, that is, any single liable person may be required to bear the entire costs of the environmental cleanup. That person, however, may usually seek contribution from other responsible persons, if there are any; and it is typical for groups of responsible parties to apportion liability among themselves. The Company regularly conducts an environmental assessment consistent with recognized standards of due diligence on properties and businesses which it acquires. To date, these assessments have not identified contamination in respect of acquired properties that would be reasonably likely to result in a material adverse effect on the Company's business, results of operations or financial condition. As a general rule, the Company intends to use such assessments as part of the evaluation of proposed acquisitions. However, there can be no assurance that environmental assessments have identified, or will in the future identify, all material liabilities relating to the Company's properties and businesses, that any indemnification agreements that can be negotiated will cover all potential liabilities, or that changes in cleanup requirements or subsequent events at the Company's properties or at off-site locations will not result in significant costs to the Company. Product Recall From time to time, the Company discovers defects in product design for existing products which require it to take steps to correct or retrofit, at the Company's expense, previously sold products. During the year ended September 30, 1998, the Company identified a defect in its LULL brand of telescopic material handlers and established reserves of approximately $1.4 million for the cost of retrofitting such telescopic material handlers. It is expected that this retrofit program will be substantially complete by the end of fiscal year 1999. There can be no assurance, however, that the ultimate cost of the retrofit program will not exceed the amount of reserves established by the Company or that the retrofit program will not adversely affect the Company's reputation and result in a decline in sales of the Company's products. In connection with the acquisition of Snorkel, the Company assumed responsibility for a recall program involving HUNTERLIFT scissor lifts manufactured by Snorkel between 1979 and 1992. The recall was prompted by a compliance issue with certain voluntary industry standards. The Company has established a reserve in connection with the recall program. There can be no assurance, however, that the ultimate cost of the HUNTERLIFT recall will not exceed the amount of reserves established by the Company or that the recall will not adversely affect the Company's reputation and result in a decline in sales of the Company's products. In connection with the assumption of the recall, the Company has assumed responsibility for a lawsuit relating to the recall. The lawsuit currently includes approximately 25 plaintiffs and alleges damages in connection with the recall. The Company is defending the lawsuit vigorously. Employees At September 30, 1998, the Company employed approximately 1,750 persons. Approximately 330 employees at the Company's Port Washington, Wisconsin facility are covered under a collective bargaining agreement with the International Association of Machinists and Aerospace Workers, which expires in November 2003. This is the only collective bargaining agreement to which the Company is a party. Substantially all of the approximately 280 employees at the Company's St. Paul, Minnesota facility and the approximately 75 employees of the Company's Oakes, North Dakota facility are employed pursuant to a lease arrangement with CBM Industries, Inc., d/b/a RJ Associates. Under the terms of such agreement, RJ Associates (which is not an affiliate of the Company) leases employees to the Company and pays the employees' salaries and benefits. The Company in turn pays RJ Associates a management fee and reimburses RJ Associates for the employees' salaries and benefits. The agreement can be terminated by either party upon short notice. The Company is obligated to hire the leased employees if the Company terminates the arrangement but continues conducting the operations in which the employees are engaged. The Company does not anticipate any material 11 disruption in its business in the event of a termination of this agreement. The Company has not experienced any work stoppage during the past five years and considers its relations with employees to be good. Item 2. Properties The Company's headquarters are located in Port Washington, Wisconsin, and the Company maintains manufacturing facilities in Minnesota, North Dakota, Kansas, and New Zealand. Set forth below is certain information with respect to the Company's manufacturing and warehouse facilities.
Square Footage Owned/ Location (Approximate) Leased Activities/Products - ----------------------------- ------------------ ----------- ------------------------------------------------------------ Port Washington, Wisconsin 150,000 Owned Telescopic material handlers; research and development Port Washington, Wisconsin 165,000 Leased(1) Boom fabrication and assembly; office and storage Port Washington, Wisconsin 45,000 Leased(2) Skid steer loader assembly St. Paul, Minnesota 100,000 Owned Telescopic material handlers; research and development Eagan, Minnesota 40,000 Leased(3) Parts warehouse; office space Oakes, North Dakota 30,000 Leased(4) Miscellaneous products and component parts Elwood, Kansas 77,000 Owned Aerial work platform assembly Elwood, Kansas 182,000 Leased(5) Aerial work platform fabrication Wathena, Kansas 50,000 Leased(6) Aerial work platform assembly Levin, New Zealand 15,000 Leased(7) Aerial work platforms
- --------------------- (1) The lease is on a month-to-month basis. (2) The initial term of the lease expires on July 14, 2002. The Company has two options to renew the lease for successive three-year terms. (3) The initial term of the lease expires on October 1, 2004. The Company has the option to renew the lease for two additional five-year terms. (4) The initial term of the lease expires on April 1, 2000 (the "Initial Term"). Upon expiration of the Initial Term, the Company has the option to purchase the facility or to extend the lease for an additional 30 months (the "Extended Term"). If the Company chooses to extend the lease term, lease payments during the Extended Term will be applied to the purchase of the facility. (5) The initial term of the lease expires on February 1, 1999. The Company has the option to renew the lease for three additional terms of five years. (6) The lease expires on June 30, 2002. (7) The lease expires on November 17, 2007. The Company also maintains other leased office and warehouse space in Port Washington, Wisconsin, St. Joseph, Missouri, Wootton Bassett, United Kingdom, Sydney and Melbourne, Australia and Auckland, New Zealand. The Company anticipates no significant difficulty in leasing alternative space at reasonable rates in the event of the expiration, cancellation or termination of a lease relating to any of the Company's material leased properties. Certain manufacturing facilities have experienced capacity constraints which have limited production output and have caused manufacturing inefficiencies during fiscal 1998. It is expected that these capacity constraints will continue to affect the material 12 handling business in fiscal 1999. The Company is addressing these capacity constraints through the capacity expansion program described in Item 7 of this Report under "Capital Resources and Liquidity." Item 3. Legal Proceedings Product liability and personal injury claims are asserted against the Company from time to time for various injuries alleged to have resulted from defects in the manufacture and/or design of the Company's products. Product liability and personal injury claims are covered by the Company's comprehensive general liability insurance policies, subject to certain deductible amounts and maximum coverage limits. The Company has reserves for such deductible amounts, which it believes to be adequate based on its previous claims experience. However, there can be no assurance that resolution of product liability and personal injury claims in the future will not have a material adverse effect on the Company. In addition to product liability and personal injury claims, from time to time, the Company is the subject of legal proceedings, including claims involving employee matters, commercial matters and similar claims. There are no such claims currently pending which the Company believes to be material. The Company maintains comprehensive general liability insurance which it believes to be adequate for the continued operation of its business. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters The Company's common stock is quoted on the Nasdaq National Market under the symbol "OMQP." As of December 18, 1998, there were 201 record owners of the Company's Common Stock. The following table sets forth, for the fiscal quarters indicated, the high and low bid prices for the Company's Common Stock as reported by the Nasdaq National Market since March 21, 1997, the day trading commenced and dividends declared per share for the periods indicated. Dividends High Low Per Share - ------------------------------------------------------------------------------- Fiscal 1997 - ----------- Second quarter (beginning March 21, 1997) $14 5/8 $14 1/4 -- Third quarter 24 1/4 11 7/8 -- Fourth quarter 25 3/8 18 1/8 $0.01 Fiscal 1998 - ----------- First quarter $21 1/4 $15 1/2 $0.01 Second quarter 26 5/8 19 1/2 0.01 Third quarter 25 3/4 17 1/4 0.01 Fourth quarter 19 1/4 9 0.01 13 Item 6. Selected Consolidated Financial Data The following table sets forth consolidated financial data derived from the consolidated financial statements of the Company or TRAK, as the predecessor to the Company.
Company Predecessor(1) ---------------------------------------------------------------------------------- Fiscal Year Ended Aug. 17, 1995 Oct. 1, 1994 Fiscal Year Ended September 30, through through September 30, -------------------------------- Sept. 30, 1995 Aug. 16, 1995 1994 1998 (2) 1997 (3) 1996 (4) --------- --------- ------------ -------------------------- ---------------------- (dollars in thousands, except per share data) Statement of Operations Data: Net sales........................... $455,653 $264,213 $124,861 $ 12,723 $ 75,401 $60,973 Cost of sales....................... 349,584 192,270 92,688 9,787 57,707 47,208 --------- --------- ------------ -------------------------- ----------------- Gross profit........................ 106,069 71,943 32,173 2,936 17,694 13,765 Selling, general and administrative 47,365 27,717 16,311 1,670 10,903 9,502 expenses............................ --------- --------- ------------ -------------------------- ----------------- Operating income ................... 58,704 44,226 15,862 1,266 6,791 4,263 Interest expense.................... 10,261 6,106 3,434 353 1,379 1,363 Other finance charges............... 2,553 2,182 2,012 269 1,121 699 --------- --------- ------------ -------------------------- ----------------- Income before income taxes.......... 45,890 35,938 10,416 644 4,291 2,201 Provision for income taxes......... 18,547 14,556 4,060 262 1,762 876 --------- --------- ------------ -------------------------- ----------------- Income before extraordinary item and change in accounting principles..... 27,343 21,382 6,356 382 2,529 1,325 Extraordinary item, net(5).......... (545) (782) (314) --- --- --- Cumulative effect of change in accounting principles............... --- --- --- --- (241)(6) --- --------- --------- ------------ -------------------------- ----------------- Net income.......................... $ 26,798 $ 20,600 $ 6,042 $ 382 $ 2,288 $ 1,325 --------- --------- ------------ -------------------------- ----------------- Basic Earnings Per Share: (7)(8) Income before extraordinary item $ 1.92 $ 1.66 $ 0.56 $ 0.03 Extraordinary item(5).......... (0.04) (0.06) (0.03) --- --------- --------- ------------ ------------- Net income..................... $ 1.88 $ 1.60 $ 0.53 $ 0.03 --------- --------- ------------ ------------- Diluted Earnings Per Share: (7)(8) Income before extraordinary item $ 1.90 $ 1.66 $ 0.56 $ 0.03 Extraordinary item(5).......... (0.04) (0.06) (0.03) --- --------- --------- ------------ ------------- Net income..................... $ 1.86 $ 1.60 $ 0.53 $ 0.03 --------- --------- ------------ ------------- Dividends Per Share ................ $ 0.04 $ 0.01 $ 0.00 $ 0.00 --------- --------- ------------ -------------
Company Predecessor (1) ---------------------------------------------------- ---------------------- As of September 30, As of September 30, ---------------------------------------------------- ---------------------- 1998 (2) 1997 (3) 1996 (4) 1995 (9) 1994 (9) ----------- ----------- ------------ ------------- ---------------------- (Dollars in thousands) Balance Data Sheet: Working capital $ 58,892 $ 14,402 $ 13,393 $10,699 $ 260 Total assets........................ 316,462 144,298 139,580 48,332 28,651 Short-term debt..................... 13,750 8,625 3,875 540 9,436 Long-term debt...................... 124,250 25,609 84,566 23,781 2,966 Mandatorily redeemable preferred stock --- --- --- --- 3,262 Stockholders' equity................ 94,969 70,398(10) 12,425(10) 6,383 1,783
14 - ----------------- (1) The Company was organized in 1995 for the purpose of acquiring TRAK, the predecessor company. (2) Amounts as of and for the fiscal year ended September 30, 1998 reflect the acquisition of Snorkel on November 17, 1997. (3) Amounts as of and for the fiscal year ended September 30, 1997 reflect the effects of the Company's initial public offering of common shares on March 20, 1997. (4) Amounts as of and for the fiscal year ended September 30, 1996 reflect the acquisition of Lull on August 15, 1996. (5) Amount in fiscal year 1998 reflects the write-off of deferred finance charges, net of $371 of income tax benefits, in connection with the refinancing of debt. Amount in fiscal 1997 reflects the write-off of deferred finance charges, net of $521 of income tax benefits, in connection with the refinancing of debt. Amount in fiscal year 1996 reflects the write-off of deferred finance charges, net of $200 of income tax benefits, in connection with the refinancing of debt. (6) In October 1994, TRAK adopted Statement of Financial Accounting Standards, No. 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106). The cumulative effect of adopting SFAS 106 was to record a charge of $241, net of income tax benefits. (7) Basic and diluted earnings per share is based on weighted-average shares outstanding of 14,261,000 and 14,392,000, respectively, for the fiscal year ended September 30, 1998, 12,845,000 and 12,905,000, respectively, for the fiscal year ended September 30, 1997 and 11,250,000 in 1996 and 1995. (8) Given the historical organization and capital structure of TRAK, as predecessor to the Company, earnings per share information is not considered meaningful for the predecessor. (9) The changes in the balances as of September 30, 1995 versus September 30, 1994 primarily reflect the acquisition of TRAK by the Company on August 16, 1995 and the related financing thereof. (10) The change in stockholders' equity as of September 30, 1997 versus September 30, 1996 includes $37,516 of proceeds from the Company's initial public offering of common stock which was completed in March 1997. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company was formed for the purpose of acquiring TRAK in August 1995. Subsequent thereto, the Company completed the acquisition of the business of Lull in August 1996 and Snorkel in November 1997. Set forth below is certain information with respect to these acquisitions: Acquisition Date of Acquisition Business Year Founded - ----------- ------------------- -------- ------------ TRAK August 1995 Manufacturer of telescopic material 1954 handlers and skid steer loaders Lull August 1996 Manufacturer of telescopic material 1956 handlers Snorkel November 1997 Manufacturer of aerial work platforms 1959 15 The Company accounted for each of these acquisitions under the purchase method of accounting, with the purchase price allocated to the estimated fair market value of the assets acquired and the liabilities assumed. The excess of the purchase price over the estimated fair market value of the net assets acquired has been allocated to goodwill, resulting in approximately $120.7 million of goodwill at September 30, 1998. The amortization of such goodwill over 40 years will result in an annual noncash charge to future operations of approximately $3.1 million. On November 17, 1997, the Company completed the acquisition of substantially all of the assets of Snorkel. The purchase price paid by the Company for Snorkel was $100 million in cash at closing plus the assumption of certain liabilities. The funds were obtained by the Company pursuant to a secured credit facility which replaced the Company's existing credit facility. The Company is also required to pay an additional purchase price of up to $50 million. Any additional payment will be equal to the amount of the net sales of Snorkel for the twelve-month period commencing on April 1, 1998 and ending on March 31, 1999 (the "Earn-Out Period") in excess of $140 million, such additional amount not to exceed $20 million, plus 70% of the amount of the net sales of Snorkel during the Earn-Out Period in excess of $160 million, such additional amount not to exceed $30 million. The acquisition has been accounted for under the purchase method of accounting with the excess of purchase price over the estimated fair value of net assets acquired recorded as goodwill. Any additional purchase price determined as described above is expected to be recorded as additional goodwill when such amounts are determined. The Company operates in a single industry segment. The Company's principal products consist of material handling and construction equipment utilizing engines of less than 130 horsepower. In addition to specific factors affecting the Company's results of operations as discussed below, certain factors typically recur from period to period. For example, cost of sales is driven to a large extent by the cost of purchased components and raw materials, which typically comprise 80% of the total cost of sales. Other factors affecting cost of sales are production volume and the resultant leveraging of fixed overhead, as well as productivity of the labor force. In addition, selling, general and administrative ("SG&A") expenses include costs related to developing, marketing and selling the Company's products, as well as infrastructure costs for management and systems. While certain SG&A costs vary with the level of net sales, many are relatively fixed over fairly wide ranges of unit volume. It is the Company's strategy to invest in infrastructure costs, in many cases in advance of increased sales. The Company sells its products to national rental centers for rental and to independent equipment dealers for sale and rental. The Company supports its independent equipment dealers in obtaining conventional floor-plan and rental fleet financing to assist in the purchase of its products. Under such financing arrangements, dealers borrow money from independent lenders on a secured basis for up to five years. The Company assists with such financing by providing the independent lenders additional guarantees or other financial support with respect to the obligations of its dealers. In conjunction with these floor-plan arrangements, the Company also provides certain financing benefits to its dealers to support both retail and rental purchases. Such costs are accounted for as other finance charges and approximated $2.0 million, $2.3 million and $2.6 million for the Company for the fiscal years ended September 30, 1996, 1997 and 1998, respectively. Certain manufacturing facilities have experienced capacity constraints which have limited production output and have caused manufacturing inefficiencies during the last nine months affecting sales and gross margins. A major capacity expansion program, which was launched in September 1998 and is described in more detail under "Capital Resources and Liquidity," is expected to address these issues. However, it is expected that these capacity constraints will continue to affect the material handling business in fiscal 1999. The following discussion summarizes the significant factors affecting the consolidated operating results and financial condition of the Company for the year ended September 30, 1998 compared to the year ended September 30, 1997, and the year ended September 30, 1997 as compared 16 to the year ended September 30, 1996. The discussion should be read in conjunction with the consolidated financial statements referenced in Item 14(1) herein. Sales
Fiscal Year Ended September 30, 1998 1997 1996 --------------- --------------- --------------- Commercial telescopic material handlers $242,033 $221,269 $ 96,174 Military telescopic material handlers 20,972 4,510 675 Compact products (1) 23,803 22,327 20,674 Aerial work platforms 137,550 --- --- Parts and other products 31,295 16,107 7,338 --------------- --------------- --------------- $455,653 $264,213 $124,861 --------------- --------------- ---------------
(1) Compact products includes skid steer loaders, mini-excavators, power haulers and power lifters and articulated forklifts and loaders. Results of Operations The following table sets forth for the fiscal years indicated the percentage of net sales represented by certain items reflected in the Company's consolidated statement of income:
Fiscal Year Ended September 30, 1998 1997 1996 --------------- --------------- --------------- Net sales................................... 100.0% 100.0% 100.0% Cost of sales............................... 76.7% 72.8% 74.2% ------------------------------------------------- Gross profit................................ 23.3% 27.2% 25.8% Selling, general and administrative expenses 10.4% 10.5% 13.1% ------------------------------------------------- Operating income............................ 12.9% 16.7% 12.7% Interest expense............................ 2.2% 2.3% 2.8% Other finance charges....................... 0.6% 0.8% 1.6% ------------------------------------------------- Income before income taxes and extraordinary 10.1% 13.6% 8.3% item........................................ Provision for income taxes.................. 4.1% 5.5% 3.2% ------------------------------------------------- Income before extraordinary item............ 6.0% 8.1% 5.1% Extraordinary item.......................... -0.1% -0.3% -0.3% ------------------------------------------------- Net income.................................. 5.9% 7.8% 4.8% -------------------------------------------------
Fiscal Year Ended September 30, 1998 Compared to Fiscal Year Ended September 30, 1997 Net sales for fiscal year 1998 were $455.7 million, an increase of $191.4 million over net sales of $264.2 million for fiscal year 1997. Net sales from Snorkel, acquired on November 17, 1997, accounted for $150.5 million of the $191.4 million increase, while net sales for the existing OmniQuip business increased by $40.9 million, or 15.5%. Commercial sales of telescopic material handlers for fiscal year 1998 were $242.0 million, an increase of $20.8 million, or 9.4%, over fiscal year 1997 reflecting continued strong market growth partially offset by constraints on manufacturing output due to capacity limitations. Military sales were $21.0 million for fiscal 1998 compared to $4.5 million for fiscal 1997 as a result of increased production 17 under the U.S. Army ATLAS contract. Sales of compact products for fiscal year 1998 were $23.8 million, up $1.5 million, or 6.6%, compared to fiscal year 1997 due to the introduction of a new line of mini-excavators in the second fiscal quarter. Sales of parts and other products for fiscal year 1998 were $31.3 million, an increase of $15.2 million, or 94%, over the 1997 period. Of the $15.2 million increase in parts and other products, $12.9 million resulted from the acquisition of Snorkel and the remaining $2.2 million reflected increased demand for parts driven by the increased population of TRAK and Lull units operating in the field. Gross profit for fiscal year 1998 was $106.1 million, an increase of $34.2 million over gross profit of $71.9 million for fiscal year 1997. The increase in gross profit primarily reflected the increase in net sales discussed above. The gross margin decreased to 23.3% for fiscal year 1998 from 27.2% for fiscal year 1997. The decline in gross margin was due to the addition of Snorkel sales at significantly lower gross margin than existing OmniQuip sales, and, to a lesser extent, increased mix of lower margin military sales. Also contributing to the margin decline were manufacturing inefficiencies related to capacity constraints and unsuccessful union organizing activities during the middle of fiscal 1998, higher costs related to the new Millennia series telescopic material handler and higher volume discounts reflecting increased sales to the large national rental companies. It is anticipated that the increased proportion of sales to large national rental companies, including the associated volume discounts, will continue in the foreseeable future. Selling, general and administrative ("SG&A") expenses for fiscal year 1998 were $47.4 million, an increase of $19.6 million over SG&A expenses of $27.7 million for fiscal year 1997. Of the $19.6 million increase, $14.9 million resulted from the acquisition of Snorkel. The remainder was a result of higher research and development expenses and increased SG&A expenses to support higher levels of sales. SG&A expenses as a percentage of net sales declined slightly from 10.4% for fiscal year 1998 compared to 10.5% for fiscal year 1997. Operating income for fiscal year 1998 was $58.7 million, an increase of $14.5 million, or 32.7%, over operating income of $44.2 million for fiscal year 1997 due to the factors discussed above. Operating margin decreased to 12.9% for fiscal year 1998 from 16.7% for fiscal year 1997. The decline in operating margin reflected the factors described above. Interest expense for fiscal year 1998 was $10.3 million, an increase of $4.2 million over interest expense of $6.1 million for fiscal year 1997. The increase in interest expense was due to additional debt incurred to finance the November 1997 acquisition of Snorkel partially offset by a lower average interest rate. Other finance charges, which are primarily comprised of dealer-related finance charges, were $2.6 million for fiscal year 1998 compared to $2.2 million for fiscal year 1997. The increase in finance charges was related to increased financing activity at TRAK and Lull primarily resulting from increased sales volume. Other finance charges as a percentage of net sales decreased from 0.8% to 0.6%. The reduction in finance charges as a percentage of sales primarily reflected the fact that, until recently, Lull and Snorkel have not historically incurred such charges. Provision for income taxes for fiscal year 1998 was $18.5 million compared to $14.6 million for fiscal year 1997. The increase reflected the increase in income before income taxes of $10.0 million. The Company's effective tax rate was 40.4% for fiscal year 1998 compared to 40.5% for fiscal year 1997. Income from continuing operations for fiscal year 1998 was $27.3 million, an increase of $5.9 million over income from continuing operations of $21.4 million for fiscal year 1997, as a result of the factors described above. 18 In November 1997, in connection with the refinancing related to the Snorkel acquisition, the Company incurred an extraordinary charge of $0.5 million, net of $0.4 million of income tax benefits, for the write-off of deferred financing charges. In March 1997, in connection with its initial public offering and the application of the proceeds therefrom to repay indebtedness, the Company incurred an extraordinary charge of $0.8 million, net of $0.5 million of income tax benefits, related to pre-payment penalties and write-off of deferred financing charges. Net income for fiscal year 1998 was $26.8 million, an increase of $6.2 million from net income of $20.6 million for fiscal year 1997, as a result of the factors described above. Basic and diluted earnings per share, before the effect of the extraordinary item discussed above, were $1.92 and $1.90, respectively, for fiscal year 1998. Basic and diluted earnings per share, before the effect of the extraordinary item discussed above, were $1.66 for fiscal year 1997. Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended September 30, 1996 Net sales for fiscal year 1997 were $264.2 million, an increase of $139.4 million over net sales of $124.9 million for fiscal year 1996. Sales of commercial telescopic material handlers for fiscal year 1997 were $221.3 million, an increase of $125.1 million over fiscal year 1996. Military sales were $4.5 million for fiscal 1997 compared to $0.7 million for fiscal 1996 due to the start-up of sales under the U.S. Army ATLAS contract, which had only prototype sales in the 1996 period. Sales of compact products for fiscal year 1997 were $22.3 million, up $1.7 million compared to fiscal year 1996. Sales of parts and other products for fiscal year 1997 were $16.1 million, an increase of $8.8 million over the 1996 period. Of the $125.1 million increase in telescopic material handlers, $93.4 million was due to the acquisition of Lull, and the remaining $31.7 million reflected continued strong growth in TRAK's commercial telescopic business. Increased compact products sales were due partly to the acquisition of Lull and increased demand in North America and internationally outside of Europe, offset by reduced shipments to Europe due to the Company's European distributor being acquired by a competitor. Of the $8.8 million increase in parts and other products, $6.6 million resulted from the acquisition of Lull and $2.2 million reflected increased demand for parts driven by the increased population of TRAK units operating in the field. Gross profit for fiscal year 1997 was $71.9 million, an increase of $39.8 million over gross profit of $32.2 million for fiscal year 1996. The increase in gross profit primarily reflected the increase in net sales discussed above. The gross margin increased to 27.2% for fiscal year 1997 from 25.8% for fiscal year 1996. The improvement in gross margin was due to improved manufacturing efficiencies at all three Company plants, price increases that were implemented in early 1997, economies due to higher volumes and increased mix of telescopic material handlers which carry higher margins than other products. Partially offsetting these improvements was the effect of the acquisition of Lull, whose gross margin has historically been lower than that of TRAK. Selling, general and administrative expenses for fiscal year 1997 were $27.7 million, an increase of $11.4 million over SG&A expenses of $16.3 million for fiscal year 1996. Of the $11.4 million increase, $7.3 million resulted from the acquisition of Lull. SG&A expenses as a percentage of net sales decreased to 10.5% for fiscal year 1997 from 13.1% for fiscal year 1996. This decrease in the SG&A percentage primarily reflected the effect of the acquisition of Lull, whose SG&A percentage has historically been lower than that of TRAK. Operating income for fiscal year 1997 was $44.2 million, an increase of $28.4 million over operating income of $15.9 million for fiscal year 1996. Operating margin increased to 16.7% for fiscal year 1997 from 12.7% for fiscal year 1996. The improvements in operating income and operating margin reflected the factors described above. 19 Interest expense for fiscal year 1997 was $6.1 million, an increase of $2.7 million over interest expense of $3.4 million for fiscal year 1996. The increase in interest expense was due primarily to the increased debt incurred to finance the August 1996 acquisition of Lull, partially offset by subsequent reduction of debt with proceeds from the initial public offering in March 1997 and with cash flow from operations. Other finance charges, which are primarily comprised of dealer-related finance charges, were $2.3 million for fiscal year 1997 compared to $2.0 million for fiscal year 1996. The increase in finance charges was related to increased financing activity at TRAK primarily resulting from increased sales volume. Other finance charges as a percentage of net sales decreased from 1.6% to 0.9%. The reduction in finance charges as a percentage of sales primarily reflected the fact that Lull has not historically incurred such charges. Provision for income taxes for fiscal year 1997 was $14.6 million compared to $4.1 million for fiscal year 1996. The increase reflected the increase in income before income taxes of $25.5 million and, to a lesser extent, an increase in the effective tax rate between these periods. The Company's effective tax rate was 40.5% for fiscal year 1997 compared to 39.0% for fiscal year 1996. Income from continuing operations for fiscal year 1997 was $21.4 million, an increase of $15.0 million over income from continuing operations of $6.4 million for fiscal year 1996, as a result of the factors described above. In March 1997, in connection with the initial public offering and the application of the proceeds therefrom to repay indebtedness, the Company incurred an extraordinary charge of $0.8 million, net of $0.5 million of income tax benefits, related to prepayment penalties and write-off of deferred financing charges. In August 1996, in connection with refinancing of debt associated with the Lull acquisition, the Company incurred an extraordinary charge of $0.3 million, net of $0.2 million of income tax benefits, related to write-off of deferred financing charges. Net income for fiscal year 1997 was $20.6 million, an increase of $14.6 million from net income of $6.0 million for fiscal year 1996, as a result of the factors described above. Diluted earnings per share for fiscal year 1997 were $1.60, an increase of $1.07 from diluted earnings per share of $0.53 for fiscal year 1996 as a result of the increase in net income described above partially offset by an increase in the weighted average shares outstanding from 11.3 million to 12.8 million. Capital Resources and Liquidity Net cash provided by operating activities of the Company was $17.7 million for fiscal year 1998. Working capital (excluding the effects of changes in cash and current portions of long-term debt) increased by $19.9 million in the period, primarily reflecting a $28.1 million increase in accounts receivable, and a $9.8 million increase in inventories, partially offset by a $15.1 million increase in accounts payable and a $3.7 million increase in accrued liabilities. Accounts receivable increased primarily due to increased sales levels and timing of shipments at the end of the year. Inventories increased due to higher sales volume and capacity constraints which prevented manufacturing operations from achieving the planned production schedules. The increase in accounts payable primarily reflected increased inventory purchases resulting from increases in production schedules. The increase in accrued liabilities primarily reflected increases in accruals related to customer volume rebate programs. Application of customer volume rebates subsequent to September 30, 1998 will adversely impact cash flows in the first and second quarters of fiscal 1999. Net cash used in investing activities was $112.8 million, including $9.9 million for capital expenditures and $102.1 million for acquisition of 20 the net assets of Snorkel. Capital expenditures in fiscal 1998 were primarily for information systems and capacity improvements. These cash requirements were financed with a new credit facility as described below. The cash balance as of September 30, 1998 primarily reflected cash balances of the Company's Australian subsidiary. Net cash provided by operating activities of the Company was $21.6 million for fiscal year 1997. Working capital (excluding the effects of changes in cash and current portions of long-term debt) increased by $5.4 million in the period, primarily reflecting increases in accounts receivable and inventories related to growth in sales volume. Cash provided by operating activities of the Company for the period was used primarily to finance capital expenditures of $3.0 million, to make payments to former TRAK shareholders of $1.0 million tied to receipt of orders under contracts with the U.S. Army and to repay existing indebtedness. Net cash provided by operating activities of the Company was $8.6 million for the fiscal year 1996. Working capital (excluding the effects of changes in cash and current portions of long-term debt) decreased by $1.4 million in the period which primarily reflected increases in accounts payable and other current liabilities partially offset by increases in accounts receivable and inventories. Cash provided by operating activities of the Company for the period was used primarily to finance capital expenditures of $1.4 million, to make payments to former TRAK shareholders of $0.4 million tied to receipt of orders under contracts with the U.S. Army and to repay existing indebtedness. The aggregate purchase price paid by the Company for Lull in August 1996 totaled approximately $69.0 million plus assumed liabilities of $14.6 million. The acquisition was financed with additional borrowings under the Company's amended credit facilities. On March 20, 1997, the Company completed its initial public offering of common stock, selling 3 million primary and 6.2 million secondary shares (including shares issued upon exercise of the underwriters' overallotment option) for $14 per share, before underwriting discounts and commissions. Proceeds to the Company from the offering of $37.6 million (net of expenses of the offering of $1.7 million) were used to repay $22.6 million of subordinated debt (including accrued interest and prepayment fees) and $15.0 million of bank term debt. On March 11, 1998, a secondary public offering of the common stock of the Company became effective, in which Harbour Group Investments III, L.P. and an affiliate sold an aggregate of 3.6 million shares of common stock at an offering price of $25.50 per share, less underwriting discounts and commissions. No proceeds from the secondary public offering were received by the Company. During November 1997, in connection with the acquisition of Snorkel, the Company entered into a new credit facility which replaced the existing loan and security agreement. The new agreement provides for a $165.0 million credit facility consisting of a $40.0 million revolving credit facility and a $125.0 million term loan. The term loan requires quarterly principal payments ranging from $2.5 million to $6.25 million commencing on February 28, 1998 with the final maturity on November 17, 2004. Borrowings under the agreement bear interest at a rate that is determined from a pricing grid based on the Company's leverage ratio (debt / EBITDA). At September 30, 1998, the interest rate under this agreement was prime or LIBOR plus 1.0%. In conjunction with entering into the new credit facility, the Company recognized an extraordinary loss in November 1997 of $0.5 million attributable to the write-off of $0.9 million of unamortized deferred financing fees, net of related tax benefits. Amounts outstanding under the credit facility at September 30, 1998 were $138 million. In addition the Company had $0.2 million in outstanding letters of credit under this revolving credit facility. At September 30, 1998, the Company had unused borrowing capacity of $15.8 million under 21 this facility. The Company was in compliance with the financial covenants of its facilities as of September 30, 1998. Pursuant to the Snorkel acquisition, the Company will be required to pay an additional purchase price of up to $50 million in May 1999. The additional payment will be equal to the amount of the net sales of Snorkel for the twelve-month period commencing on April 1, 1998 and ending on March 31, 1999 in excess of $140 million, such additional amount not to exceed $20 million, plus 70% of the amount of the net sales of Snorkel during the Earn-Out Period in excess of $160 million, such additional amount not to exceed $30 million. Based on the performance of Snorkel since April 1, 1998, the Company expects this payment to be material and intends to finance such payment through an increase in the existing credit facility. Such an increase in the credit facility would be subject to approval by the banks and will likely result in a higher interest rate. As the result of a major capacity expansion program for telescopic material handlers launched in September 1998, the Company's capital expenditures for fiscal year 1999 will be higher than normal. It is expected that total capital expenditures for the year ending September 30, 1999 will be approximately $22 million, approximately $16 million of which is related to the capacity expansion program. These capital expenditures are expected to be financed through internal cash flow and existing credit lines, with the exception of approximately $4 million related to the Oakes, North Dakota building expansion which will most likely be financed through a capital lease. It is anticipated that approximately 75% of the capital spending for fiscal year 1999 will occur in the first half of the fiscal year. Backlog The Company's backlog as of September 30, 1998 was $172.7 million, of which $36.3 million relates to the ATLAS military contract. It is expected that substantially all of the commercial backlog and approximately 80% of the military backlog will be shipped before September 30, 1999. Market Risk In the ordinary course of business, the Company is exposed to foreign currency and interest rate risks, which the Company does not currently consider to be material. These exposures primarily relate to having investments denominated in foreign currencies and to changes in interest rates. Fluctuations in currency exchange rates can impact operating results, including net sales and operating expenses. The Company may utilize derivative financial instruments, including forward exchange contracts and swap agreements, to manage certain of its foreign currency and interest rate risks that it considers practical to do so. The Company currently has $67.5 million outstanding under an interest rate swap agreement which fixes LIBOR at 6.24% through November 2004. The Company does not enter into derivative financial instruments for trading purposes. Market risks that the Company currently has elected not to hedge relate to foreign currency exposure and the portion of the floating rate debt not covered by the interest rate swap. New Accounting Pronouncements In June 1997 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). The statement establishes standards for reporting and display of comprehensive income and components in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 is effective for years beginning after December 15, 1997. The Company is continuing to analyze SFAS 130 and does not currently expect it to have a significant impact on its financial statement presentation. 22 In June 1997 the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). The statement requires that the Company report certain information if specific requirements are met about operating segments of the Company including information about services, geographic areas of operation and major customers. SFAS 131 is effective for years beginning after December 15, 1997. The Company is reviewing the applicability of SFAS 131 on its future reporting requirements. In June 1998 the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The statement establishes accounting and reporting standards for derivative instruments and for hedging activities and requires recognition of all derivatives on the balance sheet measured at fair value. SFAS 133 is effective for all fiscal quarters beginning after June 15, 1999. The Company is continuing to evaluate the provisions of SFAS 133 to determine its impact on financial position and results of operations. Year 2000 The Company utilizes software and related computer technologies essential to its operations that use two digits rather than four to specify the year, which could result in a date recognition problem with the transition to the year 2000. The Company has established a plan, utilizing third-party consultants where necessary, to assess the potential impact of the year 2000 on the Company's systems and operations and to implement solutions to address this issue. The Company has substantially completed the assessment of its internal systems for year 2000 compliance issues. The Company's plan for remediation includes a combination of repair and replacement of affected systems. For the Company's internal systems at TRAK and Lull, this remediation is an incidental consequence of the ongoing implementation of a new integrated core business system. The Company expects the remediation phase to be completed by June 1999 and for testing to be conducted in July 1999. For the Company's internal systems at Snorkel, this remediation is a software patch for the existing system which has been implemented and is currently being tested. The Company expects that all critical systems will be year 2000 compliant by July 31, 1999. Substantially all of the costs incurred, and expected to be incurred, to achieve year 2000 compliance have been and are a part of ongoing expenditures to upgrade systems. The Company is dependent upon various third parties, including certain product suppliers, to conduct its business operations. The failure of mission-critical third parties to achieve year 2000 compliance could have a material effect on the Company's operations. The Company is presently in the assessment phase of its year 2000 plan with respect to the Company's suppliers, vendors and service providers for year 2000 compliance. The Company expects to complete the assessment phase by March 1999. The Company plans to develop a contingency plan by June 1999 in the event its systems or its mission-critical vendors do not achieve year 2000 compliance. However, there can be no assurance that the Company will not experience unanticipated costs and/or business interruptions due to year 2000 problems in its internal systems or its supply chain, or that such costs and/or interruptions will not have a material adverse effect on the Company's consolidated results of operations. Cautionary Statements Regarding Forward-Looking Statements Certain statements included herein are forward-looking statements concerning the Company's operations, economic performance and financial condition. Such statements are subject to various risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including cyclical fluctuations in demand, manufacturing capacity constraints and production inefficiencies, stiffer competition from larger and better capitalized companies, the effects on price and margin of the rapid consolidation of distributors, field warranty campaigns for certain products, loss of, or reduced orders under, the Company's contract for the sale of ATLAS vehicles, issues related to year 2000 compliance, the inability to make complementary 23 acquisitions, or to integrate any such acquisitions, and risks associated with the substantial borrowings that may be necessary to finance acquisitions. Item 7a. Quantitative and Qualitative Disclosures about Market Risk The information required by this item is set forth under the caption "Market Risk" of Item 7 of this Report, which information is incorporated herein by reference thereto. 24 Item 8. Financial Statements and Supplementary Data Report of Independent Accountants To the Board of Directors and Stockholders of OmniQuip International, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of OmniQuip International, Inc. and its wholly-owned subsidiaries at September 30, 1998 and 1997 and the results of their operations and their cash flows for each of the three fiscal years in the period ended September 30, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP St. Louis, Missouri November 3, 1998 25 OMNIQUIP INTERNATIONAL, INC. Consolidated Balance Sheet September 30, 1998 (Dollars in thousands, except per share data) - --------------------------------------------------------------------------------
September 30, 1998 1997 Assets Current assets: Cash $ 4,684 $ 5 Accounts receivable, net 66,580 22,689 Inventories 71,065 30,956 Prepaid expenses and other current assets 10,020 6,640 ----------- ------------ Total current assets 152,349 60,290 Property, plant and equipment, net 41,375 17,130 Goodwill 120,746 65,359 Other assets, net 1,992 1,519 $ 316,462 $ 144,298 =========== =========== Liabilities and stockholders' equity Current liabilities: Current portion of long-term debt $ 13,750 $ 8,625 Accounts payable 47,834 20,433 Accrued liabilities 31,873 16,830 ----------- ----------- Total current liabilities 93,457 45,888 ----------- ----------- Long-term debt 124,250 25,609 Other noncurrent liabilities, net 418 422 Deferred income taxes 3,368 1,981 ----------- ----------- 128,036 28,012 ----------- ----------- Commitments and contingencies (Notes 4, 7, 13 and 15) Stockholders' equity: Preferred stock, $.01 par value, 1,500,000 shares authorized; no shares issued and outstanding Common stock, $.01 par value, 100,000,000 shares authorized; 14,270,000 and 14,250,000 shares issued and outstanding, respectively 143 143 Additional paid-in capital 44,128 43,726 Other (754) (352) Cumulative translation adjustment (1,657) --- Retained earnings 53,109 26,881 ----------- ----------- Total stockholders' equity 94,969 70,398 ----------- ----------- $ 316,462 $ 144,298 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 26 OMNIQUIP INTERNATIONAL, INC. Consolidated Statement of Income September 30, 1998 (In thousands, except per share data) - --------------------------------------------------------------------------------
For the Fiscal Year Ended September 30, 1998 1997 1996 Net sales $ 455,653 $ 264,213 $ 124,861 Cost of sales 349,584 192,270 92,688 -------------- ---------------- --------------- Gross profit 106,069 71,943 32,173 Selling, general and administrative expenses 47,365 27,717 16,311 -------------- ---------------- --------------- Operating income 58,704 44,226 15,862 -------------- ---------------- --------------- Other expenses: Interest on indebtedness 10,261 5,578 2,384 Interest on indebtedness - related parties - 528 1,050 Other finance charges 2,597 2,259 1,981 Other, net (44) (77) 31 -------------- ---------------- --------------- 12,814 8,288 5,446 -------------- ---------------- --------------- Income before income taxes and extraordinary item 45,890 35,938 10,416 Provision for income taxes 18,547 14,556 4,060 -------------- ---------------- --------------- Income before extraordinary item 27,343 21,382 6,356 Extraordinary item - loss on refinancing of long-term debt, net of income tax benefit of $371, $521 and $200 in 1998, 1997 and 1996, respectively (545) (782) (314) -------------- ---------------- --------------- Net income $ 26,798 $ 20,600 $ 6,042 ============== ================ =============== Basic earnings per share: Income before extraordinary item $ 1.92 $ 1.66 $ 0.56 Extraordinary item (0.04) (0.06) (0.03) -------------- ---------------- --------------- Net income $ 1.88 $ 1.60 $ 0.53 ============== ================ =============== Weighted average shares 14,261 12,845 11,250 ============== ================ =============== Diluted earnings per share: Income before extraordinary item $ 1.90 $ 1.66 $ 0.56 Extraordinary item (0.04) (0.06) (0.03) -------------- ---------------- --------------- Net income $ 1.86 $ 1.60 $ 0.53 ============== ================ =============== Weighted average shares 14,392 12,905 11,250 ============== ================ ===============
The accompanying notes are an integral part of these consolidated financial statements. 27 OMNIQUIP INTERNATIONAL, INC. Consolidated Statement of Changes in Stockholders' Equity September 30, 1998 (Dollars in thousands) - --------------------------------------------------------------------------------
Additional Cumulative Common paid-in translation Retained Stock capital Other adjustment Earnings Total Balance, September 30, 1995 $ 113 $ 6,240 $ (352) $ - $ 382 $ 6,383 Net income - - - - 6,042 6,042 ----------- ------------- --------------- ------------- ------------- ------------- Balance, September 30, 1996 113 6,240 (352) - 6,424 12,425 Common stock issued 30 37,486 - - - 37,516 Net income - - - - 20,600 20,600 Dividends paid - - - - (143) (143) ----------- ------------- --------------- ------------- ------------- ------------- Balance, September 30, 1997 143 43,726 (352) - 26,881 70,398 Issuance of restricted stock - 402 (402) - - - Cumulative translation adjustment - - - (1,657) - (1,657) Net income - - - - 26,798 26,798 Dividends paid - - - - (570) (570) ----------- ------------- --------------- ------------- ------------- ------------- Balance, September 30, 1998 $ 143 $ 44,128 $ (754) $ (1,657) $ 53,109 $ 94,969 =========== ============= =============== ============= ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 28 OMNIQUIP INTERNATIONAL, INC. Consolidated Statement of Cash Flows September 30, 1998 (Dollars in thousands) - --------------------------------------------------------------------------------
For the Fiscal Year Ended September 30, 1998 1997 1996 Cash flows from operating activities: Net income $ 26,798 $ 20,600 $ 6,042 Adjustments to reconcile net income to net cash provided by operating activities, excluding the effect of acquisitions: Depreciation 4,618 2,022 1,175 Amortization 3,285 1,996 571 Deferred income tax provision (benefit) 1,983 804 (712) Loss on refinancing of long-term debt 916 1,303 514 (Increase) decrease in current assets: Accounts receivable, net (28,090) (1,011) (1,264) Inventories (9,846) (3,416) (3,628) Prepaid expenses and other current assets (742) (670) (39) Increase (decrease) in current liabilities: Accounts payable 15,106 (462) 2,397 Other current liabilities 3,709 188 3,946 Other (22) 241 (433) -------------- -------------- -------------- Net cash provided by operating activities 17,715 21,595 8,569 -------------- -------------- -------------- Cash flows from investing activities: Acquisition of net assets of Lull Industries, Inc. - - (69,007) Acquisition of net assets of Snorkel Division of Figgie International Inc., net (102,111) - - Capital expenditures, net (9,921) (3,021) (1,404) Payments to former TRAK shareholders for ATLAS program (527) (1,025) (446) Other (274) 247 (133) -------------- -------------- -------------- Net cash used in investing activities (112,833) (3,799) (70,990) -------------- -------------- -------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 125,000 - 74,000 Proceeds from initial public offering - 37,516 - Net borrowings (payments) on revolver 20,891 (4,332) (3,542) Payments on long-term debt (42,125) (50,885) (6,500) Payments of dividends (570) (143) - Financing costs incurred (1,742) - (1,485) -------------- -------------- -------------- Net cash provided by (used in) financing activities 101,454 (17,844) 62,473 -------------- -------------- -------------- Effect of exchange rate changes on cash (1,657) - - -------------- -------------- --------------
The accompanying notes are an integral part of these consolidated financial statements. 29
Net change in cash 4,679 (48) 52 Cash at beginning of period 5 53 1 -------------- -------------- -------------- Cash at end of period $ 4,684 $ 5 $ 53 ============== ============== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest on indebtedness $ 10,156 $ 5,622 $ 2,619 ============== ============== ============== Income taxes $ 10,342 $ 14,543 $ 3,672 ============== ============== ==============
The accompanying notes are an integral part of these consolidated financial statements. 30 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- 1. Organization OmniQuip owns 100% of the outstanding common stock of its subsidiaries, TRAK International, Inc. (TRAK), Lull International, Inc. (Lull) and Snorkel International, Inc. (Snorkel). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. On September 30, 1996, OmniQuip's Board of Directors authorized OmniQuip to split its shares of common stock at a rate of 10 to 1, thereby increasing issued and outstanding shares from 1,000,000 to 10,000,000. On February 19, 1997, OmniQuip's Board of Directors authorized OmniQuip to further split its shares at a rate of 1.125 to 1, thereby increasing issued and outstanding shares from 10,000,000 to 11,250,000. All shares and per share amounts in the accompanying consolidated financial statements and notes have been adjusted to give retroactive effect to the stock splits. 2. Initial Public Offering On March 21, 1997, an initial public offering (Offering) of common stock of OmniQuip International, Inc. (OmniQuip or the Company) was completed. The Company sold 3,000,000 newly issued shares at an offering price of $14.00 per share, less underwriting discounts and commissions. The net proceeds to the Company of $37,516 were used to repay a portion of the Company's outstanding indebtedness. Pursuant to the Offering, Harbour Group Investments III, L.P. (HGI III, L.P.), a significant shareholder of the Company, and an affiliate of HGI III, L.P. sold an additional 5,524,200 and 675,800 shares, respectively (including a total of 1,200,000 shares related to an over-allotment option), at $14.00 per share, less underwriting discounts and commissions. The net proceeds of approximately $72,312 and $8,846, respectively, therefrom were paid directly to HGI III, L.P. and an affiliate of HGI III, L.P. 3. Secondary Public Offering On March 11, 1998, a secondary public offering of the common stock of the Company became effective, in which HGI III, L.P. and an affiliate sold an aggregate of 3,600,000 shares of common stock at an offering price of $25.50 per share, less underwriting discounts and commissions. No proceeds from the secondary public offering were received by the Company. 4. Acquisitions The following table summarizes certain information regarding the Company's acquisitions during the past three years: Date Name Business ---- ---- -------- August 16, 1995 TRAK International, Inc. Manufacturer of telescopic material handlers and skid steer loaders August 15, 1996 Lull Industries, Inc. Manufacturer of telescopic material handlers November 17, 1997 Snorkel Division of Figgie Manufacturer of aerial work International Inc. platforms During the past three years, the Company has made acquisitions which have significantly expanded its product lines. These acquisitions were each accounted for using the purchase method of accounting and 31 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- financed primarily through bank borrowings, resulting in an increase in the Company's outstanding debt. Results of operations of each acquired company have been included in the Company's consolidated financial statements from the date of acquisition. The purchase price of each acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The excess of purchase price over the estimated fair value of net assets acquired was, in each instance, recorded as goodwill. The purchase price for Lull and Snorkel were allocated as follows: Lull Snorkel --------------- --------------- Accounts receivable, net $ 7,572 $ 15,801 Inventories 11,232 30,263 Prepaid expenses and other current assets 1,937 3,234 Property, plant and equipment 7,050 18,924 Goodwill 55,841 57,518 Accounts payable (7,392) (12,295) Accrued liabilities (7,233) (11,334) --------------- --------------- $ 69,007 $ 102,111 --------------- --------------- The following table sets forth pro forma information for the Company as if the acquisition of Snorkel had taken place on October 1, 1996 (after giving effect to certain pro forma adjustments and including the pro forma effects of the Offering). This information is unaudited and does not purport to represent actual revenue, net income and earnings per share had the acquisition and the Offering actually occurred on October 1, 1996.
PRO FORMA INFORMATION (UNAUDITED) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 1997 -------------- -------------- Net sales $ 471,545 $ 421,345 Income before extraordinary loss 26,473 27,320 Diluted earnings per common share before extraordinary loss 1.84 1.92
Under the TRAK acquisition agreement, the purchase price was increased for orders received from the U.S. Army under contracts for the delivery of rough terrain telescopic material handlers (the ATLAS Program) for a period of five years from August 17, 1995. Amounts paid to TRAK's former owners totaling $1,998 have been reflected as additional goodwill in the accompanying consolidated financial statements. No further payments under the earn-out provisions of the TRAK acquisition agreement will be made to the former TRAK owners. 32 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Under the Snorkel acquisition agreement, the purchase price may be increased by up to $50,000 based on Snorkel's net sales between April 1, 1998 and March 31, 1999; such additional purchase price consideration, which is required to be paid in May 1999, is expected to result in additional goodwill for financial reporting purposes. Based on the performance of Snorkel since April 1, 1998, the Company expects this payment to be material and intends to finance such payment through an increase in the existing credit facility. Such an increase in the credit facility would be subject to approval by the banks and will likely result in a higher interest rate. 5. Summary of Significant Accounting Policies The accounting policies utilized by OmniQuip require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. The significant accounting policies followed by OmniQuip are described below and are in conformity with generally accepted accounting principles. Business The Company is principally engaged in the manufacture and sale of rough terrain telescopic material handlers, aerial work platforms and skid steer loaders to commercial customers, national rental fleets and the U.S. Government. U.S. Army contract The Company was awarded a contract to serve as the sole supplier of ATLAS, a telescopic material handler, for the U.S. Army and related entities. The Company shipments under the contract commenced in fiscal 1997. As discussed in Note 4, the purchase price for TRAK has been adjusted for orders received under the contract. Revenue recognition Revenue is recognized upon shipment to the customer. Costs and related expenses to manufacture the products are recorded as costs of sales when the related revenue is recognized. Foreign currency translation The accounts of the Company's foreign subsidiaries are maintained in their respective local currencies. The accompanying consolidated financial statements have been translated and adjusted to reflect U.S. dollars on the basis presented below. Assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the period. Adjustments resulting from the process of translating the consolidated amounts into U.S. dollars are accumulated in a separate translation adjustment account, included in stockholders' equity. Common stock and additional paid-in capital are translated at the historical U.S. dollar equivalent in effect at the date of acquisition. Foreign currency transaction gains and losses are included in earnings currently. The foreign currency transaction gains and losses for the year ended September 30, 1998 were not material. Cash and cash equivalents For purposes of the consolidated statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 33 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Relationships with suppliers The Company purchases several of its key component parts primarily from specific suppliers. The Company believes that the supply of these components and the number of alternative suppliers are adequate. Inventories Inventories are stated at the lower of cost, determined using the first-in, first-out (FIFO) method, or market. Obsolete or unsalable inventories are reflected at their estimated realizable values. Inventories relating to the U.S. Army contract are stated at actual production costs, including manufacturing overhead and direct engineering and tooling costs. The contract costs reimbursed by the U.S. Army are considered progress payments and have been offset against inventories. Title to all inventories related to the U.S. Army contract for which progress payments have been received vests with the U.S. Army. Property, plant and equipment Property, plant and equipment was recorded at estimated fair market value under the purchase method of accounting as of the acquisition dates for TRAK, Lull and Snorkel as described in Note 4. Additions to property, plant and equipment subsequent to the acquisition dates are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets which range from three to thirty-nine years. Expenditures for repairs, maintenance and minor renewals are charged to income as incurred. Expenditures which improve an asset or extend its estimated useful life are capitalized. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Goodwill Goodwill resulting from the acquisitions described in Note 4 is stated at cost and is being amortized on a straight-line basis over 40 years. Amortization expense for the fiscal years ended September 30, 1998, 1997 and 1996 was approximately $2,952, $1,664 and $400, respectively. Accumulated amortization totaled $5,043 and $2,091 at September 30, 1998 and 1997, respectively. The Company assesses the carrying value of goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based on an analysis of future expected cash flows from the underlying operations of the Company. Management believes that there has been no impairment at September 30, 1998. Other noncurrent assets Expenses associated with the issuance of debt instruments are capitalized by the Company and amortized over the respective terms of the debt instruments. Net deferred financing costs included in other assets at September 30, 1998 and 1997 were $1,522 and $941, respectively. Research and development costs Research and development costs are expensed as incurred and included in selling, general and administrative expenses in the accompanying consolidated statement of income. Such costs incurred in the development of new products or significant improvements to existing products totaled approximately $5,130, $1,996 and $1,572 for the fiscal years ended September 30, 1998, 1997 and 1996, respectively. 34 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Warranty costs The Company provides, by a current charge to income, an amount it estimates will be necessary to cover future warranty obligations for products sold during the year. The Company also provides for specific warranty obligations as necessary and appropriate. Income taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes," requiring the use of the liability method of accounting for income taxes. The current or deferred tax consequences of a transaction are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable currently or in future years. Deferred income taxes are provided for temporary differences between the income tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes. Earnings per share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share," which changed the method of computation of earnings per share (EPS). SFAS 128, which was adopted by the Company in fiscal 1998, requires the computation of Basic EPS and Diluted EPS. Basic EPS is based on the weighted average number of outstanding common shares during the period but does not consider dilution for potentially dilutive securities. Diluted EPS reflects the dilutive potential common shares consisting of certain shares subject to stock options. The dilutive potential common shares arising from the effect of outstanding stock options were computed using the treasury stock method, if dilutive. Earnings per share for fiscal 1997 and 1996 have been restated in accordance with SFAS 128. See Note 17 for additional information. Fair value of financial instruments The Company records all financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, other accruals and debt, at cost which approximates fair value. Employee stock-based compensation The Company accounts for employee stock options in accordance with Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees" (APB 25). Under APB 25, the Company applies the intrinsic value method of accounting. For employee stock options accounted for using the intrinsic value method, no compensation expense is recognized because the options are granted with an exercise price equal to the market value of the stock on the date of grant. During fiscal 1997, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), became effective for the Company. SFAS 123 prescribed the recognition of compensation expense based on the fair value of options or stock awards determined on the date of grant. However, SFAS 123 allows companies to continue to apply the valuation methods set forth in APB 25. For companies that continue to apply the valuation methods set forth in APB 25, SFAS 123 mandates certain pro forma disclosures as if the fair value method had been utilized. See Note 10 for additional discussion. 35 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- 6. Financing Long-term debt consists of the following:
SEPTEMBER 30, 1998 1997 ------------- ------------ Revolving line of credit - principal due November 17, 2004; interest due quarterly at either prime, or LIBOR, plus an additional rate determined from a pricing grid based on the Company's leverage ratio; secured by substantially all assets of the Company $ 24,000 $ --- Term loan - principal due in quarterly installments with the final payment due on November 17, 2004; interest due quarterly at either prime, or LIBOR, plus an additional rate determined from a pricing grid based on the Company's leverage ratio; secured by substantially all assets of the Company 114,000 --- Revolving line of credit - principal due August 16, 2003; interest due monthly at either LIBOR plus 2.25% or the bank's corporate base rate plus 1.0%; secured by substantially all assets of the Company; repaid November 17, 1997 --- 3,109 Term loan - principal due in installments with the final payment due August 16, 2003; interest due monthly at either LIBOR plus 2.50% or the bank's corporate base rate plus 1.25%; secured by substantially all assets of the Company; $15,000 repaid in 1997 with proceeds from the Offering; balance repaid on November 17, 1997 --- 31,125 -------------- ------------ 138,000 34,234 Less - Current portion of long-term debt 13,750 8,625 -------------- ------------ $ 124,250 $ 25,609 -------------- ------------
During November 1997, in connection with the acquisition of Snorkel, the Company entered into a new credit facility which replaced the Loan and Security Agreement described below. The new agreement provides for a $165,000 credit facility consisting of a $40,000 revolving credit facility and a $125,000 term loan. The term loan requires quarterly principal payments ranging from $2,500 to $6,250 commencing on February 28, 1998 with final maturity on November 17, 2004. Borrowings under the agreement bear interest at prime, or LIBOR, plus an additional rate (ranging from 0.0% to 1.125%) based on the Company's leverage ratio (debt/EBITDA). At September 30, 1998, the interest rate on the Company's borrowings ranged from 6.4% to 8.3%. Amounts outstanding under this credit facility totaled $138,000 at September 30, 1998. In addition, the Company had approximately $200 in outstanding letters of credit and had unused borrowing capacity of approximately $15,800 under this facility. In conjunction with entering into the new credit facility, the Company recognized an extraordinary loss in November 1997 of $545 attributable to the write-off of $916 unamortized deferred financing fees, net of a related $371 tax benefit. 36 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- The prior Loan and Security Agreement provided for a revolving line of credit facility and two term loans. The revolving line of credit facility provided for borrowings of up to the lesser of $25,000 or a borrowing base calculated based on percentages of eligible receivables and inventories. Borrowings under this line of credit were due August 16, 2003 and bore interest either at the bank's corporate base rate plus 1.00% or LIBOR plus 2.25%. Borrowings under the term loan were due in quarterly installments which commenced in October 1996 with a final payment in August 2003 and bore interest either at the bank's corporate base rate plus 1.25% or LIBOR plus 2.25%. As discussed above, the Loan and Security Agreement was replaced in November 1997. In connection with the repayment of certain debt with proceeds of the Offering described in Note 2, in fiscal 1997, the Company recognized a $782 after-tax extraordinary loss resulting from prepayment fees paid on certain debt and the write-off of applicable capitalized deferred financing costs. The Company has entered into an interest rate swap agreement to reduce the impact of changes in interest rates on its floating rate debt. At September 30, 1998, the interest rate swap agreement had a total notional principal amount of $67,500. This agreement fixes the Company's interest rate on $67,500 of its debt at 6.24% and matures in November 2004. The Company's borrowing agreements contain restrictions and requirements, including limitations on dividends, lease rentals, capital expenditures and investments, new indebtedness, achievement of certain earnings levels, and maintenance of a minimum fixed charge and interest ratios and maximum leverage ratios, among others. At September 30, 1998, the Company was in compliance with such covenants. Maturities of long-term debt for subsequent fiscal years are as follows: 1999 $ 13,750 2000 15,000 2001 18,750 2002 20,000 2003 20,000 Thereafter 50,500 -------------- $138,000 -------------- 7. Lease Commitments The Company leases certain of its facilities, equipment and automobiles under noncancelable lease agreements. These leases have been accounted for as operating leases. Minimum lease payments for subsequent fiscal years under long-term operating leases in effect at September 30, 1998 are as follows: 1999 $ 2,992 2000 2,303 2001 1,577 2002 1,226 2003 883 -------------- 37 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Total minimum lease payments $ 8,981 -------------- Rent expense under all operating leases for the fiscal years ended September 30, 1998, 1997 and 1996 was approximately $2,757, $753 and $513, respectively. 8. Income Taxes Income before provision for income taxes and extraordinary losses was taxed under the following jurisdictions: FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 1997 1996 -------------- --------------- ---------------- Domestic $ 44,435 $ 35,938 $ 10,416 Foreign 1,455 --- --- -------------- --------------- ---------------- $ 45,890 $ 35,938 $ 10,416 -------------- --------------- ---------------- The provision for income taxes, including tax benefits associated with extraordinary charges in 1998, 1997 and 1996, is summarized as follows: FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 1997 1996 -------------- --------------- ---------------- Current: Federal $ 13,329 $ 11,206 $ 3,890 State 2,341 2,025 682 Foreign 523 --- --- -------------- --------------- ---------------- Total current 16,193 13,231 4,572 -------------- --------------- ---------------- Deferred: Federal 1,694 655 (661) State 289 149 (51) -------------- --------------- ---------------- Total deferred 1,983 804 (712) -------------- --------------- ---------------- Provision for $ 18,176 $ 14,035 $ 3,860 income taxes -------------- --------------- ---------------- 38 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Deferred taxes are comprised of the following:
SEPTEMBER 30, 1998 1997 -------------- --------------- Deferred tax assets: Accruals and other reserves $ 5,069 $ 3,959 Inventories 2,017 1,799 Other 935 69 -------------- --------------- Gross deferred tax assets 8,021 5,827 -------------- --------------- Deferred tax liabilities: Property, plant and equipment (1,355) (1,121) Goodwill amortization (2,049) (1,125) Other 36 (292) -------------- --------------- (3,368) (2,538) -------------- --------------- Net deferred tax asset $ 4,653 $ 3,289 -------------- --------------- Current deferred tax asset $ 8,021 $ 5,270 Long-term deferred tax liability (3,368) (1,981) -------------- --------------- Net deferred tax asset $ 4,653 $ 3,289 -------------- ---------------
The income tax provision differs from the amount of expense determined by applying the applicable U.S. statutory federal income tax rate to pre-tax results as a result of the following differences for the fiscal years ended:
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 1997 1996 -------------- -------------- -------------- Statutory rate $ 15,741 $ 12,122 $ 3,445 Non-temporary differences: State tax provision, net 1,799 1,342 169 Other 636 571 246 -------------- -------------- -------------- Total provision $ 18,176 $ 14,035 $ 3,860 -------------- -------------- --------------
9. Retirement plans and related matters The Company offers all full-time non-union employees who have completed six months of service a retirement savings plan under Section 401(k) of the Internal Revenue Code. The Company also offers all union employees who have completed 30 days of service a retirement savings plan under Section 401(k) of 39 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- the Internal Revenue Code. For the fiscal years ended September 30, 1998, 1997 and 1996, Company contributions totaled $1,317, $666 and $310, respectively. The Company offers an incentive program to all salaried employees based upon a formula related to the Company's operating results and an incentive program to union employees based upon a formula related to productivity improvements. Prior to October 1996, certain participants in the salaried program were allowed to defer a portion of their award. At September 30, 1998 and 1997, the Company had accrued liabilities of $1,383 and $1,759, respectively, relative to such incentive programs. For the fiscal years ended September 30, 1998, 1997 and 1996, expenses relating to these plans were $1,486, $1,785 and $875, respectively. 10. Stock Option Plans The Company has two stock option plans: the 1996 Long-Term Incentive Plan and the 1996 Directors Non-Qualified Stock Option Plan (the Directors Plan). A summary of the status of the Company's stock option plans as of September 30, 1998 and 1997 and the changes during the fiscal years then ended is presented below:
1998 1997 ------------------------------- ------------------------------- Weighted- Weighted- average average exercise exercise Shares price Shares price -------------- --------------- -------------- --------------- Outstanding at beginning of year 438,752 $13.98 - - Granted 440,500 $15.97 448,752 $13.87 Exercised - - - - Forfeited (62,002) $16.85 (10,000) $14.00 -------------- -------------- Outstanding at end of year 817,250 $14.84 438,752 $13.98 ============== ============== Exercisable at end of year - - ============== ==============
No options were granted as of September 30, 1996. The 1996 Long-Term Incentive Plan provides for the granting of four types of awards on a stand-alone, combination or tandem basis, including incentive stock options, non-qualified stock options, restricted shares and performance stock awards, to the Company's executive officers and key employees. The incentive stock option plan allows such employees to purchase shares of common stock at prices equal to the fair market value of the stock on the date of grant. Options to purchase up to 1,600,000 shares of common stock may be granted under the incentive stock option plan. Options outstanding at September 30, 1998 totaling 732,250 entitle the holders to purchase common stock at prices ranging between $10.75 and $24.50 per share. Options become exercisable with respect to one-fourth of the shares covered thereby on each anniversary of the date of grant, commencing on the second anniversary of the date granted. The right to exercise the options expires 10 years from the date of grant or earlier if an option holder ceases to be employed by the Company. During the year ended September 30, 1998, 20,000 shares of restricted stock were granted. No performance stock awards have been granted by the Company at September 30, 1998. 40 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- The Directors Plan provides for the granting of options to the Company's directors, who are not employees of the Company, to purchase share of common stock at prices equal to the fair market value of the stock on the date of grant. Options to purchase up to 250,000 shares of common stock may be granted under the Directors Plan. Options outstanding at September 30, 1998 totaling 85,000 entitle the holders to purchase common stock at prices ranging between $13.25 and $14.00 per share. Options become exercisable over a five-year period from the date of grant. All options granted under the Directors Plan expire 10 years from the date of grant. The following table summarizes information for options currently outstanding and exercisable at September 30, 1998:
Options outstanding Options exercisable ------------------------------------------------ ------------------------------- Weighted average Weighted Weighted Range of remaining average average exercise Number contractual exercise Number exercise prices outstanding life price exercisable price ----------------- --------------- --------------- -------------- -------------- --------------- $10-13.25 228,750 10 $ 11.24 - $ - $14-14 361,750 8 $ 14.00 - - $17-25 226,750 9 $ 19.81 - - --------------- -------------- $10-25 817,250 9 $ 14.84 - $ - --------------- --------------
In conjunction with the Offering, the Company adopted the 1996 Executive Stock Option Plan (Executive Plan) pursuant to which non-qualified stock options were granted to certain existing executive shareholders as of the date the registration statement relating to the Offering became effective to acquire an aggregate 562,500 shares of the Company's common stock, subject to adjustment, by tendering existing common stock in payment thereof. The options were exercised immediately after the Offering and the Executive Plan was subsequently terminated. The exercise price of all options was the current market price on the date of exercise and all options were exercised by exchanging shares of previously owned common stock. The grant and exercise of options under the Executive Plan did not result in any increase in the beneficial ownership of common stock by the plan participants from the number of shares owned at the time of the Offering. Under the terms of the Executive Plan, the shares of common stock issued pursuant to the exercise of the options became freely transferable, subject to the restriction of the Stockholder Agreements with each of the executive shareholders, on the last day of the sixth full month following the date of exercise of such options. The provisions of the Stockholder Agreements, which are subject to modification or waiver by the Company, generally permit the sale of 25% of such shares one year after the Offering, an aggregate 50% of such shares two years after the Offering, an aggregate 75% of such shares three years after the Offering and 100% of such shares four years after the Offering. The shares tendered in exercise of options granted under the Executive Plan were issued under promissory notes due in September 2005 as discussed in Note 12. Pro forma disclosures The Company applies APB 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for the stock options because the options were granted with an exercise price equal to the stock price on the date of grant. Had compensation costs for the Company's stock option plans been determined based on the fair value of the options on the grant dates consistent with the methodology prescribed by SFAS 123, the Company's net income and earnings per 41 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- share would have been reduced to the pro forma amounts indicated below. Due to the adoption of the methodology prescribed by SFAS 123, the pro forma results shown below only reflect the impact of stock option awards granted in fiscal 1998 and 1997. Because future stock option awards may be granted, the pro forma impact for fiscal 1998 and 1997 is not necessarily indicative of the impact in future years. FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 1997 -------------- -------------- Net income: As reported $ 26,798 $ 20,600 Pro forma $ 25,828 $ 20,199 Diluted earnings per common share: As reported $ 1.86 $ 1.60 Pro forma $ 1.79 $ 1.58 The fair value of the options granted (which is amortized over the option vesting period in determining the pro forma impact), is estimated on the date of grant using the Black-Scholes multiple option-pricing model with the following weighted average assumptions: FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 1997 -------------- -------------- Expected life of options 6 years 6 years Risk-free interest rates 4.64 - 5.84% 6.29 - 6.85% Expected volatility of stock 57% 65% Expected dividend yield 0.2%-0.3% 0.1% The weighted average fair value of options granted during the fiscal years ended September 30, 1998 and 1997, was $8.06 and $8.99 per share, respectively. 11. Postretirement benefits The Company has adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions" (OPEB or SFAS 106). This standard requires recognition of the cost of providing postretirement benefits during an employee's period of service. The Company provides health care and life insurance benefits for certain employees who retired prior to November 13, 1987 (less than 30 retirees at September 30, 1998). Management plans to fund the premiums as incurred, net of reimbursements received by plan participants. At September 30, 1998 and 1997, 42 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- respectively, the Company had a $418 and $422 accrued postretirement benefit obligation, which is included in "other noncurrent liabilities, net" in the accompanying financial statements. There are no plan assets. For measurement purposes, a 7.5% and 8.5% annual rate of increase in health care premiums was assumed for 1998 and 1997, respectively; this rate was assumed to decrease 1% per year to 5.5% in 2000 and remain at that level thereafter. The weighted average discount rate used to determine the accumulated postretirement benefit obligation was 7.0% and 7.5% at September 30, 1998 and 1997, respectively. The obligation was calculated utilizing the 1983 group annuity mortality tables. The annual periodic postretirement benefit cost for the plan years beginning July 1, 1998, July 1, 1997 and July 1, 1996 is immaterial. 12. Related parties Under terms of a management consulting and advisory services agreement, an affiliate of HGI III, L.P. charges the Company for direct management and administrative services provided to the Company based on actual, direct costs for such services. Charges of $141, $601 and $668 were recorded by the Company during the fiscal years ended September 30, 1998, 1997 and 1996, respectively. Under terms of a management consulting and advisory services agreement, the Company has paid fees totaling $1,224 to affiliates of HGI III, L.P. in consideration of services provided in identifying, negotiating and consummating the acquisitions of TRAK, Lull and Snorkel (as described in Note 4); such amount has been capitalized as acquisition costs and is included in goodwill. In periods prior to the Offering in March 1997, certain members of management have purchased shares of the Company's stock at prices determined by the Board of Directors. The purchase price of the shares has been financed by recourse promissory notes payable to the Company with the shares pledged as security. Such notes are included in stockholders' equity in the accompanying consolidated financial statements. 13. Customer financing arrangements The Company has financing arrangements with certain third-party financing institutions to facilitate dealer purchases of equipment under floor plan and rental fleet arrangements. The aggregate outstanding loan balance on a consolidated basis under these agreements at September 30, 1998 and 1997 approximated $62,351 and $74,994, respectively. Under the Company's agreements, the Company either provides a back-up guarantee of a dealer's credit or an undertaking to repurchase equipment at a discounted price at specified times and under specified circumstances. The Company's actual exposure under these financing arrangements is significantly less than the nominal amount outstanding. Aggregate losses under substantially all of the Company's guarantee obligations to third party lenders with respect to the Company's dealers in each of the calendar years 1998 and 1997 are limited to the greater of $1,500 or 5% of the outstanding loan balance at the previous calendar year end (approximately $55,000 and $47,157 at December 31, 1997 and 1996, respectively). The Company maintains a reserve for potential repurchases of loans in default under the floor plan arrangements described above. This reserve is included in other current liabilities and totaled approximately $909 and $949 at September 30, 1998 and 1997, respectively. Historically, losses under the repurchase provisions of the floor plan arrangements have not been material and have been within management's expectations. 43 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- In conjunction with these floor plan arrangements, the Company incurs dealer-related financing charges at varying rates for a maximum period of six months. The financing charges incurred by the Company for the fiscal years ended September 30, 1998, 1997 and 1996 for all outstanding customer financing arrangements totaled $2,597, $2,259 and $1,981, respectively. 14. Concentrations of credit The Company principally sells its products through a distribution network and through national rental fleets. The Company performs ongoing credit evaluations of its customers. The Company maintains reserves for potential credit losses and historically such losses have been within management's expectations. Including the effects of the consolidation of certain of the Company's customers in fiscal 1998, at September 30, 1998 and 1997, the Company's five largest customers represented approximately 29% and 17%, respectively, of trade receivables. In addition, sales to such customers for the fiscal years ended September 30, 1998, 1997 and 1996 approximated 46%, 22% and 21%, respectively, of the Company's net sales. In the fiscal year ended September 30, 1998, two individual customers each accounted for more than 10% of net sales. No individual customer accounted for more than 10% of net sales for the fiscal years ended September 30, 1997 and 1996. 15. Contingencies The Company is included in various litigation consisting almost entirely of product and general liability claims arising in the normal course of business. The Company maintains insurance policies relative to product and general liability claims and has provided reserves for the estimated cost of the self-insured retention; accordingly, these actions, when ultimately concluded, are not expected to have a material adverse effect on the financial position, cash flows or results of operations of the Company. 16. Supplemental balance sheet information September 30, 1998 1997 -------------- -------------- Accounts receivable: Trade receivables $ 67,610 $ 22,040 Less allowance for doubtful accounts (1,295) (504) Other receivables 265 1,153 -------------- -------------- $ 66,580 $ 22,689 ============== ============== September 30, 1998 1997 -------------- -------------- Inventories: Finished goods $ 15,651 $ 6,090 Work in process 11,751 3,694 Raw materials 43,521 18,313 Unbilled government contract costs 142 2,859 -------------- -------------- $ 71,065 $ 30,956 ============== ============== 44 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Prepaid expenses and other current assets: Deferred income taxes $ 8,021 $ 5,270 Other 1,999 1,370 -------------- -------------- $ 10,020 $ 6,640 ============== ============== Property, plant and equipment: Machinery and equipment $ 35,040 $ 11,265 Buildings and building improvements 11,814 7,465 Land and land improvements 1,010 851 Construction in progress 1,294 763 -------------- -------------- Total property, plant and equipment, at cost 49,158 20,344 Less: accumulated depreciation (7,783) (3,214) -------------- -------------- $ 41,375 $ 17,130 ============== ============== Accrued liabilities: Accrued employee compensation and benefits, including related taxes $ 4,648 $ 2,314 Accrued customer rebates 8,747 5,043 Other accrued warranty 6,470 3,306 Accrued incentive compensation 1,383 1,571 Product liability reserves 1,639 1,118 Accrued income taxes 4,072 Other 4,914 3,478 -------------- -------------- $ 31,873 $ 16,830 ============== ============== 17. Earnings per share of common stock In accordance with SFAS 128, the following represents reconciliations of income before extraordinary loss and weighted average shares outstanding between basic and diluted earnings per share for the fiscal years ended September 30, 1998, 1997 and 1996:
For the fiscal year ended September 30, (in thousands) 1998 1997 1996 Income before Income before Income before extraordinary extraordinary extraordinary loss Shares loss Shares loss Shares Basic $ 27,343 14,261 $ 21,382 12,845 $ 6,356 11,250 Effect of dilutive securities: Stock options - 131 - 60 - - -------------------------- ---------------------------- --------------------------- Diluted $ 27,343 14,392 $ 21,382 12,905 $ 6,356 11,250 ========================== ============================ ===========================
45 OMNIQUIP INTERNATIONAL, INC. Notes to Consolidated Financial Statements September 30, 1998 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- 18. Quarterly financial data (unaudited) Summarized, unaudited quarterly financial data for fiscal 1998, 1997 and 1996 appears below:
For the fiscal year ended September 30, 1998 1997 1996 -------------- -------------- -------------- Net Sales First Quarter $ 84,575 $ 59,166 $ 23,487 Second Quarter 119,378 63,452 27,578 Third Quarter 119,654 74,708 30,449 Fourth Quarter 132,046 66,887 43,347 -------------- -------------- -------------- $ 455,653 $ 264,213 $ 124,861 ============= ============== ============== Gross Profit First Quarter $ 21,142 $ 15,279 $ 6,156 Second Quarter 27,493 17,107 7,234 Third Quarter 27,496 20,413 7,745 Fourth Quarter 29,938 19,144 11,038 -------------- -------------- -------------- $ 106,069 $ 71,943 $ 32,173 ============= ============== ============== Net Income First Quarter $ 4,995 $ 3,978 $ 963 Second Quarter 6,899 4,015 1,352 Third Quarter 6,939 6,643 1,573 Fourth Quarter 7,965 5,964 2,154 -------------- -------------- -------------- $ 26,798 $ 20,600 $ 6,042 ============= ============== ============== Diluted Earnings Per Share First Quarter $ 0.35 $ 0.35 $ 0.09 Second Quarter 0.48 0.35 0.12 Third Quarter 0.48 0.46 0.13 Fourth Quarter 0.56 0.41 0.19
46 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant A definitive proxy statement is expected to be filed with the Securities and Exchange Commission (the "Commission") on or about January 7, 1999. The information required by this item is set forth under the caption "Election of Directors", under the caption "Executive Officers" and under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" of the definitive proxy statement, which information is incorporated herein by reference thereto. Item 11. Executive Compensation The information required by this item is set forth under the caption "Executive Compensation" of the definitive proxy statement, which information is incorporated herein by reference thereto. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" of the definitive proxy statement, which information is incorporated herein by reference thereto. Item 13. Certain Relationships and Related Transactions The information required by this item is set forth under the caption "Certain Transactions" of the definitive proxy statement, which information is incorporated herein by reference thereto. 47 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 1. Financial Statements The following consolidated financial statements of the Company and its subsidiaries and report of independent accountants are filed as a part of this Report: Report of Independent Accountants Consolidated Balance Sheets at September 30, 1998 and 1997 Consolidated Statements of Income for the fiscal years ended September 30, 1998, 1997 and 1996 Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended September 30, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the fiscal years ended September 30, 1998, 1997 and 1996 Notes to Consolidated Financial Statements 2. Financial Statement Schedules Report of Independent Accountants on Financial Statement Schedule S-1 Schedule II - Rule 12-09 Valuation and Qualifying Accounts and S-2 Reserves for the Fiscal Years Ended September 30, 1998 and 1997 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 3. Exhibits The exhibits listed on the accompanying Index to Exhibits are filed as part of this Report. 4. Reports on Form 8-K On August 21, 1998, a Current Report on Form 8-K was filed to report, pursuant to Item 5 thereof, the adoption of a Rights Agreement and declaration by the Board of Directors of the Company of a dividend distribution of one Right for each outstanding share of Common Stock of the Company to stockholders of record at the close of business on August 31, 1998. 48 INDEX TO EXHIBITS Exhibit Description - ------- ----------- 2.1 Asset Purchase Agreement, dated as of July 19, 1997, by and among Figgie International Inc., Figgie International Real Estate Inc., Figgie Properties Inc., Figgie Licensing Corporation, Figgie Risk Management Co. and SKL Lift, Inc. (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on December 2, 1997 (the "December 1997 8-K") and incorporated herein by reference thereto) 2.2 Amendment, dated as of November 9, 1997, by and between Figgie International Inc. and SKL Lift, Inc. (filed as Exhibit 2.2 to the December 1997 8-K and incorporated herein by reference thereto) 3.1 Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-13181), filed with the Commission on October 1, 1996, as amended on November 12, 1996 and February 20, 1997 (the "Registration Statement") and incorporated herein by reference thereto) 3.2 Amended By-laws of the Registrant (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Commission on October 2, 1998 (the "October 1998 8-K") and incorporated herein by reference thereto) 4.1 Rights Agreement, dated as of August 21, 1998, by and between OmniQuip International, Inc. and First Chicago Trust Company of New York, as Rights Agent. The Rights Agreement includes as Exhibit A thereto the Certificate of Designations, Preferences and Rights of Series A Preferred Stock of OmniQuip International, Inc., as Exhibit B thereto the Form of Rights Certificate and as Exhibit C thereto the Summary of Rights to Purchase Series A Preferred Stock (filed as Exhibit 4 to the Company's Current Report on Form 8-K filed with the Commission on August 21, 1998 and incorporated herein by reference thereto) 4.2 Amendment No. 1 to Rights Agreement, dated as of October 2, 1998, by and between OmniQuip International, Inc. and First Chicago Trust Company of New York, as Rights Agent (filed as Exhibit 4 to the October 1998 8-K and incorporated herein by reference thereto) *10.1 Purchase and Stockholder Agreement, dated September 20, 1995, by and between Uniquip Corporation and P. Enoch Stiff (filed as Exhibit 10.1 to the Registration Statement and incorporated herein by reference thereto) *10.2 Stock Pledge Agreement, dated September 20, 1995, by and between P. Enoch Stiff and Uniquip Corporation (filed as Exhibit 10.2 to the Registration Statement and incorporated herein by reference thereto) *10.3 $126,859 Promissory Note, dated September 20, 1995, by P. Enoch Stiff to Uniquip Corporation (filed as Exhibit 10.3 to the Registration Statement and incorporated herein by reference thereto) *10.4 Letter Agreement, dated September 20, 1995, by and between P. Enoch Stiff and Uniquip Corporation (filed as Exhibit 10.4 to the Registration Statement and incorporated herein by reference thereto) *10.5 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996, by and between OmniQuip International, Inc. and P. Enoch Stiff (filed as Exhibit 10.5 to the Registration Statement and incorporated herein by reference thereto) *10.6 Investment Agreement, dated August 16, 1995, by and between P. Enoch Stiff and Harbour Group Investments III, L.P. (filed as Exhibit 10.6 to the Registration Statement and incorporated herein by reference thereto) *10.7 Participation Agreement, dated August 16, 1995, by and between P. Enoch Stiff and Harbour Group Investments III, L.P. (filed as Exhibit 10.7 to the Registration Statement and incorporated herein by reference thereto) *10.8 Purchase and Stockholder Agreement, dated September 20, 1995, by and between Uniquip Corporation and James H. Hook (filed as Exhibit 10.8 to the Registration Statement and incorporated herein by reference thereto) *10.9 Stock Pledge Agreement, dated September 20, 1995, by and between James H. Hook and 49 Uniquip Corporation (filed as Exhibit 10.9 to the Registration Statement and incorporated herein by reference thereto) *10.10 $47,572 Promissory Note, dated September 20, 1995, by James H. Hook to Uniquip Corporation (filed as Exhibit 10.10 to the Registration Statement and incorporated herein by reference thereto) *10.11 Letter Agreement, dated September 20, 1995, by and between James H. Hook and Uniquip Corporation (filed as Exhibit 10.11 to the Registration Statement and incorporated herein by reference thereto) *10.12 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996, by and between OmniQuip International, Inc. and James H. Hook (filed as Exhibit 10.12 to the Registration Statement and incorporated herein by reference thereto) *10.13 Purchase and Stockholder Agreement, dated September 20, 1995, by and between Uniquip Corporation and Curtis J. Laetz (filed as Exhibit 10.13 to the Registration Statement and incorporated herein by reference thereto) *10.14 Stock Pledge Agreement, dated September 20, 1995, by and between Curtis J. Laetz and Uniquip Corporation (filed as Exhibit 10.14 to the Registration Statement and incorporated herein by reference thereto) *10.15 $47,572 Promissory Note, dated September 20, 1995, by Curtis J. Laetz to Uniquip Corporation (filed as Exhibit 10.15 to the Registration Statement and incorporated herein by reference thereto) *10.16 Letter Agreement, dated September 20, 1995, by and between Curtis J. Laetz and Uniquip Corporation (filed as Exhibit 10.16 to the Registration Statement and incorporated herein by reference thereto) *10.17 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996, by and between OmniQuip International, Inc. and Curtis J. Laetz (filed as Exhibit 10.17 to the Registration Statement and incorporated herein by reference thereto) *10.18 Purchase and Stockholder Agreement, dated September 20, 1995, by and between Uniquip Corporation and Robert D. Melin (filed as Exhibit 10.18 to the Registration Statement and incorporated herein by reference thereto) *10.19 Stock Pledge Agreement, dated September 20, 1995, by and between Robert D. Melin and Uniquip Corporation (filed as Exhibit 10.19 to the Registration Statement and incorporated herein by reference thereto) *10.20 $47,572 Promissory Note, dated September 20, 1995, by Robert D. Melin to Uniquip Corporation (filed as Exhibit 10.20 to the Registration Statement and incorporated herein by reference thereto) *10.21 Letter Agreement, dated September 20, 1995, by and between Robert D. Melin and Uniquip Corporation (filed as Exhibit 10.21 to the Registration Statement and incorporated herein by reference thereto) *10.22 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996, by and between OmniQuip International, Inc. and Robert D. Melin (filed as Exhibit 10.22 to the Registration Statement and incorporated herein by reference thereto) *10.23 Purchase and Stockholder Agreement, dated September 20, 1995, by and between Uniquip Corporation and Paul D. Roblee (filed as Exhibit 10.23 to the Registration Statement and incorporated herein by reference thereto) *10.24 Stock Pledge Agreement, dated September 20, 1995, by and between Paul D. Roblee and Uniquip Corporation (filed as Exhibit 10.24 to the Registration Statement and incorporated herein by reference thereto) *10.25 $47,572 Promissory Note, dated September 20, 1995, by Paul D. Roblee to Uniquip Corporation (filed as Exhibit 10.25 to the Registration Statement and incorporated herein by reference thereto) *10.26 Letter Agreement, dated September 20, 1995, by and between Paul D. Roblee and Uniquip Corporation (filed as Exhibit 10.26 to the Registration Statement and incorporated herein by reference thereto) *10.27 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996, by 50 and between OmniQuip International, Inc. and Paul D. Roblee (filed as Exhibit 10.27 to the Registration Statement and incorporated herein by reference thereto) *10.28 OmniQuip International, Inc. 1996 Executive Stock Option Plan (filed as Exhibit 10.28 to the Registration Statement and incorporated herein by reference thereto) *10.29 Form of Option Agreement pursuant to the OmniQuip International, Inc. 1996 Executive Stock Option Plan (filed as Exhibit 10.29 to the Registration Statement and incorporated herein by reference thereto) *10.30 OmniQuip International, Inc. 1996 Long Term Incentive Plan (filed as Exhibit 10.30 to the Registration Statement and incorporated herein by reference thereto) *10.31 OmniQuip International, Inc. 1996 Directors Non-Qualified Stock Option Plan (filed as Exhibit 10.31 to the Registration Statement and incorporated herein by reference thereto) *10.32 Form of Option Agreement pursuant to the OmniQuip International, Inc. 1996 Directors Non-Qualified Stock Option Plan (filed as Exhibit 10.32 to the Registration Statement and incorporated herein by reference thereto) 10.33 Insurance Agreement, dated September 27, 1996, by and between Harbour Group Ltd. and Uniquip Corporation (filed as Exhibit 10.39 to the Registration Statement and incorporated herein by reference thereto) 10.34 Corporate Development Consulting and Advisory Services Letter Agreement, dated September 30, 1996, by and between OmniQuip International, Inc. and Harbour Group Industries, Inc. (filed as Exhibit 10.40 to the Registration Statement and incorporated herein by reference thereto) 10.35 Operations Consulting and Advisory Services Letter Agreement, dated September 30, 1996, by and between OmniQuip International, Inc. and Harbour Group Ltd. (filed as Exhibit 10.41 to the Registration Statement and incorporated herein by reference thereto) 10.36 Collective Bargaining Agreement, effective from November 1, 1994 to October 31, 1998, by and between TRAK International, Inc. and Local 1430, District No. 10 International Association of Machinists and Aerospace Workers (filed as Exhibit 10.48 to the Registration Statement and incorporated herein by reference thereto) 10.37 Contract No. DAAE0795DR012 between TRAK International, Inc. and U.S. Army Tank-Automotive Command (filed as Exhibit 10.49P to the Registration Statement and incorporated herein by reference thereto) 10.38 Floorplan Repurchase Agreement, dated October 2, 1990, by and between TRAK International, Inc. and Deutsche Financial Services and Addendum to Floorplan Repurchase Agreement, dated June 14, 1993, by and between TRAK International, Inc. and Deutsche Financial Services (Deutsche Financial Services as successor to ITT Commercial Finance Corp. and ITT Commercial Finance, a division of ITT Industries of Canada Ltd.) (filed as Exhibit 10.50 to the Registration Statement and incorporated herein by reference thereto) 10.39 Letter Agreement, dated August 21, 1996, by and between TRAK International, Inc. and Deutsche Financial Services (filed as Exhibit 10.51 to the Registration Statement and incorporated herein by reference thereto) 10.40 Agreement, dated January 19, 1995, between CBM Industries, Inc., d/b/a RJ Associates and Lull Industries, Inc. (filed as Exhibit 10.53 to the Registration Statement and incorporated herein by reference thereto) 10.41 Industrial Park Lease, dated April 1, 1995, by and between the City of Oakes and Lull Industries, Inc. (filed as Exhibit 10.54 to the Registration Statement and incorporated herein by reference thereto) 10.42 Indemnification Agreement by and among OmniQuip International, Inc., Harbour Group Investments III, L.P. and Uniquip-HGI Associates, L.P. (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on May 15, 1997 (the "May 1997 10-Q") and incorporated herein by reference thereto) 10.43 Underwriting Agreement, dated March 20, 1997, by and among OmniQuip International, Inc., Harbour Group Investments III, L.P., Uniquip-HGI Associates, L.P., and Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation, Schroder Wertheim & Co. Incorporated and Robert W. Baird & Co. Incorporated, as representatives of the several U.S. underwriters, and 51 Morgan Stanley & Co. International Limited, Credit Suisse First Boston (Europe) Limited, J. Henry Schroder & Co. Limited and Robert W. Baird & Co. Incorporated, as representatives of the several international underwriters (filed as Exhibit 10.1 to the May 1997 10-Q and incorporated herein by reference thereto) 10.44 Credit Agreement, dated November 17, 1997, by and among OmniQuip International, Inc., the certain lending institutions party thereto from time to time, Morgan Stanley Senior Funding, Inc. as Syndication Agent and Arranger, and First Union National Bank, as Administrative Agent and Co-Arranger (filed as Exhibit 10 to the December 1997 8-K and incorporated herein by reference thereto) 10.45 Business Premises Lease Agreement, dated October 27, 1997, by and between Garden Way Incorporated and TRAK International, Inc. (filed as Exhibit 10.55 to the Company's Annual Report on Form 10-K filed with the Commission on December 24, 1997 (the "1997 Form 10-K") and incorporated herein by reference thereto) 10.46 Lease Agreement, dated May 15, 1997, by and between B.M.S. Management, Inc. and Snorkel, a division of Figgie International Inc. (filed as Exhibit 10.56 to the 1997 Form 10-K and incorporated herein by reference thereto) 10.47 Lease Agreement, dated February 1, 1994, by and between SJ Associates, L.P. and Snorkel-Economy, a division of Figgie International Inc. (filed as Exhibit 10.57 to the 1997 Form 10-K and incorporated herein by reference thereto) 10.48 Land Lease, dated as of November 17, 1997, by and between SKL Lift, Inc. and Figgie International Real Estate Inc. (filed as Exhibit 10.58 to the 1997 Form 10-K and incorporated herein by reference thereto) 10.49 Deed of Lease, dated as of November 17, 1997, by and between Snorkel Elevating Work Platforms Limited and Figgie International Real Estate Inc. (filed as Exhibit 10.59 to the 1997 Form 10-K and incorporated herein by reference thereto) 10.50 Agreement for Trademark Assignment and License-Back, dated as of November 17, 1997, by and between Iveco Magirus Brandschutztechnik GmbH, Figgie International Inc. and SKL Lift, Inc. (filed as Exhibit 10.60 to the 1997 Form 10-K and incorporated herein by reference thereto) *10.51 Amended and Restated Management Agreement dated as of June 9, 1997 between Figgie International Inc. and Richard A. Solon (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on February 17, 1998 (the "February 1998 10-Q") and incorporated herein by reference thereto) 10.52 Non-Competition Agreement dated as of June 9, 1997 between Figgie International Inc. and Richard A. Solon (filed as Exhibit 10.2 to the February 1998 10-Q and incorporated herein by reference thereto) 10.53 Underwriting Agreement, dated March 11, 1998, by and among OmniQuip International, Inc., P. Enoch Stiff, Harbour Group Investments III, L.P., Uniquip-HGI Associates, L.P. and Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation, Schroder & Co. Inc. and Robert W. Baird & Co. Incorporated, as representatives of the several U.S. underwriters, and Morgan Stanley & Co. International Limited, Credit Suisse First Boston (Europe) Limited, J. Henry Schroder & Co. Limited and Robert W. Baird & Co. Incorporated, as representatives of the several international underwriters (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on May 15, 1998 (the "May 1998 10-Q") and incorporated herein by reference thereto) 10.54 Indemnification Agreement, dated March 11, 1998, by and among OmniQuip International, Inc., Harbour Group Investments III, L.P., Uniquip-HGI Associates, L.P. and P. Enoch Stiff (filed as Exhibit 10.2 to the May 1998 10-Q and incorporated herein by reference thereto) 10.55 Lease, dated as of June 30, 1998, between PW Investment LLC and TRAK International, Inc. (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q filed with the Commission on August 10, 1998 and incorporated herein by reference thereto) 10.56 Lease Agreement, dated August 19, 1998, by and between Duke Realty Minnesota, LLC and Lull International, Inc. 10.57 Collective Bargaining Agreement, effective from November 1, 1998 to October 31, 2003, by and between TRAK International, Inc. and Local 1430, District No. 10 International Association of Machinists and Aerospace Workers 52 *10.58 Letter Agreement, dated October 1, 1998, by and between OmniQuip International, Inc. and P. Enoch Stiff *10.59 Letter Agreement, dated October 1, 1998, by and between OmniQuip International, Inc. and Curtis J. Laetz *10.60 Letter Agreement, dated October 1, 1998, by and between OmniQuip International, Inc. and Richard G. Mueller *10.61 Letter Agreement, dated October 1, 1998, by and between OmniQuip International, Inc. and Richard A. Solon 21 Subsidiaries of the Registrant 23 Consent of PricewaterhouseCoopers LLP 24 Powers of Attorney 27 Financial Data Schedule *Management contract or compensatory plan or arrangement. 53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OmniQuip International, Inc. By:/s/ Philip G. Franklin ------------------------ Philip G. Franklin Vice President-Finance, Chief Financial Officer, Treasurer and Secretary December 28, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 28, 1998. * President, Chief Executive Officer and Director ________________________ (Principal executive officer) P. Enoch Stiff /s/ Philip G. Franklin Vice President - Finance, Chief Financial Officer, ________________________ Treasurer and Secretary (Principal financial and Philip G. Franklin accounting officer) * Director and Chairman of the Board - ------------------------ Donald E. Nickelson * Director - ------------------------ Peter S. Finley * Director - ------------------------ Jeffrey L. Fox * Director - ------------------------ Samuel A. Hamacher * Director - ------------------------ Paul W. Jones * Director - ------------------------ Jerry E. Ritter 54 * Director - ------------------------ Joseph F. Shaughnessy * Director - ------------------------ Robert L. Virgil By: /s/ Philip G. Franklin ----------------------- Philip G. Franklin Attorney-in-Fact - ------------------ * Such signature has been affixed pursuant to the following Power of Attorney: 55 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. 56 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of OmniQuip International, Inc. Our audits of the consolidated financial statements referred to in our report dated November 3, 1998, listed at Item 14. 1. of the Annual Report on Form 10-K of OmniQuip International, Inc. for the fiscal year ended September 30, 1998 also included an audit of the Financial Statement Schedule listed at Item 14. 2. of such Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP St. Louis, Missouri November 3, 1998 S-1 SCHEDULE II
OMNIQUIP INTERNATIONAL, INC. Rule 12-09 Valuation and Qualifying Accounts and Reserves for the Fiscal Year Ended September 30, 1998 (in thousands) Column A Column B Column C Column D Column E - -------------------------------------------- ------------ -------------------------- ------------ ----------- Additions -------------------------- Balance at Charged to Balance at Beginning Costs and Charged to End of of Expenses Other Period Valuation and Reserve Accounts Period Accounts(1) Deductions - -------------------------------------------- ------------ ------------ ------------- ------------ ----------- Accounts receivable reserve............ $ 504 $153 $ 753 $ 115 $1,295 ======= ==== ====== ===== ====== Excess and obsolete inventory reserves............................ $2,273 $ 7 $1,808 $ 439 $3,649 ====== ==== ====== ===== ======
(1) Relates to the acquisition of Snorkel on November 17, 1997.
Rule 12-09 Valuation and Qualifying Accounts and Reserves for the Fiscal Year Ended September 30, 1997 (in thousands) Column A Column B Column C Column D Column E - -------------------------------------------- ------------ ------------------------- ------------ ----------- Additions ------------------------- Balance at Charged to Balance at Beginning Costs and Charged to End of of Expenses Other Period Valuation and Reserve Accounts Period Accounts Deductions - -------------------------------------------- ------------ ------------ ------------ ------------ ----------- Accounts receivable reserve............ $ 351 $164 $ -- $ 11 $ 504 ======= ==== ====== ===== ======= Excess and obsolete inventory reserves............................ $2,482 $420 $ -- $629 $2,273 ====== ==== ====== ==== ======
S-2 EX-10.56 2 LEASE AGREEMENT PHG/JKB/kk 7/18/98 LEASE AGREEMENT THIS LEASE is executed this 19th day of August, 1998, by and between DUKE REALTY MINNESOTA, LLC, a Minnesota limited liability company ("Landlord"), and LULL INTERNATIONAL, INC., a Delaware corporation ("Tenant"). WITNESSETH: ARTICLE 1 - LEASE OF PREMISES Section 1.01. Basic Lease Provisions and Definitions. A. Leased Premises Address: 2444 Enterprise Drive, Mendota Heights, Minnesota 55120 (the "Building"); located in Enterprise Industrial Center (the "Park"); B. Rentable Area: approximately 39,648 square feet; Landlord shall use commercially reasonable standards, consistently applied, in determining the Rentable Area and the rentable area of the Building. The Rentable Area shall include the area within the Leased Premises plus a pro rata portion of the area covered by the common areas within the Building, as reasonably determined by Landlord from time to time. Landlord's determination of Rentable Area made in good faith shall conclusively be deemed correct for all purposes hereunder, including without limitation the calculation of Tenant's Proportionate Share and Tenant's Minimum Annual Rent. C. Tenant's Proportionate Share: 23.92%; D. Annual Base Rent: 10/01/98 - 09/30/99 $119,736.96 10/01/99 - 09/30/01 $151,058.88 per year 10/01/01 - 09/30/04 $160,970.88 per year; E. Monthly Rental Installments: 10/01/98 - 09/30/99 $ 9,978.08 per month 10/01/99 - 09/30/01 $ 12,588.24 per month 10/01/01 - 09/30/04 $ 13,414.24 per month; F. Term: Six (6) years; G. Commencement Date: October 1, 1998; H. Security Deposit: $13,400.00; I. Guarantor: None; J. Broker: Duke Realty Services Limited Partnership representing Landlord; Duke Realty Services Limited Partnership will not share the broker's compensation with other brokers who may represent Tenant. Landlord is solely responsible for Duke Realty Services Limited Partnership's brokerage compensation and will hold Tenant harmless therefrom. K. Permitted Use: Office and Warehouse Use including for example and without limitation for stocking, service training, light manufacturing, painting and subassembly operations (provided, however, that in the event Tenant uses the Leased Premises for painting, the same shall be done in a paint booth in a location mutually agreed upon by both Landlord and Tenant); L. Addresses for notices: Landlord: Duke Realty Minnesota, LLC 856 Fifth Street South Hopkins, MN 55343-7750 Tenant: Lull International, Inc. 2444 Enterprise Drive Mendota Heights, MN 55120 With a Copy to: OmniQuip International, Inc. 222 East Main Street Port Washington, WI 53074 Address for rental and other payments: Duke Realty Minnesota, LLC NW 7210 P.O. Box 1450 Minneapolis, MN 55485-7210 Section 1.02. Leased Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord, subject to all of the terms and conditions set forth herein, that portion of the Building described in the Basic Lease Provisions consisting of approximately 39,648 rentable square feet and outlined on Exhibit A attached hereto (the "Leased Premises"). Landlord also grants to Tenant, together with and subject to the rights granted from time to time by Landlord to other tenants and occupants of the Building, the right to use the common areas and parking area adjoining the Building. Notwithstanding the foregoing sentence, Landlord grants to Tenant and its customers and invitees the right to exclusive use of not less than fifty percent (50%) of the parking area to the east of the Leased Premises. In the event parking issues arise, Landlord and Tenant hereby agree to work together in good faith to resolve said parking issues. ARTICLE 2 - TERM AND POSSESSION Section 2.01. Term. The term of this Lease ("Lease Term") shall be the period of time specified in the Basic Lease Provisions and shall commence on the Commencement Date described in the Basic Lease Provisions. Upon tender of possession of the Leased Premises to Tenant, Tenant shall have the right to inspect the same and provided the Leased Premises are in the condition required by the Lease, Tenant agrees to execute a letter of understanding acknowledging (i) the Commencement Date of this Lease, and (ii) that Tenant has accepted the Leased Premises for occupancy and that the condition of the Leased Premises (including any tenant finish improvements constructed thereon) and the Building was at the time satisfactory and in conformity with the provisions of this Lease in all respects. -2- Such letter of understanding shall become a part of this Lease. If Tenant takes possession of and occupies the Leased Premises, Tenant shall be deemed to have accepted the Leased Premises as described above, even though Tenant may not have executed the letter of understanding. Section 2.02. Construction of Tenant Improvements. Tenant has personally inspected the Leased Premises and accepts the same "as is" without representation or warranty by Landlord of any kind, except Landlord shall construct in a good and workmanlike manner the improvements in the Leased Premises in accordance with Tenant's plans and specifications which shall be mutually agreed upon by both Landlord and Tenant and attached hereto as Exhibit B, in an amount not to exceed Fifty-nine Thousand Dollars ($59,000.00) ("Landlord's Allowance"). Landlord agrees to competitively bid such improvements. In the event Landlord receives a bid from a qualified, reputable general contractor capable of performing the work on the improvements as provided herein, and such bid is less than Fifty Thousand Dollars ($50,000.00), Tenant shall be entitled to add additional work to the improvements set forth in Exhibit B up to a total cost of Fifty Thousand Dollars ($50,000.00). Tenant hereby acknowledges and agrees that all costs in excess of Landlord's Allowance (in an amount not to exceed Twenty-five Thousand Dollars ($25,000.00)) ("Amortized Amount") will be amortized at an interest rate of eleven percent (11%) per annum and paid by Tenant as Additional Rent over the Lease Term; provided, that such excess costs shall be in conformity with Exhibit B and mutually agreed upon by both Landlord and Tenant. Any costs in excess of the Amortized Amount shall be paid by Tenant to Landlord within thirty (30) days of Tenant's receipt of Landlord's invoice therefor. In addition, Landlord hereby agrees to upgrade the existing sprinkler system in the Building, at Landlord's sole expense. Section 2.03. Surrender of the Premises. Upon the expiration or earlier termination of this Lease, or upon the exercise by Landlord of its right to re-enter the Leased Premises (as a result of Tenant's default) without terminating this Lease, Tenant shall immediately surrender the Leased Premises to Landlord, in broom-clean condition and in good order, condition and repair, except for ordinary wear and tear and damage which Tenant is not obligated to repair. Tenant shall also remove its personal property, trade fixtures and any of Tenant's alterations designated by Landlord; promptly repair any damage caused by such removal; and restore the Leased Premises to the condition existing prior to the installation of the items so removed. If Tenant fails to do so, Landlord may restore the Leased Premises to such condition at Tenant's expense, and Landlord may cause all of said property to be removed at Tenant's expense, and Tenant hereby agrees to pay all the costs and expenses thereby reasonably incurred. All property of Tenant which is not removed within ten (10) days following Landlord's written demand therefor shall be conclusively deemed to have been abandoned by Tenant, and Landlord shall be entitled to dispose of such property without thereby incurring any liability to Tenant. The provisions of this section shall survive the expiration or other termination of this Lease. -3- Section 2.04. Holding Over. If Tenant retains possession of the Leased Premises after the expiration or earlier termination of this Lease, Tenant shall become a tenant from month to month at 200% of the Monthly Rental Installment in effect at the end of the Lease Term (plus Additional Rent as provided in Article 3 hereof), and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of rent after such expiration or earlier termination shall not result in a renewal of this Lease, and Tenant shall vacate and surrender the Leased Premises to Landlord upon Tenant being given thirty (30) days prior written notice from Landlord to vacate. ARTICLE 3 - RENT Section 3.01. Base Rent. Tenant shall pay to Landlord as Annual Base Rent for the Leased Premises the sum specified in the Basic Lease Provisions, payable in equal consecutive Monthly Rental Installments, in advance, without deduction or offset, beginning on the Commencement Date and on or before the first day of each and every calendar month thereafter during the Lease Term. The Monthly Rental Installment for partial calendar months shall be prorated based on the number of days during the month this Lease was in effect in relation to the total number of days in such month. Section 3.02. Additional Rent. In addition to the Annual Base Rent specified in this Lease, Tenant agrees to pay to Landlord for each calendar year during the Lease Term, as "Additional Rent," Tenant's Proportionate Share (as described in the Basic Lease Provisions) of all costs, charges and expenses incurred by Landlord during the Lease Term for Real Estate Taxes and Operating Expenses for the Building and appurtenant common areas (collectively "Common Area Charges"). "Operating Expenses" shall mean all of Landlord's expenses for operation, repair, replacement and maintenance as necessary to keep the Building and appurtenant common areas in good order, condition and repair (including all additional direct costs and expenses of operation and maintenance of the Building which Landlord reasonably determines it would have paid or incurred during such year if the Building had been fully occupied), including, but not limited to, service and other charges incurred in the operation and maintenance of the electrical systems, heating, ventilation and air conditioning systems and sprinkler and plumbing systems; management fees; utilities; stormwater discharge fees; license, permit, inspection and other fees; environmental and pollution testing and consultation fees related thereto; fees and assessments imposed by any covenants or owners' association; tools and supplies; security services; insurance premiums; and maintenance and repair of the driveways and parking areas (including snow removal), exterior lighting facilities, landscaped areas, walkways, curbs, drainage strips, sewer lines, exterior walls, foundation, structural frame, roof and gutters. "Real Estate Taxes" shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed upon the Building and common areas (or against Landlord's business of leasing the Building, provided -4- such taxes are in lieu of standard Real Estate Taxes) by any authority having the direct or indirect power to tax, together with costs and expenses of contesting the validity or amount of Real Estate Taxes. Tenant shall pay, prior to delinquency, all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Leased Premises or elsewhere. Tenant shall cause such trade fixtures, furniture, equipment and all other personal property to be assessed and billed separately from the Leased Premises. Section 3.03. Payment of Additional Rent. Landlord shall estimate the total amount of Additional Rent to be paid by Tenant during each calendar year of the Lease Term, whereupon commencing on the Commencement Date, Tenant shall pay to Landlord each month, at the same time the Monthly Rental Installment is due, an amount equal to one-twelfth (1/12) of the estimated Additional Rent for such year. Within ninety (90) days after the end of each calendar year, or as soon afterward as is practicable, Landlord shall submit to Tenant a statement of the actual amount of such Additional Rent and within thirty (30) days after receipt of such statement, Tenant shall pay any deficiency between the actual amount owed and the estimates paid during such calendar year, or in the event of overpayment, Landlord shall credit the amount of such overpayment toward the next installments of Base Rent. To the extent that the Lease Term includes any partial calendar years, the Additional Rent included in this section shall be prorated based upon the number of days in such calendar year included within the Lease Term divided by 360. Tenant may, by notice to Landlord within thirty (30) days after Landlord's notice of the actual amount of Additional Rent, require an audit of Landlord's books and records relating to Additional Rent for the preceding calendar year. Landlord shall have the option of either providing Tenant with an audit prepared by an independent certified public accountant or allowing Tenant access to Landlord's books and records for purposes of performing the audit. If the audit indicates Landlord has overstated Additional Rent by more than five percent (5%), Landlord shall pay the cost of the audit in an amount not to exceed Five Thousand Dollars ($5,000.00). Section 3.04. Late Charges. Tenant acknowledges that Landlord may incur certain additional unanticipated costs and expenses, including administrative costs and attorneys' fees, if Tenant fails to timely pay any payment required hereunder. Therefore, as compensation for such additional expenses, and in addition to the other remedies available to Landlord hereunder, if any payment of Minimum Rent or any other sum or charge required to be paid by Tenant to Landlord hereunder shall become overdue for a period of ten (10) days, a late charge of three percent (3%) of the payment so due shall be paid by Tenant as additional rent. In addition, if Tenant fails to pay within thirty (30) days after the same is due and payable any sum or charge required to be paid by Tenant to Landlord, such unpaid amount shall bear interest from the due date thereof to the date of payment at the rate of fifteen percent (15%) per annum. -5- ARTICLE 4 - SECURITY DEPOSIT Tenant, upon execution of this Lease, shall deposit with Landlord the Security Deposit as specified in the Basic Lease Provisions as security for the full and faithful performance by Tenant of all of the terms, conditions and covenants contained in this Lease on the part of Tenant to be performed, including but not limited to the payment of the rent. In the event of a default by Tenant of any term, condition or covenant herein contained, Landlord may apply all or any part of such security deposit to curing all or any part of such default; and Tenant agrees to promptly, upon demand, deposit such additional sum with Landlord as may be required to maintain the full amount of the security deposit. All sums held by Landlord pursuant to this section shall be without interest. At the end of the Lease Term, provided that there is then no uncured default, Landlord shall return the security deposit to Tenant. ARTICLE 5 - USE Section 5.01. Use of Leased Premises. The Leased Premises are to be used by Tenant solely as provided in the Basic Lease Provisions, and for no other purposes without the prior written consent of Landlord. Section 5.02. Covenants of Tenant Regarding Use. In connection with its use of the Leased Premises, Tenant agrees to do the following: (a) Tenant shall (i) use and maintain the Leased Premises and conduct its business thereon in a safe, careful, reputable and lawful manner, (ii) comply with all laws, rules, regulations, orders, ordinances, directions and requirements of any governmental authority or agency, now in force or which may hereafter be in force, including without limitation those which shall impose upon Landlord or Tenant any duty with respect to or triggered by a change in the use or occupation of, or any improvement or alteration to, the Leased Premises, and (iii) comply with and obey all reasonable directions of the Landlord, including any Rules and Regulations that may be adopted by Landlord from time to time. (b) Tenant shall not (i) use the Leased Premises for any unlawful purpose or act, (ii) commit or permit any waste or damage to the Leased Premises, (iii) store any inventory, equipment or any other materials outside the Leased Premises (except as otherwise provided herein), or (iv) do or permit anything to be done in or about the Leased Premises or appurtenant common areas which constitutes a nuisance or which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them. Landlord acknowledges that Tenant may, from time to time, use the areas outside of the Leased Premises for temporary staging of equipment, inventory or other materials and Landlord consents to such use, provided that (i) Tenant gives Landlord prior written notice thereof, and (ii) such activities are conducted in a location mutually agreed upon by Landlord and Tenant and are in compliance with all other terms of the Lease. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of its lease or of any Rules and Regulations. -6- (c) Tenant shall not overload the floors of the Leased Premises as to cause damage to the floor. The designed floor load capacity is 3,000 pounds per square foot. All damage to the floor structure or foundation of the Building due to improper positioning or storage of items or materials shall be repaired by Landlord at the sole expense of Tenant, who shall reimburse Landlord immediately therefor upon demand. (d) Tenant shall not use the Leased Premises, or allow the Leased Premises to be used, for any purpose or in any manner which would, in Landlord's opinion, invalidate any policy of insurance now or hereafter carried on the Building or increase the rate of premiums payable on any such insurance policy. Should Tenant fail to comply with this covenant, Landlord may, at its option, require Tenant to stop engaging in such activity or to reimburse Landlord as Additional Rent for any increase in premiums charged during the term of this Lease on the insurance carried by Landlord on the Leased Premises and attributable to the use being made of the Leased Premises by Tenant. (e) Tenant may, at its own expense, erect a sign concerning its business which shall be in keeping with the decor and other signs on the Building, provided that such sign is first approved by Landlord in writing, which approval shall not be unreasonably withheld. Landlord's approval, if given, may be conditioned upon such reasonable criteria as Landlord deems appropriate to maintain the area in a neat and attractive manner. Tenant agrees to maintain any sign in good state of repair, and upon expiration of the Lease Term, Tenant shall promptly remove the sign and repair any resulting damage to the Leased Premises or Building. Section 5.03. Landlord's Rights Regarding Use. In addition to the rights specified elsewhere in this Lease, Landlord shall have the following rights regarding the use of the Leased Premises or the appurtenant common areas by Tenant, its employees, agents, customers and invitees, each of which may be exercised without notice or liability to Tenant: (a) Landlord may install such signs, advertisements, notices or tenant identification information as it shall deem necessary or proper. (b) Landlord shall have the right at any time to change or otherwise alter the appurtenant common areas. Landlord may control the appurtenant common areas in such manner as it deems necessary or proper, provided that the same shall not materially impair Tenant's rights under the Lease. Landlord agrees to use commercially reasonable efforts not to interrupt Tenant's business operations in the exercise of its rights hereunder. (c) Landlord or Landlord's agent shall be permitted to inspect or examine the Leased Premises at any reasonable time and upon prior reasonable notice to Tenant, except in the event of an emergency in which case no notice shall be required, and Landlord shall have the right to make any repairs to the Leased Premises which are necessary for its preservation; provided, however, that any repairs made by Landlord shall be at Tenant's expense, except as provided in Section 7.01 hereof. If Tenant is not present to open and permit such entry into the Leased Premises at any time when such entry is necessary or permitted hereunder, Landlord and its employees and agents may enter the -7- Leased Premises by means of a master or pass key or otherwise, provided Landlord has used reasonable efforts to notify Tenant as required hereunder. Except for loss or damage caused by its gross negligence or intentional misconduct, Landlord shall incur no liability to Tenant for such entry, nor shall such entry constitute an eviction of Tenant or a termination of this Lease, or entitle Tenant to any abatement of rent therefor. Landlord agrees to use commercially reasonable efforts not to interrupt or interfere with Tenant's business operations in the exercise of its rights hereunder. ARTICLE 6 - UTILITIES AND SERVICES Tenant shall obtain in its own name and shall pay directly to the appropriate supplier the cost of all utilities and services serving the Leased Premises, including but not limited to: natural gas, heat, light, electrical power, telephone, janitorial service, refuse disposal and other utilities and services. However, if any services or utilities are jointly metered with other property, Landlord shall make a reasonable determination of Tenant's proportionate share of the cost of such utilities and services and Tenant shall pay such share to Landlord within fifteen (15) days after receipt of Landlord's written statement. Except for damage or interruption caused by the gross negligence or intentional misconduct of Landlord, its agents or employees, Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility service or other service furnished to the Leased Premises; and no such failure or interruption shall entitle Tenant to terminate this Lease or withhold sums due hereunder. ARTICLE 7 - MAINTENANCE AND REPAIRS Section 7.01. Landlord's Responsibility. During the term of this Lease, Landlord shall maintain in good condition and repair the electrical systems, heating and air conditioning systems, sprinkler and plumbing systems, roof, exterior walls, foundation and structural frame of the Building and the parking and landscaped areas, the costs of which shall be included in Operating Expenses; provided, however, that to the extent any of the foregoing items require repair because of the negligence, misuse, or default of Tenant, its employees, agents, customers or invitees, Landlord shall make such repairs at Tenant's expense. Section 7.02. Alterations. Tenant shall not permit structural or non-structural alterations or additions in or to the Leased Premises unless and until the plans have been approved by Landlord in writing, which approval shall not be unreasonably withheld. As a condition of such approval, Landlord may require Tenant to remove the alterations and restore the Leased Premises upon termination of this Lease; otherwise, all such alterations or improvements, except movable office furniture and equipment and trade fixtures, shall at Landlord's option become a part of the realty and the property of Landlord, and shall not be removed by Tenant. If Landlord consents to Tenant's performance of alterations or additions to the Leased Premises, Tenant shall ensure that all alterations and improvements which are made or necessitated thereby shall be made in accordance with all applicable laws, regulations and building codes, in a good and workmanlike manner and in quality equal to or better than the original construction of the -8- Building. Landlord's approval of the plans, specifications and working drawings for Tenant's alterations shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. Tenant shall indemnify and save harmless Landlord from all costs, loss or expense in connection with any construction or installation. No person shall be entitled to any lien directly or indirectly derived through or under Tenant or through or by virtue of any act or omission of Tenant upon the Leased Premises for any improvements or fixtures made thereon or installed therein or for or on account of any labor or material furnished to the Leased Premises or for or on account of any matter or thing whatsoever; and nothing in this Lease contained shall be construed to constitute a consent by Landlord to the creation of any lien. If any lien is filed against the Leased Premises for work claimed to have been done for, or material claimed to have been furnished to, Tenant, Tenant shall cause such lien to be discharged of record within thirty (30) days after filing by bonding or in any other lawful manner. Tenant shall indemnify and save harmless Landlord from all costs, losses, expenses, and attorneys' fees in connection with any such lien. ARTICLE 8 - CASUALTY Section 8.01. Casualty. In the event of total or partial destruction of the Building or the Leased Premises by fire or other casualty, Landlord agrees to promptly restore and repair the Building and the Leased Premises; provided, however, that Landlord's obligation as to the interior finishing of the Leased Premises shall be consistent with and limited in amount to Landlord's Allowance regarding the tenant finish improvements as were originally required to be made by Landlord, if any. Any insurance proceeds not used by Landlord in restoring or repairing the Leased Premises shall be the sole property of Landlord. Rent shall proportionately abate during the time that the Leased Premises or part thereof are unusable because of any such damage thereto. Notwithstanding the foregoing, if the Leased Premises are (i) so destroyed that they cannot be repaired or rebuilt within one hundred eighty (180) days from the date on which the insurance claim is adjusted or one (1) year from the date of the incident causing damage, whichever is earlier; or (ii) destroyed by a casualty which is not covered by the insurance required hereunder or, if covered, such insurance proceeds are not released by any mortgagee entitled thereto or are insufficient to rebuild the Building and the Leased Premises; then, in case of a clause (i) casualty, either Landlord or Tenant may, or, in the case of a clause (ii) casualty, then Landlord may, upon thirty (30) days written notice to the other party, terminate and cancel this Lease; and all further obligations hereunder shall thereupon cease and terminate. Section 8.02. Fire and Extended Coverage Insurance. During the term of this Lease, Landlord shall maintain fire and extended coverage insurance on the Building, but shall not protect Tenant's property on the Leased Premises; and, notwithstanding the provisions of Section 9.01, Landlord shall not be liable for any damage to Tenant's property, regardless of cause, including the negligence of Landlord and its employees, agents, and invitees. Tenant hereby expressly waives any right of recovery against Landlord (or any other tenant of the -9- Building) for damage to any property of Tenant located in or about the Leased Premises, however caused, including the negligence of Landlord and its employees, agents, and invitees; and, notwithstanding the provisions of Section 9.01 below, Landlord hereby expressly waives any rights of recovery against Tenant for damage to the Leased Premises or the Building which is insured against under Landlord's fire and extended coverage insurance. All insurance policies maintained by Landlord or Tenant as provided in this Lease shall contain an agreement by the insurer waiving the insurer's right of subrogation against the other party to this Lease and agreeing not to acquire any rights of recovery which the insured has expressly waived prior to loss. ARTICLE 9 - LIABILITY INSURANCE Section 9.01. Tenant's Responsibility. Landlord shall not be liable to Tenant or to any other person for (i) damage to property or injury or death to persons due to the condition of the Leased Premises, the Building or the appurtenant common areas, or (ii) the occurrence of any accident in or about the Leased Premises or the appurtenant common areas, or (iii) any act or neglect of Tenant or any other tenant or occupant of the Building or of any other person, unless such damage, injury or death is directly and solely the result of Landlord's negligence; and Tenant hereby releases Landlord from any and all liability for the same. Tenant shall be liable for, and shall indemnify and defend Landlord and hold it harmless from, any and all liability for (i) any act or neglect of Tenant and any person coming on the Leased Premises or appurtenant common areas by the license of Tenant, express or implied, (ii) any damage to the Leased Premises, and (iii) any loss of or damage or injury to any person (including death resulting therefrom) or property occurring in, on or about the Leased Premises, regardless of cause, except for any loss or damage from fire or casualty insured as provided in Section 8.02 and except for that caused solely and directly by Landlord's negligence. Notwithstanding the foregoing, Tenant shall bear the risk of any loss or damage to its property as provided in Section 8.02. Section 9.02. Tenant's Insurance. Tenant, in order to insure against the liabilities specified in this Lease, shall at all times during the term of this Lease carry, at its own expense, one or more policies of general public liability and property damage insurance, issued by one or more insurance companies acceptable to Landlord, with the following minimum coverages: A. Worker's Compensation: minimum statutory amount. B. Comprehensive General Liability Insurance, including blanket, contractual liability, broad form property damage, personal injury, completed operations, products liability, and fire damage: Not less than $1,000,000 Combined Single Limit for both bodily injury and property damage. C. Fire and Extended Coverage, Vandalism and Malicious Mischief, and Sprinkler Leakage insurance, if applicable, for the full cost of replacement of Tenant's property. D. Business interruption insurance. -10- The insurance policy or policies shall protect Tenant and Landlord as their interests may appear, naming Landlord and Landlord's managing agent and mortgagee as additional insureds, and shall provide that they may not be cancelled on less than thirty (30) days prior written notice to Landlord. Tenant shall furnish Landlord with Certificates of Insurance evidencing all required coverage. Should Tenant fail to carry such insurance and furnish Landlord with such Certificates of Insurance after a request to do so, Landlord shall have the right to obtain such insurance and collect the cost thereof from Tenant as additional rent. ARTICLE 10 - EMINENT DOMAIN If all or any substantial part of the Building or appurtenant common areas shall be acquired by the exercise of eminent domain, Landlord may terminate this Lease by giving written notice to Tenant within fifteen (15) days after possession thereof is so taken. If all or any part of the Leased Premises shall be acquired by the exercise of eminent domain in such a manner that the Leased Premises shall become unusable by Tenant for the purpose for which it is then being used, Tenant may terminate this Lease by giving written notice to Landlord within fifteen (15) days after possession of the Leased Premises or part thereof is so taken. Tenant shall have no claim against Landlord on account of any such acquisition for the value of any unexpired lease term remaining after possession of the Leased Premises is taken. All damages awarded shall belong to and be the sole property of Landlord; provided, however, that Tenant shall be entitled to any award expressly made to Tenant by any governmental authority for the cost of or the removal of Tenant's property, including without limitation its stock, equipment and fixtures and other moving expenses. ARTICLE 11 - ASSIGNMENT AND SUBLEASE Tenant shall not assign this Lease or sublet the Leased Premises in whole or in part without Landlord's prior written consent, which consent shall not be unreasonably withheld. In the event of any assignment or subletting, Tenant shall remain primarily liable to perform all of the covenants and conditions contained in this Lease, including but not limited to payment of Base Rent and Additional Rent as provided herein. The acceptance of rent from any other person shall not be deemed to be a waiver of any of the provisions of this Lease or to be a consent to the assignment of this Lease or the subletting of the Leased Premises. Without in any way limiting Landlord's right to refuse to consent to any assignment or subletting of this Lease, Landlord reserves the right to refuse to give such consent if in Landlord's discretion and opinion (i) the use of the Leased Premises is or may be in any way adversely affected; (ii) the business reputation of the proposed assignee or subtenant is deemed unacceptable; or (iii) the financial worth of the proposed assignee or subtenant is insufficient to meet the obligations hereunder or is less than that of Tenant. Landlord further expressly reserves the right to refuse to give its consent to any subletting if (i) the proposed rent is to be less than the then current rent for similar premises in the Building, or (ii) the proposed rent is to be less than the current rent -11- payable by Tenant under the Lease. Tenant agrees to reimburse Landlord for reasonable accounting and attorneys' fees incurred in conjunction with the processing and documentation of any such requested transfer, assignment, subletting or any other hypothecation of this Lease or Tenant's interest in and to the Leased Premises. ARTICLE 12 - TRANSFERS BY LANDLORD Section 12.01. Sale and Conveyance of the Building. Landlord shall have the right to sell and convey the Building at any time during the term of this Lease, subject only to the rights of Tenant hereunder; and such sale and conveyance shall operate to release Landlord from liability hereunder after the date of such conveyance. Section 12.02. Subordination and Estoppel Certificate. Landlord shall have the right to subordinate this Lease to any mortgage presently existing or hereafter placed upon the Building by so declaring in such mortgage; and the recording of any such mortgage shall make it prior and superior to this Lease regardless of the date of execution or recording of either document. Within ten (10) days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, without cost: (a) any instrument which Landlord may deem necessary or desirable to confirm the subordination of this Lease. If Tenant fails or refuses to do so, Landlord may execute such instrument in the name and as the act of Tenant. (b) an estoppel certificate in such form as Landlord may reasonably request certifying (i) that this Lease is in full force and effect and unmodified (or, if modified, stating the nature of such modification), (ii) the date to which rent has been paid, (iii) that there are not, to Tenant's knowledge, any uncured defaults (or specifying such defaults if any are claimed), and (iv) any other matters or state of facts reasonably required respecting the Lease or Tenant's occupancy of the Leased Premises. Such estoppel may be relied upon by Landlord and by any purchaser or mortgagee of all or any part of the Building. Tenant's failure to deliver such statement within such period shall be conclusive upon Tenant that this Lease is in full force and effect and unmodified and that there are no uncured defaults in Landlord's performance hereunder. (c) Notwithstanding the foregoing, if the mortgagee shall take title to the Leased Premises through foreclosure or deed in lieu of foreclosure, Tenant shall be allowed to continue in possession of the Leased Premises as provided for in this Lease so long as Tenant shall not be in default. Tenant shall, in the event any proceedings are brought to foreclose any such mortgage, attorn to the purchaser upon any such foreclosure and recognize such purchaser as the landlord under this Lease. Section 12.03. Lender's Rights. Landlord shall have the right, at any time and from time to time, to notify Tenant in writing that Landlord has placed a mortgage on the Building, specifying the identity of the Lender ("Lender"). Following receipt of such notice, Tenant agrees to give such Lender a copy of any notice of default served by Tenant on Landlord. Tenant further agrees that if Landlord fails to cure any default as -12- provided in Section 13.03 herein, Lender shall have an additional thirty (30) days within which to cure such default; provided, however, that if the term, condition, covenant or obligation to be performed by Landlord is of such nature that the same cannot reasonably be performed within such thirty-day period, such default shall be deemed to have been cured if Lender commences such performance within said thirty-day period and thereafter diligently completes the same. ARTICLE 13 - DEFAULT AND REMEDY Section 13.01. Default. The occurrence of any of the following shall be deemed an "Event of Default": (a) Tenant shall fail to pay any Monthly Rental Installment or Additional Rent within five (5) days after the same shall be due and payable, or Tenant shall fail to pay any other amounts due Landlord from Tenant within ten (10) days after the same shall be due and payable. (b) Tenant shall fail to perform or observe any term, condition, covenant or obligation as required under this Lease for a period of ten (10) days after notice thereof from Landlord; provided, however, that if the nature of Tenant's default is such that more than ten days are reasonably required to cure, then such default shall be deemed to have been cured if Tenant commences such performance within said ten-day period and thereafter diligently completes the required action within a reasonable time. (c) Tenant shall vacate or abandon the Leased Premises for any period, or fail to occupy the Leased Premises or any substantial portion thereof for a period of thirty (30) days. (d) All or substantially all of Tenant's assets in the Leased Premises or Tenant's interest in this Lease are attached or levied under execution (and Tenant does not discharge the same within sixty (60) days thereafter); a petition in bankruptcy, insolvency, or for reorganization or arrangement is filed by or against Tenant (and Tenant fails to secure a stay or discharge thereof within sixty (60) days thereafter); Tenant shall be insolvent and unable to pay its debts as they become due; Tenant makes a general assignment for the benefit of creditors; Tenant takes the benefit of any insolvency action or law; the appointment of a receiver or trustee in bankruptcy for Tenant or its assets if such receivership has not been vacated or set aside within thirty (30) days thereafter; dissolution or other termination of Tenant's corporate charter if Tenant is a corporation. Section 13.02. Remedies. Except as otherwise provided by law regarding Tenant's rights and Landlord's obligations upon default, upon the occurrence of any Event of Default, Landlord shall have the following rights and remedies, in addition to those allowed by law, any one or more of which may be exercised without further notice to or demand upon Tenant: (a) Landlord may apply the security deposit or re-enter the Leased Premises and cure any default of Tenant, and Tenant shall reimburse Landlord as additional rent for any costs and expenses which Landlord thereby incurs; and Landlord shall not be liable to Tenant for any loss or damage which Tenant may -13- sustain by reason of Landlord's action, except for loss or damage caused by Landlord's gross negligence or intentional misconduct. (b) Landlord may terminate this Lease or, without terminating this Lease, terminate Tenant's right to possession of the Leased Premises as of the date of such default, and thereafter (i) neither Tenant nor any person claiming under or through Tenant shall be entitled to possession of the Leased Premises, and Tenant shall immediately surrender the Leased Premises to Landlord; and (ii) Landlord may re-enter the Leased Premises and dispossess Tenant and any other occupants of the Leased Premises by any lawful means and may remove their effects, without prejudice to any other remedy which Landlord may have. Upon the termination of this Lease, Landlord may declare the present value (as determined by Landlord) of all rent which would have been due under this Lease for the balance of the Lease Term to be immediately due and payable, whereupon Tenant shall be obligated to pay the same to Landlord, together with all loss or damage which Landlord may sustain by reason of Tenant's default ("Default Damages"), which shall include without limitation expenses of preparing the Leased Premises for re-letting, demolition, repairs, tenant finish improvements, and brokers' and attorneys' fees, it being expressly understood and agreed that the liabilities and remedies specified in this subsection (b) shall survive the termination of this Lease. (c) Landlord may, without terminating this Lease, re-enter the Leased Premises and re-let all or any part thereof for a term different from that which would otherwise have constituted the balance of the Lease Term and for rent and on terms and conditions different from those contained herein, whereupon Tenant shall be immediately obligated to pay to Landlord as liquidated damages the difference between the rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Leased Premises, for the period which would otherwise have constituted the balance of the Lease Term, together with all of Landlord's Default Damages. (d) Landlord may sue for injunctive relief or to recover damages for any loss resulting from the breach. (e) In addition to the defaults and remedies described above, the parties hereto agree that if Tenant defaults in the performance of any (but not necessarily the same) term or condition of this Lease three (3) or more times during any twelve (12) month period, regardless of whether such defaults are ultimately cured, then such conduct shall, at Landlord's option, represent a separate Event of Default. Tenant acknowledges that (i) Landlord will incur additional unanticipated costs as a result of such repetitive defaults, including but not limited to administrative costs and legal fees, and (ii) the purpose of this provision is to adequately compensate Landlord for those costs, which would be difficult to determine with certainty. Therefore, Tenant agrees to pay to Landlord upon a default under this habitual default provision the amount of One Thousand Dollars ($1,000.00) as liquidated damages to cure such default, payable within ten (10) days after written demand therefor to Tenant by Landlord. -14- Section 13.03. Landlord's Default and Tenant's Remedies. Landlord shall be in default if it shall fail to perform or observe any term, condition, covenant or obligation as required under this Lease for a period of thirty (30) days after written notice thereof from Tenant to Landlord and to Lender, if any; provided, however, that if the term, condition, covenant or obligation to be performed by Landlord is of such nature that the same cannot reasonably be performed within such thirty-day period, such default shall be deemed to have been cured if Landlord commences such performance within said thirty-day period and thereafter diligently undertakes to complete the same. Upon the occurrence of any such default, Tenant may sue for injunctive relief or to recover damages for any loss resulting from the breach, but Tenant shall not be entitled to terminate this Lease (unless otherwise ordered by a court of competent jurisdiction) or withhold, offset or abate any rent due hereunder. Section 13.04. Limitation of Landlord's Liability. If Landlord shall fail to perform or observe any term, condition, covenant or obligation required to be performed or observed by it under this Lease and if Tenant shall, as a consequence thereof, recover a money judgment against Landlord (whether compensatory or punitive in nature), Tenant agrees that it shall look solely to Landlord's right, title and interest in and to the Building for the collection of such judgment; and Tenant further agrees that no other assets of Landlord shall be subject to levy, execution or other process for the satisfaction of Tenant's judgment and that Landlord shall not be personally liable for any deficiency. The references to "Landlord" in this Lease shall be limited to mean and include only the owner or owners, at the time, of the fee simple interest in the Building. In the event of a sale or transfer of such interest (except a mortgage or other transfer as security for a debt), the "Landlord" named herein, or, in the case of a subsequent transfer, the transferor, shall, after the date of such transfer, be automatically released from all liability for the performance or observance of any term, condition, covenant or obligation required to be performed or observed by Landlord hereunder; and the transferee shall be deemed to have assumed all of such terms, conditions, covenants and obligations. Section 13.05. Nonwaiver of Defaults. Neither party's failure or delay in exercising any of its rights or remedies or other provisions of this Lease shall be construed to be a waiver thereof or affect its right thereafter to exercise or enforce each and every such right or remedy or other provision. No waiver of any default shall be deemed to be a waiver of any other default. Landlord's receipt of less than the full rent due shall not be construed to be other than a payment on account of rent then due, nor shall any statement on Tenant's check or any letter accompanying Tenant's check be deemed an accord and satisfaction, and Landlord may accept such payment without prejudice to Landlord's right to recover the balance of the rent due or to pursue any other remedies provided in this Lease. No act or omission by Landlord or its employees or agents during the term of this Lease shall be deemed an acceptance of a surrender of the Leased Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord. -15- Section 13.06. Attorneys' Fees. If either party defaults in the performance or observance of any of the terms, conditions, covenants or obligations contained in this Lease and the non-defaulting party obtains a judgment against the defaulting party, then the defaulting party agrees to reimburse the non-defaulting party for the attorneys' fees incurred thereby. ARTICLE 14 - LANDLORD'S RIGHT TO RELOCATE TENANT Intentionally Omitted. ARTICLE 15 - NOTICE AND PLACE OF PAYMENT Section 15.01. Notices. Any notice required or permitted to be given under this Lease or by law shall be deemed to have been given if it is written and delivered in person or by overnight courier or mailed by certified mail, postage prepaid, to (i) the party who is to receive such notice at the address specified in the Basic Lease Provisions and (ii) in the case of a default notice from Tenant to Landlord, any Lender designated by Landlord. When so mailed, the notice shall be deemed to have been given as of the date it was mailed. Either party may change its address by giving written notice thereof to the other party. Section 15.02. Place of Payment. All payments required to be made by Tenant to Landlord shall be delivered or mailed to Landlord's management agent at the address specified in the Basic Lease Provisions or any other address Landlord may specify from time to time by written notice to Tenant. ARTICLE 16 - TENANT'S RESPONSIBILITY REGARDING ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES. Section 16.01. Definitions. a. "Environmental Laws" - All federal, state and municipal laws, ordinances, rules and regulations applicable to the environmental and ecological condition of the Leased Premises, including, without limitation, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the Federal Resource Conservation and Recovery Act; the Federal Toxic Substance Control Act; the Clean Air Act; the Clean Water Act; the rules and regulations of the Federal Environmental Protection Agency, or any other federal, state or municipal agency or governmental board or entity having jurisdiction over the Leased Premises. b. "Hazardous Substances" - Includes: (i) Those substances included within the definitions of "hazardous substances," "hazardous materials," "toxic substances" "solid waste" or "infectious waste" in any of the Environmental Laws; and (ii) Such other substances, materials and wastes which are or become regulated under applicable local, state or federal law, or which are classified as hazardous, toxic or infectious under present or future Environmental Laws or other federal, state, or local laws or regulations. -16- Section 16.02. Compliance. Tenant, at its sole cost and expense, shall promptly comply with the Environmental Laws which shall impose any duty upon Tenant with respect to the use, occupancy, maintenance or alteration of the Leased Premises. Tenant shall promptly comply with any notice from any source issued pursuant to the Environmental Laws or with any notice from any insurance company pertaining to Tenant's use, occupancy, maintenance or alteration of the Leased Premises, whether such notice shall be served upon Landlord or Tenant. Section 16.03. Restrictions on Tenant. Tenant shall not cause or permit to occur: a. Any violation of the Environmental Laws related to environmental conditions on, under, or about the Leased Premises, or arising from Tenant's use or occupancy of the Leased Premises, including, but not limited to, soil and ground water conditions. b. The use, generation, release, manufacture, refining, production, processing, storage or disposal of any Hazardous Substances on, under, or about the Leased Premises, or the transportation to or from the Leased Premises of any Hazardous Substances, except as necessary and appropriate for general office use in which case the use, storage or disposal of such Hazardous Substances shall be performed in compliance with the Environmental Laws and the highest standards prevailing in the industry. Landlord understands that Tenant may stock at the Leased Premises, materials falling within the definition of Hazardous Substances, including but not limited to paint, oil, grease, sealants, friction modifiers, calcium chloride, lubricants, adhesives, cleansers, nitrogen and other materials commonly used in connection with servicing and maintenance of construction equipment. Tenant understands and agrees to use, store and dispose of such materials only in accordance with applicable law. Landlord consents to the stocking of such materials, provided same is in accordance with applicable law and the provisions of this Lease. Section 16.04. Notices, Affidavits, Etc. a. Tenant shall immediately notify Landlord of (i) any violation by Tenant, its employees, agents, representatives, customers, invitees or contractors of the Environmental Laws on, under or about the Leased Premises, or (ii) the presence or suspected presence of any Hazardous Substances on, under or about the Leased Premises and shall immediately deliver to Landlord any notice received by Tenant relating to (i) and (ii) above from any source. b. Tenant shall execute affidavits, representations and the like from time to time, within five (5) days of Landlord's request therefor, concerning Tenant's best knowledge and belief regarding the presence of any Hazardous Substances on, under or about the Leased Premises. Section 16.05. Landlord's Rights. a. Landlord and its agent shall have the right, but not the duty, upon advance notice (except in the case of emergency when no notice shall be required) to inspect the Leased Premises and conduct tests thereon at any time to determine whether or the extent to which there has been a violation of Environmental Laws -17- by Tenant or whether there are Hazardous Substances on, under or about the Leased Premises. In exercising its rights herein, Landlord shall use reasonable efforts to minimize interference with Tenant's business but such entry shall not constitute an eviction of Tenant, in whole or in part, and Landlord shall not be liable for any interference, loss, or damage to Tenant's property or business caused thereby. b. If Landlord, any lender or governmental agency shall ever require testing to ascertain whether there has been a release of Hazardous Substances on, under or about the Leased Premises or a violation of the Environmental Laws, and such requirement arose in whole or in part because of an act or omission on the part of Tenant, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as Additional Rent. Section 16.06. Tenant's Indemnification. Tenant shall indemnify and hold harmless Landlord and Landlord's managing agent from any and all claims, loss, liability, costs, expenses or damage, including reasonable attorneys' fees and costs of remediation, incurred by Landlord in connection with any breach by Tenant of its obligations under this Article 16. The covenants and obligations of Tenant under this Article 16 shall survive the expiration or earlier termination of this Lease. Section 16.07. Landlord's Indemnification. Landlord shall indemnify and hold Tenant harmless from and against any and all claims, loss, liability, costs, expenses or damage, including reasonable attorneys' fees and costs of remediation, incurred by Tenant as a result of any Hazardous Substances existing on or in the Leased Premises or the Building prior to the Commencement Date, except to extent caused by or exacerbated by Tenant. ARTICLE 17 - MISCELLANEOUS Section 17.01. Benefit of Landlord and Tenant. This Lease and all of the terms and provisions hereof shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and assigns. Section 17.02. Governing Law. This Lease shall be governed in accordance with the laws of the State of Minnesota. Section 17.03. Guaranty. In consideration of Landlord's leasing the Leased Premises to Tenant, Tenant shall provide Landlord with a Guaranty of Lease executed by the guarantor(s) described in the Basic Lease Provisions, if any. Section 17.04. Force Majeure. Landlord and Tenant (except as to the payment of rent) shall be excused for the period of any delay in the performance of any obligation hereunder when such delay is occasioned by causes beyond its control, including, but not limited to, war, invasion or hostility; work stoppages, boycotts, slowdowns or strikes; shortages of materials, equipment, labor or energy; man-made or natural casualties; unusual weather conditions; acts or omissions of governmental or political bodies; or civil disturbances or riots. -18- Section 17.05. Condition of Premises. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Leased Premises or the Building or with respect to the suitability or condition of any part thereof for the conduct of Tenant's business except as provided in this Lease. Section 17.06. Examination of Lease. Submission of this instrument for examination or signature to Tenant does not constitute a reservation of or option for Lease, and it is not effective as a Lease or otherwise until execution by and delivery to both Landlord and Tenant. Section 17.07. Indemnification for Leasing Commissions. The parties hereby represent and warrant that the only real estate brokers involved in the negotiation and execution of this Lease are those named in the Basic Lease Provisions and that no other broker or person is entitled to any leasing commission or compensation as a result of the negotiation or execution of this Lease. Each party shall indemnify and hold the other harmless from any and all liability for the breach of this representation and warranty on its part and shall pay any compensation to any other broker or person who may be deemed or held to be entitled thereto. Section 17.08. Quiet Enjoyment. If Tenant shall perform all of the covenants and agreements herein provided to be performed by Tenant, Landlord covenants that Tenant shall, at all times during the Lease Term, have the quiet enjoyment and peaceful possession of the Leased Premises without hindrance from Landlord or any persons lawfully claiming under Landlord, except as may be provided in Section 12.02 hereunder. Section 17.09. Severability of Invalid Provisions. If any provision of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall not be affected or impaired, and such remaining provisions shall remain in full force and effect. Section 17.10. Financial Statements. During the Lease Term and any extensions thereof, Tenant shall provide to Landlord on an annual basis, within ninety (90) days following the end of Tenant's fiscal year, a copy of Tenant's most recent certified and audited financial statements prepared as of the end of Tenant's most recent fiscal year. Such financial statements shall be prepared in conformity with generally accepted accounting principles, consistently applied. Section 17.11. Tenant's Representations and Warranties. The undersigned represents and warrants to Landlord that (i) Tenant is duly organized, validly existing and in good standing in accordance with the laws of the state under which it was organized; (ii) all action necessary to authorize the execution of this Lease has been taken by Tenant; and (iii) the individual executing and delivering this Lease on behalf of Tenant has been authorized to do so, and such execution and delivery shall bind Tenant. Tenant, at Landlord's request, shall provide Landlord with evidence of such authority. Section 17.12. Representations and Indemnifications. Any representations and indemnifications of Landlord contained in the Lease shall not be binding upon (i) any mortgagee having a -19- mortgage presently existing or hereafter placed on the Building, or (ii) a successor to Landlord which has obtained or is in the process of obtaining fee title interest to the Building as a result of a foreclosure of any mortgage or a deed in lieu thereof. Section 17.13. Early Occupancy. In the event the Leased Premises become available and are ready for occupancy prior to the Commencement Date, Landlord may elect to allow Tenant to take possession of the Leased Premises prior to the Commencement Date for fixturing purposes. Tenant agrees to coordinate its fixturing work with the work of Landlord such that Tenant's work does not interfere with or delay Landlord's work; provided, however, that neither Landlord nor any of Landlord's affiliates shall have any responsibility or liability whatsoever for any injury (including death) to persons or loss or damage to any of Tenant's leasehold improvements, fixtures, equipment or any other materials installed or left in the Leased Premises prior to the Commencement Date. All of the terms and conditions of this Lease will become effective upon Tenant taking possession of the Leased Premises except for the payment of Annual Base Rent and Additional Rent which will commence on the Commencement Date. Section 17.14. Option to Extend. A. Grant and Exercise of Option. Provided that (i) Tenant has not been in default hereunder at any time during the Term of this Lease (the "Original Term"), (ii) the creditworthiness of Tenant is then acceptable to Landlord, (iii) Tenant originally named herein remains in possession of and has been continuously operating in the entire Leased Premises throughout the Original Term and (iv) the current use of the Leased Premises is a Permitted Use pursuant to Section 1.01.K., Tenant shall have two (2) options to extend the Original Term for additional periods of five (5) years each (the "Extension Terms"). The Extension Terms shall be upon the same terms and conditions contained in the Lease for the Original Term except (i) Tenant shall not have any further options to extend and (ii) the Annual Base Rent shall be adjusted as set forth herein ("Rent Adjustment"). Tenant shall exercise such option by delivering to Landlord, no later than one hundred twenty (120) days prior to the expiration of the then current Term, written notice of Tenant's desire to extend the then current Term. Tenant's failure to properly exercise such option shall waive it. If Tenant properly exercises its option to extend, Landlord shall notify Tenant of the Rent Adjustment no later than ninety (90) days prior to the commencement of the Extension Term. Tenant shall be deemed to have accepted the Rent Adjustment if it fails to deliver to Landlord a written objection thereto within ten (10) business days after receipt thereof. If Tenant properly exercises its option to extend, Landlord and Tenant shall execute an amendment to the Lease (or, at Landlord's option, a new lease on the form then in use for the Building) reflecting the terms and conditions of the Extension Term, within thirty (30) days after Tenant's acceptance of the Rent Adjustment. B. Market Rent Adjustment. The Annual Base Rent for the Extension Term shall be an amount equal to the Annual Base Rent then being quoted by Landlord to prospective new tenants of the Building for space of comparable size and quality and with -20- similar or equivalent improvements as are found in the Building, and if none, then in similar buildings in the Park, excluding free rent and other concessions; provided, however, that in no event shall the Annual Base Rent during the Extension Term be less than the highest Annual Base Rent payable during the Original Term. The Minimum Monthly Rent shall be an amount equal to one-twelfth (1/12) of the Annual Base Rent for the Extension Term and shall be paid at the same time and in the same manner as provided in the Lease. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written. LANDLORD: DUKE REALTY MINNESOTA, LLC, a Minnesota limited liability company By:/s/ Robert H. Johnson ------------------------------- Robert H. Johnson Chief Manager TENANT: LULL INTERNATIONAL, INC., a Delaware corporation By:/s/ Dianna I. Herman ------------------------------- Printed: Dianna I. Herman -------------------------- Title: Controller ---------------------------- STATE OF _______________) ) SS: COUNTY OF ______________) Before me, a Notary Public in and for said County and State, personally appeared _________________________, by me known and by me known to be the ________________________ of Lull International, Inc., a Delaware corporation, who acknowledged the execution of the above and foregoing Lease Agreement for and on behalf of said corporation. WITNESS my hand and Notarial Seal this 19th day of August, 1998. /s/ Lee Ann Verbovanec --------------------------------- Notary Public Lee Ann Verbovanec --------------------------------- (Printed Signature) My Commission Expires: January 31, 2000 ------------------ My County of Residence: Washington ----------------- -21- EX-10.57 3 LABOR AGREEMENT [OMNIQUIP/SKY TRAK LOGOS] LABOR AGREEMENT Entered into by: TRAK International Inc. 369 W. Western Avenue Port Washington, WI 53074 And Local 1430 District No. 10 International Association of Machinist and Aerospace Workers November 1, 1998 To October 31, 2003 [HANDSHAKE LOGO] TABLE OF CONTENTS Management Clause------------------------------------------------- 2 Grievance Procedure----------------------------------------------- 3 Seniority Temporary Layoffs---------------------------------------- 5 Job Postings--------------------------------------------- 6 Loss of ------------------------------------------------- 7 Temporary Transfers-------------------------------------- 9 Vacation---------------------------------------------------------- 9 Hours & Overtime------------------------------------------------- 11 Double Time--------------------------------------------- 12 Shift Premium------------------------------------------- 13 Holidays--------------------------------------------------------- 14 Pay Provisions--------------------------------------------------- 14 Jury Duty----------------------------------------------- 15 Funeral/Bereavement------------------------------------- 15 Safety----------------------------------------------------------- 16 Benefits Group Insurance (Health, Life, S&A, etc.)--------------- 18 401 (k) Savings Plan------------------------------------ 20 No Strike - No Lockout------------------------------------------- 20 Plant Closing---------------------------------------------------- 22 AGREEMENT This Agreement made and entered into this 1st day of November 1998 by and between TRAK International Inc. in Port Washington, Wisconsin, hereinafter referred to as the company and District 10 of the International Association of Machinists and Aerospace Workers, Milwaukee, Wisconsin, hereinafter referred to as the Union is set forth to establish principles and harmonious labor relations for the exclusive use of the contracting parties. ARTICLE I RECOGNITION 1.00 The Company hereby recognizes District No.10 of the International Association of Machinists and Aerospace Workers as the exclusive bargaining agent for all production and maintenance employees of the Company's plants in the Port Washington, Wisconsin area in the Milwaukee, Wisconsin area, but excluding office and clerical employees, and supervisors as defined in the National Labor Relations Act as amended. Supervisors must have full authority to hire, fire, and recommend wage increases subject to the regular Company policies, and shall not work on the jobs normally performed by production employees, except to the extent necessary in instructing employees during job runs, provided, however, that any such overall work performed shall not exceed 20% of the normal work week. If development of prototype parts or machines is performed on site, bargaining unit employees will be used for the majority of the activities. Salaried personnel will participate as needed up to 20% of the work to assist training bargaining unit employees, performing sample trials, and evaluations including test. 1.01 As a condition of employment, all employees covered by this Agreement shall no later that the 61st work day after the date of the execution of this Agreement, or in the case of new employees, no later than the 61st work day after the date of hiring, becoming members of the Union and remain members of the Union in good standing during the term of this Agreement. 1.02 Check-off. For the duration of this Agreement, the Company agrees to deduct the regular monthly Union dues and/or initiation fee from the pay of each employee who executes and delivers to the Company a written authorization for such deductions, which authorization shall be in a form acceptable to the Company and such authorization shall be irrevocable for the period of one (1) year, or until the termination of the Agreement, whichever occurs sooner; such authorization shall be automatically renewed and shall be irrevocable for successive periods of one (1) year each or for the period of each succeeding applicable collective agreement between the Company and the Union, whichever occurs sooner, unless written notice is given by the employee to the Company and the Union at least thirty (30) days prior to the expiration of each period of one (1) year, or of each applicable collective bargaining agreement between the Company and the Union, whichever occurs sooner. 1 All deductions shall be made from the second paycheck to be delivered to the employee each month, beginning with the month following receipt by the Company of his authorization. All amounts deducted each month shall be paid by the Company to the Union official certified by the Union as authorized to receive them on the Union's behalf. 1.03 The Union agrees to indemnify and hold the Company harmless against any and all claims, suits, orders or judgments brought or issued against the Company as a result of any action taken or not taken by the Company under the provisions of Section 1.02. 1.04 The parties mutually agree that there will be no discrimination to any employee or applicant for employment based on race, creed, color, religion, sex, age, national origin, disability, disabled veteran and Vietnam era veterans, or other area of prohibitive discrimination. Throughout this Agreement, a masculine pronoun shall be deemed to include the feminine. All employment decisions shall be based on the principles of equal opportunity and affirmation action. All acts of discrimination and/or harassment (including sexual harassment) shall be subject to disciplinary action up to and including discharge. ARTICLE II MANAGEMENT CLAUSE 2.00 Except as otherwise expressly limited by this Agreement, the management of the Company's plant and business and the direction of the working force, including the rights to plan, direct, and control operations in the use of all equipment and other property of the Company are vested exclusively in the Company and include, but are not limited to: hiring, suspending, or discharging of employees for proper cause, transferring or relieving employees from duty for lack of work or other legitimate reasons, right to study or introduce improved production methods, facilities, and the right to establish reasonable rules. Such rights shall be exercised in accordance with the terms of this Agreement, subject to the grievance procedure. The Company shall have the sole right to make such technical and other changes in operations, as it deems necessary and as a result of the introduction of new work or the installation of new machinery or processing or for any other reasons. All functions of management not herein relinquished or limited shall remain vested in the Company. 2 ARTICLE III GRIEVANCE PROCEDURE 3.00 Should differences arise between the Company and its employees either individually or collectively as to the meaning and application of the provisions of this Agreement or should differences arise about matters within the framework of this agreement an earnest effort shall be made to settle such differences at the earliest possible time by use of the following procedures. 3.01 Step #1. An aggrieved employee or employees shall present his or their grievances to his or their department supervisor accompanied, if the employee or employees so desire, by a committee person within two (2) working days of union knowledge of the event causing the grievance. The supervisor shall respond with an answer within two (2) days during the regular work week. 3.02 Step #2. If not settled at Step #1, the grievance shall be presented in writing and signed by the aggrieved employee(s) to a member of the Union Committee, who will in turn present two copies of the grievance to the Director of Manufacturing, Human Resources Manager or a duly appointed Company representative within three (3) working days following Step #1. Grievances will be dated and should refer to a specific article and section number and the corrective action desired. Management will have three (3) working days to write an answer to the grievance and return it to the Union Committee. The final disposition will be written in the place provided on the front of the grievance form. 3.03 Step #3. If the grievance is not settled in the second step, the grievance shall then be taken up by the Union Committee and representative of the Union and a designated representative or representatives of the Company, within thirty (30) calendar days of the second step response. 3.04 Step #4. In the event the parties cannot agree in the third step, the dispute may then be referred to arbitration. This must be done within twenty (20) working days from the completion of Step #3 or the grievance will be deemed resolved. The arbitration procedure shall be as follows: a) The party raising the issue shall notify the other party by certified mail, return receipt requested, informing them that they are carrying the grievance to arbitration. The notification shall include the identity of the grievant(s), the identification of the issue(s), the remedy desired, and the claimed violation(s), if any, of the Labor Agreement. 3 b) The party desiring arbitration shall request the Federal Mediation and Conciliation service to submit to the parties a panel. Within ten (10) working days after receipt of such panel the parties shall meet for the purpose of selecting an arbitrator from such panel. Each of the parties shall alternately strike one name from the panel until the name of only one person remains and such person shall be the arbitrator. The determination of the party to strike the first name shall be made by the flip of a coin. The foregoing procedure for the selection of an arbitrator may be waived if the parties mutually agree upon an arbitrator. (c) The arbitrator's decision shall be rendered in writing and shall be final and binding upon the Company and the Union. (d) The Arbitrator shall not have the power to add to, or change any of the provisions of the Agreement. (e) Each party will bear its cost of the arbitration. The expenses and fee of the arbitrator will be shared equally by the Union and the Company. All time limits set forth in the foregoing steps may be extended by mutual agreement of the parties. 3.05 Any employee facing suspension or discharge will be granted Union Representation with management prior to the suspension or discharge being effected. Should a grievance result from a suspension or discharge, it will be introduced at and as provided in Step #3 of the Grievance Procedure. 3.06 Grievances involving disciplinary action against employees that result in loss of work or disqualification for job opportunity resulting in loss of pay or benefits shall not be initiated more than six (6) working days from the date the action first became the Union's knowledge. 3.07 General wage negotiations, agreement negotiations and including amendments to the Agreement are excluded from the grievance procedure above set forth and, therefore, are not arbitrable. Arbitration is not intended and shall not be construed in any way so as to qualify or change any of the terms or provisions of the Agreement. 4 Article IV SENIORITY 4.00 An employee's seniority is based upon the length of continuous employment both with the Company and the predecessor company, shall begin from the date of hiring after completion of sixty (60) working days, which shall constitute the probationary period. Seniority includes the accumulated time an employee is on the payroll of the Company whether working or laid off, for a period of absence due to an injury or illness and for period of approved leaves of absence, all subject to the other provisions of the seniority clause. Seniority for employees with the identical dates of hire will be determined through the use of the last six digits of their social security number. Comparison of those numbers will produce a lowest sequential number and that employee will be senior. Seniority will apply on a company wide basis for the unit covered by this Agreement and will govern the process of layoff and recall only provided the senior employee processes the necessary skills to do the available job in an acceptable manner. Employees, if transferred from this bargaining unit to jobs outside the bargaining unit, shall have his or her Accumulated seniority frozen as of the date of transfer for one year, and may return to the bargaining unit one time to any available job. For the purpose of promotions, transfers, and job posting, seniority will apply on a company wide basis for the unit covered by this Agreement provided the senior employee possesses the necessary skills to perform the job in an acceptable manner. 4.01 Layoffs. In the reduction of the working force, the following procedure will be followed: (a) The Company and Union will discuss pending layoff/recalls before notification. (b) Temporary Layoffs. Temporary layoffs of five (5) days (Monday thru Friday inclusive) are allowed within department and classification without Company-wide seniority or notice restrictions provided: (1) Employees affected are notified and given the option to volunteer for temporary layoff and/or: (2) That in the event the volunteer option above does not satisfy the reduction requirement, seniority shall be honored but only within the departments and classifications affected after all possible temporary transfers are filled. 5 (3) This provision does not exceed three (3) occurrences per year per department and classification. (4) Temporary layoff will not be applied in any way to affect the employee's benefits and holidays otherwise set forth in this Agreement. (c) Indefinite Layoff (1) Before layoff of any employee, the Committee and affected employees will be given five (5) working days notice of a forthcoming layoff. (2) Senior employees will be transferred or moved from one job classification to another consistent with the employee's skills provided: (a) The employee has successfully performed the job in the past, or the Company has determined the employee can do the job after a maximum of five (5) days of training and evaluation, or (b) The job is a lower labor grade. (d) The applicable job rate will apply with first Monday of job change, due to force reduction. (e) An employee may refuse a transfer to a job two or more labor grades lower than his home base labor grade and upon layoff shall retain his seniority, but must report as provided in 4.05 ( c ) below upon recall to a job within one (1) labor grade of his home base grade of his home base grade. 4.02 Recall. In the event of an increase in the work force, the Company shall follow the procedures listed in Section 4.01 in reverse. Thereafter-new employees may be hired. 4.03 Job Posting. All job vacancies, including new jobs, will be posted for two (2) working days. Bids for these jobs will be on a Company-wide basis. Job posting bid sheets shall indicate the maximum number of job openings. Any jobs not awarded or filled by new hire thirty (30) days from the date of posting shall be reposted. The following procedure will be observed: (a) Employees may make an application stating why they want to change and state their skills. The Company agrees to give such applicant careful consideration and to make such changes provided the employee possesses the skills to do the job in an acceptable manner. (b) When bids are posted, before award is made, the Supervisor, Team leader and Union Steward for that area will meet to decide either (a) who gets the award (b) the order in which the bidders receive a trial bid. If this team is unable to decide, the matter will be referred to the Mutual Interest Group. When skills to perform the job in an acceptable manner are relatively equal, seniority will prevail subject to provisions of the seniority article. 6 (c) In the event the employee does not qualify during the trial period of ten (10) working days, he shall be returned to the former job he bid from provided he possesses more seniority than an employee in that former classification. If not, the employee may exercise his seniority within the company on existing vacancies provided he/she has the appropriate skills. The employee shall not be allowed to bid on any other job for six (6) months following disqualification of himself or three (3) months if the Company disqualifies the employee. (d) Two (2) weeks after job bidding, the selected employee and Union will be advised as to his/her selection for the job. Every effort will be made to move the successful bidder to the new position within sixty (60) days. This does not guarantee a job until such job is available. After thirty (30) days if the selected employee is not moved he shall receive the pay of the job awarded. (e) When employees bid down, said employees cannot bid for six months. (f) Employees shall be limited to one successful job bid in any six (6) month period. 4.04 The above sections shall be administered by the following rules: (a) In downgrading, the affected employee will retain his relative position in the new rate schedule. (b) In upgrading or lateral movement, the affected employee's base hourly wage will be reduced by twenty-five cents ($.25) for a period of thirty (30) days. During this period, the employee will improve his skill and knowledge in his new classification. After thirty (30) days, the employee will receive $0.25 and move to the next level in the wage matrix for that labor grade. 4.05 Seniority shall cease upon: (a) Justifiable discharge. (b) Voluntary quitting. (c) Failure to comply with recall policy. (1) It is the obligation of every employee, including those on layoff,to keep the Company informed in writing of their correct home address and telephone number. The Company's obligation in connection with recall shall end with a notice of recall sent by the Company by certified mail to the employee's current address as shown on the records of the Company. 7 (2) Employees on layoff must report within three (3) working days, to their regular job or any job in the next lower labor grade compared to their home base labor grade, after receiving written notice by certified mail, receipt requested. This does not apply to an employee, who by reason of illness or other good cause, is not able to report and so advises the Company within the three (3) day period. (3) Employees on layoff who are offered employment, and are not working elsewhere, on jobs other than his regular job prior to lay off, or within one (1) labor grade of his home base grade shall be given three (3) work days to accept such job. If the employee is not working elsewhere and such job offer is not accepted, the employee will be denied Unemployment Compensation benefits by TRAK International, Inc. (4) In contrast to number 3 above, if the employee is working elsewhere, and such job offer (other than his regular or within one (1) labor grade of his home base) is refused, the employee will retain his seniority and Unemployment Compensation benefit rights. (d) Absence from work for three (3) consecutive days without notifying the Company. (e) For failure to return to work after a Leave of absence has expired unless proper notification to the Company has been made and an extension granted subject to Section 11.00. 4.06 Employees shall retain seniority for recall from layoff based upon their seniority at time of layoffs as follows: a) 170 Hours to one year seniority: One year seniority for recall. b) One year to five years seniority: Equal to seniority time for recall. c) Five years or more seniority: One-half (1/2) of seniority time minimum five years for recall. 4.07 Shop Committeemen shall head the seniority list. Their employment in their respective classification, department, and plant shall remain in effect so long as their classification, department, and the plant is in operation. These employees shall be compensated at their current hourly rate for all time consumed (up to a maximum of their scheduled shift hours) in Union activity with the Company or its representatives during the regular work schedule at the plant. 8 Should the Committeeman be required to leave his department, their supervisor will be notified accordingly, as to where he is going, who he is going to see, and why. Upon arrival the employee(s) involved will also receive an appropriate card on which shall be noted the time started Union activity. When the Committeeman and employee are finished, their time of return to work shall be on the card. Such time charged for Union activity shall continue until the card is returned to the supervisor. 4.08 Employees returning from military service shall be reinstated under Government rules and regulations. 4.09 When necessary to either downgrade or remove an employee from the job due to some physical impairment, both parties to this Agreement shall decide this issue as favorable as is possible for the individual through the terms of the Labor Agreement. 4.10 Temporary transfers shall not exceed three(3) terms of thirty (30) days each or one (1) term of ninety (90) consecutive days. If the job then appears to be permanent, it shall be posted in accordance with Section 4.03 of this Agreement. The term, temporary transfer, does not apply where employees are absent, on vacation, or out of work in the employee's classification. Temporary transfer pay will be handled as follows: When an employee is assigned work in a higher paying classification, the employee will immediately be paid the higher rate of pay. However, should an employee be assigned to a lower rated classification, the employee would retain his present rate of pay. ARTICLE V VACATIONS 5.00 Subject to the following requirements, each of the Company's employees to whom this Agreement is applicable shall be granted a vacation with pay, including night shift premium. Earned Vacation Schedule:
Length of Employee's Minimum Number Percent Vacation Minimum Vacation Seniority to of Vacation Days Pay of All Hours Anniversary Date Earned Earnings 0 but less than 1 year 5 days 2.10% 0 1 but less than 2 years 5 days 2.10% 40 2 but less than 3 years 6 days 2.52% 48 3 but less than 4 years 7 days 2.94% 56 4 but less than 7 years 10 days 4.20% 80 7 but less than 8 years 11 days 4.62% 88 8 but less than 10 years 12 days 5.04% 96 10 but less than 16 years 15 days 6.30% 120 16 but less than 17 years 16 days 6.72% 128 17 but less than 18 years 17 days 7.14% 136 18 but less than 19 years 20 days 8.40% 160 19 but less than 20 years 21 days 8.82% 168 20 but less than 21 years 22 days 9.24% 176 21 but less than 22 years 23 days 9.66% 184 22 years or more 25 days 10.50% 200
9 5.01 Employees may arrange for prepaid vacations which are five (5) days or longer by completing a Request for Prepaid Vacation form and submitting it to their supervisor at least seven (7) days prior to the Monday of the vacation period. 5.02 The employee's W-2 form last issued by the Company with the Federal Government shall be used in computing the employee's vacation benefits in accordance with the above schedule. Employees shall be paid the amount of the percent vacation pay of all earnings or the minimum vacation hours earned, whichever is greater as provided in this Article. 5.03 An Employee's Percentage Vacation Pay as provided for above shall be derived by computing his total earnings together with any bonus, vacation pay, and holiday pay granted. Time lost due to illness of one (1) week or more duration but not more than (10) weeks in any anniversary year and time lost due to a compensable accident shall be counted as time worked in computing vacation pay on the basis of eight (8) hours per day and forty (40) hours per week. 5.04 An employee who is laid off indefinitely shall be paid vacation pay at the appropriate percentage of his previous year's W-2 form. Employees will not be paid the minimum hours. Employees who were laid off have the option to take pro-rated vacation or not after recall. Employees not recalled during the year may request their vacation pay. 5.05 In the event the company designates a specific week(s) as a general shutdown, notice will be posted as soon as possible or a minimum of three(3) months advance notice will be given. 5.06 Vacation shall be granted at such time during the year as the management finds most suitable, considering both the wishes of the employee and the efficient operation of the department concerned. Insofar as practical, employees with the highest seniority shall be given preference of date. 5.07 Vacation Choice Slips will be distributed to employees the first (1st) Monday in February on the vacation year. By the third (3rd) Monday in February, all employees shall select, by seniority, up to two (2) weeks of their vacation, for approval, after which the selection of the third (3rd) and fourth (4th) weeks shall be in the same manner. Employees who do not respond with vacation choices by the third (3rd) Monday in February loose their right of exercising seniority preference for vacation time off for the rest of the vacation year. Employees will be informed by the fourth (4th) Monday in February as to the status of their vacation requests. Should employees' original requests be denied, they will be allowed other choices providing their first requests were filed timely. 10 5.08 Vacations should be taken in multiples of five (5) consecutive working days. Employees with more than one (1) week may take odd days at a time other than the full week period. However, employees shall be allowed to schedule single days of vacation up to a maximum of ten (10) days. Whenever possible, three (3) days advance notice should be given. Employees may schedule up to 4 1/2 days of vacation provided they obtain approval from their supervisors at least 24 hours in advance which may be taken, using the same criteria as single days in 5.09 with 24 hour approval. Single vacations days will be granted in accordance with Section 5.07 above and section 7.04, maintaining the efficient operation of the department concerned. Half-days vacation pay. When four (4) hours of vacation are used, all hours in excess of the standard eight (8) will be paid at the appropriate rate. a) In cases of absence due to emergency, the employee will report his absence and request one(1) day vacation from his supervisor. b) When the Supervisor can spare the employee with no upset to production, the employee and Supervisor may agree to less than three (3) days, 24 hours, advance notice, whichever applies. 5.09 No employee shall be required to work on the Saturday or Sunday prior to his vacation nor on the Saturday or Sunday immediately following his vacation. 5.10 Armed Services. Any employee who is drafted or enlists for military duty by the United States Government shall be paid such vacation pay as he is entitled to at the time of leaving the employment of the Company to enter such service. Such employees returning from the Armed Forces within ninety (90) day after honorable discharge shall be given their vacation in the year that they return to work and accorded their accumulated seniority while they were in the service. 5.11 An employee who has completed one or more years service with the Company who is terminated for any reason whatsoever, such employees shall be paid any vacation benefits due such employee. 5.12 In the case of death, the vacation pay will be paid to the employee's lawful heir or beneficiary. ARTICLE VI HOURS AND OVERTIME 6.00 Eight (8) consecutive hours with an assigned lapse period for lunch shall constitute a normal day's work. Lunch periods shall be determined by mutual agreement between the parties. 6.01 Five (5) days, Monday through Friday inclusive, shall constitute a normal weeks work. 11 6.02 The normal shift hours will be as follows, except when overtime requires departure therefrom: 1st Shift - 7:00 a.m. to 3:30 p.m. 2nd Shift - 3:30 p.m. to 12:00 Midnight 3rd shift - 11:00 p.m. to 7:00 a.m. (starts Sunday evening) Included in this schedule is a thirty (30) minute unpaid lunch period for the 1st and 2nd shifts and a 15 minute paid lunch period for the 3rd shift. The paid lunch period is at the employee's personal hourly rate for the job in which he is working immediately prior to the designated lunch period. Stated times may be adjusted to accommodate changes in production schedules when agreed upon by the Mutual Interest Group. The Summer Shift Hours will be from the first Monday in May to the last Friday in October as follows, except when overtime requires departure therefrom: 1st Shift - 6:00 a.m. to 2:30 p.m. 2nd Shift - 2:30 p.m. to 11:00 p.m. 3rd Shift - 10:00 p.m. to 6:00 a.m. Included in this schedule is a thirty (30) minute unpaid lunch period. Stated times may be adjusted to accommodate changes in production schedules when agreed upon by the Mutual Interest Group. 6.03 In the event a second and/or third shift operation is created, employees with the most seniority within their classification will have the preference of shift. 6.04 All hours worked in excess or outside of the normal scheduled eight (8) hour shift, or the normal scheduled forty (40) hour work week shall be paid for at the rate of time and one-half (1-1/2) the regular hourly rate of the employee. 6.05 All employees shall be allowed a three (3) minute wash-up time before their assigned mid-day lunch period and at the end of each shift, except for employees in classifications granted additional time due to the nature of their work. Break periods will be as follows: A ten (10) minute break for regular eight (8) hours shifts and Saturdays. A five (5) minute break to be taken during the ninth (9th) hour of a ten (10) hour or more shift. 6.06 Double time (2x) the rate shall be paid for all hour worked: a) Over ten (10) hours in any twenty-four (24) hour period (except as it applies to second shift employees working Saturday overtime commencing at 11:00 a.m. or third shift employees starting at 11:30 p.m.). b) Over five (5) hours on Saturday. c) Sunday. d) Designated Holidays (in addition employees working on such Holiday shall receive Holiday pay). 12 6.07 An employee reporting for work on a regularly scheduled work day or as instructed shall be guaranteed a minimum of four (4) hours work and/or for (4) hours pay at their regular rate with overtime provisions stated above applying for Saturdays, Sundays and Holidays, unless notified not to report, at least twelve (12) hours in advance of the shift start time. The provisions of the Section shall not apply at acts of God, during inventory, or any act beyond the Company's control. 6.08 Insofar as is practical without reducing the efficiency of the plant, all overtime worked in each classification within a department shall be divided as equally as possible among the employees within the classification with the department.* Employees entering a classification in a department by hire, bid or other means will be credited with the maximum amount of overtime hours worked by an incumbent employee in that classification and department. *Overtime records of work performed or refused shall be kept to maintain such division and made available to the Union Committee. 6.09 Scheduled overtime shall be when the Company notifies the employees within one hour after lunch break of any day prior to daily overtime, or within one our after lunch break on Thursday preceding weekend overtime. A minimum work force of 66-2/3% of the employees in the classification, department, and shift shall work to assure efficient operation during scheduled overtime. On full department work scheduled other than the normal work-week, a minimum of 66-2/3% of the overtime in a normal week (Monday-Friday) must be worked by each employee in the department. If an employee agrees to work overtime and then fails to report for such overtime work, such failure shall be treated as an unexcused absence. 6.10 All non-scheduled daily or weekend overtime shall be optional with the individual employee. 6.11 A minimum premium rate per hour above the employee's regular hourly rate will be paid to second and third shift workers according to the following schedule: Second Shift (Cents per hour) .45 Third Shift (Cents per hour) .50 6.12 Labor Agreement provisions regarding hours and overtime will apply for all time worked (including minimum hours pay) for employees agreeing to offsite work. 6.13 The Schedule for Overtime hours will be determined by the team consisting of the Union Representative and the Supervisor of the area with consent of the Mutual Interest Group. 6.14 On operations involving continuous processes or critical work center, the Company may assign someone to that operation on a staggered time basis to cover for breaks and lunch time, with at least 24 hours notice or by mutual agreement. 13 ARTICLE VII HOLIDAYS 7.00 Holidays will be celebrated according to the attached schedule, Exhibit C. 7.01 All eligible employees covered by this Agreement, except those on non-emergency leave of Absence or Military Service and Layoff shall receive Holiday Pay including shift premium, if applicable. 7.02 Employees on a bona-fide Sick Leave and Absence and drawing disability compensation during the period in which a Holiday occurs will be paid Holiday pay which will be reported as income to the payer of the disability benefit. 7.03 The Company will not schedule layoffs prior to Holidays to avoid payment of Holiday pay. Any employee laid off two (2) weeks prior to a Holiday will receive Holiday pay. 7.04 To receive Holiday pay, an employee must have completed 340 hours of employment and must have worked the regularly scheduled hours on the work day immediately preceding and following the Holiday except when absent because of an excused absence, excused tardiness, scheduled vacation (including 1 day call in), jury service, being subpoenaed as a witness, due to a death in the family or documented circumstances and/or circumstances reasonably acceptable to Management. Tardiness equal to 1-1/2 hours or less will not affect eligibility for Holiday Pay. 7.05 When Holidays occur consecutively and an employee fails to report either the day before and/or the day after eligibility requirements, as provided for in 7.04 above, he shall lose the holiday pay which corresponds to the day of absence. ARTICLE VIII PAY PROVISIONS 8.00 The classification of any job existing as of the date of execution of this Agreement, or established during the term of the Agreement as provided in 8.01, shall remain unchanged for the duration of this Agreement unless the job content is changed. No one shall be downgraded during the term of this Agreement subject to Section 4.09 except for just cause. 8.01 When the need for a new job occurs or an existing job is changed, the job content/description will be the sole responsibility of the Company not subject to the Grievance procedure or bargaining. In the event a new job is created or an existing job is changed, the Union shall be notified of same and the Company may operate same with the temporary classification and rate. As soon as practical, but in no event more than thirty (30) days thereafter, the Company shall prepare a description for the job and a permanent classification and rate, which shall be submitted to the Union. In the event such classification and rate are not acceptable to the Union, they may be placed in effect, but this shall be a matter for the grievance and arbitration procedure. 14 When the classification and rate are finalized, either by agreement between the parties or through the grievance and arbitration procedure, they shall be incorporated in the job classification manual and the rate shall be made retroactive to the date the new or changed job was first placed in effect. 8.02 Should a machine operator be required to operate more than one machine simultaneously. No. of Machines Operated Increase in Rate While Operating ------------------------ -------------------------------- 2 $ .75 3 $1.00 4 $1.25 8.03 The Company will pay its employees on a weekly basis on the regular designated pay day, unless mutually agreed to otherwise. 8.04 Job and wage rate classifications shall be attached hereto and marked Exhibit A and shall by this reference become part of this Agreement. ARTICLE IX JURY DUTY - MAKE UP PAY AND FUNERAL PAY 9.00 When an employee is selected to serve on a local or community jury panel, the Company will make up a portion of the wages according to certain conditions as follows: (a) To qualify for make-up wages, an employee must either have served on a trial or consumed more than a half day in court before dismissal which would make it impractical to return to work. (b) Make-up wages will be based upon a maximum of eight (8) hours of total wages less jury panel daily fee in any one day, Saturday, Sundays and Holidays to be excluded. The plant must be operating in whole or part and the employee regularly at work to be paid make-up wages. (c) A form provided by the Company with signature affixed by an official of the court will be necessary before make-up wages can be granted. 9.01 Funeral Pay. In the event of the death of an employee's relative, such employees shall be permitted to take time off as necessary according to the following schedule: (a) Employee's Mother, Father, Brother, Sister, Spouse, or Children, or Step-Children - eight (8) hours at regular straight time rate not to exceed three (3) consecutive days of work. (b) Employee's Grandparents, Grandchildren, Step-Mother, Step-Father, Step-Brother, Step-Sister, Mother-in-Law, Father-in-Law, Sister-in-Law, Brother-in-Law, Son-in-Law, and Daughter-in-Law eight (8) hours at regular straight time rate not to exceed two (2) consecutive days of work. 15 (c) Employees' vacation will be extended equal to appropriate days during his vacation. ARTICLE X SAFETY AND HEALTH 10.00 There shall not be less than two (2) employees working in a facility at a time. 10.01 The Company will furnish gloves to Plate and Weld shop personnel for their use in normal day-to-day functions. Replacement new gloves will be issued upon return of the used, worn gloves to the Tool Room attendant. 10.02 The wearing of safety shoes shall be mandatory for all employees covered by this Agreement. The Company will pay fifty percent (50%) towards the cost of two (2) pair of safety shoes per year to be worn at and for work and $50.00 for prescription exam for first or changed prescription for safety glasses. ARTICLE XI LEAVE OF ABSENCE 11.00 Leave of absence may be applied for by filling out a leave of absence form as provided by management. Leaves of Absence may be granted upon the mutual agreement between the Company and the Employee for a period not exceeding sixty (60) working days except for Union activity. Leave of Absence shall be granted for full time Union activity for a two (2) year renewal upon thirty (30) days written notice. Union Leaves of Absence, not to exceed two (2) employees at a time (for Union schools, conventions, etc.) except for a three day overlap shall be granted for a maximum for thirty (30) working days per calendar year. Company agrees to notify the Union of all granted leaves 11.01 All Leaves of Absence shall be without pay. All employees granted Leaves of Absence shall be returned to work with full retention of their seniority rights and at the prevailing rate of pay at the time of their return consistent with the other provisions of this Agreement. 11.02 Employees returning from Sick Leave of Absence wherein surgery or serious illness was involved are to advise the Company with a written release from their physician at least (3) working days in advance of their intended return day. This will allow scheduling within the department and review, if necessary, of the employee's condition by a physician(s) of the Company's choice, at the Company's expense. 16 ARTICLE XII MISCELLANEOUS PROVISIONS 12.00 The authorized representative or his duly appointed substitute of the Union, shall have access to the Company's plants, buildings, and grounds during business hours upon approval of Management or its duly appointed representative. 12.01 The Company will furnish chronological seniority listings showing clock number, name, birthdate, seniority date, job title, shift and rate of pay every three (3) months to the Committee. 12.02 When hiring new employees, the Company agrees to notify the Union committee chairman with the name of each employee, wage rate, and classification before or no later than the first day of employment. 12.03 Bulletin boards shall be made available by the Company upon request by the Mutual Interest Group at convenient places as near as possible to the time clock for the posting of Union notices approved by Management. 12.04 The Union Bargaining Committee shall be made up of no more than six (6) employees. Stewards will not apply to this section. 12.05 Representatives of the Company and Union will meet within five (5) working days of receipt of a written (verbal by mutual agreement) request by either party. The request is to include the agenda to be discussed and such meetings not to exceed one (1) per month unless mutually agreed otherwise. 12.06 Should any State or Federal court decide that any given clause of this Agreement is not in accordance with a State or Federal Statute, this shall not nullify the remaining clauses of this agreement. 12.07 Credit Union deductions will be implemented when requested. 12.08 Any assignment to new start times other than those worked by the majority of employees the following prorated premium allowance will be paid. This does not supersede Section 6.04. One hour after shift start time .10/Hr Two hours after shift start time .10/Hr. Three hours after shift start time .12/Hr. Four hours after shift start time .16/Hr. Five hours after shift start time .20/Hr. 12.09 Before any work is outsourced, except for emergencies, the Union will be notified by Management fourteen (14) days in advance of actual outsource date. 12.10 The Mutual Interest Group will meet to discuss outsourcing alternatives. Management reserves the right to a final decision. 17 ARTICLE XIII GROUP INSURANCE Health Insurance: The company shall provide to all active employees a Group comprehensive Health Plan, which applies to covered medical expenses. The employee shall pay: PPO IN NETWORK OUT OF NETWORK SINGLE FAMILY SINGLE FAMILY ------ ------ ------ ------ PAYROLL DEDUCTION 0 0 0 0 DEDUCTIBLE $ 100 $ 300 $ 200 $ 600 CO-INSURANCE 90/10 90/10 75/25 75/25 MAXIMUM OUT OF POCKET $ 350 $ 800 $1,200 $2,600 In and Out of Network --------------------- Co-Pays: Drugs $5 Generic / $10 Branded Office Visit $10 per occurrence Emergency Room $25 per occurrence Participants enrolled in this PPO plan may move in and out of network throughout the enrollment period. Complete details are available in the insurance booklet. 13.01 Life Insurance a) Life - $20,000 Year b) AD&D - one half to full amount of life insurance as specified in insurance handbook. c) Life insurance and AD&D will be reduced 8% per year beginning at age 65 for employees who elect to continue working. 13.02 Accident and Sickness: The Company will provide accident and sickness insurance of $265.00 Year 1 ($270.00 in Year 2); ($280.00 in Year 3); ($285.00 in Year 4) and ($295.00 in Year 5) to a maximum of 26 weeks for regular active employees with eligibility for benefits, beginning the first day of disability caused by an accident or hospitalization (as defined within the policy) and the fourth day for illness not requiring hospitalization as certified by his physician. Weekly accident and sickness benefits will continue to be provided for actively working employees over the age of 65 until retirement. Employees will have the choice as to whether taxes will be withheld or not, however, employee must choose when applying for A&S Benefits. An employee unable to work due to sickness or accident will be granted a Leave of Absence upon presentation of medical documentation. Such leave is subject to extension based on medical reports submitted but not to exceed time of employment with the Company or eighteen (18) months, whichever us greater. Group insurance coverage will continue to be provided to the employee while drawing A & S benefits up to twenty-six (26) 18 weeks. At the expiration of the employee's A & S benefits (26 weeks), the employee can remain in the Group Health, Dental and Prescription Drug Plan for another eighteen (18) months (COBRA coverage) by paying advance monthly to the Company for such coverage except weekly A & S benefits. 13.03 The company will provide Dental Insurance (Comprehensive Plan). 13.04 The Group Insurance Plan shall be continued for employees laid off for a period of time equal the employee's active employment during the six (6) months prior to layoff provided the employee pays one half (1/2) the cost of insurance during the first three (3) months and full premium during the next fifteen (15) months, excluding A&S weekly benefits, and life insurance benefits. Agreed upon principles concerning group insurance coverage: (1) General Rules: (A) Group Insurance coverage becomes effective on the first day of the month in which the employee completes their probationary period. (B) All group insurance coverage ceases on the last day of the month an individual's employment terminates with the exception of laid off employees covered as above. (2) Specific Applications: (A) Employees laid off during a month, lose coverage at the end of that month unless they elect to continue coverage under COBRA. (B) Employees recalled from layoff during the first fifteen (15) days of a month will be covered by group insurance from the first (1st) day of the month. (1) Those employees who paid their share of the premiums coverage during layoff and are recalled during the first fifteen-(15) days of a month shall have that month's COBRA premium refunded. (C) Employees recalled from layoff after the fifteenth (15th) day of the month will be covered beginning the first (1st) day of the succeeding/following month. (1) Those employees who paid their share of the COBRA premium during layoff and are recalled after the fifteenth (15) day of the month will continue to be covered by group insurance with no premium refund. 19 ARTICLE XIV 401K SAVINGS PLAN 14.00 The company will maintain a 401K Savings Plan for employee participation on an elective salary deferral basis. Furthermore, the Company will contribute, to each eligible employee's account, cents per hour as listed below up to a maximum of 2,080 hours in a calendar year. Further, for those who defer part of their pay the Company will provide a matching contribution of 33 1/3% up to a 3% maximum of the weekly gross wages. Contract Year 1 $.32 cents Contract Year 2 $.32 cents Contract Year 3 $.32 cents Contract Year 4 $.34 cents Contract Year 5 $.36 cents ARTICLE XIV NO STRIKE - NO LOCKOUT 15.00 The state of Wisconsin guidelines will apply in the event of a plant closing, that gives rise to a permanent layoff/termination of all bargaining unit personnel, the Company and the Union will promptly meet to discuss the impact of the closing upon the effected employees. The parties shall negotiate over the effects of such closing in an effort to establish severance pay and benefit allowances based on seniority. a) Notice has been served requesting negotiations for general wage rates in accordance with the terms of this Agreement and no agreement has been reached. b) Notice has been served requesting negotiations for modification and/or termination or renewal of this Agreement and no agreement has been reached. c) Notice has been served requesting arbitration or this stipulation to arbitrate a grievance according to the procedure in Paragraph 3.00. The party upon whom notice was served has refused either to arbitrate and/or to stipulate, or has refused to abide by the decision of the arbitration board. 15.01 Should a strike, concerted slowdown or stoppage of work by employees of the company occur which is in violation of 15.00 above, during the term of this Agreement. The Union before the next scheduled workday after receipt of the written notice from the Company shall be obligated to the following things only: a) Advise the Company in writing that the strike or stoppage has not been called or sanctioned by the Union. b) Post copies of the following notice on bulletin boards in the plant or use other acceptable methods of notifications: 20 We have been advised by TRAK International, Inc. that a strike, or stoppage or slowdown has occurred in the plant. Inasmuch as no strike, slowdown or stoppage has been called by the union, IF YOU ARE ENGAGED IN ANY SUCH STRIKE, SLOWDOWN OR STOPPAGE, YOU ARE HEREBY INSTRUCTED TO RETURN TO WORK IMMEDIATELY. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, DISTRICT NO. 10. THIS NOTICE IS POSTED IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT BETWEEN THE COMPANY AND THE UNION." 15.02 The obligation of the Union shall be limited to the performance of the acts required by Paragraph 15.01 of this Article and upon compliance by the Union with the provisions of Paragraph 15.01 of this Article, the Union and its officers and members shall have no further liability during the term of this Agreement or thereafter, for any damage suffered by the company arising from or out of any stoppage or strike. 15.03 Should Management comply with the terms and conditions of this Agreement, its officers and representatives shall have no further liability during the term of this Agreement or thereafter, for any losses suffered by the Union or employees arising from any unauthorized strike or work stoppage. 15.04 The Company shall have the right to discipline any or all employees engaged in an unauthorized strike, slowdown, or stoppage of work during the life of this Agreement by suspension or discharge provided there is no discrimination. 15.05 In the event an employee believes he has been unjustly discharged from employment, the said employee may request the difference be resolved under the grievance procedure as long as the grievance is submitted within ten (10) working days from date of discharge. ARTICLE XVI PAST PRACTICE 16.01 TRAK International, Inc. hereby agrees that all past practices initiated, or followed by it since its acquisition and not specifically mentioned in this Agreement shall nevertheless by binding upon both parties during the term of this Agreement. This Agreement does not include various past practices initiated by any predecessor companies, if these practices are not followed by TRAK International, Inc. 21 ARTICLE XVII PLANT CLOSING 17.00 In the event of a plant closing that gives rise to a permanent layoff/termination of all bargaining unit personnel, the Company and the Union will promptly meet to discuss the impact of the closing upon the effected employees. The parties shall negotiate over the effects of such closing in an effort to establish severance pay and benefit allowances based on seniority. Nothing in this section shall obligate either party to arbitrate any dispute over severance pay or severance benefits in accordance with our grievance provisions. ARTICLE XVIII TERMINATION 18.01 During the period of this Agreement if both of the parties agree to bargain collectively with regard to any of the provisions of this Agreement, or any other matter not contained in this Agreement, then any Agreement reached as a result of such bargaining shall be reduced to writing and be signed by the parties hereto, and only thereupon shall be a part of this Agreement as an amendment thereof. 18.02 This Agreement becomes effective on November 1,1998 and remains in effect until Midnight October 31,2003 unless notice in writing is filed by either the Company or the Union of a desire for change, modification, or termination, thereof at least sixty (60) days prior to, but not more than ninety (90) days prior to the expiration of any said period. The parties agree that negotiation for modification of change in this Agreement will be undertaken once the above notice has been served. 22 For the Union: District No. 10 For the Company: International Association of TRAK International, Inc. Machinists & Aerospace Workers: Port Washington, WI By:/s/ Joseph F. Develice By:/s/ Thomas Rice ----------------------------- -------------------------------- Joseph F. Develice, Bus. Rep. Thomas Rice, VP Human Resources. By:/s/ Jason Adams By:/s/ Phillip Christiansen ----------------------------- -------------------------------- Jason Adams, Chairman Phillip Christiansen, VP Skytrak By:/s/ James Fitzpatrick By:/s/ Terrence Hernesman ----------------------------- -------------------------------- James Fitzpatrick, Committeeman Terrence Hernesman, VP.Compact Tech. By:/s/ Sean Young By:/s/ Glenda Moehlenpah ----------------------------- -------------------------------- Sean Young, Committeeman Glenda Moehlenpah, Dir.Fin. Rep. By:/s/ Jim Schmalz By:/s/ Dennis Cherne ----------------------------- -------------------------------- Jim Schmalz, Committeeman Dennis Cherne, Mgr. Mfg. Eng. By:/s/ Michael Brey ----------------------------- Michael Brey, Committeeman EX-10.58 4 STIFF LETTER AGREEMENT OMNIQUIP INTERNATIONAL, INC. 222 East Main Street Port Washington, Wisconsin 53074 October 1, 1998 P. Enoch Stiff 720 E. Newark Drive West Bend, WI 53095 Dear Mr. Stiff: OmniQuip International, Inc. (the "Company") considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this regard, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control 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 shareholders. Accordingly, the Company's Board of Directors 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 yourself, to their assigned duties without distraction in the face of the 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, this letter agreement sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. TERM. This Agreement shall commence on the date hereof and shall continue until December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1st date, the Company shall have given notice that it does not wish to extend this Agreement, and provided, further, that following a change in control of the Company (as hereinafter defined) the term of this Agreement shall automatically extend to the date which is two years following such change in control. 2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and your employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if (a) any "person" (as such term is used in Section October 1, 1998 Page 2 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding securities; or (b) during any period of two consecutive years (including periods commencing prior to the date hereof), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board") cease for any reason to constitute at least 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 at least two-thirds of the directors then still in office who were directors at the beginning of the period. 3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of your employment within a period of two (2) years following such change in control unless such termination is because of your death or Retirement, by the Company for Cause or Disability or by you other than for Good Reason. (a) Disability; Retirement. (i) If, as a result of your incapacity due to physical or mental illness, you shall have been absent from your duties with the Company on a full time basis for 130 consecutive business days, 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, the Company may terminate this Agreement for "Disability." (ii) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. (b) Cause. The Company may terminate your employment for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate your employment hereunder upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed you duties, or (ii) the willful engaging by you in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "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. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the 2 October 1, 1998 Page 3 Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (i) or (ii) of the first sentence of this paragraph and specifying the particulars thereof in detail. (c) Good Reason. You may terminate your employment for Good Reason. For purposes of this Agreement "Good Reason" shall mean: (i) without your express written consent, the assignment to you of any duties materially inconsistent with your positions, duties, responsibilities and status with the Company immediately prior to a change in control; (ii) a reduction by the Company in your base salary as in effect on the date hereof or as the same may be increased from time to time; (iii) without your express written consent, the Company's requiring you to be based anywhere other than the Company's facility where you performed your duties for the Company immediately prior to a change in control; and; (iv) the failure by the Company to continue in effect any benefit or compensation plan, pension plan, life insurance plan, health and accident plan or disability plan in which you are participating at the time of a change in control of the Company (or plans providing you with substantially similar benefits), the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the change in control, or the failure by the Company to provide you with the number of paid vacation days to which you are then entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on the date hereof; (v) the failure of the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 6 hereof; or (vi) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (d) below (and, if applicable, subparagraph (b) above); and for purposes of this Agreement, no such purported termination shall be effective. (d) Notice of Termination. Any termination by the Company pursuant to subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which 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. 3 October 1, 1998 Page 4 (e) Date of Termination. "Date of Termination" shall mean (i) if this Agreement is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (ii) if your employment is terminated pursuant to subparagraph (c) above, the date specified in the Notice of Termination, and (iii) if your employment is terminated for any other reason, the date on which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination one party notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect until this Agreement is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long term disability plan, or a substitute plan then in effect. (b) If your employment shall be terminated for Cause, 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 and the Company shall have no further obligations to you under this Agreement. (c) If the Company shall terminate your employment other than pursuant to Section 3(a) or 3(b) hereof or if you shall terminate your employment for Good Reason, then the Company shall pay to you as severance pay in a lump sum on the fifth day following the Date of Termination, the following amounts: (i) your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) if the Date of Termination occurs on or prior to the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to two (2) times your annual base salary in effect as of the Date of Termination; (iii) if the Date of Termination occurs after the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to (A) two (2) times your annual base salary in effect as of the Date of Termination less (B) an amount equal to one-twelfth (1/12) of your annual base salary in effect as of the Date of Termination for each month (or portion of a month) which has elapsed between the first anniversary of the date of the change in control and the Date of Termination. For 4 October 1, 1998 Page 5 example, if a change in control occurs on January 1, 1999 and the Date of Termination occurs on January 10, 2000, a portion of one month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the Date of Termination. If the Date of Termination occurs on November 10, 2000, ten months and a portion of one additional month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the Date of Termination; (iv) in lieu of a bonus under the Company's executive incentive plan (or any successor bonus plan or arrangement), an amount in cash equal to 50% of the average bonus payment awarded under such plan (or any predecessor bonus plan or arrangement) for the three years prior to the Date of Termination (or such lesser period of years as you have been employed by the Company); (v) in lieu of shares of common stock of the Company, par value $.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term Incentive Plan, as amended, or any other stock option plan adopted from time to time by the Company for its key executives (the "Plan"), issuable upon exercise of options ("Options") granted to you under the Company's Plan, (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the aggregate spread between the exercise prices of all Options held by you whether or not then fully exercisable, and the higher of (a) the closing price of Company Shares as reported on the National Association of Securities Dealers Automatic Quotation System National Market System ("NASDAQ") on the Date of Termination (or the closing price on any exchange on which the Company Shares are then traded, if applicable), or (b) the highest price per Company Share actually paid in connection with any change in control of the Company; (vi) the Company shall also pay all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement). (d) Unless you are terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of you for one year after the Date of Termination, all employee benefit plans and programs or arrangements in which you were entitled to participate immediately prior to the Date of Termination provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of the period of coverage, you shall have the option to have assigned to you at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to you. 5 October 1, 1998 Page 6 (e) 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 provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. OTHER AGREEMENTS. Until the occurrence of a change in control of the Company as defined herein, the Company's obligation for the payment of severance or other benefits upon termination of your employment shall be governed by such other agreement, if any, between you and the Company or any subsidiary thereof. Following the occurrence of a change in control of the Company, as defined herein, this Agreement shall supersede any such other agreement and such other agreement shall have no further force or effect. 6. SUCCESSORS, BINDING AGREEMENT. (a) 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, by agreement in form and substance satisfactory to you, 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 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 as you would be entitled hereunder if you terminated your employment for Good Reason, 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 executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had 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 be no such designee, to your estate. 7. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in 6 October 1, 1998 Page 7 writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board of Directors of the Company. 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 set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Wisconsin. 9. VALIDITY. The invalidity or unenforceability of any provisions 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. 10. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original but both of which together will constitute one and the same instrument. Any such counterpart may be executed by facsimile signature with only verbal confirmation, and when so executed and delivered shall be deemed an original and such counterpart(s) together shall constitute only one original. 11. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Milwaukee, Wisconsin in accordance with the rules of the American Arbitration Association then in effect. Notwithstanding the pendency of any such dispute or controversy, 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 Section 3(e) hereof. Amounts paid under this Section 11 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. 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. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 7 October 1, 1998 Page 8 If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, OMNIQUIP INTERNATIONAL, INC. By: /s/ Donald E. Nickelson ------------------------- Donald E. Nickelson Chairman of the Board AGREED TO THIS 1ST DAY OF OCTOBER, 1998 /s/ P. Enoch Stiff - ---------------------------------- 8 EX-10.59 5 LAETZ LETTER AGREEMENT OMNIQUIP INTERNATIONAL, INC. 222 East Main Street Port Washington, Wisconsin 53074 October 1, 1998 Curtis J. Laetz 4108 N. Lake Drive Shorewood, WI 53211 Dear Mr. Laetz: OmniQuip International, Inc. (the "Company") considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this regard, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control 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 shareholders. Accordingly, the Company's Board of Directors 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 yourself, to their assigned duties without distraction in the face of the 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, this letter agreement sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. TERM. This Agreement shall commence on the date hereof and shall continue until December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1st date, the Company shall have given notice that it does not wish to extend this Agreement, and provided, further, that following a change in control of the Company (as hereinafter defined) the term of this Agreement shall automatically extend to the date which is two years following such change in control. 2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and your employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if (a) any "person" (as such term is used in Section October 1, 1998 Page 2 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding securities; or (b) during any period of two consecutive years (including periods commencing prior to the date hereof), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board") cease for any reason to constitute at least 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 at least two-thirds of the directors then still in office who were directors at the beginning of the period. 3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of your employment within a period of two (2) years following such change in control unless such termination is because of your death or Retirement, by the Company for Cause or Disability or by you other than for Good Reason. (a) Disability; Retirement. (i) If, as a result of your incapacity due to physical or mental illness, you shall have been absent from your duties with the Company on a full time basis for 130 consecutive business days, 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, the Company may terminate this Agreement for "Disability." (ii) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. (b) Cause. The Company may terminate your employment for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate your employment hereunder upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed you duties, or (ii) the willful engaging by you in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "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. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the 2 October 1, 1998 Page 3 Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (i) or (ii) of the first sentence of this paragraph and specifying the particulars thereof in detail. (c) Good Reason. You may terminate your employment for Good Reason. For purposes of this Agreement "Good Reason" shall mean: (i) without your express written consent, the assignment to you of any duties materially inconsistent with your positions, duties, responsibilities and status with the Company immediately prior to a change in control; (ii) a reduction by the Company in your base salary as in effect on the date hereof or as the same may be increased from time to time; (iii) without your express written consent, the Company's requiring you to be based anywhere other than the Company's facility where you performed your duties for the Company immediately prior to a change in control; and; (iv) the failure by the Company to continue in effect any benefit or compensation plan, pension plan, life insurance plan, health and accident plan or disability plan in which you are participating at the time of a change in control of the Company (or plans providing you with substantially similar benefits), the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the change in control, or the failure by the Company to provide you with the number of paid vacation days to which you are then entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on the date hereof; (v) the failure of the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 6 hereof; or (vi) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (d) below (and, if applicable, subparagraph (b) above); and for purposes of this Agreement, no such purported termination shall be effective. (d) Notice of Termination. Any termination by the Company pursuant to subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which 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. 3 October 1, 1998 Page 4 (e) Date of Termination. "Date of Termination" shall mean (i) if this Agreement is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (ii) if your employment is terminated pursuant to subparagraph (c) above, the date specified in the Notice of Termination, and (iii) if your employment is terminated for any other reason, the date on which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination one party notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect until this Agreement is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long term disability plan, or a substitute plan then in effect. (b) If your employment shall be terminated for Cause, 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 and the Company shall have no further obligations to you under this Agreement. (c) If the Company shall terminate your employment other than pursuant to Section 3(a) or 3(b) hereof or if you shall terminate your employment for Good Reason, then the Company shall pay to you as severance pay in a lump sum on the fifth day following the Date of Termination, the following amounts: (i) your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) if the Date of Termination occurs on or prior to the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to two (2) times your annual base salary in effect as of the Date of Termination; (iii) if the Date of Termination occurs after the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to (A) two (2) times your annual base salary in effect as of the Date of Termination less (B) an amount equal to one-twelfth (1/12) of your annual base salary in effect as of the Date of Termination for each month (or portion of a month) which has elapsed between the first anniversary of the date of the change in control and the Date of Termination. For 4 October 1, 1998 Page 5 example, if a change in control occurs on January 1, 1999 and the Date of Termination occurs on January 10, 2000, a portion of one month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the Date of Termination. If the Date of Termination occurs on November 10, 2000, ten months and a portion of one additional month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the Date of Termination; (iv) in lieu of a bonus under the Company's executive incentive plan (or any successor bonus plan or arrangement), an amount in cash equal to 50% of the average bonus payment awarded under such plan (or any predecessor bonus plan or arrangement) for the three years prior to the Date of Termination (or such lesser period of years as you have been employed by the Company); (v) in lieu of shares of common stock of the Company, par value $.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term Incentive Plan, as amended, or any other stock option plan adopted from time to time by the Company for its key executives (the "Plan"), issuable upon exercise of options ("Options") granted to you under the Company's Plan, (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the aggregate spread between the exercise prices of all Options held by you whether or not then fully exercisable, and the higher of (a) the closing price of Company Shares as reported on the National Association of Securities Dealers Automatic Quotation System National Market System ("NASDAQ") on the Date of Termination (or the closing price on any exchange on which the Company Shares are then traded, if applicable), or (b) the highest price per Company Share actually paid in connection with any change in control of the Company; (vi) the Company shall also pay all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement). (d) Unless you are terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of you for one year after the Date of Termination, all employee benefit plans and programs or arrangements in which you were entitled to participate immediately prior to the Date of Termination provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of the period of coverage, you shall have the option to have assigned to you at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to you. 5 October 1, 1998 Page 6 (e) 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 provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. OTHER AGREEMENTS. Until the occurrence of a change in control of the Company as defined herein, the Company's obligation for the payment of severance or other benefits upon termination of your employment shall be governed by such other agreement, if any, between you and the Company or any subsidiary thereof. Following the occurrence of a change in control of the Company, as defined herein, this Agreement shall supersede any such other agreement and such other agreement shall have no further force or effect. 6. SUCCESSORS, BINDING AGREEMENT. (a) 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, by agreement in form and substance satisfactory to you, 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 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 as you would be entitled hereunder if you terminated your employment for Good Reason, 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 executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had 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 be no such designee, to your estate. 7. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in 6 October 1, 1998 Page 7 writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board of Directors of the Company. 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 set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Wisconsin. 9. VALIDITY. The invalidity or unenforceability of any provisions 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. 10. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original but both of which together will constitute one and the same instrument. Any such counterpart may be executed by facsimile signature with only verbal confirmation, and when so executed and delivered shall be deemed an original and such counterpart(s) together shall constitute only one original. 11. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Milwaukee, Wisconsin in accordance with the rules of the American Arbitration Association then in effect. Notwithstanding the pendency of any such dispute or controversy, 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 Section 3(e) hereof. Amounts paid under this Section 11 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. 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. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 7 October 1, 1998 Page 8 If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, OMNIQUIP INTERNATIONAL, INC. By: /s/ P. Enoch Stiff -------------------------------- P. Enoch Stiff President and Chief Executive Officer AGREED TO THIS 14TH DAY OF OCTOBER, 1998 /s/ Curtis J. Laetz - ---------------------------------- 8 EX-10.60 6 MUELLER LETTER AGREEMENT OMNIQUIP INTERNATIONAL, INC. 222 East Main Street Port Washington, Wisconsin 53074 October 1, 1998 Richard Mueller 9357 Wedgewood Drive Woodbury, MN 55125 Dear Mr. Mueller: OmniQuip International, Inc. (the "Company") considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this regard, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control 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 shareholders. Accordingly, the Company's Board of Directors 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 yourself, to their assigned duties without distraction in the face of the 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, this letter agreement sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. TERM. This Agreement shall commence on the date hereof and shall continue until December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1st date, the Company shall have given notice that it does not wish to extend this Agreement, and provided, further, that following a change in control of the Company (as hereinafter defined) the term of this Agreement shall automatically extend to the date which is two years following such change in control. 2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and your employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if (a) any "person" (as such term is used in Section October 1, 1998 Page 2 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding securities; or (b) during any period of two consecutive years (including periods commencing prior to the date hereof), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board") cease for any reason to constitute at least 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 at least two-thirds of the directors then still in office who were directors at the beginning of the period. 3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of your employment within a period of two (2) years following such change in control unless such termination is because of your death or Retirement, by the Company for Cause or Disability or by you other than for Good Reason. (a) Disability; Retirement. (i) If, as a result of your incapacity due to physical or mental illness, you shall have been absent from your duties with the Company on a full time basis for 130 consecutive business days, 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, the Company may terminate this Agreement for "Disability." (ii) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. (b) Cause. The Company may terminate your employment for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate your employment hereunder upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed you duties, or (ii) the willful engaging by you in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "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. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the 2 October 1, 1998 Page 3 Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (i) or (ii) of the first sentence of this paragraph and specifying the particulars thereof in detail. (c) Good Reason. You may terminate your employment for Good Reason. For purposes of this Agreement "Good Reason" shall mean: (i) without your express written consent, the assignment to you of any duties materially inconsistent with your positions, duties, responsibilities and status with the Company immediately prior to a change in control; (ii) a reduction by the Company in your base salary as in effect on the date hereof or as the same may be increased from time to time; (iii) without your express written consent, the Company's requiring you to be based anywhere other than the Company's facility where you performed your duties for the Company immediately prior to a change in control; and; (iv) the failure by the Company to continue in effect any benefit or compensation plan, pension plan, life insurance plan, health and accident plan or disability plan in which you are participating at the time of a change in control of the Company (or plans providing you with substantially similar benefits), the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the change in control, or the failure by the Company to provide you with the number of paid vacation days to which you are then entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on the date hereof; (v) the failure of the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 6 hereof; or (vi) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (d) below (and, if applicable, subparagraph (b) above); and for purposes of this Agreement, no such purported termination shall be effective. (d) Notice of Termination. Any termination by the Company pursuant to subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which 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. 3 October 1, 1998 Page 4 (e) Date of Termination. "Date of Termination" shall mean (i) if this Agreement is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (ii) if your employment is terminated pursuant to subparagraph (c) above, the date specified in the Notice of Termination, and (iii) if your employment is terminated for any other reason, the date on which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination one party notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect until this Agreement is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long term disability plan, or a substitute plan then in effect. (b) If your employment shall be terminated for Cause, 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 and the Company shall have no further obligations to you under this Agreement. (c) If the Company shall terminate your employment other than pursuant to Section 3(a) or 3(b) hereof or if you shall terminate your employment for Good Reason, then the Company shall pay to you as severance pay in a lump sum on the fifth day following the Date of Termination, the following amounts: (i) your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) if the Date of Termination occurs on or prior to the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to two (2) times your annual base salary in effect as of the Date of Termination; (iii) if the Date of Termination occurs after the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to (A) two (2) times your annual base salary in effect as of the Date of Termination less (B) an amount equal to one-twelfth (1/12) of your annual base salary in effect as of the Date of Termination for each month (or portion of a month) which has elapsed between the first anniversary of the date of the change in control and the Date of Termination. For 4 October 1, 1998 Page 5 example, if a change in control occurs on January 1, 1999 and the Date of Termination occurs on January 10, 2000, a portion of one month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the Date of Termination. If the Date of Termination occurs on November 10, 2000, ten months and a portion of one additional month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the Date of Termination; (iv) in lieu of a bonus under the Company's executive incentive plan (or any successor bonus plan or arrangement), an amount in cash equal to 50% of the average bonus payment awarded under such plan (or any predecessor bonus plan or arrangement) for the three years prior to the Date of Termination (or such lesser period of years as you have been employed by the Company); (v) in lieu of shares of common stock of the Company, par value $.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term Incentive Plan, as amended, or any other stock option plan adopted from time to time by the Company for its key executives (the "Plan"), issuable upon exercise of options ("Options") granted to you under the Company's Plan, (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the aggregate spread between the exercise prices of all Options held by you whether or not then fully exercisable, and the higher of (a) the closing price of Company Shares as reported on the National Association of Securities Dealers Automatic Quotation System National Market System ("NASDAQ") on the Date of Termination (or the closing price on any exchange on which the Company Shares are then traded, if applicable), or (b) the highest price per Company Share actually paid in connection with any change in control of the Company; (vi) the Company shall also pay all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement). (d) Unless you are terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of you for one year after the Date of Termination, all employee benefit plans and programs or arrangements in which you were entitled to participate immediately prior to the Date of Termination provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of the period of coverage, you shall have the option to have assigned to you at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to you. 5 October 1, 1998 Page 6 (e) 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 provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. OTHER AGREEMENTS. Until the occurrence of a change in control of the Company as defined herein, the Company's obligation for the payment of severance or other benefits upon termination of your employment shall be governed by such other agreement, if any, between you and the Company or any subsidiary thereof. Following the occurrence of a change in control of the Company, as defined herein, this Agreement shall supersede any such other agreement and such other agreement shall have no further force or effect. 6. SUCCESSORS, BINDING AGREEMENT. (a) 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, by agreement in form and substance satisfactory to you, 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 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 as you would be entitled hereunder if you terminated your employment for Good Reason, 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 executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had 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 be no such designee, to your estate. 7. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in 6 October 1, 1998 Page 7 writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board of Directors of the Company. 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 set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Wisconsin. 9. VALIDITY. The invalidity or unenforceability of any provisions 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. 10. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original but both of which together will constitute one and the same instrument. Any such counterpart may be executed by facsimile signature with only verbal confirmation, and when so executed and delivered shall be deemed an original and such counterpart(s) together shall constitute only one original. 11. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Milwaukee, Wisconsin in accordance with the rules of the American Arbitration Association then in effect. Notwithstanding the pendency of any such dispute or controversy, 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 Section 3(e) hereof. Amounts paid under this Section 11 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. 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. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 7 October 1, 1998 Page 8 If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, OMNIQUIP INTERNATIONAL, INC. By: /s/ P. Enoch Stiff ---------------------------------- P. Enoch Stiff President and Chief Executive Officer AGREED TO THIS 5TH DAY OF OCTOBER, 1998 /s/ Richard G. Mueller - --------------------------------- 8 EX-10.61 7 SOLON LETTER AGREEMENT OMNIQUIP INTERNATIONAL, INC. 222 East Main Street Port Washington, Wisconsin 53074 October 1, 1998 Richard A. Solon 6101 SE Riverside Terrace St. Joseph, MO 64507 Dear Mr. Solon: OmniQuip International, Inc. (the "Company") considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this regard, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control 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 shareholders. Accordingly, the Company's Board of Directors 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 yourself, to their assigned duties without distraction in the face of the 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, this letter agreement sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. TERM. This Agreement shall commence on the date hereof and shall continue until December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1st date, the Company shall have given notice that it does not wish to extend this Agreement, and provided, further, that following a change in control of the Company (as hereinafter defined) the term of this Agreement shall automatically extend to the date which is two years following such change in control. 2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below, and your employment by the Company shall thereafter have been terminated in accordance with Section 3 below. For purposes of this Agreement, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if (a) any "person" (as such term is used in Section October 1, 1998 Page 2 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding securities; or (b) during any period of two consecutive years (including periods commencing prior to the date hereof), individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Board") cease for any reason to constitute at least 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 at least two-thirds of the directors then still in office who were directors at the beginning of the period. 3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described in Section 2 hereof constituting a change in control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 4 hereof upon the subsequent termination of your employment within a period of two (2) years following such change in control unless such termination is because of your death or Retirement, by the Company for Cause or Disability or by you other than for Good Reason. (a) Disability; Retirement. (i) If, as a result of your incapacity due to physical or mental illness, you shall have been absent from your duties with the Company on a full time basis for 130 consecutive business days, 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, the Company may terminate this Agreement for "Disability." (ii) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. (b) Cause. The Company may terminate your employment for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate your employment hereunder upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed you duties, or (ii) the willful engaging by you in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "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. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the 2 October 1, 1998 Page 3 Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (i) or (ii) of the first sentence of this paragraph and specifying the particulars thereof in detail. (c) Good Reason. You may terminate your employment for Good Reason. For purposes of this Agreement "Good Reason" shall mean: (i) without your express written consent, the assignment to you of any duties materially inconsistent with your positions, duties, responsibilities and status with the Company immediately prior to a change in control; (ii) a reduction by the Company in your base salary as in effect on the date hereof or as the same may be increased from time to time; (iii) without your express written consent, the Company's requiring you to be based anywhere other than the Company's facility where you performed your duties for the Company immediately prior to a change in control; and; (iv) the failure by the Company to continue in effect any benefit or compensation plan, pension plan, life insurance plan, health and accident plan or disability plan in which you are participating at the time of a change in control of the Company (or plans providing you with substantially similar benefits), the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the change in control, or the failure by the Company to provide you with the number of paid vacation days to which you are then entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on the date hereof; (v) the failure of the Company to obtain the assumption of the agreement to perform this Agreement by any successor as contemplated in Section 6 hereof; or (vi) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (d) below (and, if applicable, subparagraph (b) above); and for purposes of this Agreement, no such purported termination shall be effective. (d) Notice of Termination. Any termination by the Company pursuant to subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which 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. 3 October 1, 1998 Page 4 (e) Date of Termination. "Date of Termination" shall mean (i) if this Agreement is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such thirty (30) day period), (ii) if your employment is terminated pursuant to subparagraph (c) above, the date specified in the Notice of Termination, and (iii) if your employment is terminated for any other reason, the date on which a Notice of Termination is given; provided that if within thirty (30) days after any Notice of Termination one party notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect until this Agreement is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long term disability plan, or a substitute plan then in effect. (b) If your employment shall be terminated for Cause, 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 and the Company shall have no further obligations to you under this Agreement. (c) If the Company shall terminate your employment other than pursuant to Section 3(a) or 3(b) hereof or if you shall terminate your employment for Good Reason, then the Company shall pay to you as severance pay in a lump sum on the fifth day following the Date of Termination, the following amounts: (i) your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) if the Date of Termination occurs on or prior to the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to two (2) times your annual base salary in effect as of the Date of Termination; (iii) if the Date of Termination occurs after the first anniversary date of the change in control of the Company, then in lieu of any further salary payments to you for periods subsequent to the Date of Termination, an amount equal to (A) two (2) times your annual base salary in effect as of the Date of Termination less (B) an amount equal to one-twelfth (1/12) of your annual base salary in effect as of the Date of Termination for each month (or portion of a month) which has elapsed between the first anniversary of the date of the change in control and the Date of Termination. For 4 October 1, 1998 Page 5 example, if a change in control occurs on January 1, 1999 and the Date of Termination occurs on January 10, 2000, a portion of one month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the Date of Termination. If the Date of Termination occurs on November 10, 2000, ten months and a portion of one additional month shall have elapsed between the first anniversary of the date of the change in control and the Date of Termination, and you would be eligible to receive an amount equal to approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the Date of Termination; (iv) in lieu of a bonus under the Company's executive incentive plan (or any successor bonus plan or arrangement), an amount in cash equal to 50% of the average bonus payment awarded under such plan (or any predecessor bonus plan or arrangement) for the three years prior to the Date of Termination (or such lesser period of years as you have been employed by the Company); (v) in lieu of shares of common stock of the Company, par value $.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term Incentive Plan, as amended, or any other stock option plan adopted from time to time by the Company for its key executives (the "Plan"), issuable upon exercise of options ("Options") granted to you under the Company's Plan, (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the aggregate spread between the exercise prices of all Options held by you whether or not then fully exercisable, and the higher of (a) the closing price of Company Shares as reported on the National Association of Securities Dealers Automatic Quotation System National Market System ("NASDAQ") on the Date of Termination (or the closing price on any exchange on which the Company Shares are then traded, if applicable), or (b) the highest price per Company Share actually paid in connection with any change in control of the Company; (vi) the Company shall also pay all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement). (d) Unless you are terminated for Cause, the Company shall maintain in full force and effect, for the continued benefit of you for one year after the Date of Termination, all employee benefit plans and programs or arrangements in which you were entitled to participate immediately prior to the Date of Termination provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of the period of coverage, you shall have the option to have assigned to you at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to you. 5 October 1, 1998 Page 6 (e) 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 provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. OTHER AGREEMENTS. Until the occurrence of a change in control of the Company as defined herein, the Company's obligation for the payment of severance or other benefits upon termination of your employment shall be governed by such other agreement, if any, between you and the Company or any subsidiary thereof. Following the occurrence of a change in control of the Company, as defined herein, this Agreement shall supersede any such other agreement and such other agreement shall have no further force or effect. 6. SUCCESSORS, BINDING AGREEMENT. (a) 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, by agreement in form and substance satisfactory to you, 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 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 as you would be entitled hereunder if you terminated your employment for Good Reason, 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 executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had 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 be no such designee, to your estate. 7. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in 6 October 1, 1998 Page 7 writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board of Directors of the Company. 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 set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Wisconsin. 9. VALIDITY. The invalidity or unenforceability of any provisions 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. 10. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original but both of which together will constitute one and the same instrument. Any such counterpart may be executed by facsimile signature with only verbal confirmation, and when so executed and delivered shall be deemed an original and such counterpart(s) together shall constitute only one original. 11. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Milwaukee, Wisconsin in accordance with the rules of the American Arbitration Association then in effect. Notwithstanding the pendency of any such dispute or controversy, 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 Section 3(e) hereof. Amounts paid under this Section 11 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. 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. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 7 October 1, 1998 Page 8 If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, OMNIQUIP INTERNATIONAL, INC. By: /s/ P. Enoch Stiff --------------------------------- P. Enoch Stiff President and Chief Executive Officer AGREED TO THIS 9TH DAY OF OCTOBER, 1998 /s/ Richard A. Solon - ---------------------------------- 8 EX-21 8 OMNIQUIP - EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Subsidiary Jurisdiction of Incorporation - ---------- ----------------------------- TRAK International, Inc. Delaware Lull International, Inc. Delaware Snorkel International, Inc. Delaware OmniQuip U.K. Limited England and Wales Subsidiaries of Snorkel International, Inc.: Snorkel Elevating Work Platforms Pty Limited Australia Snorkel Elevating Work Platforms Limited New Zealand EX-23 9 PWC'S CONSENT OF INDEPENDENT ACCOUNTANTS CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-24777, No. 333-24811 and No. 333-24827) of OmniQuip International, Inc. of our report dated November 3, 1998 listed at Item 14. 1. of this Annual Report on Form 10-K of OmniQuip International, Inc. for the fiscal year ended September 30, 1998. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which is listed at Item 14. 2. of this Form 10-K. PricewaterhouseCoopers LLP St. Louis, Missouri December 28, 1998 EX-24 10 VARIOUS OMNIQUP POAS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: December 24, 1998 /s/ Donald E. Nickelson --------------------------- Donald E. Nickelson POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: December 18, 1998 /s/ Peter S. Finley --------------------------- Peter S. Finley POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: December 24, 1998 /s/ Jeffrey L. Fox --------------------------- Jeffrey L. Fox POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: December 24, 1998 /s/ Samuel A. Hamacher --------------------------- Samuel A. Hamacher POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: November 3, 1998 /s/ Paul W. Jones --------------------------- Paul W. Jones POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: November 2, 1998 /s/ Jerry E. Ritter --------------------------- Jerry E. Ritter POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: October 26, 1998 /s/ Joseph F. Shaughnessy --------------------------- Joseph F. Shaughnessy POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: November 8, 1998 /s/ Robert L. Virgil --------------------------- Robert L. Virgil POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Philip G. Franklin, Curtis J. Laetz and Glenda Moehlenpah, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the 1998 Annual Report on Form 10-K of OmniQuip International, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary as fully to all intents and purposes as he might or could do in person, and hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Dated: December 24, 1998 /s/ P. Enoch Stiff --------------------------- P. Enoch Stiff EX-27 11 FDS - OMNIQUIP INTERNATIONAL, INC.
5 This document contains summary financial information extracted from the financial statements contained in the attached Annual Report on Form 10-K for the fiscal year ended September 30, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 U.S. DOLLARS 12-MOS SEP-30-1998 OCT-01-1997 SEP-30-1998 1 4,684 0 67,875 1,295 71,065 152,349 41,375 7,783 316,462 93,457 124,250 0 0 143 41,717 316,462 455,653 455,653 349,584 396,949 2,553 0 10,261 45,890 18,547 27,343 0 545 0 26,798 1.88 1.86
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